Welltower’s Revenue Dips but REIT Predicts Strong Growth Thanks to Senior Housing
By Julia Echikson July 30, 2024 12:19 pm
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Despite revenue for Welltower (WELL) dipping slightly quarter-to-quarter, the health care real estate investment trust raised its 2024 guidance Monday after second-quarter earnings beat estimates, predicting strong growth within its senior housing portfolio thanks to a booming aging population in the West.
Total revenue at the close of the second quarter dropped to $1.82 billion, marking a 2 percent decrease from the previous quarter for the REIT, which also specializes in medical rentals across the U.S., Canada, and the U.K. All the while, total expenses grew by 0.5 percent to $1.73 billion in the same time frame.
Still, the recent figures marked improvements from a year ago, when Welltower hit $1.67 billion in revenue. Recent acquisitions boosted some of the growth. During the second quarter, the Toledo, Ohio-based REIT completed $1.7 billion of investments, including $1.4 billion in acquisitions and loan funding and $251 million in development funding.
The REIT now expects 2024 funds from operations (FFO) to land between $4.13 and $4.21 per share, up from its prior guidance, which it estimated at $4.05 and $4.17 per share.
The senior housing and assisted living portion of the portfolio fueled much of the REIT’s growth. Resident fees and services revenue rose to $1.39 billion, up from $1.16 billion a year ago. In the second quarter alone, income from the senior housing component surged by 21.7 percent, following 25.5 percent growth in the previous quarter.
All the while in the second quarter, income from the medical rentals decreased by $47 million to $336 million from a year prior. In the quarter, Welltower converted, or is in the process of converting, 47 triple-net leased properties to senior operating structures.
“Not only is the 80-plus population growing at the fastest clip in decades, but what’s even more compelling is the growth of seniors will accelerate to 7 percent throughout the decade, driving demand even higher,” Welltower’s CEO Shankh Mitra said during an earnings call Tuesday.
Mitra expects the supply of senior residential facilities to remain low, given the constraints in the debt market. “It remains extraordinarily challenging to secure construction financing as regional banks that served as the most prolific lender to the sector in previous cycles have effectively shut down all activity,” he added.
Despite the headwinds in the market, the REIT managed to recast and upsize its revolving credit facility to $5 billion, bringing its near-term liquidity to nearly $9 billion.
One tranche of the updated credit facility consists of $3 billion that will mature in July 2028. The remaining $2 billion will come due a year later.
Julia Echikson can be reached at jechikson@commercialobserver.com.
