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Welltower (WELL) Sees Seniors Housing Occupancy Gains in June

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Going by its recent business update, Welltower Inc.’s WELL seniors housing operating (“SHO”) portfolio is seeing a recovery in occupancy. In fact, quarter to date through Jun 18, 2021, the SHO portfolio occupancy expanded 140 basis points (bps), surpassing the company’s initial guidance of around 130 bps gain for the full second quarter. Moreover, total portfolio occupancy advanced 180 bps from the pandemic-induced low on Mar 12, 2021.

Since the beginning of the quarter through Jun 18, 2021, the company’s U.S. and U.K. SHO portfolios reported occupancy gains of roughly 210 bps and 170 bps, respectively. In addition, though the Canada SHO portfolio saw an occupancy decline of 50 bps through the first two months of the second quarter, it was flat, month to date, through Jun 18.

The return of many communities to pre-COVID conditions helped this performance, with move-in activity remaining solid through June. Additionally, strong sales activity is likely to support this tempo in the near term.

Notably, acceleration in vaccinations has reduced resident cases while the relaxation of restrictions has enabled the majority of the company’s communities to restart accepting residents, resulting in higher move-in activity and occupancy growth in recent weeks. The resumption of in-person tours, indoor visitation, communal dining and social activities at Welltower’s communities is also encouraging. In Canada, a roughly 80% decrease in new COVID-19 cases has led to a lessening in occupancy declines in recent weeks.

Besides, the outlook looks encouraging, as historically, the months of June through October denote the seasonally strongest period of lead generation and occupancy gain for the seniors housing industry. Also, the reopening of certain states, where the company has considerable presence, including California and Washington, is raising hopes.

Welltower also expects to receive a total of $838 million in pro rata disposition proceeds through Jun 30, 2021 and an additional $618 million in disposition proceeds in the second half of 2021 from assets held for sale as of first quarter.

In the wake of aging baby boomers, Welltower’s communities will likely absorb vacancy at a faster pace. Amid such encouraging prospects for recovery, the company’s efforts to magnify focus on senior living asset class are commendable. Recently, this healthcare REIT behemoth inked an agreement to acquire 86 communities to be operated by a combined Atria and Holiday entity for $1.58 billion. The move is a strategic fit for Welltower, given the significant cash flow growth scope from the recovery in seniors housing and portfolio reinvestment.

However, expenses might continue flaring up due to additional health and safety measures adopted in light of the pandemic. Hence, amid such rising expenses, the company is likely to witness strain on margins in the time to come.

Shares of this Zacks Rank #3 (Hold) company have gained 29.4% over the past six months compared with the industry's growth of 19.7%.

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