Real estate investment trust Welltower (NYSE: WELL) is undertaking a reorganizational move meant to improve the company’s ability to buy properties in tax-deferred structures.
The company is reorganizing as an umbrella partnership real estate investment trust, or UPREIT. Under the arrangement, Toledo, Ohio-based Welltower is forming a publicly traded parent company also called Welltower, and converting the existing REIT into a Delaware limited liability company that would be controlled by the new parent entity.
The holding company would inherit the Welltower name and WELL stock ticker, and the REIT currently known as Welltower would become a new entity officially called “Welltower OP LLC” with the transition.
Welltower said the move would have no impact on our existing shareholders, debt security holders, lenders or other constituencies, nor would it change the composition of the company’s leadership or financial position. Instead, the company’s aim was to improve its ability to buy properties on a tax-deferred basis. Executives with Welltower also said the move more closely aligns the corporate structure with other REITs.
The UPREIT structure allows for non-cash acquisitions of properties, which Welltower’s leaders believe would give the REIT a competitive advantage on future acquisitions over other REITs who aren’t organized that way.
Specifically, the UPREIT structure allows owners of appreciated property to designate the asset under an “operating partnership” in exchange for interests in the partnership.
“We believe that the conversion will further expand our already robust external growth pipeline, as [operating partnership] units potentially offer a unique tool for sellers seeking tax deferral and advanced tax planning,” Welltower CEO Shankh Mitra said in a press release.
Welltower stock would automatically be converted on a one-for-one basis into stock of the new company on a one-for-one basis.
The formation of the new parent company is currently slated to take effect April 1. The LLC conversion is expected to be effective shortly following the company’s 2022 annual meeting of shareholders, pending approval.
Welltower has invested about $6.8 billion since October, 2020, with $1.2 billion of that happening in the first quarter of 2022. On Sunday, the company announced a $548 million deal to acquire 33 communities in an expansion of its relationship with operating partner StoryPoint Senior Living.