Q4 FFO Beats Estimates
Welltower Inc.’s (WELL) fourth-quarter 2023 normalized funds from operations (FFO) per share of 96 cents exceeded the Zacks Consensus Estimate of 94 cents. The reported figure, showing a marked improvement of 15.7% year over year, reflects the company’s robust performance in the past quarter.
Results showcased a surge in revenues, with the total same-store net operating income (SSNOI) indicating a year-over-year increase. The growth in the seniors housing operating (SHO) portfolio played a pivotal role in driving this positive momentum. Alongside these achievements, the company issued its guidance for 2024, laying out its strategic roadmap for the year ahead.
Strong Financial Performance
Welltower recorded revenues of $1.75 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.71 billion. This notable increase of 15.2% year over year has underpinned the company’s solid financial standing and enduring growth trajectory. The firm’s consistent success was also evident in the full-year numbers for 2023, as it reported a normalized FFO per share of $3.64, a substantial improvement from the prior year’s $3.35. Moreover, the reported figure exceeded the Zacks Consensus Estimate of $3.61. With total revenues of $6.64 billion, marking a 13.3% year-over-year increase and surpassing the consensus mark of $6.60 billion, Welltower concluded 2023 on a resoundingly positive note.
Strategic Acquisitions and Expansion
Concurrent with the fourth-quarter earnings release, Welltower announced a definitive agreement to acquire a portfolio of 25 age-restricted active adult communities from Affinity Living Communities for $969 million. This strategic move is poised to significantly bolster Welltower’s market leadership, positioning the company to solidify its presence with a total of around 25,000 units. As these developments unfold, the company’s expansion efforts are expected to carve a path for sustained growth and success in the burgeoning real estate sector.
Portfolio Activity and Growth
During the fourth quarter, Welltower displayed notable portfolio activity, acquiring properties totaling $968 million across seniors housing, wellness housing, outpatient medical, and long-term/post-acute sectors. These strategic acquisitions, largely conducted through privately-negotiated off-market transactions, add further depth to Welltower’s diverse portfolio. The acquisition of a portfolio of ten seniors housing communities for $469 million from Kayne Anderson Real Estate, acquired at a material discount to replacement cost, underscores Welltower’s keen strategic acumen and the ability to identify value propositions that drive sustained success.
Robust Balance Sheet and Dividend Payout
As of December 31, 2023, Welltower boasted $6.1 billion of available liquidity, comprising $2.1 billion of available cash and restricted cash, and full capacity under its $4 billion line of credit. Furthermore, on February 13, the company announced a cash dividend of 61 cents per share for the fourth quarter, continuing its prolific track record with the 211th consecutive quarterly cash dividend payout. This strong balance sheet and ongoing commitment to rewarding stockholders underscore Welltower’s steadfast and reliable approach to value creation and investor returns.
Positive 2024 Guidance
Looking ahead, Welltower has projected a normalized FFO per share of $3.94-$4.10 for 2024, with the Zacks Consensus Estimate pegged at $3.98, aligning closely with the company’s guided range. This bullish outlook, which assumes substantial SSNOI growth in critical sectors, reflects Welltower’s confidence in its ability to navigate evolving market dynamics and execute its strategic vision, guiding investors toward a future of sustained value creation and growth.
Comparative Performance of Other REITs
Welltower’s solid quarterly performance is mirrored in the positive strides taken by other REITs, such as Healthpeak Properties, Inc., Boston Properties Inc., and Alexandria Real Estate Equities, Inc.. The collective advancements in the real estate sector underscore a broader trend of resilience and growth, boding well for the overall outlook of the industry.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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