Welltower (WELL) Q4 FFO Beat Estimates, SHO Occupancy Rises
Welltower Inc.’s WELL fourth-quarter 2023 normalized funds from operations (FFO) per share of 96 cents surpassed the Zacks Consensus Estimate of 94 cents. The reported figure improved 15.7% year over year.
Results reflect better-than-anticipated revenues. The total same-store net operating income (SSNOI) increased year over year, driven by SSNOI growth in the seniors housing operating (SHO) portfolio. The company issued its guidance for 2024.
WELL recorded revenues of $1.75 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.71 billion. Moreover, the top line increased 15.2% year over year.
For 2023, the company reported a normalized FFO per share of $3.64, up from the prior year’s $3.35. Moreover, the reported figure surpassed the Zacks Consensus Estimate of $3.61. The total revenues of $6.64 billion improved 13.3% year over year and beat the consensus mark of $6.60 billion.
Concurrent with the fourth-quarter earnings release, WELL entered into a definitive agreement to acquire a portfolio of 25 age-restricted active adult communities from Affinity Living Communities for $969 million. The transaction is expected to be funded by cash and the assumption of $523 million of below-market-rate debt with an average interest rate of 3.8%. After the completion of the deal, subject to customary closing conditions, WELL will significantly expand its market leadership with a total of around 25,000 units.
Quarter in Detail
The SHO portfolio’s same-store revenues increased 9.7% year over year, backed by a 330-basis point uptick in average occupancy.
In the fourth quarter, property operating expenses flared up 10.4% to $1.04 billion year over year.
The company’s total portfolio SSNOI grew 12.5% year over year, supported by SSNOI growth in its SHO portfolio of 23.7%.
WELL’s pro-rata gross investments in the fourth quarter totaled $3 billion. This included $2.8 billion in acquisitions and loan funding, and $277 million in development funding. It opened 11 development projects for a pro-rata investment amount of $335 million. Welltower also completed pro-rata property dispositions and loan payoffs of $43 million in the quarter.
Portfolio Activity
During the fourth quarter, Welltower acquired properties totaling $968 million (at company’s share) across seniors housing, wellness housing, outpatient medical and long-term/post-acute sectors largely across granular, privately-negotiated off-market transactions.
It also acquired a portfolio of ten seniors housing communities for $469 million from Kayne Anderson Real Estate. The portfolio, with an average age of 11 years, was acquired at a material discount to replacement cost.
Balance Sheet Position
As of Dec 31, 2023, WELL had $6.1 billion of available liquidity, comprising $2.1 billion of available cash and restricted cash, and full capacity under its $4 billion line of credit.
Dividend Update
On Feb 13, concurrent with its fourth-quarter 2023 earnings release, Welltower announced a cash dividend of 61 cents per share for the fourth quarter. The dividend will be paid out on Mar 7 to stockholders of record as of Feb 23, 2023. This will mark the company’s 211th consecutive quarterly cash dividend payout.
2024 Guidance
The company projects normalized FFO per share of $3.94-$4.10. The Zacks Consensus Estimate is pegged at $3.98, which lies within the company's guided range.
WELL’s guidance assumes the average blended SSNOI growth of 8.25-11.50%, comprising 15-21% growth in Seniors Housing Operating, 2.5-4.0% in Seniors Housing Triple-net, 2-3% in Outpatient Medical and 2-3% in Long-Term/Post-Acute Care.
Welltower expects to fund an additional $819 million of development in 2024 relating to projects underway as of Dec 31, 2023.
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-eps-surprise-chart | Welltower Inc. Quote
Performance of Other REITs
Healthpeak Properties, Inc. PEAK reported fourth-quarter 2023 FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure rose 4.5% year over year.
Results reflected better-than-anticipated revenues. Moreover, growth in same-store portfolio cash (adjusted) net operating income was witnessed across the portfolio. The company also issued its 2024 outlook.
Boston Properties Inc.’s BXP fourth-quarter 2023 FFO per share of $1.82 outpaced the Zacks Consensus Estimate by a penny. However, the reported figure fell 2.2% year over year.
BXP’s quarterly results reflect better-than-anticipated revenues on healthy leasing activity. However, higher interest expenses during the quarter marred its year-over-year FFO per share growth. BXP also issued its guidance for 2024 FFO per share.
Alexandria Real Estate Equities, Inc. ARE reported fourth-quarter 2023 adjusted funds from operations (AFFO) per share of $2.28, missing the Zacks Consensus Estimate by a penny. However, the reported figure climbed 6.5% year over year.
Results reflected lower-than-anticipated AFFO per share. However, a rise in revenues, aided by decent leasing activity and rental rate growth, supported the results to some extent. ARE also issued its 2024 outlook.
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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