TOLEDO, Ohio, July 28, 2017 /PRNewswire/ -- Welltower
Inc. (NYSE: HCN) today announced results for the quarter ended
June 30, 2017. For the quarter, we
generated net income attributable to common stockholders of
$0.51 per share and normalized FFO
attributable to common stockholders of $1.06 per share.
Quarterly Highlights
- Seniors housing operating SSNOI grew 3.5% and SS REVPOR grew
3.9%
- Increasing total SSNOI guidance to 2.25%-3% from 2%-3% due to
stronger 1H17 seniors housing operating performance
- Net debt to undepreciated book capitalization declined to 35.0%
from 39.2% at 6/30/16
- Net debt to adjusted EBITDA improved to 5.17x from 5.47x in
2Q16
"Our core diversified health care real estate platform continues
to drive outperformance and demonstrates the value of owning best
in class real estate managed by the industry's top operators,"
commented CEO Tom DeRosa.
"Increasing demand for high-end seniors housing has led to pricing
power and enabled Welltower to drive consistent rate growth. We are
pleased to be raising guidance for our total same store portfolio
as a result of our strong first half performance."
Capital Activity On June 30,
2017, we had $442 million of
cash and cash equivalents and $2.6
billion of available borrowing capacity under our primary
unsecured credit facility. During the second quarter, we
generated approximately $192 million
in proceeds under our ATM program at an average price of
$72.56. In addition, we extinguished
$182 million of secured debt during
the quarter, bringing our year to date retirement of debt and
preferred securities to $1.275
billion at a blended average rate of 5.6%.
Outlook for 2017 Net income attributable to common
stockholders has been revised to a range of $2.32 to $2.42 per diluted share from the
previous range of $2.39 to $2.49 per
diluted share primarily due to the normalizing items in Exhibit 1
and impairments. We are affirming our 2017 normalized FFO
attributable to common stockholders guidance and expect to report
in a range of $4.15 to $4.25 per
diluted share. As previously disclosed, 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 updated the following assumptions:
- Same Store NOI: We are increasing SSNOI guidance and now expect
average blended SSNOI growth of approximately 2.25%-3% in 2017, up
from 2%-3% primarily due to better than expected performance in our
seniors housing operating portfolio in the first half of 2017.
- Acquisitions: 2017 earnings guidance excludes any additional
potential acquisitions beyond what has been announced.
- Development: We anticipate funding additional development of
approximately $173 million in 2017
relating to projects underway on June 30,
2017. We expect development conversions during the remainder
of 2017 of approximately $143
million, which are currently expected to generate stabilized
yields of approximately 8.8%. These projections exclude the
development projects in London and
midtown Manhattan which are still
in the planning stages.
- Dispositions: We continue to anticipate approximately
$2 billion of disposition proceeds at
a blended yield of 7.6% in 2017. This includes approximately
$1.3 billion of proceeds from
dispositions completed to-date and $0.7
billion of incremental proceeds from other potential loan
payoffs and property sales.
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 normalized FFO
attributable to common stockholders. We will provide
additional detail regarding our 2017 outlook and assumptions on the
second quarter 2017 conference call.
Dividend Growth As previously announced, the Board of
Directors declared a cash dividend for the quarter ended
June 30, 2017 of $0.87 per share, as compared to $0.86 per share for the same period in
2016. On August 21, 2017, we
will pay our 185th 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
$292 million of pro rata gross
investments for the quarter including $110
million in acquisitions/JVs, $162
million in development funding and $20 million in loans. 92% of these
investments were completed with existing relationships.
Acquisitions/JVs were comprised of four separate transactions at a
blended yield of 6.5%. The development fundings are expected to
yield 7.8% upon stabilization and the loans were made at a blended
rate of 6.6%. We also placed into service 10 development projects
totaling $273 million at a blended
stabilized yield of 7.6%. Also during the quarter, we completed
total dispositions of $160 million
consisting of loan payoffs of $43
million at an average yield of 8.9% and property sales of
$117 million at a blended yield on
proceeds of 9.3%.
Notable Investments with Existing Operating Partners
Legend Senior Living We expanded our relationship with Legend by
acquiring two purpose-built, private pay seniors housing properties
located in Tulsa, OK and
Greeley, CO. The properties were
acquired through our existing 88/12 joint venture with Legend and
the purchase price based on a 100% ownership interest was
$49 million. These properties were
added to an existing long-term master lease at an initial lease
yield of 6.25% and which escalates 3.25% annually. Since starting
our initial $6 million development in
2005, we have completed $547 million
of follow-on investments with Legend.
Sagora Senior Living We expanded our relationship with Sagora by
acquiring a 100% ownership interest in a 90-unit private pay
seniors housing property owned by a third party and located in the
Houston MSA for $24 million. The
property opened in 2015 and was added to a master lease which has a
corporate guarantee and expires in 2032. The initial lease yield is
6.25% with 5% annual increasers for the first two years and then
3.5% annual increasers thereafter. Since closing our
initial $8.5 million acquisition in 2010, we have
completed $460 million of follow-on investments with
Sagora.
Ascension Health We acquired an on-campus, affiliated outpatient
medical office building in the Austin MSA. The purchase price was
$19 million, representing a 6.7%
stabilized cap rate. The property is 80,734 rentable square feet,
was built in 2014, and is 75.8% leased. It is located on the campus
of a 93-bed Ascension Health affiliated hospital. Ascension Health,
the largest non-profit health system in the U.S. and the world's
largest Catholic health system, encompasses 15,721 staffed beds
across 128 hospitals and generates $17.7
billion of annual net patient revenues.
Notable Investments with New Operating Partners
University of California Irvine
Health We acquired an off-campus, affiliated outpatient medical
office building in Costa Mesa, CA
in a 55/45 joint venture with Canada Pension Plan Investment Board.
The purchase price based upon 100% ownership interest was
$43 million, which represents a year
one cap rate of 6.9%. After factoring in the above market rate
debt, the effective cap rate is 6.2%. The property is 76,880
rentable square feet, was built in 2007, and is 93% leased. UC
Irvine Health leases 39% of the building's RSF and is a new tenant
for Welltower. UC Irvine Health is owned and operated by The
Regents of the University of California
(Moody's A2), a public university system with 10 campuses.
Notable Development Conversions
Sunrise Senior Living We expanded our relationships with
Sunrise and Revera by completing the development of two private
pay, seniors housing properties located in Bath and High Wycombe, U.K. for £24 million based upon 100%
ownership. Revera is a 25% joint venture partner. The purchase
price represents an 8.1% stabilized return on cost. Since closing
our initial $243 million acquisition
in 2012, we have completed $5.1
billion of follow-on pro rata investments with Sunrise.
Brandywine Living We expanded our relationship with Brandywine
by completing the development of a 120-unit senior housing property
located in the New York MSA. The investment amount based upon
100% ownership interest was $53
million and the property was added to a newly-created master
lease in a 95/5 joint venture at an initial lease yield of
7.0%. There are outsized annual escalators for the first five
years of the lease followed by 25 basis point annual escalators
thereafter. Since closing our initial $599 million acquisition/leaseback in 2010, we
have completed $397 million of
follow-on pro rata investments with Brandywine.
Kisco We expanded our relationship with Kisco by completing the
development of 60 assisted living, memory care and private pay
long-term/post-acute units as part of a private pay, rental
continuing care retirement community campus located in the
North Hills area of Raleigh, NC. The 165 IL units were
completed in 1Q17. The investment amount based on 100%
ownership interest was $23 million
and the property was added to a master lease at an
initial lease yield of 8.0% in our existing 85/15 joint
venture. There are no increasers for the first five years and
25 basis point annual increasers thereafter. Since closing
our initial $19 million acquisition in 2012, we have
completed $137 million of follow-on investments with
Kisco.
Medstar We completed a 46,326 square foot development of an
outpatient medical building in Timonium,
MD that is 100% leased by Medstar Health. The investment
amount was $21 million and the yield
on the development is 6.0%.
St. John Providence We completed
a 56,211 square foot development of an outpatient medical building
in Howell, MI that is 70% leased
by St. John Providence, a subsidiary of Ascension Health, with the
remaining space fully occupied by several physician practices. The
investment amount was $16 million and
the stabilized yield on the development is 8.1%.
Notable Dispositions
Foundations Health Solutions We completed the disposition of 11
triple-net facilities for $117
million. The properties were purchased by Foundations and
continue to be operated and managed by Foundations. We realized a
gain on sale of $42 million and an
unlevered IRR of 11.4%.
Genesis Healthcare We received $28
million in loan repayments from Genesis at an average yield
of 10%.
Conference Call Information We have scheduled a
conference call on Friday, July 28,
2017 at 9:00 a.m. Eastern Time
to discuss our second quarter 2017 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 August 11,
2017. To access the rebroadcast, dial 855-859-2056 or
404-537-3406 (international). The conference ID number is
44271382. 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 revenues,
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), net operating
income (NOI), same store net operating income (SSNOI), same store
revenues per occupied room (SS REVPOR), and Adjusted EBITDA
(A-EBITDA) to be useful supplemental measures of our operating
performance. Excluding A-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 1. 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 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.
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 paid to operators, marketing,
housekeeping, food service, maintenance, utilities, property taxes
and insurance. General and administrative expenses represent
costs unrelated to property operations or transaction costs.
These expenses include, but are not limited to, payroll and
benefits, professional services, office expenses and depreciation
of corporate fixed assets.
SSNOI is used to evaluate the operating performance of our
properties 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 the pro rata version of resident fees and
services revenues per the income statement 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 is
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.
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 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 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 A-EBITDA to exclude
unconsolidated entities and to include adjustments for stock-based
compensation expense, provision for loan losses, gains/losses on
extinguishment of debt, transactions costs,
gains/losses/impairments on properties, gains/losses on derivatives
and other non-recurring and/or non-cash income/charges. We believe
that A-EBITDA, along with net income and cash flow provided from
operating activities, is an important supplemental measure because
it provides additional information to assess and evaluate the
performance of our operations. Our leverage ratios include net debt
to undepreciated book capitalization and net debt to A-EBITDA.
Undepreciated book capitalization represents book capitalization
adjusted for accumulated depreciation and amortization. Book
capitalization represents the sum of net debt (defined as total
long-term debt less cash and cash equivalents and any IRC section
1031 deposits), total equity and redeemable 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 June 30,
2017, 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 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)
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
|
Real estate
investments:
|
|
|
|
|
|
|
|
|
|
Land and land
improvements
|
|
$
|
2,746,483
|
|
$
|
2,537,508
|
|
|
|
Buildings and
improvements
|
|
|
25,399,178
|
|
|
25,293,007
|
|
|
|
Acquired lease
intangibles
|
|
|
1,436,041
|
|
|
1,345,424
|
|
|
|
Real property held
for sale, net of accumulated depreciation
|
|
|
141,319
|
|
|
501,192
|
|
|
|
Construction in
progress
|
|
|
321,655
|
|
|
475,203
|
|
|
|
|
|
|
30,044,676
|
|
|
30,152,334
|
|
|
|
Less accumulated
depreciation and intangible amortization
|
|
|
(4,568,408)
|
|
|
(4,109,585)
|
|
|
|
|
Net real property
owned
|
|
|
25,476,268
|
|
|
26,042,749
|
|
|
|
Real estate loans
receivable
|
|
|
520,479
|
|
|
647,677
|
|
|
|
Less allowance for
losses on loans receivable
|
|
|
(5,811)
|
|
|
-
|
|
|
|
|
Net real estate loans
receivable
|
|
|
514,668
|
|
|
647,677
|
|
|
|
Net real estate
investments
|
|
|
25,990,936
|
|
|
26,690,426
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
|
Investments in
unconsolidated entities
|
|
|
425,489
|
|
|
543,068
|
|
|
|
Goodwill
|
|
|
68,321
|
|
|
68,321
|
|
|
|
Cash and cash
equivalents
|
|
|
442,284
|
|
|
466,585
|
|
|
|
Restricted
cash
|
|
|
45,357
|
|
|
58,440
|
|
|
|
Straight-line rent
receivable
|
|
|
370,819
|
|
|
449,617
|
|
|
|
Receivables and other
assets
|
|
|
632,580
|
|
|
688,044
|
|
|
|
|
|
|
1,984,850
|
|
|
2,274,075
|
|
Total
assets
|
|
$
|
27,975,786
|
|
$
|
28,964,501
|
|
|
|
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Borrowings under
primary unsecured credit facility
|
|
$
|
385,000
|
|
$
|
745,000
|
|
|
|
Senior unsecured
notes
|
|
|
8,250,940
|
|
|
8,711,790
|
|
|
|
Secured
debt
|
|
|
2,670,914
|
|
|
3,442,178
|
|
|
|
Capital lease
obligations
|
|
|
73,092
|
|
|
74,759
|
|
|
|
Accrued expenses and
other liabilities
|
|
|
893,441
|
|
|
728,080
|
|
Total
liabilities
|
|
|
12,273,387
|
|
|
13,701,807
|
|
Redeemable
noncontrolling interests
|
|
|
388,876
|
|
|
394,126
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
718,750
|
|
|
1,006,250
|
|
|
|
Common
stock
|
|
|
369,525
|
|
|
357,950
|
|
|
|
Capital in excess of
par value
|
|
|
17,439,977
|
|
|
16,625,186
|
|
|
|
Treasury
stock
|
|
|
(62,335)
|
|
|
(51,288)
|
|
|
|
Cumulative net
income
|
|
|
5,330,702
|
|
|
4,102,919
|
|
|
|
Cumulative
dividends
|
|
|
(8,805,336)
|
|
|
(7,491,922)
|
|
|
|
Accumulated other
comprehensive income
|
|
|
(163,624)
|
|
|
(159,638)
|
|
|
|
Other
equity
|
|
|
1,173
|
|
|
3,917
|
|
|
|
|
Total Welltower Inc.
stockholders' equity
|
|
|
14,828,832
|
|
|
14,393,374
|
|
|
|
Noncontrolling
interests
|
|
|
484,691
|
|
|
475,194
|
|
Total
equity
|
|
|
15,313,523
|
|
|
14,868,568
|
|
Total liabilities
and equity
|
|
$
|
27,975,786
|
|
$
|
28,964,501
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Income (unaudited)
|
(in thousands,
except per share data)
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
|
355,599
|
|
$
|
422,628
|
|
$
|
722,741
|
|
$
|
838,290
|
|
|
Resident fees and
service
|
|
|
677,040
|
|
|
615,220
|
|
|
1,347,377
|
|
|
1,217,369
|
|
|
Interest
income
|
|
|
20,901
|
|
|
24,007
|
|
|
41,649
|
|
|
49,195
|
|
|
Other
income
|
|
|
5,062
|
|
|
14,802
|
|
|
9,133
|
|
|
18,851
|
Gross
revenues
|
|
|
1,058,602
|
|
|
1,076,657
|
|
|
2,120,900
|
|
|
2,123,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
116,231
|
|
|
132,326
|
|
|
234,827
|
|
|
265,285
|
|
|
Property operating
expenses
|
|
|
501,855
|
|
|
458,832
|
|
|
1,012,024
|
|
|
908,468
|
|
|
Depreciation and
amortization
|
|
|
224,847
|
|
|
226,569
|
|
|
453,124
|
|
|
455,265
|
|
|
General and
administrative expenses
|
|
|
32,632
|
|
|
39,914
|
|
|
63,733
|
|
|
85,606
|
|
|
Transaction
costs
|
|
|
-
|
|
|
5,157
|
|
|
-
|
|
|
13,365
|
|
|
Loss (gain) on
derivatives, net
|
|
|
736
|
|
|
-
|
|
|
1,960
|
|
|
-
|
|
|
Loss (gain) on
extinguishment of debt, net
|
|
|
5,515
|
|
|
33
|
|
|
36,870
|
|
|
9
|
|
|
Impairment of
assets
|
|
|
13,631
|
|
|
-
|
|
|
24,662
|
|
|
14,314
|
|
|
Other
expenses
|
|
|
6,339
|
|
|
3,161
|
|
|
18,014
|
|
|
3,161
|
|
Total
expenses
|
|
|
901,786
|
|
|
865,992
|
|
|
1,845,214
|
|
|
1,745,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and income from
unconsolidated entities
|
|
|
156,816
|
|
|
210,665
|
|
|
275,686
|
|
|
378,232
|
Income tax (expense)
benefit
|
|
|
8,448
|
|
|
513
|
|
|
6,203
|
|
|
2,239
|
Income (loss) from
unconsolidated entities
|
|
|
(3,978)
|
|
|
(1,959)
|
|
|
(27,084)
|
|
|
(5,778)
|
Income (loss) from
continuing operations
|
|
|
161,286
|
|
|
209,219
|
|
|
254,805
|
|
|
374,693
|
Gain (loss) on real
estate dispositions, net
|
|
|
42,155
|
|
|
1,530
|
|
|
286,247
|
|
|
1,530
|
Net income
(loss)
|
|
|
203,441
|
|
|
210,749
|
|
|
541,052
|
|
|
376,223
|
Less:
|
Preferred
dividends
|
|
|
11,680
|
|
|
16,352
|
|
|
26,059
|
|
|
32,703
|
|
|
|
Preferred stock
redemption charge
|
|
|
-
|
|
|
-
|
|
|
9,769
|
|
|
-
|
|
|
|
Net income (loss)
attributable to noncontrolling interests
|
|
|
3,332
|
|
|
(1,077)
|
|
|
4,156
|
|
|
(924)
|
Net income (loss)
attributable to common stockholders
|
|
$
|
188,429
|
|
$
|
195,474
|
|
$
|
501,068
|
|
$
|
344,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
366,524
|
|
|
356,646
|
|
|
364,551
|
|
|
355,879
|
|
|
Diluted
|
|
|
368,149
|
|
|
358,891
|
|
|
366,423
|
|
|
357,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.51
|
|
$
|
0.55
|
|
$
|
1.37
|
|
$
|
0.97
|
|
|
Diluted
|
|
$
|
0.51
|
|
$
|
0.54
|
|
$
|
1.37
|
|
$
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common dividends per
share
|
|
$
|
0.87
|
|
$
|
0.86
|
|
$
|
1.74
|
|
$
|
1.72
|
Normalizing
Items
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
1
|
(in thousands,
except per share data)
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Transaction
costs
|
$
|
-
(1)
|
|
$
|
5,157
|
|
|
$
|
-
|
|
$
|
13,365
|
|
Loss (gain) on
derivatives, net
|
|
736
(2)
|
|
|
-
|
|
|
|
1,960
|
|
|
-
|
|
Loss (gain) on
extinguishment of debt, net
|
|
5,515
(3)
|
|
|
33
|
|
|
|
36,870
|
|
|
9
|
|
Preferred stock
redemption charge
|
|
-
|
|
|
-
|
|
|
|
9,769
|
|
|
-
|
|
Nonrecurring income
tax benefits
|
|
(7,916)(4)
|
|
|
-
|
|
|
|
(7,916)
|
|
|
-
|
|
Other
expenses
|
|
6,339
(5)
|
|
|
3,161
|
|
|
|
18,014
|
|
|
3,161
|
|
Additional other
income
|
|
-
|
|
|
(11,811)
|
|
|
|
-
|
|
|
(11,811)
|
|
Normalizing items
attributable to noncontrolling interests and unconsolidated
entities, net
|
|
1,911
(6)
|
|
|
921
|
|
|
|
24,850
|
|
|
2,439
|
|
Net normalizing
items
|
$
|
6,585
|
|
$
|
(2,539)
|
|
|
$
|
83,547
|
|
$
|
7,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted
common shares outstanding
|
|
368,149
|
|
|
358,891
|
|
|
|
366,423
|
|
|
357,489
|
|
Net normalizing items
per diluted share
|
$
|
0.02
|
|
$
|
(0.01)
|
|
|
$
|
0.23
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1) Effective 1/1/17
with the adoption of ASU 2017-01, any non-capitalizable transaction
costs are in Other Expenses.
|
|
|
(2) Primarily related
to mark-to-market of a convertible note receivable.
|
|
|
(3) Primarily related
to secured debt extinguishments.
|
|
|
(4) Primarily related
to a nonrecurring deferred tax benefit.
|
|
|
(5) Primarily related
to severance-related costs and non-capitalizable transaction
costs.
|
|
|
(6) Primarily related
to non-capitalizable transaction costs in joint
ventures.
|
|
FFO
Reconciliations
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
2
|
(in thousands,
except per share data)
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Net income (loss)
attributable to common stockholders
|
$
|
188,429
|
|
$
|
195,474
|
|
|
$
|
501,068
|
|
$
|
344,444
|
|
Depreciation and
amortization
|
|
224,847
|
|
|
226,569
|
|
|
|
453,124
|
|
|
455,265
|
|
Losses/impairments
(gains) on properties, net
|
|
(28,524)
|
|
|
(1,530)
|
|
|
|
(261,585)
|
|
|
12,784
|
|
Noncontrolling
interests(1)
|
|
(16,955)
|
|
|
(20,616)
|
|
|
|
(35,061)
|
|
|
(37,934)
|
|
Unconsolidated
entities(2)
|
|
16,593
|
|
|
17,077
|
|
|
|
33,077
|
|
|
33,682
|
|
NAREIT FFO
attributable to common stockholders
|
|
384,390
|
|
|
416,974
|
|
|
|
690,623
|
|
|
808,241
|
|
Normalizing items,
net(3)
|
|
6,585
|
|
|
(2,539)
|
|
|
|
83,547
|
|
|
7,163
|
|
Normalized FFO
attributable to common stockholders
|
$
|
390,975
|
|
$
|
414,435
|
|
|
$
|
774,170
|
|
$
|
815,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted
common shares outstanding
|
|
368,149
|
|
|
358,891
|
|
|
|
366,423
|
|
|
357,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
0.51
|
|
$
|
0.54
|
|
|
$
|
1.37
|
|
$
|
0.96
|
|
NAREIT FFO
|
$
|
1.04
|
|
$
|
1.16
|
|
|
$
|
1.88
|
|
$
|
2.26
|
|
Normalized
FFO
|
$
|
1.06
|
|
$
|
1.15
|
|
|
$
|
2.11
|
|
$
|
2.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized FFO Payout
Ratio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common
share
|
$
|
0.87
|
|
$
|
0.86
|
|
|
$
|
1.74
|
|
$
|
1.72
|
|
Normalized FFO
attributable to common stockholders per share
|
$
|
1.06
|
|
$
|
1.15
|
|
|
$
|
2.11
|
|
$
|
2.28
|
|
Normalized
FFO payout ratio
|
|
82%
|
|
|
75%
|
|
|
|
82%
|
|
|
75%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
items:(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net straight-line
rent and above/below market rent amortization
|
$
|
(17,058)
|
|
$
|
(26,897)
|
|
|
$
|
(34,980)
|
|
$
|
(56,520)
|
|
Non-cash interest
expenses
|
|
3,612
|
|
|
2,124
|
|
|
|
5,852
|
|
|
2,066
|
|
Recurring cap-ex,
tenant improvements, and lease commissions
|
|
(15,263)
|
|
|
(16,593)
|
|
|
|
(29,069)
|
|
|
(28,399)
|
|
Stock-based
compensation
|
|
4,763
|
|
|
7,031
|
|
|
|
9,669
|
|
|
15,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
(4) Amounts presented
net of noncontrolling interests' share and Welltower's share of
unconsolidated entities.
|
|
Outlook
Reconciliations: Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
Exhibit
3
|
(in millions,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
Outlook
|
|
|
Current
Outlook
|
|
|
|
|
|
Low
|
|
High
|
|
|
Low
|
|
High
|
|
FFO
Reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
880
|
|
$
|
917
|
|
|
$
|
853
|
|
$
|
890
|
|
Losses/impairments
(gains) on properties, net(1,2)
|
|
(316)
|
|
|
(316)
|
|
|
|
(300)
|
|
|
(300)
|
|
Depreciation and
amortization(1)
|
|
887
|
|
|
887
|
|
|
|
891
|
|
|
891
|
|
NAREIT FFO
attributable to common stockholders
|
|
1,451
|
|
|
1,488
|
|
|
|
1,444
|
|
|
1,481
|
|
Normalizing items,
net(3)
|
|
77
|
|
|
77
|
|
|
|
84
|
|
|
84
|
|
Normalized FFO
attributable to common stockholders
|
$
|
1,528
|
|
$
|
1,565
|
|
|
$
|
1,528
|
|
$
|
1,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
2.39
|
|
$
|
2.49
|
|
|
$
|
2.32
|
|
$
|
2.42
|
|
NAREIT FFO
|
|
3.94
|
|
|
4.04
|
|
|
|
3.92
|
|
|
4.02
|
|
Normalized
FFO
|
|
4.15
|
|
|
4.25
|
|
|
|
4.15
|
|
|
4.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Items(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net straight-line
rent and above/below market rent amortization
|
$
|
(65)
|
|
$
|
(65)
|
|
|
$
|
(70)
|
|
$
|
(70)
|
|
Non-cash interest
expenses
|
|
10
|
|
|
10
|
|
|
|
12
|
|
|
12
|
|
Recurring cap-ex,
tenant improvements, and lease commissions
|
|
(71)
|
|
|
(71)
|
|
|
|
(71)
|
|
|
(71)
|
|
Stock-based
compensation
|
|
18
|
|
|
18
|
|
|
|
21
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(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
1.
|
|
SSNOI
Reconciliations
|
|
|
|
Exhibit
4
|
(in
thousands)
|
|
Three Month
Ended
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Net income
|
$
|
203,441
|
|
$
|
210,749
|
|
|
|
Loss (gain) on real
estate dispositions, net
|
|
(42,155)
|
|
|
(1,530)
|
|
|
|
Loss (income) from
unconsolidated entities
|
|
3,978
|
|
|
1,959
|
|
|
|
Income tax expense
(benefit)
|
|
(8,448)
|
|
|
(513)
|
|
|
|
Other
expenses
|
|
6,339
|
|
|
3,161
|
|
|
|
Impairment of
assets
|
|
13,631
|
|
|
-
|
|
|
|
Loss (gain) on
extinguishment of debt, net
|
|
5,515
|
|
|
33
|
|
|
|
Loss (gain) on
derivatives, net
|
|
736
|
|
|
-
|
|
|
|
Transaction
costs
|
|
-
|
|
|
5,157
|
|
|
|
General and
administrative expenses
|
|
32,632
|
|
|
39,914
|
|
|
|
Depreciation and
amortization
|
|
224,847
|
|
|
226,569
|
|
|
|
Interest
expense
|
|
116,231
|
|
|
132,326
|
|
|
|
Consolidated
NOI
|
|
556,747
|
|
|
617,825
|
|
|
|
NOI attributable to
unconsolidated investments
|
|
21,873
|
|
|
16,881
|
|
|
|
NOI attributable to
noncontrolling interests
|
|
(29,359)
|
|
|
(27,156)
|
|
|
|
Pro rata
NOI
|
|
549,261
|
|
|
607,550
|
|
|
|
|
Non-cash NOI
attributable to same store properties
|
|
(12,702)
|
|
|
(18,162)
|
|
|
|
|
NOI attributable to
non same store properties
|
|
(62,013)
|
|
|
(102,276)
|
|
|
|
|
Currency and
ownership adjustments(1)
|
|
(584)
|
|
|
(19,897)
|
|
|
|
|
Other
adjustments(2)
|
|
(297)
|
|
|
(7,261)
|
|
|
|
Same store NOI
(SSNOI)
|
$
|
473,665
|
|
$
|
459,954
|
|
|
|
|
|
|
|
|
|
|
%
growth
|
|
Seniors housing
triple-net
|
$
|
129,536
|
|
$
|
125,748
|
|
3.0%
|
|
Long-term/post-acute
care
|
|
64,163
|
|
|
62,228
|
|
3.1%
|
|
Seniors housing
operating
|
|
196,506
|
|
|
189,798
|
|
3.5%
|
|
Outpatient
medical
|
|
83,460
|
|
|
82,180
|
|
1.6%
|
|
|
Total
SSNOI
|
|
$
|
473,665
|
|
$
|
459,954
|
|
3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1) Includes
adjustments to reflect consistent property ownership percentages
and foreign currency exchange rates for properties in the UK and
Canada.
|
|
(2) Includes other
adjustments described in the accompanying Supplement.
|
SHO SS REVPOR
Reconciliation
|
|
|
|
Exhibit
5
|
(dollars in
thousands, except REVPOR)
|
|
Three Months Ended
June 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Consolidated seniors
housing operating (SHO) revenues
|
$
|
678,089
|
|
$
|
625,251
|
|
|
SHO revenues
attributable to unconsolidated investments
|
|
41,735
|
|
|
40,366
|
|
|
SHO revenues
attributable to noncontrolling interests
|
|
(58,203)
|
|
|
(57,052)
|
|
|
SHO pro rata
revenues
|
|
661,621
|
|
|
608,565
|
|
|
Non-cash revenues on
same store properties
|
|
(138)
|
|
|
(130)
|
|
|
Revenues attributable
to non-same store properties
|
|
(76,755)
|
|
|
(18,514)
|
|
|
Currency and
ownership adjustments(1)
|
|
(597)
|
|
|
(11,165)
|
|
|
Other
adjustments(2)
|
|
-
|
|
|
(7,654)
|
|
|
SHO same store
revenues
|
$
|
584,131
|
|
$
|
571,102
|
|
|
Avg. occupied
rooms/month(3)
|
|
34,555
|
|
|
35,093
|
|
%
growth
|
SHO SS
REVPOR
|
$
|
5,650
|
|
$
|
5,440
|
|
3.9%
|
|
|
|
|
|
|
|
|
Notes:
|
(1) Includes
adjustments to reflect consistent property ownership percentages
and foreign currency exchange rates for properties in the UK and
Canada.
|
|
(2) Includes other
adjustments described in the accompanying Supplement.
|
|
(3) Represents
average occupied rooms for same store properties on a pro rata
basis.
|
|
|
|
|
|
|
|
|
|
|
Undepreciated Book
Capitalization
|
|
|
|
Exhibit
6
|
(dollars in
thousands)
|
|
As Of
|
|
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
Lines of
credit
|
$
|
385,000
|
|
$
|
745,000
|
|
|
Long-term debt
obligations(1)
|
|
10,994,946
|
|
|
12,228,727
|
|
|
Cash and cash
equivalents(2)
|
|
(442,284)
|
|
|
(466,585)
|
|
|
Net debt
|
|
10,937,662
|
|
|
12,507,142
|
|
|
Accumulated
depreciation and amortization
|
|
4,568,408
|
|
|
4,109,585
|
|
|
Total
equity(3)
|
|
15,702,399
|
|
|
15,262,694
|
|
|
Undepreciated book
capitalization
|
$
|
31,208,469
|
|
$
|
31,879,421
|
|
|
Net debt to
undepreciated book capitalization ratio
|
|
35.0%
|
|
|
39.2%
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1) Amounts include
unamortized premiums/discounts and other fair value adjustments as
reflected on balance sheet.
|
|
(2) Inclusive of IRC
section 1031 deposits, if any.
|
|
(3) Includes all
noncontrolling interests (redeemable and permanent) as reflected on
balance sheet.
|
|
|
|
|
|
|
|
|
|
Net Debt to
Adjusted EBITDA Reconciliation
|
|
|
|
Exhibit
7
|
(dollars in
thousands)
|
|
Three Months
Ended
|
|
|
|
|
June 30,
2017
|
|
|
June 30,
2016
|
|
|
Net income
|
$
|
203,441
|
|
$
|
210,749
|
|
|
Interest
expense
|
|
116,231
|
|
|
132,326
|
|
|
Income tax expense
(benefit)
|
|
(8,448)
|
|
|
(513)
|
|
|
Depreciation and
amortization
|
|
224,847
|
|
|
226,569
|
|
|
EBITDA
|
$
|
536,071
|
|
|
569,131
|
|
|
Loss (income) from
unconsolidated entities
|
|
3,978
|
|
|
1,959
|
|
|
Stock-based
compensation
|
|
4,763
|
|
|
7,031
|
|
|
Loss (gain) on
extinguishment of debt, net
|
|
5,515
|
|
|
33
|
|
|
Losses/impairments
(gains) on properties, net
|
|
(28,524)
|
|
|
(1,530)
|
|
|
Loss (gain) on
derivatives, net
|
|
736
|
|
|
-
|
|
|
Additional other
income
|
|
-
|
|
|
(11,811)
|
|
|
Other expenses &
transaction costs
|
|
6,339
|
|
|
6,895
|
|
|
Adjusted
EBITDA
|
$
|
528,878
|
|
$
|
571,708
|
|
|
Adjusted EBITDA
Annualized
|
$
|
2,115,512
|
|
|
2,286,832
|
|
|
Net
debt(1)
|
$
|
10,937,662
|
|
$
|
12,507,140
|
|
|
Net debt to Adjusted
EBITDA ratio
|
|
5.17x
|
|
|
5.47x
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1) See Exhibit
6.
|
View original content with
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SOURCE Welltower Inc.