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Welltower (WELL) Ups Q2 Guidance, Boosts Financial Flexibility

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Welltower Inc. (WELL - Free Report) raised its guidance for second-quarter 2021 and announced expanded $4.7 billion unsecured credit facility.

Particularly, this behemoth in healthcare REIT now expects to achieve normalized funds from operations ("FFO") per share in a range of 75-79 cents, marking a 2.5 cents increase at the midpoint from the prior guidance of 72-77 cents.

In its business update, the REIT noted that its seniors housing operating (“SHO”) portfolio is seeing a recovery with occupancy trending ahead of expectations. In fact, quarter to date through Jun 4, 2021, spot occupancy expanded 120 basis points (bps) compared with the initial guidance of around 130 bps gain for the full quarter.

Particularly, its SHO portfolio spot occupancy ended at 73.8% as of Jun 4, 2021. This marks an approximate occupancy gain of 150 bps since the pandemic-induced low on Mar 12, 2021. In fact, through Jun 4, 2021, the U.S. and U.K. SHO portfolios reported occupancy gains of roughly 240 bps and 140 bps, respectively, since the pandemic-induced low.

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 considerable decrease in COVID-19 cases has led to a lessening in occupancy declines in recent weeks, with occupancy falling only 10 bps in May.

The company also disclosed closing of approximately $350 million of pro rata gross investments since its prior business update issued on May 19, 2021.

Moreover, the outlook remains 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.
Separately, the company announced closing of an expanded $4.0 billion unsecured revolving line of credit, replacing its existing line of credit of roughly $3.0 billion. It bears an interest rate of LIBOR plus 77.5bps, representing a 5 bps improvement from pricing under the prior unsecured revolving line of credit.

Welltower has two existing term facilities which will remain outstanding – a $500 million term loan and a CAD 250 million term loan ($206.6 million at exchange rates as of Jun 2, 2021). Notably, the revolving facility comprises a $1 billion tranche maturing on Jun 4, 2023 and a $3 billion tranche that matures on Jun 4, 2025. The term facilities will mature on Jul 19, 2023. The move boosts its liquidity profile and indicates the company’s solid access to capital.

However, expenses are expected to continue to remain elevated 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 near term.

Shares of this Zacks Rank #3 (Hold) company have gained 22.1% over the past six months compared with the industry's growth of 21.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Industrial Logistics Properties Trust’s (ILPT - Free Report) Zacks Consensus Estimate for 2021 FFO per share for the current year moved up marginally to $1.88 in the past month. The company currently carries a Zacks Rank of 2 (Buy).

OUTFRONT Media Inc.’s (OUT - Free Report) estimate for 2021 FFO per share has moved nearly 6% north to 89 cents in two months’ time. Currently, the company carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. (BHR - Free Report) holds a Zacks Rank of 2 at present. The consensus estimate for the ongoing year’s FFO per share has been revised 37.5% upward to 44 cents over the past month.

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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