Recent Highlights
- Reported net income attributable to common stockholders of
$0.75 per diluted share - Reported normalized FFO attributable to common stockholders of
$1.02 per diluted share - Completed pro rata dispositions of
$717 million at a blended yield of 5.4% - Improved net debt to Adjusted EBITDA to 5.93x at
March 31, 2020 from 6.37x atDecember 31, 2019 - Reduced
May 2020 dividend to 70% of pre COVID-19 levels, or$0.61 per share - Enhanced near-term liquidity profile to
$3.5 billion through settlement of forward sale agreements resulting in$588 million of gross proceeds onMarch 30, 2020 and closing on a$1 billion term loan onApril 1, 2020
"The COVID-19 pandemic is having an overwhelming global impact with at-risk populations, including frail seniors, who are disproportionately affected," stated
COVID-19 Update
Seniors Housing Operating As previously announced, the total SHO portfolio incurred approximately $7 million of unanticipated property level expenses associated with the COVID-19 pandemic in March 2020, driven by higher labor costs coupled with expenditures related to procurement of personal protective equipment and other supplies. These costs had an unfavorable impact on normalized FFO of approximately
In our SHO portfolio of 586 properties, our operators have reported 1,044 confirmed cases as of
Since our last update on April 17, 2020, occupancy within our Seniors Housing Operating (SHO) portfolio has declined further as move-in restrictions and intensified screening have expanded to additional communities in markets outside those initially impacted by COVID-19. As of
Rent Collections Rent collections for
Investments and Dispositions Our investments in and acquisitions of senior housing and healthcare properties, as well as our ability to transition or sell properties with profitable results, may be limited as a result of the impact of the pandemic on our business and related industry. During
Guidance Our initial 2020 earnings guidance provided on February 12, 2020 did not contemplate the COVID-19 pandemic. Due to the unanticipated impact of COVID-19 on SHO portfolio fundamentals and recent revisions to our investment outlook and capital plans, we elected to withdraw all components related to full year 2020 guidance on
Capital Activity and Liquidity On
In addition, the Board of Directors has authorized a share repurchase program whereby we may repurchase up to $1 billion of common stock through
On April 1, 2020, Welltower closed on its previously announced $1.0 billion two-year unsecured term loan. The term loan carries a 60-day delayed draw and bears interest at a rate of 1-month LIBOR + 1.20%, based on our credit rating. Inclusive of available borrowings under our line of credit, two-year unsecured term loan, and cash and cash equivalents, at
Dividend Due to the anticipated impact of the COVID-19 pandemic, on
Notable Investments and Dispositions
Outpatient Medical Acquisition We closed on 16 properties totaling
welltowerLIVING As previously announced, we launched welltowerLIVING through the acquisition of three seniors apartment communities located in
Invesco Outpatient Medical Joint Venture We closed the first tranche of a previously announced joint venture agreement with Invesco for a pro rata sales price of
Subsequent to quarter end, we closed on the second tranche of the previously announced joint venture agreement with Invesco for a pro rata sales price of
ProMedica Disposition We closed on the previously announced disposition of three skilled nursing facilities with an average age of 49 years, for a pro rata sales price of
Genesis Healthcare Dispositions During the quarter, we completed the disposition of two properties for $17 million and a loan payoff of
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 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 coverage ratios are based on EBITDA which stands for earnings (net income per income statement) before interest expense, income taxes, depreciation and amortization. Covenants in our senior unsecured notes and primary credit facility contain financial ratios based on a definition of EBITDA that is specific to those agreements. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial covenants, we have defined Adjusted EBITDA to exclude unconsolidated entities and to include 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 and cash flow provided from operating activities, 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 |
$ |
3,514,456 |
$ |
3,238,679 |
||||
Buildings and improvements |
29,236,477 |
28,047,658 |
||||||
Acquired lease intangibles |
1,629,662 |
1,539,363 |
||||||
Real property held for sale, net of accumulated depreciation |
729,560 |
330,327 |
||||||
Construction in progress |
431,497 |
253,478 |
||||||
Less accumulated depreciation and intangible amortization |
(5,910,979) |
(5,670,111) |
||||||
Net real property owned |
29,630,673 |
27,739,394 |
||||||
Right of use assets, net |
523,217 |
502,429 |
||||||
Real estate loans receivable, net of credit allowance |
221,228 |
351,085 |
||||||
Net real estate investments |
30,375,118 |
28,592,908 |
||||||
Other assets: |
||||||||
Investments in unconsolidated entities |
702,497 |
484,265 |
||||||
|
68,321 |
68,321 |
||||||
Cash and cash equivalents |
303,423 |
249,127 |
||||||
Restricted cash |
89,643 |
158,312 |
||||||
Straight-line rent receivable |
449,075 |
395,621 |
||||||
Receivables and other assets |
934,951 |
688,782 |
||||||
Total other assets |
2,547,910 |
2,044,428 |
||||||
Total assets |
$ |
32,923,028 |
$ |
30,637,336 |
||||
Liabilities and equity |
||||||||
Liabilities: |
||||||||
Unsecured credit facility and commercial paper |
$ |
844,985 |
$ |
419,293 |
||||
Senior unsecured notes |
10,218,853 |
9,632,013 |
||||||
Secured debt |
2,901,232 |
2,660,190 |
||||||
Lease liabilities |
464,659 |
426,639 |
||||||
Accrued expenses and other liabilities |
997,603 |
1,000,825 |
||||||
Total liabilities |
15,427,332 |
14,138,960 |
||||||
Redeemable noncontrolling interests |
429,359 |
450,545 |
||||||
Equity: |
||||||||
Common stock |
418,226 |
404,509 |
||||||
Capital in excess of par value |
20,818,230 |
19,654,137 |
||||||
|
(86,975) |
(74,492) |
||||||
Cumulative net income |
7,659,038 |
6,402,004 |
||||||
Cumulative dividends |
(12,579,535) |
(11,163,317) |
||||||
Accumulated other comprehensive income |
(96,213) |
(144,618) |
||||||
Other equity |
12 |
268 |
||||||
|
16,132,783 |
15,078,491 |
||||||
Noncontrolling interests |
933,554 |
969,340 |
||||||
Total equity |
17,066,337 |
16,047,831 |
||||||
Total liabilities and equity |
$ |
32,923,028 |
$ |
30,637,336 |
Consolidated Statements of Income (unaudited) |
||||||||||
(in thousands, except per share data) |
||||||||||
Three Months Ended |
||||||||||
|
||||||||||
2020 |
2019 |
|||||||||
Revenues: |
||||||||||
Resident fees and services |
$ |
849,972 |
$ |
868,285 |
||||||
Rental income |
389,960 |
381,084 |
||||||||
Interest income |
15,241 |
15,119 |
||||||||
Other income |
3,429 |
7,757 |
||||||||
Total revenues |
1,258,602 |
1,272,245 |
||||||||
Expenses: |
||||||||||
Property operating expenses |
681,781 |
670,807 |
||||||||
Depreciation and amortization |
274,801 |
243,932 |
||||||||
Interest expense |
142,007 |
145,232 |
||||||||
General and administrative expenses |
35,481 |
35,282 |
||||||||
Loss (gain) on derivatives and financial instruments, net |
7,651 |
(2,487) |
||||||||
Loss (gain) on extinguishment of debt, net |
— |
15,719 |
||||||||
Provision for loan losses |
7,072 |
18,690 |
||||||||
Impairment of assets |
27,827 |
— |
||||||||
Other expenses |
6,292 |
8,756 |
||||||||
Total expenses |
1,182,912 |
1,135,931 |
||||||||
Income (loss) from continuing operations before income taxes |
||||||||||
and other items |
75,690 |
136,314 |
||||||||
Income tax (expense) benefit |
(5,442) |
(2,222) |
||||||||
Income (loss) from unconsolidated entities |
(3,692) |
(9,199) |
||||||||
Gain (loss) on real estate dispositions, net |
262,824 |
167,409 |
||||||||
Income (loss) from continuing operations |
329,380 |
292,302 |
||||||||
Net income (loss) |
329,380 |
292,302 |
||||||||
Less: |
Net income (loss) attributable to noncontrolling interests |
19,096 |
11,832 |
|||||||
Net income (loss) attributable to common stockholders |
$ |
310,284 |
$ |
280,470 |
||||||
Average number of common shares outstanding: |
||||||||||
Basic |
410,306 |
391,474 |
||||||||
Diluted |
412,420 |
393,452 |
||||||||
Net income (loss) attributable to common stockholders per share: |
||||||||||
Basic |
$ |
0.76 |
$ |
0.72 |
||||||
Diluted |
$ |
0.75 |
$ |
0.71 |
||||||
Common dividends per share |
$ |
0.87 |
$ |
0.87 |
FFO Reconciliations |
Exhibit 1 |
|||||||||||
(in thousands, except per share data) |
Three Months Ended |
|||||||||||
|
||||||||||||
2020 |
2019 |
|||||||||||
Net income (loss) attributable to common stockholders |
$ |
310,284 |
$ |
280,470 |
||||||||
Depreciation and amortization |
274,801 |
243,932 |
||||||||||
Impairments and losses (gains) on real estate dispositions, net |
(234,997) |
(167,409) |
||||||||||
Noncontrolling interests(1) |
(9,409) |
(17,760) |
||||||||||
Unconsolidated entities(2) |
15,445 |
19,150 |
||||||||||
NAREIT FFO attributable to common stockholders |
356,124 |
358,383 |
||||||||||
Normalizing items, net(3) |
63,195 |
41,182 |
||||||||||
Normalized FFO attributable to common stockholders |
$ |
419,319 |
$ |
399,565 |
||||||||
Average diluted common shares outstanding |
412,420 |
393,452 |
||||||||||
Per diluted share data attributable to common stockholders: |
||||||||||||
Net income (loss) |
$ |
0.75 |
$ |
0.71 |
||||||||
NAREIT FFO |
$ |
0.86 |
$ |
0.91 |
||||||||
Normalized FFO |
$ |
1.02 |
$ |
1.02 |
||||||||
Normalized FFO Payout Ratio: |
||||||||||||
Dividends per common share |
$ |
0.87 |
$ |
0.87 |
||||||||
Normalized FFO attributable to common stockholders per share |
$ |
1.02 |
$ |
1.02 |
||||||||
Normalized FFO payout ratio |
85 |
% |
85 |
% |
||||||||
Other items:(4) |
||||||||||||
Net straight-line rent and above/below market rent amortization(5) |
$ |
(24,930) |
$ |
(23,715) |
||||||||
Non-cash interest expenses(6) |
2,823 |
5,900 |
||||||||||
Recurring cap-ex, tenant improvements, and lease commissions |
(22,616) |
(21,416) |
||||||||||
Stock-based compensation(7) |
6,822 |
7,529 |
||||||||||
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) Amounts presented net of noncontrolling interests' share and |
||||||||||||
(5) Excludes normalized other impairment (see Exhibit 2). |
||||||||||||
(6) Excludes normalized incremental interest expense (see Exhibit 2). |
||||||||||||
(7) Excludes certain severance related stock-based compensation recorded in other expense. |
Normalizing Items |
Exhibit 2 |
|||||||||
(in thousands, except per share data) |
Three Months Ended |
|||||||||
|
||||||||||
2020 |
2019 |
|||||||||
Loss (gain) on derivatives and financial instruments, net |
$ |
7,651 |
(1) |
$ |
(2,487) |
|||||
Loss (gain) on extinguishment of debt, net |
— |
15,719 |
||||||||
Provision for loan losses |
7,072 |
(2) |
18,690 |
|||||||
Incremental interest expense |
5,871 |
(3) |
— |
|||||||
Other impairment |
32,268 |
(4) |
— |
|||||||
Other expenses |
6,292 |
(5) |
8,756 |
|||||||
Normalizing items attributable to noncontrolling interests and unconsolidated entities, net |
4,041 |
(6) |
504 |
|||||||
Net normalizing items |
$ |
63,195 |
$ |
41,182 |
||||||
Average diluted common shares outstanding |
412,420 |
393,452 |
||||||||
Net normalizing items per diluted share |
$ |
0.15 |
$ |
0.10 |
||||||
Note: (1) Primarily related to mark-to-market of Genesis Healthcare, Inc. stock holdings. |
||||||||||
(2) Primarily related to the collectability assessment of a non-real estate loan. |
||||||||||
(3) Represents mark-to-market adjustment recorded in interest expense on intercompany CAD denominated loan. |
||||||||||
(4) Represents write off of straight-line rent receivables recorded in rental income in conjunction with an amended lease. |
||||||||||
(5) Primarily related to non-capitalizable transaction costs. |
||||||||||
(6) Primarily related to non-capitalizable transaction costs in joint ventures. |
Net Debt to Adjusted EBITDA Reconciliation |
Exhibit 3 |
|||||||||||
(in thousands) |
Three Months Ended |
|||||||||||
|
|
|||||||||||
Net income (loss) |
$ |
329,380 |
$ |
240,136 |
||||||||
Interest expense |
142,007 |
131,648 |
||||||||||
Income tax expense (benefit) |
5,442 |
(4,832) |
||||||||||
Depreciation and amortization |
274,801 |
262,644 |
||||||||||
EBITDA |
751,630 |
629,596 |
||||||||||
Loss (income) from unconsolidated entities |
3,692 |
(57,420) |
||||||||||
Stock-based compensation(1) |
7,083 |
4,547 |
||||||||||
Loss (gain) on extinguishment of debt, net |
— |
2,612 |
||||||||||
Loss (gain) on real estate dispositions, net |
(262,824) |
(12,064) |
||||||||||
Impairment of assets |
27,827 |
98 |
||||||||||
Provision for loan losses |
7,072 |
— |
||||||||||
Loss (gain) on derivatives and financial instruments, net |
7,651 |
(5,069) |
||||||||||
Other expenses(1) |
6,031 |
16,042 |
||||||||||
Other impairment(2) |
32,268 |
— |
||||||||||
Adjusted EBITDA |
580,430 |
578,342 |
||||||||||
Unsecured credit facility and commercial paper |
$ |
844,985 |
$ |
1,587,597 |
||||||||
Long term debt obligations(3) |
13,228,433 |
13,436,365 |
||||||||||
Cash and cash equivalents(4) |
(303,423) |
(284,917) |
||||||||||
Net debt |
$ |
13,769,995 |
$ |
14,739,045 |
||||||||
Adjusted EBITDA annualized |
$ |
2,321,720 |
$ |
2,313,368 |
||||||||
Net debt to Adjusted EBITDA ratio |
5.93 |
x |
6.37 |
x |
||||||||
Note: |
(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses. |
|||||||||||
(2) Represents write off of straight-line rent receivables recorded in rental income in conjunction with an amended lease. |
||||||||||||
(3) Amounts include unamortized premiums/discounts, fair value adjustments and lease liabilities related to financing leases. Operating |
||||||||||||
(4) Inclusive of IRC section 1031 deposits, if any. |
||||||||||||
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SOURCE
Tim McHugh, (419) 247-2800