Morningstar | Welltower Reporting In-Line Results for 4Q Feels Like a Win for Shareholders
Given that fourth-quarter results for the industry and Welltower's peers have been underwhelming, no-moat Welltower reporting fourth-quarter numbers and a 2019 outlook in line with our estimates comes as a pleasant surprise. Same-store net operating income growth for the total portfolio was a modest beat at 1.6%, 50 basis points ahead of our number. Focus will be on the senior housing portfolio, which saw occupancies pick up 20 basis points sequentially despite high supply growth, same-store revenue increase 2.7% year over year, and same-store NOI growth of 0.6%, 25 basis points higher than our NOI growth estimate. Normalized funds from operations came in at $1.01 and missed our estimate by $0.01, but the miss is due to timing as Welltower issued $552 million of shares midquarter to acquire $559 million of medical office and senior housing properties that closed toward the back end of the quarter. The company's pro forma results are in line with our expectations, so we don't anticipate any material changes to our $72 fair value estimate for Welltower.Guidance for 2019 was also in line with our expectations. Our 1.9% same-store NOI growth estimate for the total portfolio is comfortably within management's guidance of 1.25% to 2.25% for 2019. Similarly, our 1.5% same-store NOI estimate for the senior housing portfolio falls in management's range of 0.5% to 2.0%, and our 2.0% same-store NOI estimate for the medical office portfolio matches the midpoint of management's range of 1.75% to 2.25%. Our normalized funds from operation estimate of $4.23 is toward the high end of the $4.10 to $4.25 guidance, as management increased disposition guidance to $1.4 billion while maintaining acquisition guidance at the previously announced $2.25 billion volume. As Welltower announces new deals through the year, we suspect that management will raise their guidance range to match our estimate as they look to create value for shareholders.
Welltower is a real estate investment trust. The company's segments are: Seniors Housing Operating, which includes seniors apartments, independent living and independent supportive living, continuing care retirement communities, Alzheimer's/dementia care, and care homes with or without nursing; Triple-net, which includes independent living and independent supportive living, continuing care retirement communities, Alzheimer's/dementia care and care homes with or without nursing, as well as long-term/post-acute care; and Outpatient Medical, which consists of outpatient medical buildings including physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/or labs.
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