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Welltower (WELL) Q4 FFO Tops Estimates, NOI & Revenues Dip

Welltower Inc. WELL reported normalized funds from operations (FFO) per share of 84 cents in fourth-quarter 2020, which surpassed the Zacks Consensus Estimate of 77 cents. However, the reported figure compares unfavorably with the year-ago quarter’s figure of $1.05.

Moreover, it generated revenues of $1.12 billion, which missed the Zacks Consensus Estimate by 0.22%. The top line also declined 11% year over year.

While gains on real estate disposals aided better-than-expected FFO per share, the company’s seniors housing operating (“SHO”) portfolio continued to be affected by the coronavirus pandemic. In fact, a decline in occupancy impeded same-store net operating income (NOI) growth.

For 2020, Welltower reported normalized FFO per share of $3.56, down 14% from the prior year’s $4.16. The figure beat the Zacks Consensus Estimate of $3.50. Total revenues of $4.6 billion slipped 10% year over year.

Quarter in Detail

For the fourth quarter, total same-store NOI declined 15.3% year over year. Specifically, same-store NOI for the SHO portfolio and seniors housing triple-net segments declined 33.8% and 2.7%, respectively.

Nonetheless, the same for outpatient medical, health systems and long-term/post-acute care properties improved 2.1%, 2.7% and 2%, respectively, over the prior-year quarter.

Portfolio Activity

Welltower's pro-rata gross investments in the fourth quarter totaled $703 million. This included $506 million in loan funding, $176 million in development funding and $21 million of loan funding.

Apart from this, the company completed property dispositions of $674 million.

Balance Sheet Position

It exited the quarter with $2 billion of cash and cash equivalents, up from $284.9 million recorded in the prior-year quarter. In addition, as of Dec 31, 2020, it had $3 billion of available borrowing capacity under its unsecured credit facility.

As of Feb 8, the company had near-term liquidity of $5.1 billion and no material senior unsecured note maturities until 2023.

Dividend Update

On Feb 9, Welltower announced a cash dividend of 61 cents per share for the fourth quarter. The dividend will be paid out on Feb 26 to stockholders of record as of Feb 22. This marks the company’s 199th consecutive quarterly cash dividend payout.

COVID-19 Update

The company’s SHO portfolio witnessed a spot occupancy sequential decline of 220 basis points (bps) in the fourth quarter. Following a sharp increase in COVID-19 cases and the implementation of shelter-in-place orders across many of the company’s markets, occupancy erosion continued in January and February.

In fact, spot occupancy witnessing a sequential decline of 140 bps to 74.8% in January. Through Feb 5, total SHO portfolio occupancy declined by another 40 bps to 74.4%. Moreover, the company’s same-store SHOP pro-rata pandemic-related property level expenses were $19 million for the fourth quarter.

For first-quarter 2021, occupancy is expected to sequentially decline 275-375 bps.

Further, Welltower collected 97% of fourth-quarter rents from its triple-net lease operators. In its outpatient medical segment, the company collected 98% of fourth-quarter rents.

Guidance

The company expects first-quarter 2021 normalized FFO per share of 71-76 cents. The Zacks Consensus Estimate for the same is 74 cents.

Currently, the company carries a Zacks Rank #4 (Sell).

Welltower Inc. Price, Consensus and EPS Surprise

 

Welltower Inc. price-consensus-eps-surprise-chart | Welltower Inc. Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like SBA Communications Corporation SBAC, PS Business Parks, Inc. PSB and Extra Space Storage EXR, whichare slated to report fourth-quarter earnings on Feb 22.

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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