Welltower Reports Third Quarter 2023 Results

Welltower, Inc. -0.44%

Welltower, Inc.

WELL

93.41

-0.44%

TOLEDO, Ohio, Oct. 30, 2023 /PRNewswire/ -- Welltower Inc. (NYSE: WELL) today announced results for the quarter ended September 30, 2023.

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Recent Highlights

  • Reported net income attributable to common stockholders of $0.24 per diluted share
  • Reported normalized funds from operations ("FFO") attributable to common stockholders of $0.92 per diluted share
  • Reported total portfolio year-over-year same store NOI ("SSNOI") growth of 14.1%, driven by SSNOI growth in our Seniors Housing Operating ("SHO") portfolio of 26.1%
  • SHO portfolio year-over-year same store ("SS") revenue increased 9.8% in the third quarter, driven by 220 basis points ("bps") of year-over-year average occupancy growth and Revenue Per Occupied Room ("RevPOR") growth of 6.9%
  • SHO portfolio year-over-year SSNOI margin expanded by 330 bps driven primarily by strong RevPOR growth which continued to meaningfully outpace Expense per Occupied Room ("ExpPOR") growth
  • During the third quarter, we completed $1.4 billion of pro rata acquisitions and loan funding. Year to date as of October 30, 2023, we have completed $3.0 billion of pro rata gross investments exclusive of development funding
  • As of September 30, 2023, we had approximately $6.7 billion of available liquidity inclusive of $2.7 billion of available cash and restricted cash and full capacity under our $4.0 billion line of credit
  • Improved net debt to Adjusted EBITDA to 5.14x at September 30, 2023 from 6.93x at September 30, 2022
  • Revised full year 2023 net income attributable to common stockholders outlook to a range of $0.91 to $0.95 per diluted share as compared to previous guidance of $0.75 to $0.84 per diluted share. Full year normalized FFO attributable to common stockholders guidance has been revised to a range of $3.59 to $3.63 per diluted share as compared to previous guidance of $3.51 to $3.60 per diluted share

Capital Activity and Liquidity During the third quarter, net debt to consolidated enterprise value improved to 22.9% at September 30, 2023 from 29.5% at December 31, 2022. During the third quarter and subsequent to quarter end, we sourced approximately $3 billion of attractively priced capital, including debt, equity and proceeds from dispositions and loan payoffs to fund accretive capital deployment opportunities and to further strengthen our already robust liquidity profile.  We reduced our share of variable rate debt to 12.2% as of September 30, 2023 from 16.0% as of December 31, 2022.

Notable Investment Activity In the third quarter, we completed $1.6 billion of pro rata gross investments, including $1.4 billion in acquisitions and loan funding and $270 million in development funding. We opened seven development projects for an aggregate pro rata investment amount of $137 million. Additionally, during the third quarter we completed pro rata property dispositions and loan payoffs of $325 million. Subsequent to quarter end, we completed $922 million in acquisitions and loan funding, along with $29 million in pro rata property dispositions and loan payoffs.

Revera Joint Venture During the second quarter, we entered into definitive agreements to dissolve our existing Revera joint venture relationship across the U.S., United Kingdom and Canada. The transactions include acquiring the remaining interests in 110 properties from Revera while simultaneously selling interests in 31 properties to Revera.

We closed the portion of the transactions predominantly related to the U.S. portfolio during the third quarter through (i) the acquisition of wholly-owned interests in ten well-located properties currently under development or recently developed by Sunrise Senior Living that were previously held within a 34% Welltower/66% Revera joint venture, (ii) the disposition of our minority interests in 12 U.S. properties and one Canadian development project and (iii) the disposition of our 34% interest in the Sunrise Senior Living management company. In conjunction with these transactions, operations for two of the now wholly-owned properties, as well as an additional 26 existing 100% owned properties, transitioned to Oakmont Management Group, which has previously demonstrated rapid success in driving outsized NOI growth after assuming management of properties in its core markets.

We anticipate closing the remainder of the real estate transaction and operator transitions related to our Canadian portfolio at year end subject to customary closing conditions. The Canadian portfolio consists of 85 properties in a joint venture owned 75% by us and 25% by Revera. As a part of the transaction, we intend to acquire Revera's interest in 71 properties and sell our interests in the remaining 14 properties. To date, operations for 18 of the 71 retained properties have transitioned to new operators.

Canadian Pension Plan Investment Board ("CPPIB") During the third quarter, we acquired CPPIB's 45% interest in an existing joint venture with us for a pro rata investment of $161 million.

Other Transactions During the third quarter, we acquired five SHO properties, two Outpatient Medical properties and 24 Long-Term/Post-Acute Care properties for a pro rata purchase price of $619 million. We provided loan funding of $259 million during the quarter. Additionally, we received $320 million in proceeds from the disposition of 17 seniors housing properties and one medical office building and $5 million in proceeds received from loan payoffs.

Notable Investment Activity Subsequent to Quarter End

Cogir Management Corporation Subsequent to quarter end, we continued to grow our relationship with Cogir, closing on a portfolio of 12 best-in-class senior living communities in Quebec for a pro rata purchase price of $885 million CAD. Cogir will continue to manage the properties in a 95/5 joint venture.

Environmental, Social and Governance ("ESG") During the third quarter, we received the GRESB Green Star designation for the third consecutive year and were awarded full points for the Management component and Social and Governance sections due to our strong governance practices, commitments and engagement across ESG.

Dividend On October 30, 2023, the Board of Directors declared a cash dividend for the quarter ended September 30, 2023 of $0.61 per share. This dividend, which will be paid on November 22, 2023 to stockholders of record as of November 14, 2023, will be our 210th consecutive quarterly cash dividend. The declaration and payment of future quarterly dividends remains subject to review and approval by the Board of Directors.

Outlook for 2023 Net income attributable to common stockholders guidance has been revised to a range of $0.91 to $0.95 per diluted share from the previous range of $0.75 to $0.84 per diluted share, primarily due to change in projected net gains/losses/impairments and depreciation and amortization. We increased the midpoint of the guidance range of full year normalized FFO attributable to common stockholders to a range of $3.59 to $3.63 per diluted share from the previous range of $3.51 to $3.60 per diluted share. In preparing our guidance, we have updated or confirmed the following assumptions:

  • Same Store NOI: We expect average blended SSNOI growth of 11.5% to 13.5%, which is comprised of the following components:
    • Seniors Housing Operating approximately 23% to 26%
    • Seniors Housing Triple-net approximately 1.5% to 2.5%
    • Outpatient Medical approximately 2.5% to 3%
    • Long-Term/Post-Acute Care approximately 4% to 5%
  • Investments: Our earnings guidance includes only those acquisitions closed to date. Furthermore, no transitions or restructures beyond those announced to date are included.
  • Impact of Interest Rates and Foreign Exchange Rates: Increased interest rates on floating rate debt and a strengthening U.S. Dollar relative to the British Pound and Canadian Dollar are expected to reduce 2023 normalized FFO attributable to common stockholders by approximately $0.20 per diluted share versus 2022.
  • General and Administrative Expenses: We anticipate general and administrative expenses to be approximately $176 million to $180 million and stock-based compensation expense to be approximately $35 million.
  • Development: We anticipate funding an additional $334 million of development in 2023 relating to projects underway on September 30, 2023.
  • Dispositions: We expect pro rata disposition proceeds of $624 million at a blended yield of 5.5% in the next twelve months. This includes approximately $588 million of consideration from expected property sales and $36 million of expected proceeds from loan repayments.
  • Pandemic Relief Funds: Our initial 2023 earnings guidance did not include the recognition of any pandemic relief funds. During the nine months ended September 30, 2023, we recognized approximately $13 million at our share relating to federal programs in the United States and similar programs in the United Kingdom and Canada. Our updated guidance does not include any additional funds in 2023. During the full year 2022, we recognized approximately $35 million at our share relating to these programs.

Our guidance does not include any additional investments, dispositions or capital transactions beyond those we have announced, nor any other expenses, impairments, unanticipated additions to the loan loss reserve or other additional normalizing items. Please see the Supplemental Reporting Measures section for further discussion and our definition of normalized FFO and SSNOI and Exhibit 3 for a reconciliation of the outlook for net income available to common stockholders to normalized FFO attributable to common stockholders. We will provide additional detail regarding our 2023 outlook and assumptions on the third quarter 2023 conference call.

Conference Call Information We have scheduled a conference call on Tuesday, October 31, 2023 at 9:00 a.m. Eastern Time to discuss our third quarter 2023 results, industry trends and portfolio performance. Telephone access will be available by dialing (888) 340-5024 or (646) 960-0135 (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 November 7, 2023. To access the rebroadcast, dial (800) 770-2030 or (647) 362-9199 (international). The conference ID number is 8230248. 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 and net income attributable to common stockholders ("NICS"), as defined by U.S. generally accepted accounting principles ("U.S. GAAP"), are the most appropriate earnings measurements. However, we consider funds from operations ("FFO"), normalized FFO, net operating income ("NOI"), same store NOI ("SSNOI"), revenue per occupied room ("RevPOR"), same store RevPOR ("SS RevPOR"), expense per occupied room ("ExpPOR"), same store ExpPOR ("SS ExpPOR"), EBITDA and Adjusted EBITDA to be useful supplemental measures of our operating performance. Excluding EBITDA and Adjusted EBITDA, 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 attributable to common stockholders, 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 attributable to common stockholders represents FFO attributable to common stockholders adjusted for certain items detailed in Exhibit 2. We believe that normalized FFO attributable to common stockholders is a useful supplemental measure of operating performance because investors and equity analysts may use this measure to compare the operating performance of Welltower 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.

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 general overhead costs that are unrelated to property operations and unallocable to the properties. These expenses include, but are not limited to, payroll and benefits related to corporate employees, 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 UK properties using a consistent exchange rate. 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. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties. No reconciliation of the forecasted range for SSNOI on a combined basis or by property type 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 and ExpPOR represents the average expenses per occupied room per month at our Seniors Housing Operating properties. These metrics are calculated as our pro rata version of total resident fees and services revenues or property operating expenses from the income statement, divided by average monthly occupied room days. SS RevPOR and SS ExpPOR are used to evaluate the RevPOR and ExpPOR performance of our properties under a consistent population, which eliminates changes in the composition of our portfolio. They are based on the same pool of properties used for SSNOI and includes any revenue or expense normalizations used for SSNOI. We use RevPOR, ExpPOR, SS RevPOR and SS ExpPOR 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.

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 restricted cash. 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, other impairment charges and other adjustments deemed appropriate in management's opinion. 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 restricted cash. Consolidated enterprise value represents the sum of net debt, the fair market value of our common stock and noncontrolling interests.

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 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 September 30, 2023, which is available on Welltower's website (www.welltower.com), for information and reconciliations of additional supplemental reporting measures.

About Welltower Welltower Inc. (NYSE:WELL), a real estate investment trust ("REIT") and S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. Welltower 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, owns interests in 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 our 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 Welltower uses 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, Welltower is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause Welltower's actual results to differ materially from Welltower's expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the impact of the COVID-19 pandemic; 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; Welltower's 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 Welltower's properties; Welltower's ability to re-lease space at similar rates as vacancies occur; Welltower's 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 Welltower's properties; changes in rules or practices governing Welltower's financial reporting; the movement of U.S. and foreign currency exchange rates; Welltower's ability to maintain its qualification as a REIT; key management personnel recruitment and retention; and other risks described in Welltower's reports filed from time to time with the SEC. Welltower undertakes 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)





September 30,





2023



2022

Assets









Real estate investments:









Land and land improvements



$                     4,373,058



$                     4,156,985

Buildings and improvements



35,010,855



33,018,251

Acquired lease intangibles



1,961,799



1,920,803

Real property held for sale, net of accumulated depreciation



355,380



175,657

Construction in progress



1,338,076



1,012,202

Less accumulated depreciation and intangible amortization



(8,868,627)



(7,687,077)

Net real property owned



34,170,541



32,596,821

Right of use assets, net



338,693



323,230

Real estate loans receivable, net of credit allowance



1,181,265



916,639

Net real estate investments



35,690,499



33,836,690

Other assets:









Investments in unconsolidated entities



1,568,096



1,383,246

Goodwill



68,321



68,321

Cash and cash equivalents



2,582,037



343,446

Restricted cash



104,674



81,738

Straight-line rent receivable



405,154



430,173

Receivables and other assets



1,235,921



1,270,874

Total other assets



5,964,203



3,577,798

Total assets



$                   41,654,702



$                   37,414,488











Liabilities and equity









Liabilities:









Unsecured credit facility and commercial paper



$                                 —



$                         654,715

Senior unsecured notes



13,453,985



12,324,601

Secured debt



2,380,253



2,121,628

Lease liabilities



365,115



410,415

Accrued expenses and other liabilities



1,636,730



1,445,479

Total liabilities



17,836,083



16,956,838

Redeemable noncontrolling interests



244,793



400,965

Equity:









Common stock



533,918



473,930

Capital in excess of par value



30,056,076



25,289,432

Treasury stock



(112,313)



(111,772)

Cumulative net income



9,061,133



8,808,678

Cumulative dividends



(16,435,416)



(15,215,694)

Accumulated other comprehensive income



(149,362)



(75,267)

Total Welltower Inc. stockholders' equity



22,954,036



19,169,307

Noncontrolling interests



619,790



887,378

Total equity



23,573,826



20,056,685

Total liabilities and equity



$                   41,654,702



$                   37,414,488

 

Consolidated Statements of Income (unaudited)









(in thousands, except per share data)

















Three Months Ended



Nine Months Ended









September 30,



September 30,









2023



2022



2023



2022

Revenues:





















Resident fees and services



$       1,199,808



$       1,068,706



$       3,490,942



$       3,073,040





Rental income



384,507



361,983



1,152,005



1,079,784





Interest income



42,220



37,791



117,335



113,925





Other income



35,478



5,364



127,938



75,335





Total revenues



1,662,013



1,473,844



4,888,220



4,342,084

Expenses:





















Property operating expenses



995,273



912,180



2,911,698



2,619,932





Depreciation and amortization



339,314



353,699



1,020,371



968,082





Interest expense



156,532



139,682



453,272



389,128





General and administrative expenses



46,106



34,811



134,764



109,071





Loss (gain) on derivatives and financial instruments, net



2,885



6,905



5,095



8,076





Loss (gain) on extinguishment of debt, net



1



2



7



593





Provision for loan losses, net



4,059



490



7,292



(149)





Impairment of assets



7,388



4,356



21,103



4,356





Other expenses



38,220



15,481



72,034



76,716





Total expenses



1,589,778



1,467,606



4,625,636



4,175,805

Income (loss) from continuing operations before income taxes





















and other items



72,235



6,238



262,584



166,279

Income tax (expense) benefit



(4,584)



(3,257)



(11,132)



(11,335)

Income (loss) from unconsolidated entities



(4,031)



(6,698)



(51,434)



(16,640)

Gain (loss) on real estate dispositions, net



71,102



1,064



69,681



20,466

Income (loss) from continuing operations



134,722



(2,653)



269,699



158,770



















Net income (loss)



134,722



(2,653)



269,699



158,770

Less:



Net income (loss) attributable to noncontrolling interests (1)



7,252



4,114



13,516



13,828

Net income (loss) attributable to common stockholders



$         127,470



$           (6,767)



$         256,183



$         144,942

Average number of common shares outstanding:





















Basic



521,848



463,366



504,420



455,074





Diluted



525,138



463,366



507,353



457,999

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





















Basic



$               0.24



$             (0.01)



$               0.51



$               0.32





Diluted(2)



$               0.24



$             (0.01)



$               0.50



$               0.32

Common dividends per share



$               0.61



$               0.61



$               1.83



$               1.83























(1) Includes amounts attributable to redeemable noncontrolling interests.

(2) Includes adjustment to the numerator for income (loss) attributable to OP Units and DownREIT Units.

 

FFO Reconciliations















Exhibit 1



(in thousands, except per share data)



Three Months Ended



Nine Months Ended













September 30,



September 30,













2023



2022



2023



2022



Net income (loss) attributable to common stockholders



$     127,470



$       (6,767)



$     256,183



$     144,942



Depreciation and amortization



339,314



353,699



1,020,371



968,082



Impairments and losses (gains) on real estate dispositions, net



(63,714)



3,292



(48,578)



(16,110)



Noncontrolling interests(1)



(8,789)



(14,614)



(34,957)



(42,540)



Unconsolidated entities(2)



24,843



27,253



78,349



65,712



NAREIT FFO attributable to common stockholders



419,124



362,863



1,271,368



1,120,086



Normalizing items, net(3)



66,404



28,279



84,557



33,938



Normalized FFO attributable to common stockholders



$     485,528



$     391,142



$   1,355,925



$   1,154,024





























Average diluted common shares outstanding





















For net income (loss) purposes



525,138



463,366



507,353



457,999





For FFO purposes



525,138



466,950



507,353



457,999





























Per diluted share data attributable to common stockholders:





















Net income (loss)(4)



$           0.24



$         (0.01)



$           0.50



$           0.32





NAREIT FFO



$           0.80



$           0.78



$           2.51



$           2.45





Normalized FFO



$           0.92



$           0.84



$           2.67



$           2.52





























Normalized FFO Payout Ratio:





















Dividends per common share



$           0.61



$           0.61



$           1.83



$           1.83





Normalized FFO attributable to common stockholders per share



$           0.92



$           0.84



$           2.67



$           2.52







Normalized FFO payout ratio



66 %



73 %



69 %



73 %





























Other items:(5)



















Net straight-line rent and above/below market rent amortization(6)



$     (32,340)



$     (33,816)



$     (96,060)



$     (79,337)



Non-cash interest expenses(7)



7,191



5,365



19,643



15,638



Recurring cap-ex, tenant improvements, and lease commissions



(50,026)



(44,987)



(127,633)



(117,011)



Stock-based compensation



8,578



6,115



28,193



19,458







(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 Units and DownREIT Units.



(5) Amounts presented net of noncontrolling interests' share and including Welltower's share of unconsolidated entities.



(6) Excludes normalized other impairment (see Exhibit 2).



(7) Excludes normalized foreign currency loss (gain) (see Exhibit 2).







 

Normalizing Items







Exhibit 2



(in thousands, except per share data)



Three Months Ended



Nine Months Ended







September 30,



September 30,







2023



2022



2023



2022



Loss (gain) on derivatives and financial instruments, net



$       2,885

(1)

$       6,905



$       5,095



$       8,076



Loss (gain) on extinguishment of debt, net



1



2



7



593



Provision for loan losses, net



4,059

(2)

490



7,292



(149)



Income tax benefits







(246)





Other impairment



12,309

(3)



12,309



(620)



Other expenses



38,220

(4)

15,481



72,034



76,716



Leasehold interest termination







(65,485)



(64,854)



Casualty losses, net of recoveries



1,014

(5)

328



9,069



3,001



Foreign currency loss (gain)



82

(6)

2,037



(490)



3,877



Normalizing items attributable to noncontrolling interests and unconsolidated entities, net



7,834

(7)

3,036



44,972



7,298



Net normalizing items



$     66,404



$     28,279



$     84,557



$     33,938























Average diluted common shares outstanding



525,138



466,950



507,353



457,999



Net normalizing items per diluted share



$         0.13



$         0.06



$         0.17



$         0.07























(1) Primarily related to mark-to-market of the equity warrants received as part of the Safanad/HC-One transaction that closed in 2021.



(2) Primarily related to reserves for loan losses under the current expected credit losses accounting standard.



(3) Represents the write off of straight-line rent receivable balances relating to leases placed on cash recognition.



(4) Primarily related to non-capitalizable transaction costs and legal fees associated with operator transitions.



(5) Primarily relates to casualty losses net of any insurance recoveries.



(6) Primarily relates to foreign currency gains and losses related to accrued interest on intercompany loans and third party debt denominated in a foreign currency.



(7) Primarily related to hypothetical liquidation at book value adjustments related to in substance real estate investments.



 

Outlook Reconciliation: Year Ending December 31, 2023

Exhibit 3



(in millions, except per share data)





Prior Outlook



Current Outlook









Low



High



Low



High



FFO Reconciliation:



















Net income attributable to common stockholders



$         385



$         431



$         468



$         489



Impairments and losses (gains) on real estate dispositions, net(1,2)



(20)



(20)



(124)



(124)



Depreciation and amortization(1)



1,406



1,406



1,422



1,422



NAREIT FFO attributable to common stockholders



1,771



1,817



1,766



1,787



Normalizing items, net(1,3)



18



18



85



85



Normalized FFO attributable to common stockholders



$       1,789



$       1,835



$       1,851



$       1,872

























Diluted per share data attributable to common stockholders:



















Net income



$         0.75



$         0.84



$         0.91



$         0.95



NAREIT FFO



$         3.47



$         3.56



$         3.43



$         3.47



Normalized FFO



$         3.51



$         3.60



$         3.59



$         3.63

























Other items:(1)



















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



$       (126)



$       (126)



$       (131)



$       (131)



Non-cash interest expenses



27



27



28



28



Recurring cap-ex, tenant improvements, and lease commissions



(177)



(177)



(184)



(184)



Stock-based compensation



37



37



37



37









(1) Amounts presented net of noncontrolling interests' share and Welltower's share of unconsolidated entities.



(2) Includes estimated gains on projected dispositions.



(3) See Exhibit 2.



 

SSNOI Reconciliation











Exhibit 4



(in thousands)



Three Months Ended













September 30,













2023



2022



% growth



Net income (loss)



$                         134,722



$                           (2,653)







Loss (gain) on real estate dispositions, net



(71,102)



(1,064)







Loss (income) from unconsolidated entities



4,031



6,698







Income tax expense (benefit)



4,584



3,257







Other expenses



38,220



15,481







Impairment of assets



7,388



4,356







Provision for loan losses, net



4,059



490







Loss (gain) on extinguishment of debt, net



1



2







Loss (gain) on derivatives and financial instruments, net



2,885



6,905







General and administrative expenses



46,106



34,811







Depreciation and amortization



339,314



353,699







Interest expense



156,532



139,682







Consolidated NOI



666,740



561,664







NOI attributable to unconsolidated investments(1)



29,488



27,374







NOI attributable to noncontrolling interests(2)



(22,838)



(27,236)







Pro rata NOI



673,390



561,802







Non-cash NOI attributable to same store properties



(14,036)



(16,045)







NOI attributable to non-same store properties



(190,461)



(134,532)







Currency and ownership adjustments(3)



(1,513)



2,746







Normalizing adjustments, net(4)



(1,489)



(5,758)







Same Store NOI (SSNOI)



$                         465,891



$                         408,213



14.1 %



















Seniors Housing Operating



238,882



189,440



26.1 %



Seniors Housing Triple-net



89,929



86,573



3.9 %



Outpatient Medical



117,217



113,344



3.4 %



Long-Term/Post-Acute Care



19,863



18,856



5.3 %



Total SSNOI



$                         465,891



$                         408,213



14.1 %





















(1) Represents Welltower's interests in joint ventures where Welltower is the minority partner.



(2) Represents minority partners' interests in joint ventures where Welltower is the majority partner.



(3) Includes adjustments to reflect consistent property ownership percentages and foreign currency exchange rates for properties in the U.K. and Canada.



(4) Includes other adjustments described in the accompanying Supplement.







 

Reconciliation of SHO SS RevPOR Growth

Exhibit 5



(in thousands except SS RevPOR)









September 30,







2023



2022





Consolidated SHO revenues

$       1,203,899



$       1,072,600





Unconsolidated SHO revenues attributable to WELL(1)

59,550



53,953





SHO revenues attributable to noncontrolling interests(2)

(41,696)



(64,800)





SHO pro rata revenues(3)

1,221,753



1,061,753





Non-cash and non-RevPOR revenues on same store properties

(1,054)



(960)





Revenues attributable to non-same store properties

(283,502)



(225,646)





Currency and ownership adjustments(4)

(4,644)



14,688





SHO SS RevPOR revenues(5)

$           932,553



$           849,835

















Average occupied units/month(6)

59,445



57,914





SHO SS RevPOR(7)

$               5,187



$               4,851





SS RevPOR YOY growth

6.9 %





















(1) Represents Welltower's interests in joint ventures where Welltower is the minority partner.





(2) Represents minority partners' interests in joint ventures where Welltower is the majority partner.



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





(4) Includes where appropriate adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.37 and to translate UK properties at a GBP/USD rate of 1.20.



(5) Represents SS SHO RevPOR revenues at Welltower pro rata ownership.





(6) Represents average occupied units for SS properties on a pro rata basis.





(7) Represents pro rata SS average revenues generated per occupied room per month.





 

Net Debt to Adjusted EBITDA Reconciliation







Exhibit 6



(in thousands)



Three Months Ended













September 30, 2023



September 30, 2022



Net income (loss)



$                   134,722



$                     (2,653)



Interest expense



156,532



139,682



Income tax expense (benefit)



4,584



3,257



Depreciation and amortization



339,314



353,699



EBITDA



635,152



493,985



Loss (income) from unconsolidated entities



4,031



6,698



Stock-based compensation



8,578



6,115



Loss (gain) on extinguishment of debt, net



1



2



Loss (gain) on real estate dispositions, net



(71,102)



(1,064)



Impairment of assets



7,388



4,356



Provision for loan losses, net



4,059



490



Loss (gain) on derivatives and financial instruments, net



2,885



6,905



Other expenses



38,220



15,481



Casualty losses, net of recoveries



1,014



328



Other impairment(1)



12,309





Adjusted EBITDA



$                   642,535



$                   533,296















Total debt(2)



$             15,899,420



$             15,210,358



Cash and cash equivalents and restricted cash



(2,686,711)



(425,184)



Net debt



$             13,212,709



$             14,785,174















Adjusted EBITDA annualized



$               2,570,140



$               2,133,184



Net debt to Adjusted EBITDA ratio



                          5.14 x



                          6.93 x

















(1)  Represents the write off of straight-line rent receivable balances for leases placed on cash recognition.



(2) Amounts include unamortized premiums/discounts, other fair value adjustments and financing lease liabilities. Excludes operating lease liabilities related to ASC 842 of $299,933,000 and $301,001,000 for the three months ended September 30, 2023 and 2022, respectively.





















 

Net Debt to Consolidated Enterprise Value







Exhibit 7



(in thousands, except share price)













September 30, 2023



December 31, 2022



Common shares outstanding



532,268



490,509



Period end share price



$                     81.92



$                     65.55



Common equity market capitalization



$           43,603,395



$           32,152,865















Total debt(1)



$           15,899,420



$           14,661,552



Cash and cash equivalents and restricted cash



(2,686,711)



(722,292)



Net debt



$           13,212,709



$           13,939,260

















Noncontrolling interests(2)



864,583



1,099,182



Consolidated enterprise value



$           57,680,687



$           47,191,307



Net debt to consolidated enterprise value



22.9 %



29.5 %

















(1) Amounts include senior unsecured notes, secured debt and lease liabilities related to finance leases, as reflected on our consolidated balance sheets. Operating lease liabilities related to the ASC 842 adoption are excluded.



(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests as reflected on our consolidated balance sheets.

















 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/welltower-reports-third-quarter-2023-results-301971838.html

SOURCE Welltower

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