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Welltower (WELL) Q2 FFO Tops, SHO Occupancy Up, '23 View Raised

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Welltower Inc.’s (WELL - Free Report) second-quarter 2023 normalized funds from operations (FFO) per share of 90 cents surpassed the Zacks Consensus Estimate of 86 cents. The reported figure improved 4.7% from the prior-year quarter’s actual.

Results reflect better-than-anticipated revenues. The total same-store net operating income (SSNOI) increased year over year, driven by SSNOI growth in the seniors housing operating (SHO) portfolio. The company also raised its guidance for 2023 normalized FFO per share.

WELL clocked in revenues of $1.67 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.59 billion. Moreover, the top line increased 13.1% year over year.

Quarter in Detail

The SHO portfolio’s same-store revenues increased 9.9% year over year, backed by a 190-basis point uptick in average occupancy from the year-ago quarter. A 7.3% year-over-year rise in same-store revenue per occupied room (REVPOR) was another contributing factor.

In the second quarter, property operating expenses flared up 12.2% to $958.7 million year over year.

The company’s total portfolio SSNOI grew 12.7% year over year, supported by SSNOI growth in its SHO portfolio of 24.2%.

WELL’s pro-rata gross investments in the second quarter totaled $414 million. This included $164 million in acquisitions and loan funding, and $250 million in development funding. It opened nine development projects for a pro-rata investment amount of $315 million. Welltower also completed pro-rata property dispositions and loan payoffs of $433 million in the quarter.

Portfolio Activity

In the quarter, WELL entered into definitive agreements to dissolve its existing joint venture (JV) with Revera across the United States, the United Kingdom and Canada. Through this, the company will acquire the remaining interests in 110 properties from Revera. WELL will simultaneously divest interests in 31 properties to the Revera.

In May 2023, as part of the March 2021 Genesis transactions related to the seven facilities, Welltower carried out a set of transactions that included the assignment of the leasehold interest to a newly formed tri-party unconsolidated JV with Aurora Health Network, Peace Capital (an affiliate of Complete Care Management) and Welltower. The JV closed the transaction by exercising the $66 million purchase option. The deal yielded net cash proceeds of $104 million for Welltower.

Balance Sheet Position

As of Jul 28, 2023, WELL had $6.7 billion of available liquidity comprising $2.7 billion of available cash and restricted cash and full capacity under its $4.0 billion line of credit.

Dividend Update

On Jul 31, concurrent with its second-quarter 2023 earnings release, Welltower announced a cash dividend of 61 cents per share for the second quarter. The dividend will be paid out on Aug 23 to stockholders of record as of Aug 15, 2023. This will mark the company’s 209th consecutive quarterly cash dividend payout.

2023 Guidance Raised

Welltower now projects 2023 normalized FFO per share of $3.48-$3.59, up from the prior-guided range of $3.43-$3.56. The Zacks Consensus Estimate for the same is pegged at $3.50, which lies within the guided range.

The company’s full-year guidance now assumes the average blended SSNOI growth of 10-13%, comprising 20-25% growth in Seniors Housing Operating, 1-3% in Seniors Housing Triple-net, 2-3% in Outpatient Medical and 3-4% in Long-Term/Post-Acute Care.

Welltower expects to fund an additional $441 million of development in 2023 relating to projects underway as of Jun 30, 2023.

Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Welltower Inc. Price, Consensus and EPS Surprise Welltower Inc. Price, Consensus and EPS Surprise

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

Performance of Other REITs

Healthpeak Properties, Inc. reported second-quarter 2023 FFO as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure improved 2.3% from the year-ago quarter.

PEAK’s results reflected better-than-anticipated revenues. Moreover, year-over-year improvement in same-store portfolio cash (adjusted) net operating income (NOI) was witnessed across the portfolio. The company revised its 2023 outlook.

Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported second-quarter 2023 adjusted FFO (AFFO) per share of $2.24, surpassing the Zacks Consensus Estimate of $2.20. The reported figure climbed 6.7% from the year-ago quarter’s tally.

ARE’s results reflected better-than-expected revenues on healthy leasing activity and solid rental rate growth.

American Tower Corporation (AMT - Free Report) reported second-quarter 2023 AFFO per share, attributable to AMT common stockholders, of $2.46, beating the Zacks Consensus Estimate of $2.36.

Results reflected better-than-anticipated revenues, aided by improving revenues across its Property segment. American Tower recorded healthy year-over-year organic tenant billings growth of 6.2% and total tenant billings growth of 7.2%. It also revised its 2023 outlook.

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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