Welltower (WELL) Picks Optima Living to Manage Seniors Communities
Welltower Inc. WELL recently partnered with Optima Living, a premier operator of seniors residences, to manage six seniors communities in Western Canada. The company’s latest move is part of its efforts to improve operator diversification across its portfolio, which is encouraging.
The communities, offering upscale seniors living and private long-term care services, are located in Red Deer and Medicine Hat, Alberta, and Victoria, British Columbia.
The collaboration strengthens the private pay space in seniors housing in Western Canada. Also, WELL’s recent move seems prudent, given that Optima Living achieved more than 90% occupancy rates at its seniors communities during the pandemic.
The transfer of management to Optima Living is expected to take place on Oct 1, 2023, subject to regulatory approval.
Per Edward Cheung, senior vice president - International Investments of Welltower, “We were looking for a regional partner that had the capacity and expertise to manage our assets and we are confident in our choice of Optima Living. We look forward to further growth together in the future.”
Welltower owns a well-diversified portfolio of healthcare real estate assets in the major, high-growth markets of the United States, Canada and the United Kingdom. It usually leases its healthcare facilities under "triple net" leases, where the tenant pays all taxes, insurance and maintenance for the properties in addition to rent.
It also focuses on establishing business relationships and expanding such tie-ups with experienced healthcare management companies or operators who lease these properties on a long-term basis. These efforts insulate it from short-term market swings and drive steady top-line growth.
Furthermore, Welltower’s seniors housing operating (SHO) portfolio has benefited from the continued rise in senior citizens’ healthcare expenditure, which is generally higher than the average population. An influx in move-in activity in the wake of the pandemic has aided occupancy levels in these communities. Muted new supply has been another positive for this industry.
During the second quarter of 2023, the SHO portfolio’s same-store net operating income (SSNOI) climbed 24.2% year over year, driving total portfolio SSNOI growth of 12.7%.
With senior citizens’ healthcare expenditure expected to rise in the coming years and favorable demand-supply fundamentals in its markets, Welltower’s SHO portfolio is well-poised to prosper.
Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for the company’s 2023 FFO per share has been raised marginally over the past week to $3.53.
Its shares have gained 21.8% in the year-to-date period against the industry’s fall of 5.7%.
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Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are SBA Communications SBAC, Americold Realty Trust COLD and Omega Healthcare Investors OHI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for SBA Communications’ current-year FFO per share has moved 1.4% northward over the past month to $12.86.
The Zacks Consensus Estimate for Americold Realty Trust’s 2023 FFO per share has been raised 1.6% upward over the past month to $1.23.
The Zacks Consensus Estimate for Omega Healthcare’s ongoing year’s FFO per share has been raised marginally upward over the past month to $2.83.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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