Welltower Inc. WELL recently provided an update on its seniors housing operating portfolio and liquidity profile in light of the coronavirus pandemic. The number of infected patients in the United States is skyrocketing and Welltower’s senior housing portfolio has not been spared as well.
The company’s 45 communities have reported at least one confirmed COVID-19 case, as of Apr 1, based on its operators’ reports. This has affected 116 residents out of a total resident population of 61,000.
The senior housing operating portfolio, which generates a significant portion of the company’s net operating income, has been witnessing a decline in occupancy, of late. Occupancy level fell from 85.8% as of Feb 28, to 85.4% as of Mar 27, and this declining trend is likely to prevail, given tour limitations in many of its communities as well as check on resident move-ins. Furthermore, the company has witnessed a rise in operating expenses in recent weeks due to higher labour costs and procurement costs of personal protective equipment (PPE).
Nevertheless, the company has been taking steps to bolster its liquidity and recently announced measures to solidify the balance sheet. The company garnered proceeds of about $588 million under its ATM program, covering 6.8 million shares at $86.48 per share. These proceeds were used to reduce the company’s debts under its unsecured revolving credit facility. Also, the company closed on the previously-announced $1-billion two-year unsecured term loan.
The company has also been making dispositions and concluded $781 million worth of such activities on a pro rata basis during the first quarter. With such strategic efforts, the company’s near-term available liquidity amounted to $3.5 billion as of March end. Also, Welltower has no significant unsecured debt maturities until 2023, thanks to its decent balance-sheet management. This ready availability of significant liquidity with no short-term debt maturities bodes well for the company in these testing times.
Therefore, though the coronavirus pandemic has been wreaking havoc all over, Welltower, with its sound liquidity position and diversified portfolio, is expected to sail through these uncertain times. Moreover, efforts to expand the outpatient medical portfolio look encouraging. Welltower remains well poised to capitalize on the growing demand for healthcare assets amid rising healthcare spending and a favorable demographic trend.
Shares of this Zacks Rank #3 (Hold) company have depreciated 52.6% so far this year, while its industry has declined 25.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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