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Welltower Rides on Growth Curve With Strategic Developments

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Welltower has been making efforts to bring together modern healthcare centers and major health systems. Through these efforts the company is also enhancing the quality of its assets. Furthermore, this industry-leading healthcare real estate investment trust (REIT) has been resorting to innovative initiatives in a bid to add value to its portfolio.

Most recently, the company collaborated with Simon Property Group (SPG - Free Report) — a preeminent leader in the ownership of high quality retail and mixed-use properties — to provide an outpatient facility. Specifically, the outpatient facility will be opened in Simon-owned — The Shops — in Mission Viejo, CA. The 105,000-square-foot best-in-class center will offer a range of health and medical services, and focus on cancer care.

Moreover, Welltower is set to join forces with a prominent local health system which also has a hospital adjacent to the mall. Notably, the mall serves many nearby communities such as Ladera Ranch, Rancho Santa Margarita, San Juan Capistrano and Mission Viejo city. Further, it is conveniently located at the intersection of the I-5 and Crown Valley Parkway. Hence the facility will enjoy decent demand and the mall will witness higher footfall.

Importantly, this arrangement is the first time that a healthcare REIT, health system and Simon have come together to offer healthcare services in a dynamic location such as The Shops.

In other remarkable moves, Welltower has secured an institutional investor as a joint-venture partner for the development of a senior living building. Specifically, Welltower, in partnership with Hines, will develop the new senior living community at 56th Street and Lexington Avenue in Midtown Manhattan.    

Notably, the company’s business is focused on senior housing operating assets and the steady performance of this asset class demonstrates the rationale behind the increasing interest of institutional investors toward senior housing assets.

Also, Mark Shaver, currently the VP of Business Development and Strategic Alliances at Johns Hopkins Medicine, is set to join management of Welltower as SVP, Strategy. He has 20 years of experience in executing strategic initiatives at leading health systems and will work toward bringing together health systems, heath-care services providers and technology companies at Welltower.  

While Welltower is actively expanding its portfolio, the company continues to follow a disciplined deleveraging strategy and aims to reduce corporate overheads. In fact, it anticipates 2017 disposition proceeds to be around $2.4 billion, an increase from the previous outlook of $2 billion. Welltower is also set to dispose healthcare facilities leased to the skilled nursing giant — Genesis HealthCare (GEN - Free Report) . This will make the company’s capital structure more sustainable.

However, increased supply of senior housing assets remains a concern for the company. Further, shares of this Zacks Rank #3 (Hold) company have underperformed its industry, in the year so far. In fact, the stock has declined 5.5% compared with the industry’s gain of 4.4% during the same time period.


 

Better-ranked stocks in the REIT space include Franklin Street Properties (FSP - Free Report) , Columbia Property Trust and MedEquities Realty Trust (MRT - Free Report) . All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Franklin Street Properties’ funds from operations (FFO) per share estimates for 2017 remained unchanged at $1.05 over the past month. Its share price has increased 0.5% in three months’ time.

Columbia Property Trust’s FFO per share estimates for the current year have remained unchanged at $1.15 in a month’s time. Over the past three months, the stock has gained 5.3%.

MedEquities Realty’s 2017 FFO per share estimates remained unchanged at $1.12 over the past month. The stock has been down 5% for the past three months.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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