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Welltower Gives May Portfolio, Disposition & Liquidity Update

Zacks Equity Research
·4 min read

Welltower Inc. WELL announced an update on the seniors housing operating (SHO) portfolio, triple-net portfolio, outpatient medical portfolio, disposition transactions and liquidity status.

SHO Portfolio

Notably, new admissions continue to be restricted for around 39% of SHO properties as of May 29. Moreover, during May, move-ins declined year over year to nearly 79%. Low move-in activities and ban on admissions likely drove an occupancy decline.

The company announced the SHO portfolio’s spot occupancy of 81.1% as of May 29, 2020. This indicates a decline of around 150 basis points (bps) since May 1.

Nonetheless, it witnessed a slowing pace of occupancy declines in the second half of May.

The company continues to expect SHO portfolio occupancy to witness a sequential decline of 500-600 bps in the second quarter.

Moreover, total SHO portfolio expenses for the April-June quarter are anticipated to increase by 5% sequentially, primarily driven by a rise in labor expenses. In fact, the company incurred $18 million in the coronavirus outbreak-related expenses, labor costs and procurement of personal protective equipment (PPE) in April.

Outpatient Medical &Triple-Net Portfolio

The outpatient medicalportfolio’s occupancy as of May 29, 2020, was 93.8%. Moreover, the company has collected or approved deferral requests for 98% of its May rents.

It continues to capitalize on the favorable secular trends and growing need for value-based care in its medical office asset class as indicated by lease renewal activity. In fact, the company executed a renewal lease for 86% of leases expiring in the second quarter.

It also received 94% of May rents in its triple-net portfolio.

Dispositions and Liquidity Position

Post first-quarter earnings, the company’s dispositions aggregated $1.3 billion across two transactions. This included the two-phased sale of a $1-billion portfolio of seven seniors housing and 29 outpatient medical properties as well as a $300-million portfolio of six seniors housing assets in the Midwest.

The first tranche of the $1-billion portfolio sale closed in May. The company disposed of six seniors housing assets and 12 outpatient medical assets for gross proceeds of $429 million. The second tranche of the transaction is expected to close in July 2020 for gross proceeds of $360 million. 

The $300-million portfolio was closed on May 29 for $228 million.

With this, the company completed $1.5 billion in pro-rata dispositions year to date. It also expects proceeds of $312 million from assets held for sale for the remainder of the year.

Through the dispositions, the company also enhanced its near-term liquidity to more than $4.6 billion.

Price Performance

Moreover, shares of the Zacks Rank #3 (Hold) company have declined 28.9% over the past year compared with its industry’s decline of 3%.


Stocks to Consider

Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has been unchanged at 83 cents over the past month. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

One Liberty Properties, Inc.’s OLP FFO per share estimate for the ongoing year has been unchanged at $1.89 over the past 30 days. The company currently flaunts a Zacks Rank of 1.

Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has moved 3% upward to 68 cents over the past month. Further, it currently carries a Zacks Rank of 2 (Buy).

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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