The stock price of Toledo-based Welltower dropped by more than 4 percent Wednesday after a research report called Integra Healthcare Properties, a New York company that is buying into 147 money-losing skilled nursing homes that ProMedica is divesting, “a sham.”
Welltower shares fell by $3.20 to $65 per share.
The report by Hindenburg Research said Integra is just seven months old and has no track record for operating skilled nursing facilities.
ProMedica said in a statement, however, it was never the plan for Integra to operate the 147 skilled nursing homes after the divestiture. Instead, ProMedica is working with regional operators to run the nursing homes in various markets.
“We are aware that false information about the transaction involving ProMedica’s senior care facilities has been circulating due to an investor opinion piece referenced as a research report,” the statement said. “That opinion piece contains many inaccuracies — the most obvious of which is the fact that Integra is not the proposed operator in this transaction.”
ProMedica announced last month it was exiting a joint venture with Welltower to own and operate the 147 skilled nursing homes so ProMedica could rid itself of their more than $200 million in operating losses.
To facilitate the move, ProMedica gave away its 15 percent equity in the joint venture — worth about $412 million — to a new joint venture between Welltower and Integra. ProMedica also said it would contribute operating reserves for the transition to the new owners, a cost that one analyst said would reach at least $100 million.
In its statement, ProMedica said it is moving ahead to complete the deal. It was originally slated to close Dec. 19.
Hindenburg Research’s report Wednesday called into question the capabilities of the Welltower-Integra joint venture to effectively run the new venture, saying that Integra is inexperienced and Welltower, a real estate investment trust, would have a difficult time making money on the deal through rents it would collect on the buildings housing the 147 skilled nursing homes.
“Critically, we believe the new JV partner is little more than a sham designed to obfuscate weakness in the portfolio,” the report said.
Hindenburg, an investment group, noted in its report that it had taken a short position in Welltower based in part on Welltower’s recent deal with ProMedica. A short position is a bet that share prices will fall over a period of time.
The principal of Integra Healthcare, Hindenburg Research said, is a real estate investor named David Gefner, whose only known experience with skilled nursing homes is a 2021 deal in which Welltower worked with a Gefner affiliate to assume control of 21 distressed nursing homes operated by Genesis Healthcare.
Hindenburg noted similarities between the Welltower divestiture of Genesis homes and the announced one with ProMedica under which ProMedica will give its equity in the 147 skilled nursing homes to the Welltower-Integra joint venture.
“Red flags indicate that another of Welltower’s distressed deals, a 2021 restructuring with its troubled fourth-largest operator, Genesis Healthcare, mirrored the latest ‘miracle’ deal,” Hindenburg noted.
In 2000, Hindenburg released a report on the Nikola Corporation that cast doubts on its EV technology. Following the report, the company’s shares plummeted and its founder, Trevor Milton, was found guilty of fraud. He will be sentenced in January.
Welltower is a real estate investment trust that owns the physical buildings that house nursing homes, assisted living communities, and medical offices. It leases the buildings to operators like ProMedica.
ProMedica is northwest Ohio’s largest regional healthcare system, with 11 hospitals, a health plan, and senior care facilities.
While divesting itself of the 147 troubled nursing homes, ProMedica is keeping about 10 skilled nursing homes located near its hospitals and other local operations.
The money-losing homes being divested are located outside of Ohio and mainly along the East Coast, including Philadelphia. A smaller number of the divested homes are located in California and in other western states.
At deal’s close this month, the well-being of thousands of patients in those 147 facilities will be in the hands of new operators.
Hindenburg Research pointed to Integra and Mr. Gefner as the proposed operator — a contention ProMedica denied. ProMedica said it and Integra instead are working together to identify regional operators “that are trusted and proven in their respective markets, and that prioritize quality of care and resident well-being.”
All individual facility transitions shall occur only in accordance with processes established by local regulatory authorities, ProMedica added.
Mr. Gefner is the 29-year-old founder of a real estate investment firm called Perigrove. He only incorporated Integra Health Properties on May 9 and locked up the URL for the Integra website on the same day, according to Hindenburg’s Welltower report.
The report also said it could find no evidence of Perigrove’s claim to have raised $3 billion from investors for various real estate projects. Hindenburg researchers found Perigrove’s offices in a suburban New York strip mall rather than at a prominent Manhattan address as claimed by the company.
Mr. Gefner’s track record, the report notes, contrasts radically with statements made by Welltower CEO Shankh Mitra during a third-quarter earnings call that Integra was a well-capitalized partner “well positioned to return these assets to its previous glory.”
Other than an affiliate of Mr. Gefner buying into the 21 Genesis skilled nursing homes, Hindenburg Research said it could find no evidence that Mr. Gefner had participated in the industry beyond that.
Mr. Gefner did not return a call seeking comment sent to him by a receptionist at Integra who said she was assisting Wednesday in light of an “overflow of calls.”
Welltower did not respond to requests for comment.
First Published December 7, 2022, 3:31 p.m.
