Welltower Reports Fourth Quarter 2016 Results

February 22, 2017

TOLEDO, Ohio, Feb. 22, 2017 /PRNewswire/ — Welltower Inc. (NYSE:HCN) today announced results for the quarter ended December 31, 2016. For the quarter, we generated net income attributable to common stockholders of $0.91 per share, normalized FFO of $1.10 per share and normalized FAD of $0.99 per share. For the year, we generated net income attributable to common stockholders of $2.81 per share, normalized FFO of $4.55 per share and normalized FAD of $4.08 per share.

 

Quarterly Highlights

  • Net debt to undepreciated book capitalization declined to 37.4% from 39.5% versus 12/31/15
  • Total portfolio SSNOI grew 2.3% versus 4Q15
  • Same store seniors housing operating REVPOR growth of 4.3% versus 4Q15
  • Began executing on portfolio repositioning efforts and improved private pay revenue mix to 92.8%

Annual Highlights

  • Generated normalized FFO and FAD per share increases of 4% and 6% versus 2015, respectively
  • Completed $3.0 billion of gross investments, including $1.15 billion premier west coast seniors housing portfolio
  • Received credit ratings upgrades to Baa1 from Moody’s and BBB+ from S&P
  • Enhanced financial flexibility with expanded, extended and lower-priced $3.7 billion unsecured credit facility

“Welltower delivered 2016 results at the top end of our guidance and ended the year with another strong quarter. We are pleased to be guiding similar 2%-3% same store growth in our best in class total portfolio for 2017,” commented CEO Tom DeRosa.  “We begin the year with the lowest levered balance sheet in our peer group, 93% of revenues from private pay sources, and a corporate reorganization that includes a projected $30 million reduction in G&A from a year ago. Welltower’s premium health care real estate and dynamic operating platform is uniquely positioned to capture significant efficiencies and growth opportunities as health care delivery transitions from a fee-for-service to a value based model.”

Capital Activity On December 31, 2016, we had $419 million of cash and cash equivalents and $2.4 billion of available borrowing capacity under our primary unsecured credit facility.  During the fourth quarter, we generated approximately $14 million in proceeds under our ATM and DRIP programs. In December, we extinguished our 4.7% $450 million senior unsecured notes due September 2017. Also, as previously announced, we will redeem all 11.5 million shares of our 6.5% Series J preferred stock on March 7, 2017.

Outlook for 2017 We are introducing our 2017 earnings guidance and expect to report net income attributable to common stockholders in a range of $2.65 to $2.75 per diluted share and normalized FFO in a range of $4.15 to $4.25 per diluted share.  Going-forward, we will no longer report FAD, primarily because it could be considered a liquidity metric, but we will provide relevant data components. In preparing our guidance, we have made the following assumptions:

  • Same Store NOI: We expect average blended SSNOI growth of approximately 2%-3% in 2017 which is comprised of the following components:
    • Seniors housing operating approximately 1.5%-3%
    • Seniors housing triple-net approximately 2.5%-3%
    • Long-term/post-acute care approximately 2.5%-3%
    • Outpatient medical approximately 2%-2.5%
  • Acquisitions: 2017 earnings guidance excludes any potential acquisitions.
  • Development: We anticipate funding development of approximately $323 million in 2017 relating to projects underway on December 31, 2016. We expect development conversions during 2017 of approximately $544 million, which are currently expected to generate stabilized yields of approximately 7.7%. These projections exclude the midtown Manhattan project which is still in the planning stage.
  • Dispositions: We anticipate approximately $2 billion of disposition proceeds at a blended yield of 7.6% in 2017. This includes approximately $1.2 billion of proceeds from dispositions previously expected to close in 2016, $0.4 billion of proceeds from the previously disclosed Genesis real estate buy back and $0.4 billion of incremental proceeds from other potential loan payoffs and property sales.
  • G&A Expenses: We anticipate annual general and administrative expenses of approximately $135 million in 2017, including approximately $18 million of stock-based compensation. This estimate excludes severance costs related to the previously announced organizational restructuring.

Our guidance does not include any additional investments, dispositions or capital transactions beyond what we have announced, nor any transaction costs, impairments, unanticipated additions to the loan loss reserve or other additional normalizing items.  Please see the exhibits for a reconciliation of the outlook for net income available to common stockholders to FFO.  We will provide additional detail regarding our 2017 outlook and assumptions on the fourth quarter 2017 conference call.

Dividend Growth As previously announced, the Board of Directors declared a cash dividend for the quarter ended December 31, 2016 of $0.87 per share, as compared to $0.86 per share for the same period in 2015.  On February 21, 2017, we paid our 183rd consecutive quarterly cash dividend.  The declaration and payment of future quarterly dividends remains subject to review and approval by the Board of Directors.

Investment and Disposition Activity We completed $878 million of pro rata gross investments for the quarter including $644 million in acquisitions/JVs, $137 million in development funding and $97 million in loans.  73% of these investments were completed with existing relationships. Acquisitions/JVs were comprised of seven separate transactions at a blended yield of 6.1%. The development fundings are expected to yield 7.5% upon stabilization and the loans were made at a blended rate of 9.2%. We also placed into service seven development projects totaling $136 million at a blended stabilized yield of 8.1%. Also during the quarter, we completed total dispositions of $1.9 billion consisting of loan payoffs of $125 million at an average yield of 10.4% and property sales of $1.8 billion at a blended yield on proceeds of 9.0%.

Notable Investments with Existing Operating Partners

Signature Senior Lifestyle We expanded our relationships with Signature and Revera by acquiring, through our existing 75/25 joint venture with Revera, four Signature private pay seniors housing properties in Greater London. The purchase price based on a 100% ownership interest was £207 million. The properties have a double net lease structure with an initial lease yield of 6.0%. In connection with this transaction, we received a $65 million loan repayment from Signature. Since closing our initial $37 million acquisition in 2012, we have completed $543 million of follow-on pro rata investments with Signature.

Senior Resource Group (SRG) We expanded our relationship with SRG in the Southern California market by acquiring a 100% ownership interest in a 233-unit seniors housing property located in Laguna Woods, CA (Los Angeles MSA). The purchase price of $99 million represents a stabilized cap rate in the mid 6’s.  The property was added to an existing portfolio with SRG who will manage the day-to-day operations for us under an incentive-based management contract. Since closing our initial $386 million acquisition in 2014, we have completed $1.0 billion of follow-on pro rata investments with SRG.

Silverado Senior Living We expanded our relationship with Silverado by acquiring through our existing 95/5 joint venture, four private pay seniors housing properties owned by a third party and located in the Dallas (2), Houston and Austin MSAs. The properties were developed between 2014 and 2015 and the purchase price of $75 million (based on a 100% ownership interest) represents a stabilized cap rate in the mid 8’s. Since closing our initial $4.4 million loan in 1998, we have completed $517 million of follow-on pro rata investments with Silverado.

Sagora Senior Living We expanded our relationship with Sagora by acquiring a 100% ownership interest in a 75-unit private pay seniors housing property owned by a third party and located in the Dallas MSA for $18 million. The property opened in 2013 and was added to the Sagora master lease which has a corporate guarantee and expires in 2031. The initial lease yield is 6.25% with 3% annual increasers. Since closing our initial $8.5 million acquisition in 2010, we have completed $412 million of follow-on pro rata investments with Sagora.

Revera We expanded our relationship with Revera by acquiring a 102-unit private pay seniors housing property through our existing 75/25 joint venture with Revera. The property opened in 2003 and is located in the Kitchener-Cambridge-Waterloo CMA. The purchase price based on a 100% ownership interest was CAD$19 million, which represents a projected stabilized cap rate in the mid 8’s. Since completing our initial transaction with Revera for $1.0 billion in 2013, we have completed $955 million of follow-on pro rata investments with Revera.

Baylor Scott & White Health We acquired a 100% ownership interest in an on campus outpatient medical building in Waxahachie, TX for $19 million, which represents a projected year one cap rate in the mid 6’s. The property, constructed in 2014, is 72,015 rentable square feet, 100% leased, and is located on the campus of Baylor’s Waxahachie Hospital, a 76-bed acute-care hospital. The building is anchored by Baylor, which leases 73% of the property. We own 11 Baylor-affiliated buildings, totaling over 500,000 rentable square feet.

Notable Investments with New Operating Partners

Northbridge Companies We created a new joint venture with the Northbridge Companies on six private pay seniors housing properties with 506 units. The total capitalization was $236 million, which represents a projected year one cap rate in the mid 5’s.  The six properties are located in high barrier to entry sub-markets primarily in the Boston MSA.  Northbridge is a leading developer and operator of high quality seniors housing properties in New England. The investment is consistent with our strategy of partnering with leading developers/operators to own high quality seniors housing properties in affluent, high barrier to entry markets.

Notable Development Conversions

Sunrise Senior Living We completed the development of four private pay, seniors housing properties totaling 318 units located in Birmingham and Greater London areas of the United Kingdom for £53 million. Revera is a 25% joint venture partner. The investment amount represents a 9.0% stabilized return on cost. Since closing our initial $243 million acquisition in 2012, we have completed $5.0 billion of follow-on pro rata investments with Sunrise.

Sagora Senior Living   We completed the development of a 104-unit private pay seniors housing property located in the Dallas MSA. The investment amount is $22 million and the property was added to a Welltower master lease at an initial lease yield of 6.0%. There are outsized 10%+ annual escalators for the first five years of the lease followed by 3% annual escalators. Since closing our initial $8.5 million acquisition in 2010, we have completed $412 million of follow-on investments with Sagora.

Northside Hospital We completed a 103,156 square foot development of an outpatient medical building that is 60% leased by Northside Hospital and located in the Atlanta MSA. The investment amount was $23 million and the stabilized yield on the development is 8.1%. Northside Hospital leases over 400,000 square feet of space in our outpatient medical properties.

New York Presbyterian Healthcare System We completed a 92,070 square foot development of an outpatient medical building that is 70% leased by an affiliate of New York Presbyterian and located in Stamford, CT. The investment amount was $41 million and the stabilized yield on the development is 8.2%.

Notable Dispositions

Vibra Healthcare We completed the disposition of an inpatient rehabilitation facility operated by Vibra for $64 million, which represents a 7.1% cap rate on in-place rent. At closing, Vibra also fully repaid a $20 million mezzanine loan due to us and paid $1 million against another mezzanine loan due to us. The sale generated a $29 million gain and a 15% IRR.

Genesis Healthcare As previously announced, we completed three separate transactions totaling $1.7 billion in proceeds related to Genesis property sales. Two of the transactions representing $1.2 billion were sales to third parties and the third transaction was related to the Cindat/Union Life joint venture where we retained a 25% ownership stake. The effective cap rate for the combined Genesis dispositions to us was 9.0%. In addition, we received $15 million in loan payoffs during the quarter and restructured our outstanding real estate loans with Genesis. See our press releases dated November 2, 2016 and December 29, 2016 for additional information.

Mainstreet We sold eight Mainstreet-related loans for $23 million, which includes a $1.2 million (or 5.6%) premium on the principal balance of the loans. As part of the sale, we also sold the purchase options for the eight post-acute properties being developed by Mainstreet associated with the loans. We sold the loans to Mainstreet Health Investments and generated a 23% IRR.

Notable Transactions Subsequent to Year-End

Cindat/Union Life JV We completed the previously announced sale of a 75% interest in 11 Brookdale communities at a valuation of $268.5 million (based on a 100% ownership interest), which represents a 6.0% cap rate on in-place rent. The portfolio was added to an existing joint venture where Cindat/Union Life owns a 75% interest and Welltower retains a 25% stake.

Conference Call Information We have scheduled a conference call on Wednesday, February 22, 2017 at 10:00 a.m. Eastern Time to discuss our fourth quarter 2016 results, industry trends, portfolio performance and outlook for 2017. Telephone access will be available by dialing 888-346-2469 or 706-758-4923 (international).  For those unable to listen to the call live, a taped rebroadcast will be available beginning two hours after completion of the call through March 8, 2017. To access the rebroadcast, dial 855-859-2056 or 404-537-3406 (international).  The conference ID number is 55892518. To participate in the webcast, log on to www.welltower.com 15 minutes before the call to download the necessary software.  Replays will be available for 90 days.

Supplemental Reporting Measures We believe that net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, we consider funds from operations (FFO), funds available for distribution (FAD), same store net operating income (SSNOI), in-place net operating income (IPNOI) and same store revenues per occupied room (SS REVPOR) to be useful supplemental measures of our operating performance. These supplemental measures are disclosed on our pro rata ownership basis. Pro rata amounts are derived by reducing consolidated amounts for minority partners’ noncontrolling ownership interests and adding our minority ownership share of unconsolidated amounts. We do not control unconsolidated investments. While we consider pro rata disclosures useful, they may not accurately depict the legal and economic implications of our joint venture arrangements and should be used with caution.

Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairments of depreciable assets, plus real estate depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests.   Normalized FFO represents FFO adjusted for certain items detailed in Exhibit 1.  FAD represents FFO excluding net straight-line rental adjustments, amortization related to above/below market leases and amortization of non-cash interest expenses and less cash used to fund recurring capital expenditures, tenant improvements and lease commissions.  Normalized FAD represents FAD adjusted for certain items detailed in Exhibit 1. We believe that normalized FFO and normalized FAD are useful supplemental measures of operating performance because investors and equity analysts may use these measures to compare the operating performance of the company between periods or as compared to other REITs or other companies on a consistent basis without having to account for differences caused by unanticipated and/or incalculable items. 

Net operating income (NOI) is used to evaluate the operating performance of our properties. 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 seniors housing operating and outpatient medical properties.  These expenses include, but are not limited to, property-related payroll and benefits, property management fees, 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.  IP NOI represents NOI excluding interest income, other income and non-cash NOI and adjusted for timing of current quarter portfolio changes such as acquisitions, development conversions, segment transitions, dispositions and investments held for sale.

SSNOI is used to evaluate the operating performance of our properties under a consistent population which eliminates 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.  Land parcels, loans and sub-leases as well as any properties acquired, developed/redeveloped, transitioned, sold or classified as held for sale during that period are excluded from the same store amounts.  Normalizers include adjustments that in management’s opinion are appropriate in considering SSNOI, a supplemental, non-GAAP performance measure.  None of these adjustments, which may increase or decrease SSNOI, are reflected in our financial statements prepared in accordance with U.S. GAAP.  Significant normalizers (defined as any that individually exceed 0.50% of SSNOI growth per property type) are separately disclosed and explained in the relevant supplemental information package. We believe SSNOI provides investors relevant and useful information because it measures the operating performance of our properties at the property level on an unleveraged basis. No reconciliation of the forecasted range for SSNOI on a combined or segment basis for fiscal year 2017 is included in this release because we are unable to quantify certain amounts that would be required to be included in the comparable GAAP financial measure without unreasonable efforts, and we believe such reconciliation would imply a degree of precision that could be confusing or misleading to investors.

REVPOR represents the average revenues generated per occupied room per month at our seniors housing operating properties.  It is calculated as total resident fees and services revenues divided by average monthly occupied room days.  SS REVPOR is used to evaluate the REVPOR performance of our properties under a consistent population which eliminates changes in the composition of our portfolio. It based on the same pool of properties used for SSNOI and includes any revenue normalizations used for SSNOI. We use REVPOR and SS REVPOR to evaluate the revenue-generating capacity and profit potential of our seniors housing operating portfolio independent of fluctuating occupancy rates. They are also used in comparison against industry and competitor statistics, if known, to evaluate the quality of our seniors housing operating portfolio.

Our supplemental reporting measures and similarly entitled financial measures are widely used by investors and equity analysts in the valuation, comparison 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 U.S. GAAP and should not be considered as alternative measures of profitability or liquidity.  Finally, the supplemental reporting measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.  Please see the exhibits for reconciliations of supplemental reporting measures and the supplemental information package for the quarter ended December 31, 2016, which is available on the company’s website (www.welltower.com), for information and reconciliations of additional supplemental reporting measures.

About Welltower Welltower Inc. (NYSE:HCN), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience.  Welltower™, a real estate investment trust (“REIT”), owns interests in approximately 1,400 properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties. More information is available at www.welltower.com.  We routinely post important information on our website at www.welltower.com in the “Investors” section, including corporate and investor presentations and financial information.  We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website under the heading “Investors”.  Accordingly, investors should monitor such portion of the company’s website in addition to following our press releases, public conference calls and filings with the Securities and Exchange Commission.  The information on our website is not incorporated by reference in this press release, and our web address is included as an inactive textual reference only.

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 we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimate” or similar expressions that do not relate solely to historical matters, we are making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to our opportunities to acquire, develop or sell properties; our ability to close anticipated acquisitions, investments or dispositions on currently anticipated terms, or within currently anticipated timeframes; the expected performance of our operators/tenants and properties; our expected occupancy rates; our ability to declare and to make distributions to shareholders; our investment and financing opportunities and plans; our continued qualification as a REIT; our ability to access capital markets or other sources of funds; and our ability to meet our earnings guidance. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause our actual results to differ materially from our expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; our ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting our properties; our ability to re-­lease space at similar rates as vacancies occur; our ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting our properties; changes in rules or practices governing our financial reporting; the movement of U.S. and foreign currency exchange rates; our ability to maintain our qualification as a REIT; key management personnel recruitment and retention; and other risks described in our reports filed from time to time with the Securities and Exchange Commission. Finally, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.

 

Welltower Inc.
Financial Exhibits

 
   

Consolidated Balance Sheets (unaudited)

 

(in thousands)

 
         

December 31,

 
         

2016

 

2015

 

Assets

             

Real estate investments:

             
   

Land and land improvements

 

$

2,591,071

 

$

2,563,445

 
   

Buildings and improvements

   

24,496,153

   

25,522,542

 
   

Acquired lease intangibles

   

1,402,884

   

1,350,585

 
   

Real property held for sale, net of accumulated depreciation

   

1,044,859

   

169,950

 
   

Construction in progress

   

506,091

   

258,968

 
         

30,041,058

   

29,865,490

 
   

Less accumulated depreciation and intangible amortization

   

(4,093,494)

   

(3,796,297)

 
     

Net real property owned

   

25,947,564

   

26,069,193

 
   

Real estate loans receivable

   

622,628

   

819,492

 
   

Less allowance for losses on loans receivable

   

(6,563)

   

 
     

Net real estate loans receivable

   

616,065

   

819,492

 
   

Net real estate investments

   

26,563,629

   

26,888,685

 

Other assets:

             
   

Investments in unconsolidated entities

   

457,138

   

542,281

 
   

Goodwill

   

68,321

   

68,321

 
   

Cash and cash equivalents

   

419,378

   

360,908

 
   

Restricted cash

   

187,842

   

61,782

 
   

Straight-line rent receivable

   

342,578

   

395,562

 
   

Receivables and other assets

   

826,298

   

706,306

 
         

2,301,555

   

2,135,160

 

Total assets

 

$

28,865,184

 

$

29,023,845

 
               

Liabilities and equity

             

Liabilities:

             
   

Borrowings under primary unsecured credit facility

 

$

645,000

 

$

835,000

 
   

Senior unsecured notes

   

8,161,619

   

8,548,055

 
   

Secured debt

   

3,477,699

   

3,509,142

 
   

Capital lease obligations

   

73,927

   

75,489

 
   

Accrued expenses and other liabilities

   

827,034

   

697,191

 

Total liabilities

   

13,185,279

   

13,664,877

 

Redeemable noncontrolling interests

   

398,433

   

183,083

 

Equity:

             
   

Preferred stock

   

1,006,250

   

1,006,250

 
   

Common stock

   

363,071

   

354,811

 
   

Capital in excess of par value

   

16,999,691

   

16,478,300

 
   

Treasury stock

   

(54,741)

   

(44,372)

 
   

Cumulative net income

   

4,803,575

   

3,725,772

 
   

Cumulative dividends

   

(8,144,981)

   

(6,846,056)

 
   

Accumulated other comprehensive income

   

(169,531)

   

(88,243)

 
   

Other equity

   

3,059

   

4,098

 
     

Total Welltower Inc. stockholders’ equity

   

14,806,393

   

14,590,560

 
   

Noncontrolling interests

   

475,079

   

585,325

 

Total equity

   

15,281,472

   

15,175,885

 

Total liabilities and equity

 

$

28,865,184

 

$

29,023,845

 
                     

 

Consolidated Statements of Income (unaudited)

(in thousands, except per share data)

         

Three Months Ended

 

Twelve Months Ended

         

December 31,

 

December 31,

         

2016

 

2015

 

2016

 

2015

Revenues:

                       
   

Rental income

 

$

389,372

 

$

413,446

 

$

1,648,815

 

$

1,598,948

   

Resident fees and service

   

657,345

   

584,713

   

2,504,731

   

2,158,031

   

Interest income

   

23,688

   

24,191

   

97,963

   

84,141

   

Other income

   

7,916

   

7,134

   

29,651

   

18,706

Gross revenues

   

1,078,321

   

1,029,484

   

4,281,160

   

3,859,826

                               

Expenses:

                       
   

Interest expense

   

126,360

   

131,097

   

521,345

   

492,169

   

Property operating expenses

   

494,835

   

438,738

   

1,876,983

   

1,622,257

   

Depreciation and amortization

   

227,916

   

222,809

   

901,242

   

826,240

   

General and administrative expenses

   

32,807

   

36,854

   

155,241

   

147,416

   

Transaction costs

   

9,704

   

40,547

   

42,910

   

110,926

   

Loss (gain) on derivatives, net

   

68

   

   

(2,448)

   

(58,427)

   

Loss (gain) on extinguishment of debt, net

   

17,204

   

(195)

   

17,214

   

34,677

   

Provision for loan losses

   

10,215

   

   

10,215

   

   

Impairment of assets

   

13,187

   

   

37,207

   

2,220

   

Other expenses

   

8,838

   

35,648

   

11,998

   

46,231

 

Total expenses

   

941,134

   

905,498

   

3,571,907

   

3,223,709

                               

Income (loss) from continuing operations before income taxes

                       
 

and income from unconsolidated entities

   

137,187

   

123,986

   

709,253

   

636,117

Income tax (expense) benefit

   

16,585

   

(2,682)

   

19,128

   

(6,451)

Income (loss) from unconsolidated entities

   

(2,829)

   

(3,273)

   

(10,357)

   

(21,504)

Income (loss) from continuing operations

   

150,943

   

118,031

   

718,024

   

608,162

Gain (loss) on real estate dispositions, net

   

200,165

   

31,385

   

364,046

   

280,387

Net income (loss)

   

351,108

   

149,416

   

1,082,070

   

888,549

Less:

Preferred dividends

   

16,352

   

16,352

   

65,406

   

65,406

     

Net income (loss) attributable to noncontrolling interests

   

1,714

   

133

   

4,267

   

4,799

Net income (loss) attributable to common stockholders

 

$

333,042

 

$

132,931

 

$

1,012,397

 

$

818,344

                               

Average number of common shares outstanding:

                       
   

Basic

   

362,088

   

353,604

   

358,275

   

348,240

   

Diluted

   

364,369

   

354,972

   

360,227

   

349,424

                               

Net income (loss) attributable to common stockholders per share:

                       
   

Basic

 

$

0.92

 

$

0.38

 

$

2.83

 

$

2.35

   

Diluted

 

$

0.91

 

$

0.37

 

$

2.81

 

$

2.34

                               

Common dividends per share

 

$

0.86

 

$

0.825

 

$

3.44

 

$

3.30

 

 

 

Normalizing Items

                     

Exhibit 1

 
 

(in thousands, except per share data)

Three Months Ended

   

Twelve Months Ended

 
         

December 31,

   

December 31,

 
         

2016

 

2015

   

2016

 

2015

 
 

Transaction costs

$

 9,704 (1)

 

$

40,547

   

$

42,910

 

$

110,926

 
 

Loss (gain) on derivatives, net

 

 68 (2)

   

     

(2,448)

   

(58,427)

 
 

Loss (gain) on extinguishment of debt, net

 

 17,204 (3)

   

(195)

     

17,214

   

34,677

 
 

Provision for loan losses

 

 10,215 (4)

   

     

10,215

   

 
 

Nonrecurring income tax benefits

 

 (15,675)(5)

   

     

(15,675)

   

(5,430)

 
 

Other expenses

 

 8,838 (6)

   

35,648

     

11,998

   

46,926

 
 

Additional other income

 

 (4,853)(7)

   

(3,669)

     

(16,664)

   

(5,813)

 
 

Normalizing items attributable to noncontrolling interests and unconsolidated entities, net

 

 3,214 (8)

   

(2,485)

     

7,228

   

(312)

 
 

Net normalizing items

$

28,715

 

$

69,846

   

$

54,778

 

$

122,547

 
                             
 

Average diluted common shares outstanding

 

364,369

   

354,972

     

360,227

   

349,424

 
 

Net normalizing items per diluted share

$

0.08

 

$

0.20

   

$

0.15

 

$

0.35

 
                                   
 

Notes:  (1) Primarily related to costs incurred with seniors housing transactions.

 
 

            (2) Primarily related to mark-to-market of a convertible note receivable.

 
 

            (3) Primarily related to early extinguishment of Senior Unsecured Notes due September 2017.

 
 

            (4) Primarily related to Genesis loan restructurings.

 
 

            (5) Primarily related to release of a valuation allowance on a taxable subsidiary and restructuring of an equity investment.

 
 

            (6) Primarily related to estimated severance costs related to organizational restructuring.

 
 

            (7) Primarily related to a bargain purchase gain for an acquisition and a loan payoff premium.

 
 

            (8) Primarily related to transaction costs.

 

 

 

FAD Reconciliation

                     

Exhibit 2

 
 

(in thousands, except per share data)

Three Months Ended

   

Twelve Months Ended

 
   

December 31,

   

December 31,

 
   

2016

 

2015

   

2016

 

2015

 
 

Net income (loss) attributable to common stockholders

$

333,042

 

$

132,931

   

$

1,012,397

 

$

818,344

 
 

Depreciation and amortization

 

227,916

   

222,809

     

901,242

   

826,240

 
 

Losses/impairments (gains) on properties, net

 

(186,978)

   

(31,385)

     

(326,840)

   

(278,167)

 
 

Noncontrolling interests(1)

 

(16,035)

   

(8,974)

     

(63,624)

   

(36,275)

 
 

Unconsolidated entities(2)

 

14,915

   

14,823

     

63,579

   

74,336

 
 

Gross straight-line rental income

 

(22,949)

   

(31,002)

     

(108,271)

   

(122,893)

 
 

Amortization related to above (below) market leases, net

 

(40)

   

1,155

     

322

   

4,018

 
 

Non-cash interest expense

 

216

   

2,878

     

1,681

   

2,586

 
 

Cap-ex, tenant improvements, lease commissions

 

(18,277)

   

(19,993)

     

(66,332)

   

(64,458)

 
 

Funds available for distribution

 

331,810

   

283,242

     

1,414,154

   

1,223,731

 
 

Normalizing items, net(3)

 

28,715

   

69,846

     

54,778

   

122,547

 
 

Funds available for distribution – normalized

$

360,525

 

$

353,088

   

$

1,468,932

 

$

1,346,278

 
                             
 

Average diluted common shares outstanding

 

364,369

   

354,972

     

360,227

   

349,424

 
                             
 

Per share data:

                         
   

Net income (loss) attributable to common stockholders

$

0.91

 

$

0.37

   

$

2.81

 

$

2.34

 
   

Funds available for distribution

$

0.91

 

$

0.80

   

$

3.93

 

$

3.50

 
   

Funds available for distribution – normalized

$

0.99

 

$

0.99

   

$

4.08

 

$

3.85

 
                                 
 

Normalized FAD Payout Ratio:

                         
   

Dividends per common share

$

0.86

 

$

0.825

   

$

3.44

 

$

3.30

 
   

FAD per diluted share – normalized

$

0.99

 

$

0.99

   

$

4.08

 

$

3.85

 
     

Normalized FAD payout ratio

 

87%

   

83%

     

84%

   

86%

 
                                   
 

Notes:  (1) Represents noncontrolling interests’ share of net FAD adjustments.

               
 

            (2) Represents Welltower’s share of net FAD adjustments from unconsolidated entities.

               
 

            (3) See Exhibit 1.

               

 

 

FFO Reconciliation

                     

Exhibit 3

 
 

(in thousands, except per share data)

Three Months Ended

   

Twelve Months Ended

 
         

December 31,

   

December 31,

 
         

2016

 

2015

   

2016

 

2015

 
 

Net income (loss) attributable to common stockholders

$

333,042

 

$

132,931

   

$

1,012,397

 

$

818,344

 
 

Depreciation and amortization

 

227,916

   

222,809

     

901,242

   

826,240

 
 

Losses/impairments (gains) on properties, net

 

(186,978)

   

(31,385)

     

(326,840)

   

(278,167)

 
 

Noncontrolling interests(1)

 

(17,897)

   

(9,908)

     

(71,527)

   

(39,271)

 
 

Unconsolidated entities(2)

 

16,746

   

18,062

     

67,667

   

82,494

 
 

Funds from operations – NAREIT

 

372,829

   

332,509

     

1,582,939

   

1,409,640

 
 

Normalizing items, net(3)

 

28,715

   

69,846

     

54,778

   

122,547

 
 

Funds from operations – normalized

$

401,544

 

$

402,355

   

$

1,637,717

 

$

1,532,187

 
                             
 

Average diluted common shares outstanding

 

364,369

   

354,972

     

360,227

   

349,424

 
                                   
 

Per share data:

                         
   

Net income (loss) attributable to common stockholders

$

0.91

 

$

0.37

   

$

2.81

 

$

2.34

 
   

Funds from operations – NAREIT

$

1.02

 

$

0.94

   

$

4.39

 

$

4.03

 
   

Funds from operations – normalized

$

1.10

 

$

1.13

   

$

4.55

 

$

4.38

 
                                   
 

Normalized FFO Payout Ratio:

                         
   

Dividends per common share

$

0.86

 

$

0.825

   

$

3.44

 

$

3.30

 
   

FFO per diluted share – normalized

$

1.10

 

$

1.13

   

$

4.55

 

$

4.38

 
     

Normalized FFO payout ratio

 

78%

   

73%

     

76%

   

75%

 
                                   
 

Notes:  (1) Represents noncontrolling interests’ share of net FFO adjustments.

     
 

            (2) Represents Welltower’s share of net FFO adjustments from unconsolidated entities.

     
 

            (3) See Exhibit 1.

             

 

 

Outlook Reconciliations: Year Ended December 31, 2017

     

Exhibit 4

 
 

(in millions, except per share data)

               
       

Current Outlook

 
       

Low

 

High

 
 

FFO Reconciliation:

               
 

Net income attributable to common stockholders

   

$

967

 

$

1,003

 
 

Gains on real estate dispositions(1,2)

     

(316)

   

(316)

 
 

Depreciation and amortization(1)

     

852

   

852

 
 

Funds from operations – NAREIT

     

1,503

   

1,539

 
 

Normalizing items, net(3)

     

10

   

10

 
 

Funds from operations – normalized

   

$

1,513

 

$

1,549

 
                     
 

Other Items(1)

               
 

Net straight-line rent and above/below market rent amortization

   

$

(59)

 

$

(59)

 
 

Non-cash interest expenses

     

5

   

5

 
 

Recurring cap-ex, tenant improvements, and lease commissions

     

(71)

   

(71)

 
 

Stock-based compensation

     

18

   

18

 
                         
 

Amounts per fully diluted share:

               
 

Net income attributable to common stockholders

   

$

2.65

 

$

2.75

 
 

Funds from operations – NAREIT

     

4.12

   

4.22

 
 

Funds from operations – normalized

     

4.15

   

4.25

 
                   
 

Notes:

(1) Amounts presented net of noncontrolling interests’ share and Welltower’s share of unconsolidated

      entities.

 
 

(2) Includes estimated gains on projected dispositions.

 
 

(3) Represents expected preferred stock redemption charge for Series J preferred stock.

 

 

 

 

SSNOI Reconciliation

     

Exhibit 5

 
 

(In thousands. NOI amounts at Welltower pro rata ownership.)

 

Three Months Ended

     
         

December 31,

     
     

2016

   

2015

     
 

Consolidated total revenues

$

1,078,321

 

$

1,029,484

     
 

Consolidated property operating expenses

 

494,835

   

438,738

     
 

Consolidated net operating income

 

583,486

   

590,746

     
 

Pro rata adjustments(1)

 

(11,684)

   

(5,399)

     
 

Pro rata net operating income (NOI)

 

571,802

   

585,347

     
     

Non-cash NOI attributable to same store properties

 

(16,085)

   

(21,162)

     
     

NOI attributable to non same store properties

 

(102,706)

   

(114,908)

     
     

Adjustments(2)

 

(6,347)

   

(12,560)

     
 

Same store NOI (SSNOI)

$

446,664

 

$

436,717

     
               

% growth

 
 

Seniors housing triple-net

$

124,783

 

$

121,442

 

2.8%

 
 

Long-term/post-acute care

 

61,356

   

59,393

 

3.3%

 
 

Seniors housing operating

 

177,331

   

174,360

 

1.7%

 
 

Outpatient medical

 

83,194

   

81,522

 

2.1%

 
     

Total SSNOI

$

446,664

 

$

436,717

 

2.3%

 
                       
 

Notes:  (1) Represents NOI amounts attributable to joint venture partners, both majority and minority.

 

            (2) Includes adjustments to reflect consistent ownership percentages and foreign currency exchange rates for properties in the UK

                  and Canada as well as other adjustments described in the accompanying Supplement.

 

 

 

REVPOR Reconciliation

     

Exhibit 6

 
 

(dollars in thousands, except REVPOR)

 

Three Months Ended

     
     

December 31,

     
     

2016

   

2015

     
 

Consolidated seniors housing operating (SHO) revenues(1)

$

663,594

 

$

586,826

     
 

Pro rata adjustments(2)

 

(17,727)

   

(5,204)

     
 

SHO pro rata revenues(3)

 

645,867

   

581,622

     
 

Adjustments(4)

 

(83,860)

   

(40,212)

     
 

SHO same store revenues(5)

$

562,007

 

$

541,410

     
 

Avg. occupied rooms/month(6)

 

31,533

   

31,672

     
 

SHO same store REVPOR(7)

$

5,893

 

$

5,652

     
 

SHO same store REVPOR growth

 

4.3%

           
                   
 

Notes:  (1) Represents total consolidated revenues per U.S. GAAP which derive from the relevant 10-K.

 
 

            (2) Represents amounts attributable to joint venture partners, both majority and minority.

 
 

            (3) Represents total SHO revenues at Welltower pro rata ownership.

 
 

            (4) Represents revenues from non same store properties, non-cash revenues from same store

                  properties, currency and ownership adjustments and other normalizing adjustments described in the

                  accompanying Supplement.

 
 

            (5) Represents same store SHO revenues at Welltower pro rata ownership.

 
 

            (6) Represents average occupied rooms for same store properties on a pro rata basis.

 
 

            (7) Represents pro rata same store average revenues per occupied room per month.

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/welltower-reports-fourth-quarter-2016-results-300411550.html

SOURCE Welltower Inc.

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