Welltower Inc.’s WELL efforts to expand its outpatient medical and seniors housing portfolio through accretive acquisitions will be beneficial amid the growing demand for healthcare assets. However, the senior housing environment is expected to remain challenging in the near term, which is a concern for the company.
Notably, this healthcare real estate investment trust is focusing on strategic portfolio optimization and synergistic collaborations with health systems to invest in next-generation assets of health and wellness care delivery.
The company recently entered into a definitive agreement to acquire a portfolio of Class-A medical office buildings (MOBs) from Hammes Partners, for $787 million. Including this transaction, its year-to-date outpatient medical acquisitions aggregated $3.5 billion. Notably, the company is poised to add 450 properties, spanning 8 million square feet to its asset portfolio, with these buyouts.
Amid significant increase in outpatient visits and growing need for value-based care, these expansion efforts and strategic acquisitions are appropriate.
Further, with stronger demographics and increasing penetration rates, the company’s seniors housing operating portfolio is favorably positioned for growth in the upcoming period.
To pursue these growth opportunities and source future accretive transactions, Welltower has followed a conservative and consistent capital-sourcing policy, raising funds across both debt and equity markets.
However, rise in the supply of seniors housing assets in certain markets might impact Welltower’s performance in the near term. This is because elevated supply usually curtails landlords’ pricing power and limits growth in occupancy level.
Moreover, Welltower has resorted to aggressive asset disposals. Year to date through October, the company has sold $2.67 billion of assets, including $558 million of post-acute transactions. Though such efforts to improve its portfolio mix are commendable, the near-term dilutive impact on earnings from these asset dispositions cannot be bypassed.
Shares of this Zacks Rank #3 (Hold) company have rallied 5.7%, outperforming its industry’s growth of 4.2%, over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duke Realty Corporation DRE currently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for the ongoing year’s funds from operations (FFO) per share has been revised marginally upward to $1.44 over the past week.
Healthcare Realty Trust Incorporated HR holds a Zacks Rank of 2, at present. The company’s FFO per share estimate for 2019 moved 1.2% north to $1.60 over the past 30 days.
Cousins Properties Incorporated CUZ currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for the ongoing year’s FFO per share climbed 1.4% to $2.94 in a month’s time.
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