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Welltower (WELL) Beats on Q2 FFO and Revenues, Forms 2 JVs

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Welltower Inc. WELL reported normalized funds from operations (FFO) per share of 79 cents in second-quarter 2021, which surpassed the Zacks Consensus Estimate of 77 cents. However, the reported figure compares unfavorably with the year-ago quarter’s 86 cents.

The company generated revenues of $1.14 billion, outpacing the Zacks Consensus Estimate of $1.10 billion. The top line, however, declined 4% year over year.

Welltower seniors housing operating (“SHO”) portfolio is seeing a recovery in occupancy. Also, the return of many communities to pre-COVID conditions aided its performance, with move-in activity being solid through June.

Concurrent with the second-quarter earnings release, Welltower announced the formation of a joint venture (JV) with real estate developer Aspect Health. As per the partnership, Welltower will make an investment in Aspect Health's existing portfolio of six properties and an under-construction medical office building located in the New York City metropolitan area.

Moreover, the company announced the expansion of its partnership with Oakmont Management Group. Through the buyout of new management contracts, both companies will strengthen its foothold in California. Welltower has also signed a long-term exclusive development agreement with Oakmont.

With the above-mentioned moves, the company will likely expand its footprint in New York and California.

Quarter in Detail

Welltower's pro-rata gross investments in the second quarter totaled $1.5 billion. This included $1.4 billion in acquisitions, and $142 million in development funding.

Apart from this, the company completed property dispositions and loan payoffs of $541 million.

Balance Sheet Position

Welltower exited the second quarter with $513.6 million of cash and cash equivalents, down from the $1.7 billion recorded in the prior-year quarter.

As of Jun 30, the company had near-term liquidity of $4.8 billion and no material senior unsecured note maturities until 2024.

Dividend Update

On Jul 29, Welltower announced a cash dividend of 61 cents per share for the second quarter. The dividend will be paid out on Aug 19 to stockholders of record as of Aug 12, 2021. This marks the company’s 201st consecutive quarterly cash dividend payout.

COVID-19 Update

The company’s SHO portfolio witnessed a sequential expansion of 200 basis points (bps) in spot occupancy to 74.6% in June from 72.6% in March.

From Jul 1 through Jul 23, SHO portfolio occupancy improved nearly 40 bps. In the United States and the U.K., it witnessed occupancy gains of 60 bps and 30 bps respectively. Nonetheless, occupancy remained flat in Canada.

Guidance

Welltower has announced the acquisition of an 86 property seniors housing portfolio for $1.58 billion. This move will likely be immediately accretive to normalized FFO per diluted share.

The company projects third-quarter 2021 normalized FFO per share of 78-83 cents. The Zacks Consensus Estimate for the same is pegged at 79 cents.

For third-quarter 2021, occupancy is expected to sequentially advance 190 bps.

Currently, the company carries a Zacks Rank #2 (Buy). 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 Other REITs

Prologis, Inc. PLD came up with second-quarter core FFO per share of $1.01, surpassing the Zacks Consensus Estimate of 99 cents. Results underlined all-time low vacancies in its markets that aided rent growth and valuation increases.

Boston Properties Inc.’s BXP second-quarter 2021 FFO per share of $1.72 beat the Zacks Consensus Estimate of $1.61. The quarterly figure also exceeded the mid-point of the company’s second-quarter guidance by 12 cents, highlighting an improved portfolio performance, and better-than-projected parking, hotel, retail and termination income.

Highwoods Properties, Inc.’s HIW quarterly FFO per share of 93 cents topped the Zacks Consensus Estimate by a cent. Rental and other revenues of $185.5 million outpaced the consensus mark of $184.9 million.

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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