Welltower Reports Third Quarter 2020 Results
Recent Highlights
- Reported net income attributable to common stockholders of
$0.77 per diluted share - Reported normalized FFO attributable to common stockholders of
$0.84 per diluted share - Completed
$1.4 billion of pro rata dispositions at a blended yield of 5.3% - Reported net debt to Adjusted EBITDA of 6.02x as of
September 30, 2020 and enhanced near-term liquidity profile to$5.2 billion , including$2.2 billion of cash and cash equivalents as ofOctober 26, 2020 - Total Seniors Housing Operating ("SHO") portfolio occupancy declined approximately 150 basis points during the third quarter, in line with our outlook of a decline of 125 to 175 basis points resulting in a sequential decline in SSNOI growth of (1.1)%
Leadership Updates
- Appointed Shankh Mitra as Chief Executive Officer and a member of the Board of Directors.
Mr. Mitra will retain his title of Chief Investment Officer and will continue to leadWelltower's data-driven approach to capital allocation and our operator relationships - Named
Kenneth Bacon as Chairman of the Board of Directors, who will lead the Board and oversee the leadership team as they execute on the Company's strategy to create long-term shareholder value - Appointed
Philip Hawkins to the Board of Directors.Mr. Hawkins currently serves as Executive Chairman ofLink Logistics Real Estate ,Blackstone's U.S. logistics real estate portfolio company, and previously served as President and Chief Executive Officer ofDCT Industrial Trust
COVID-19 Update
Seniors Housing Operating Portfolio Consistent with the most recent three months, 96% of communities are currently accepting new residents. Recent occupancy rates are as follows:
February |
March |
April |
May |
June |
July |
August |
September |
||||||||||||||||||
Spot occupancy (1) |
85.6 |
% |
84.8 |
% |
82.5 |
% |
80.8 |
% |
79.9 |
% |
79.2 |
% |
78.7 |
% |
78.4 |
% |
|||||||||
Sequential occupancy change |
(0.8) |
% |
(2.3) |
% |
(1.7) |
% |
(0.9) |
% |
(0.7) |
% |
(0.5) |
% |
(0.3) |
% |
|||||||||||
(1) Spot occupancy represents approximate month end occupancy for properties in operation as of |
Month-to-date, through
Our share of property-level expenses associated with the COVID-19 pandemic relating to our total SHO portfolio, net of reimbursements, totaled approximately
In September applications were made for Provider Relief Funds related to our SHO portfolio following the announcement from the
As of
Rent Collections During the third quarter, we collected approximately 98% of rent due from operators under Triple-net lease agreements (primarily seniors housing and post-acute care facilities). In the Outpatient Medical ("OM") segment we have either collected or approved short term deferrals for over 99% of rent due in the third quarter, consisting of 97% cash collections and 2% short term deferrals. In most cases deferred rent represents two months of rent with repayment generally expected by the end of the year. Furthermore, collections of deferred rent due in the third quarter under executed deferrals was over 99%.
Genesis Healthcare Update As a result of Genesis Healthcare noting substantial doubt as to their ability to continue as a going concern we have written off all existing straight-line rent receivable balances and revised our method of revenue recognition to a cash-basis accounting method from a straight-line accounting method, effective
Capital Activity and Liquidity On
Inclusive of available borrowings under our line of credit and cash and cash equivalents, at
Dividend On
Notable Portfolio Transactions
Invesco Outpatient Medical Joint Venture As previously announced, we expanded our partnership with
Post Quarter Portfolio Transactions
StoryPoint Senior Living Acquisition We entered into an agreement to acquire a portfolio of 25 assisted living and memory care communities located throughout the Midwest. In October, we closed on the first tranche of 11 properties for
Northbridge Senior Housing Disposition In October, we sold a portfolio of SHO properties operated by
Conference Call Information We have scheduled a conference call on
Supplemental Reporting Measures We believe that net income and net income attributable to common stockholders ("NICS"), as defined by
Historical cost accounting for real estate assets in accordance with
We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations or transaction costs. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. SSNOI is used to evaluate the operating performance of our properties using a consistent population which controls for changes in the composition of our portfolio. As used herein, same store is generally defined as those revenue-generating properties in the portfolio for the relevant year-over-year reporting periods. Acquisitions and development conversions are included in the same store amounts five full quarters after acquisition or being placed into service. Land parcels, loans and sub-leases, as well as any properties sold or classified as held for sale during the period, are excluded from the same store amounts. Redeveloped properties (including major refurbishments of a Seniors Housing Operating property where 20% or more of units are simultaneously taken out of commission for 30 days or more or Outpatient Medical properties undergoing a change in intended use) are excluded from the same store amounts until five full quarters post completion of the redevelopment. Properties undergoing operator transitions and/or segment transitions are also excluded from the same store amounts until five full quarters post completion of the operator transition or segment transition. In addition, properties significantly impacted by force majeure, acts of God or other extraordinary adverse events are excluded from same store amounts until five full quarters after the properties are placed back into service. SSNOI excludes non-cash NOI and includes adjustments to present consistent property ownership percentages and to translate Canadian properties and
We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and Internal Revenue Code ("IRC") Section 1031 deposits. We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The ratios are based on EBITDA and Adjusted EBITDA. EBITDA is defined as earnings (net income per income statement) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding unconsolidated entities and including adjustments for stock-based compensation expense, provision for loan losses, gains/losses on extinguishment of debt, gains/losses/impairments on properties, gains/losses on derivatives and financial instruments, other expenses, additional other income and other impairment charges. We believe that EBITDA and Adjusted EBITDA, along with net income, are important supplemental measures because they provide additional information to assess and evaluate the performance of our operations. Our leverage ratios include net debt to Adjusted EBITDA. Net debt is defined as total long-term debt, excluding operating lease liabilities, less cash and cash equivalents and any IRC Section 1031 deposits.
Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and ratings agencies in the valuation, comparison, rating and investment recommendations of companies. Our management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, they are utilized by the Board of Directors to evaluate management. The supplemental reporting measures do not represent net income or cash flow provided from operating activities as determined in accordance with
About
Forward-Looking Statements and Risk Factors This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When
|
||||||||
Financial Exhibits |
||||||||
Consolidated Balance Sheets (unaudited) |
||||||||
(in thousands) |
||||||||
|
||||||||
2020 |
2019 |
|||||||
Assets |
||||||||
Real estate investments: |
||||||||
Land and land improvements |
$ |
3,386,072 |
$ |
3,370,841 |
||||
Buildings and improvements |
27,782,471 |
28,798,241 |
||||||
Acquired lease intangibles |
1,509,053 |
1,604,982 |
||||||
Real property held for sale, net of accumulated depreciation |
362,886 |
336,649 |
||||||
Construction in progress |
414,833 |
466,286 |
||||||
Less accumulated depreciation and intangible amortization |
(6,002,775) |
(5,769,843) |
||||||
Net real property owned |
27,452,540 |
28,807,156 |
||||||
Right of use assets, net |
480,861 |
536,689 |
||||||
Real estate loans receivable, net of credit allowance |
414,706 |
361,530 |
||||||
Net real estate investments |
28,348,107 |
29,705,375 |
||||||
Other assets: |
||||||||
Investments in unconsolidated entities |
822,586 |
556,854 |
||||||
|
68,321 |
68,321 |
||||||
Cash and cash equivalents |
1,603,740 |
265,788 |
||||||
Restricted cash |
551,593 |
64,947 |
||||||
Straight-line rent receivable |
334,203 |
432,616 |
||||||
Receivables and other assets |
813,047 |
770,054 |
||||||
Total other assets |
4,193,490 |
2,158,580 |
||||||
Total assets |
$ |
32,541,597 |
$ |
31,863,955 |
||||
Liabilities and equity |
||||||||
Liabilities: |
||||||||
Unsecured credit facility and commercial paper |
$ |
— |
$ |
1,334,586 |
||||
Senior unsecured notes |
11,321,573 |
9,730,047 |
||||||
Secured debt |
2,459,659 |
2,623,010 |
||||||
Lease liabilities |
427,842 |
454,538 |
||||||
Accrued expenses and other liabilities |
1,041,368 |
1,025,704 |
||||||
Total liabilities |
15,250,442 |
15,167,885 |
||||||
Redeemable noncontrolling interests |
330,053 |
470,341 |
||||||
Equity: |
||||||||
Common stock |
418,361 |
406,498 |
||||||
Capital in excess of par value |
20,835,022 |
19,796,676 |
||||||
|
(94,022) |
(78,843) |
||||||
Cumulative net income |
8,163,869 |
7,129,642 |
||||||
Cumulative dividends |
(13,088,891) |
(11,870,244) |
||||||
Accumulated other comprehensive income |
(126,469) |
(117,676) |
||||||
Other equity |
4 |
12 |
||||||
|
16,107,874 |
15,266,065 |
||||||
Noncontrolling interests |
853,228 |
959,664 |
||||||
Total equity |
16,961,102 |
16,225,729 |
||||||
Total liabilities and equity |
$ |
32,541,597 |
$ |
31,863,955 |
Consolidated Statements of Income (unaudited) |
||||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||
|
|
|||||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||||
Revenues: |
||||||||||||||||||
Resident fees and services |
$ |
740,956 |
$ |
834,121 |
$ |
2,360,488 |
$ |
2,616,491 |
||||||||||
Rental income |
275,046 |
412,147 |
1,061,311 |
1,178,817 |
||||||||||||||
Interest income |
16,750 |
15,637 |
48,060 |
48,112 |
||||||||||||||
Other income |
4,122 |
4,228 |
14,092 |
15,064 |
||||||||||||||
Total revenues |
1,036,874 |
1,266,133 |
3,483,951 |
3,858,484 |
||||||||||||||
Expenses: |
||||||||||||||||||
Property operating expenses |
634,717 |
655,588 |
1,977,262 |
2,027,522 |
||||||||||||||
Depreciation and amortization |
255,532 |
272,445 |
795,704 |
764,429 |
||||||||||||||
Interest expense |
124,851 |
137,343 |
393,215 |
423,911 |
||||||||||||||
General and administrative expenses |
31,003 |
31,019 |
100,546 |
100,042 |
||||||||||||||
Loss (gain) on derivatives and financial instruments, net |
1,395 |
1,244 |
10,480 |
670 |
||||||||||||||
Loss (gain) on extinguishment of debt, net |
33,004 |
65,824 |
33,253 |
81,543 |
||||||||||||||
Provision for loan losses |
2,857 |
— |
11,351 |
18,690 |
||||||||||||||
Impairment of assets |
23,313 |
18,096 |
126,291 |
28,035 |
||||||||||||||
Other expenses |
11,544 |
6,186 |
37,247 |
36,570 |
||||||||||||||
Total expenses |
1,118,216 |
1,187,745 |
3,485,349 |
3,481,412 |
||||||||||||||
Income (loss) from continuing operations before income taxes |
||||||||||||||||||
and other items |
(81,342) |
78,388 |
(1,398) |
377,072 |
||||||||||||||
Income tax (expense) benefit |
(2,003) |
(3,968) |
(9,678) |
(7,789) |
||||||||||||||
Income (loss) from unconsolidated entities |
(5,981) |
3,262 |
(8,341) |
(14,986) |
||||||||||||||
Gain (loss) on real estate dispositions, net |
484,304 |
570,250 |
902,991 |
735,977 |
||||||||||||||
Income (loss) from continuing operations |
394,978 |
647,932 |
883,574 |
1,090,274 |
||||||||||||||
Net income (loss) |
394,978 |
647,932 |
883,574 |
1,090,274 |
||||||||||||||
Less: |
Net income (loss) attributable to noncontrolling interests (1) |
69,393 |
58,056 |
68,459 |
82,166 |
|||||||||||||
Net income (loss) attributable to common stockholders |
$ |
325,585 |
$ |
589,876 |
$ |
815,115 |
$ |
1,008,108 |
||||||||||
Average number of common shares outstanding: |
||||||||||||||||||
Basic |
417,027 |
405,023 |
414,822 |
400,441 |
||||||||||||||
Diluted |
418,987 |
406,891 |
416,860 |
402,412 |
||||||||||||||
Net income (loss) attributable to common stockholders per share: |
||||||||||||||||||
Basic |
$ |
0.78 |
$ |
1.46 |
$ |
1.96 |
$ |
2.52 |
||||||||||
Diluted(2) |
$ |
0.77 |
$ |
1.45 |
$ |
1.94 |
$ |
2.51 |
||||||||||
Common dividends per share |
$ |
0.61 |
$ |
0.87 |
$ |
2.09 |
$ |
2.61 |
||||||||||
(1) Includes amounts attributable to redeemable noncontrolling interests. |
||||||||||||||||||
(2) Includes adjustment to the numerator for income (loss) attributable to OP unitholders. |
FFO Reconciliations |
Exhibit 1 |
|||||||||||||||||||
(in thousands, except per share data) |
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
|
|
|||||||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||
Net income (loss) attributable to common stockholders |
$ |
325,585 |
$ |
589,876 |
$ |
815,115 |
$ |
1,008,108 |
||||||||||||
Depreciation and amortization |
255,532 |
272,445 |
795,704 |
764,429 |
||||||||||||||||
Impairments and losses (gains) on real estate dispositions, net |
(460,991) |
(552,154) |
(776,700) |
(707,942) |
||||||||||||||||
Noncontrolling interests(1) |
48,559 |
31,347 |
(3,389) |
(5,302) |
||||||||||||||||
Unconsolidated entities(2) |
16,329 |
10,864 |
46,005 |
41,489 |
||||||||||||||||
NAREIT FFO attributable to common stockholders |
185,014 |
352,378 |
876,735 |
1,100,782 |
||||||||||||||||
Normalizing items, net(3) |
167,597 |
74,285 |
256,150 |
151,583 |
||||||||||||||||
Normalized FFO attributable to common stockholders |
$ |
352,611 |
$ |
426,663 |
$ |
1,132,885 |
$ |
1,252,365 |
||||||||||||
Average diluted common shares outstanding |
418,987 |
406,891 |
416,860 |
402,412 |
||||||||||||||||
Per diluted share data attributable to common stockholders: |
||||||||||||||||||||
Net income (loss)(4) |
$ |
0.77 |
$ |
1.45 |
$ |
1.94 |
$ |
2.51 |
||||||||||||
NAREIT FFO |
$ |
0.44 |
$ |
0.87 |
$ |
2.10 |
$ |
2.74 |
||||||||||||
Normalized FFO |
$ |
0.84 |
$ |
1.05 |
$ |
2.72 |
$ |
3.11 |
||||||||||||
Normalized FFO Payout Ratio: |
||||||||||||||||||||
Dividends per common share |
$ |
0.61 |
$ |
0.87 |
$ |
2.09 |
$ |
2.61 |
||||||||||||
Normalized FFO attributable to common stockholders per share |
$ |
0.84 |
$ |
1.05 |
$ |
2.72 |
$ |
3.11 |
||||||||||||
Normalized FFO payout ratio |
73 |
% |
83 |
% |
77 |
% |
84 |
% |
||||||||||||
Other items:(5) |
||||||||||||||||||||
Net straight-line rent and above/below market rent amortization(6) |
$ |
(18,729) |
$ |
(24,578) |
$ |
(69,286) |
$ |
(72,644) |
||||||||||||
Non-cash interest expenses(7) |
4,339 |
2,454 |
9,437 |
9,744 |
||||||||||||||||
Recurring cap-ex, tenant improvements, and lease commissions |
(19,443) |
(34,526) |
(59,638) |
(84,374) |
||||||||||||||||
Stock-based compensation(8) |
6,565 |
5,008 |
20,279 |
18,940 |
||||||||||||||||
Note: (1) Represents noncontrolling interests' share of net FFO adjustments. |
||||||||||||||||||||
(2) Represents Welltower's share of net FFO adjustments from unconsolidated entities. |
||||||||||||||||||||
(3) See Exhibit 2. |
||||||||||||||||||||
(4) Includes adjustment to the numerator for income (loss) attributable to OP unitholders. |
||||||||||||||||||||
(5) Amounts presented net of noncontrolling interests' share and |
||||||||||||||||||||
(6) Excludes normalized other impairment (see Exhibit 2). |
||||||||||||||||||||
(7) Excludes normalized incremental interest expense (see Exhibit 2). |
||||||||||||||||||||
(8) Excludes certain severance related stock-based compensation recorded in other expense. |
Normalizing Items |
Exhibit 2 |
|||||||||||||||||
(in thousands, except per share data) |
Three Months Ended |
Nine Months Ended |
||||||||||||||||
|
|
|||||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||||
Loss (gain) on derivatives and financial instruments, net |
$ |
1,395 |
(1) |
$ |
1,244 |
$ |
10,480 |
$ |
670 |
|||||||||
Loss (gain) on extinguishment of debt, net |
33,004 |
(2) |
65,824 |
33,253 |
81,543 |
|||||||||||||
Provision for loan losses |
2,857 |
(3) |
— |
11,351 |
18,690 |
|||||||||||||
Incremental interest expense |
— |
— |
5,871 |
— |
||||||||||||||
Other impairment |
112,398 |
(4) |
— |
146,508 |
— |
|||||||||||||
Other expenses |
11,544 |
(5) |
6,186 |
37,247 |
36,570 |
|||||||||||||
Normalizing items attributable to noncontrolling interests and unconsolidated entities, net |
6,399 |
(6) |
1,031 |
11,440 |
14,110 |
|||||||||||||
Net normalizing items |
$ |
167,597 |
$ |
74,285 |
$ |
256,150 |
$ |
151,583 |
||||||||||
Average diluted common shares outstanding |
418,987 |
406,891 |
416,860 |
402,412 |
||||||||||||||
Net normalizing items per diluted share |
$ |
0.40 |
$ |
0.18 |
$ |
0.61 |
$ |
0.38 |
||||||||||
Note: (1) Primarily related to mark-to-market of Genesis Healthcare, Inc. stock holdings. |
||||||||||||||||||
(2) Primarily related to the July extinguishment of |
||||||||||||||||||
(3) Represents additional reserves for loan losses under the current expected credit losses accounting standard. |
||||||||||||||||||
(4) Represents write-off of straight-line rent receivable balances related to leases with two operators including Genesis Healthcare. |
||||||||||||||||||
(5) Primarily related to non-capitalizable transaction costs. |
||||||||||||||||||
(6) Primarily related to write-off of Genesis Healthcare straight-line rent receivable balances at unconsolidated entities. |
SSNOI Reconciliation |
Exhibit 3 |
|||||||||||
(in thousands) |
Three Months Ended |
|||||||||||
|
|
% growth |
||||||||||
Net income (loss) |
$ |
394,978 |
$ |
159,216 |
||||||||
Loss (gain) on real estate dispositions, net |
(484,304) |
(155,863) |
||||||||||
Loss (income) from unconsolidated entities |
5,981 |
(1,332) |
||||||||||
Income tax expense (benefit) |
2,003 |
2,233 |
||||||||||
Other expenses |
11,544 |
19,411 |
||||||||||
Impairment of assets |
23,313 |
75,151 |
||||||||||
Provision for loan losses |
2,857 |
1,422 |
||||||||||
Loss (gain) on extinguishment of debt, net |
33,004 |
249 |
||||||||||
Loss (gain) on derivatives and financial instruments, net |
1,395 |
1,434 |
||||||||||
General and administrative expenses |
31,003 |
34,062 |
||||||||||
Depreciation and amortization |
255,532 |
265,371 |
||||||||||
Interest expense |
124,851 |
126,357 |
||||||||||
Consolidated NOI |
402,157 |
527,711 |
||||||||||
NOI attributable to unconsolidated investments(1) |
13,659 |
20,871 |
||||||||||
NOI attributable to noncontrolling interests(2) |
(28,024) |
(30,369) |
||||||||||
Pro rata NOI |
387,792 |
518,213 |
||||||||||
Non-cash NOI attributable to same store properties |
107,005 |
(15,059) |
||||||||||
NOI attributable to non-same store properties |
(68,696) |
(75,426) |
||||||||||
Currency and ownership adjustments(3) |
(4,127) |
(2,126) |
||||||||||
Normalizing adjustments, net(4) |
(1,049) |
(1,707) |
||||||||||
Same Store NOI (SSNOI) |
$ |
420,925 |
$ |
423,895 |
(0.7)% |
|||||||
Seniors Housing Operating |
160,610 |
162,462 |
(1.1)% |
|||||||||
Seniors Housing Triple-net |
95,893 |
96,647 |
(0.8)% |
|||||||||
Outpatient Medical |
84,879 |
85,929 |
(1.2)% |
|||||||||
Health System |
36,456 |
35,800 |
1.8% |
|||||||||
Long-Term/Post-Acute Care |
43,087 |
43,057 |
0.1% |
|||||||||
Total SSNOI |
$ |
420,925 |
$ |
423,895 |
(0.7)% |
|||||||
Notes: |
(1) Represents Welltower's interests in joint ventures where |
|||||||||||
(2) Represents minority partners' interests in joint ventures where |
||||||||||||
(3) Includes adjustments to reflect consistent property ownership percentages and foreign currency exchange rates for properties in the |
||||||||||||
(4) Includes other adjustments described in the accompanying Supplement. |
Net Debt to Adjusted EBITDA Reconciliation |
Exhibit 4 |
|||||||
(in thousands) |
Three Months Ended |
|||||||
|
||||||||
Net income (loss) |
$ |
394,978 |
||||||
Interest expense |
124,851 |
|||||||
Income tax expense (benefit) |
2,003 |
|||||||
Depreciation and amortization |
255,532 |
|||||||
EBITDA |
777,364 |
|||||||
Loss (income) from unconsolidated entities |
5,981 |
|||||||
Stock-based compensation(1) |
6,565 |
|||||||
Loss (gain) on extinguishment of debt, net |
33,004 |
|||||||
Loss (gain) on real estate dispositions, net |
(484,304) |
|||||||
Impairment of assets |
23,313 |
|||||||
Provision for loan losses |
2,857 |
|||||||
Loss (gain) on derivatives and financial instruments, net |
1,395 |
|||||||
Other expenses |
11,544 |
|||||||
Other impairment(1) |
112,398 |
|||||||
Adjusted EBITDA |
490,117 |
|||||||
Unsecured credit facility and commercial paper |
$ |
— |
||||||
Long term debt obligations(2) |
13,889,030 |
|||||||
Cash and cash equivalents(3) |
(2,096,571) |
|||||||
Net debt |
$ |
11,792,459 |
||||||
Adjusted EBITDA annualized |
$ |
1,960,468 |
||||||
Net debt to Adjusted EBITDA ratio |
6.02 |
x |
||||||
Note: |
(1) Represents write-off of straight-line rent receivable balances related to leases with two operators including Genesis Healthcare. |
|||||||
(2) Amounts include unamortized premiums/discounts, fair value adjustments and lease liabilities related to financing leases. |
||||||||
(3) Inclusive of |
||||||||
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