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Welltower's (WELL) Seniors Housing Occupancy Slips in February

While Welltower Inc. WELL continues to make solid strides on the portfolio front with operator transitions and non-strategic sales; continued senior housing woes, exacerbated by the pandemic, have been affecting its performance.

The operating environment for senior housing properties remains challenging amid the surge in global COVID-19 cases. This has been affecting occupancy, move-ins and move-outs at the company’s seniors housing operating assets.

According to a business update, total seniors housing operating (SHO) portfolio occupancy continued to decline, slipping 220 basis points from 76.2% on Dec 31, 2020, to 74% as of Feb 28, 2021.

This likely reflects the adverse effects of the resurgence of COVID-19 cases in December and January that is anticipated to have compelled operators to reinstate admission bans.  In fact, as of mid-January, 84% of the company’s communities were accepting new residents. The number improved to 95% as of Feb 28, 2021. This will limit occupancy losses in the upcoming period.

Moreover, the company noted elevated cleaning and PPE protocols. Hence, operating expenses are expected to continue to be high due to rising labor costs and procurement cost of protective-equipment supplies. Further, with occupancy declines and rising expenses, the company is likely to witness net operating income (NOI) erosions in the near term.

Amid these concerns, the speedy vaccination process at Welltower’s seniors housing communities is reassuring. In fact, the company noted that nearly all assisted living/memory care communities have finished the first vaccine clinic, while many have completed the second clinic as well.

Markedly, while the seniors housing industry beats back the pandemic through vaccination, immediate recovery is less likely and will drag the company’s near-term performance.

Welltower currently carries a Zacks Rank #5 (Strong Sell). In the past year, the company’s shares have declined 10.9%, wider than the industry's fall of 2.1%.

 

 

Stocks to Consider

Extra Space Storage Inc.’s EXR Zacks Consensus Estimate for 2021 FFO per share has moved up 2.5% to $5.66 in the past week. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JBG SMITH Properties JBGS Zacks Consensus Estimate for 2021 FFO per share has been unchanged at $1.48 in a month’s time. The company has a Zacks Rank of 2 at present.

American Tower Corporation’s AMT FFO per share estimate for the current year has moved up marginally to $9.41 in the past week. The company carries a Zacks Rank of 2, currently.

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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