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Welltower (WELL) Q1 FFO Tops, Seniors Housing Occupancy Gains

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Welltower Inc.’s WELL first-quarter 2022 normalized funds from operations (FFO) per share of 82 cents came in line with the Zacks Consensus Estimate. The reported figure also exceeded the midpoint of the guidance range and also compared favorably with the year-ago quarter’s 80 cents.

The company generated revenues of $1.39 billion in the quarter. The top line increased 32.7% year over year.

The Welltower seniors housing operating (“SHO”) portfolio is seeing recovery in occupancy, though the rising property operating expenses act as a deterrent.

Concurrent with the first-quarter earnings release, Welltower announced the expansion of its strategic partnership with Oakmont Management Group. WELL agreed to purchase seven senior living communities, subject to customary closing norms, which Oakmont will operate under an aligned RIDEA 3.0 contract.

Located in affluent markets in California, the seven properties include four rental properties and three continuing care retirement communities. The total investment will be about $344 million and is expected to generate a high single-digit unlevered internal rate of return.

Quarter in Detail

In the first quarter, property operating expenses were $853.7 million, reflecting an increase of 38.3% year over year.

Welltower’s share of property-level expenses associated with the pandemic relating to its total SHO portfolio, net of reimbursements, including Provider Relief Funds and similar programs in the United Kingdom and Canada, aggregated an expense of $6 million for the first quarter of 2022 compared with a benefit of $23 million in the year-ago period. This had an unfavorable impact on the first-quarter 2022 normalized FFO per share of 1 cent.

The SHO portfolio average same-store occupancy increased roughly 460 basis points year over year to 78.0%.

WELL reported total portfolio same-store NOI ("SSNOI") growth of 8.9%, backed by the year-over-year SSNOI growth in its SHO portfolio of 18.4%.

Moreover, in the first quarter, within the SHO portfolio, WELL achieved same-store REVPOR (average revenues generated per occupied room per month) growth of 4.6% compared with 3.4% in the fourth quarter of 2021.

Welltower's pro rata gross investments in the first quarter totaled $1.0 billion. This included $787 million in acquisitions and loan funding and $233 million in development funding. It converted four development projects for a total pro rata investment amount of $228 million. Welltower also accomplished pro rata property dispositions and loan payoffs of $155 million during the quarter.

Balance Sheet Position

Welltower exited the first quarter of 2022 with $301.1 million of cash and cash equivalents, down from the $2.1 billion recorded at the first-quarter 2021 end.

Along with available borrowings under its line of credit and restricted cash, as of Mar 31, 2022, WELL had $4.1 billion of near-term available liquidity and no material senior unsecured note maturities until 2024.

Dividend Update

On May 10, Welltower announced a cash dividend of 61 cents per share for the first quarter. The dividend will be paid out on May 31 to stockholders of record as of May 24, 2022. This marks the company’s 204th consecutive quarterly cash dividend payout.

Guidance

Welltower projects second-quarter 2022 normalized FFO per share in the range of 82-87 cents. The Zacks Consensus Estimate for the same is pegged at 86 cents.

WELL’s second-quarter guidance assumes the average blended same-store NOI growth of 8.0-10.0%, comprising 15.0-20.0% growth in Seniors Housing Operating, 7.0-8.0% in Seniors Housing Triple-net, 2.0-3.0% in Outpatient Medical, 2.75% in Health System and 2.0-3.0% in Long-Term/Post-Acute Care.

Welltower anticipates funding roughly $673 million in development in 2022 relating to projects underway on Mar 31, 2022.

Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Welltower Inc. Price, Consensus and EPS Surprise

Welltower Inc. Price, Consensus and EPS Surprise
Welltower Inc. Price, Consensus and EPS Surprise

Welltower Inc. price-consensus-eps-surprise-chart | Welltower Inc. Quote

Performance of Notable REITs

Ventas, Inc. VTR reported first-quarter 2022 normalized FFO per share of 79 cents, beating the Zacks Consensus Estimate of 77 cents. Moreover, the figure climbed 9.7% year over year from 72 cents. The quarterly results of Ventas reflected an improvement in occupancy and pricing power for the Senior Housing Operating Portfolio segment. Additionally, VTR’s triple-net leased and office portfolios witnessed growth in same-store NOI due to contractual escalators.

Healthpeak Properties, Inc. PEAK reported first-quarter 2022 FFO as adjusted per share of 43 cents, marginally surpassing the Zacks Consensus Estimate of 42 cents. The reported figure was up 7.5% from the year-ago quarter’s 40 cents. The performance of Healthpeak Properties was backed by solid revenue growth. The same-store portfolio cash (adjusted) NOI also witnessed growth due to an overall improvement in all its segments, namely life-science, medical office and continuing care retirement communities.

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


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