Welltower, Inc. WELL recently announced that its affiliate plans to acquire NorthStar Healthcare and its portfolio of 40 senior living communities in an all-cash transaction for approximately $900 million.

The proposed acquisition, subject to customary closing conditions, is expected to close in the first half of 2025. The acquisition has been unanimously approved by NorthStar Healthcare's board of directors, while shareholders of NorthStar Healthcare will vote on the merger at a special meeting. The merger is not subject to a financing condition.

Terms of the Merger Agreement

NorthStar Healthcare's shareholders will receive $3.03 per share in cash, which surpasses the net asset value per share of $2.96 decided by the company’s board of directors as of June 30, 2024.

NorthStar Healthcare's board of directors and advisors are permitted to initiate, solicit and consider alternative acquisition proposals for 40 days, starting from the date of the merger agreement. NorthStar Healthcare has the right to terminate the agreement with Welltower to accept a superior proposal subject to the terms and conditions of the agreement.

WELL's Management Commentary

Per Nikhil Chaudhri, co-president and CIO of Welltower, "We are delighted to have reached an agreement to acquire NorthStar's portfolio of 40 seniors housing communities, which portfolio, subject to satisfaction of closing conditions and closing under the merger agreement, Welltower anticipates will be allocated to an entity affiliated with its recently announced funds management business."

Wrapping Up

With the company’s current geographic reach and network of outstanding senior housing operators, it is anticipated that this portfolio will strengthen the company’s regional densification strategy.

Welltower is poised to benefit from its diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the United Kingdom. An aging population and an expected rise in senior citizens’ healthcare expenditure are likely to aid the senior housing operating portfolio’s growth. The outpatient medical segment is expected to benefit from favorable outpatient visit trends.

Over the past six months, shares of this Zacks Rank #2 (Buy) company have gained 21.5%, outperforming the industry’s decline of 3.7%.

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Other Stocks to Consider

Some other top-ranked stocks from the healthcare REIT sector are CareTrust REIT CTRE and Sabra Healthcare REIT SBRA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for CareTrust’s 2024 FFO per share is pinned at $1.50, which suggests year-over-year growth of 6.4%.

The Zacks Consensus Estimate for Sabra’s 2024 FFO per share stands at $1.42, which indicates an increase of 6.8% from the year-ago period.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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