Back to top

Image: Bigstock

Welltower (WELL) Expects 1Q21 FFO to Reach Top-End of Outlook

Read MoreHide Full Article

With the rise in vaccination coverage, first-quarter 2021 is likely to be a hopeful one for Welltower, Inc. (WELL - Free Report) , with occupancy erosions significantly moderating from the onset of the pandemic. In fact, in a recently-provided business update, the company announced that it expects to attain the top-end of its first-quarter 2021 normalized funds from operations (FFO) guidance of 71-76 cents.

Moreover, for first-quarter 2021, seniors housing operating or SHO occupancy was expected to sequentially decline 275-375 basis points (bps). Now, the company expects occupancy to “finish favorably to the midpoint” of this guided range.

In fact, the healthcare REIT recorded its lowest occupancy decline in March 2021 since the onset of the pandemic. Particularly, in March, occupancy declined by only 10 bps sequentially to 74%. At December 2020 end, total SHO portfolio occupancy was 76.3%. The moderation in occupancy loss is likely backed by a return to pre-COVID conditions, with the restart of in-person tours and the majority of communities accepting new residents. These factors have likely led to a sharp increase in move-ins compared to the beginning of 2021.

Also, the company expects virtually all of its assisted living and memory care communities to complete the final scheduled vaccinations by “early to mid April”. This is likely to propel occupancy stability.

The developments in the seniors housing industry have likely led to a surge in Welltower’s share performance.  Notably, the company’s shares have gained 18.3% over the past three months compared with the industry’s rally of 11.2%.



Welltower has also remained active on the investment and balance sheet front in first-quarter 2021. In this period, it completed $209 million of pro-rata acquisitions and $216 million of pro-rata dispositions.

Further, it issued $750 million of 2.800% senior unsecured notes due June 2031 and expects to use proceeds in part to fully redeem the remaining outstanding unsecured senior notes due in 2023 and for general corporate purposes. The redemption will eliminate any unsecured senior note maturities until 2024.

As of Mar 31, 2021, its near-term liquidity stood at $4.76 billion, consisting of $1.76 billion of cash and cash equivalents, and $3 billion of capacity remaining under its line of credit.

The company currently carries a Zacks Rank #4 (Sell).

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

While the industry beats back the pandemic through vaccination, immediate recovery is less likely. Notably, due to the pandemic, seniors housing operators have seen significant broad-based occupancy erosions and consequently, the landscape is likely to be competitive in 2021 and beyond as operators try to fill unoccupied units. This is concerning for REITs like Welltower, New Senior Investment Group (SNR - Free Report) , Diversified Healthcare Trust (DHC - Free Report) and Ventas, Inc. (VTR - Free Report) , which have meaningful seniors housing exposures.

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.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>