US healthcare property group Welltower has confirmed that it is acquiring the portfolio of the Barchester Healthcare nursing home group mainly owned by Irish billionaires JP McManus, Dermot Desmond and John Magnier for £5.2 billion (€5.96 billion).
As part of the transaction, Welltower has formed an exclusive long-term partnership with Barchester, which is considered to be among the best performing operators in the UK, the New York-listed company said in a statement.
The portfolio comprises 263 homes, with 111 managed on a type of contract where the owner of the property shares the operating income from the underlying homes, and a further 152 so-called triple-net lease properties, where the operator pays the lease and any operating expenses. A further 21 homes are being developed.
It is not clear whether the Irish trio will remain owners of the operating company.
The Barchester group is essentially made up of two companies owned by common shareholders: the operating company, Barchester Healthcare; and a company that owns the underlying homes, Limecay Ltd.
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The value of the deal is much higher than the expected figure of north of £4 billion, reported last week.
Welltower said it believes that the deal “has significant long-term growth potential” for the US group.
“The operating portfolio, comprised of both stabilised and lease up properties, is positioned for significant future growth with current blended portfolio occupancy in the high 70 per cents,” it said.
“Moreover, the triple-net lease is structured with 3.5 per cent annual escalators and a coverage-based rent reset every five years at Welltower’s election.”
“Through our strategic partnership with Welltower and their significant and ongoing investment into their operating platform, we expect to continue to meaningfully enhance the lives of thousands of older adults,” said Dr Pete Calveley, Barchester’s chief executive.
Barchester and Limecay each have little underlying debt when intergroup loans are stripped out.
Barchester owed £103.6 million to related parties and had £366.4 million of external loans at the end of last year, according to its latest accounts filed recently with Companies House, London.
Limecay has £1.09 billion of loan notes issued to its parent company in the British Virgin Islands. These are due for repayment at the end of 2027, its most recent accounts state. Loan notes can be a tax-efficient way to structure investments. Limecay’s property portfolio had a gross value of £1.91 billion at the end of December.
Barchester and the related properties came close to being sold six years ago to Macquarie for £2.5 billion before the Australian financial services giant pulled out of the deal, blaming uncertainty caused by Brexit.
Welltower was also among runners and riders in that abandoned sales process.
The Irish tycoons invested in Barchester in 1994, a little over a year after the business was set up by British entrepreneur Mike Parsons. The three are said to be by far the biggest shareholders in the business.
Derrick Smith, part owner of the Coolmore Stud racehorse breeding business in Co Tipperary with John Magnier, also has a stake, along with a number of smaller Irish investors.