Welltower Inc. · NYSE:WELL
Welltower — Investor Presentation (May 2017)
54 slides from Welltower's investor presentation, May 2017
Slide 1: The Aging Population: Driving Health Care Real Estate Investments
The Aging Population: Driving Health Care Real Estate Investments Corporate Presentation May 2017
Slide 2: Forward Looking Statements
Forward Looking Statements This document contains “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995. When the company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimate”
Slide 3: Welltower At A Glance
Welltower At A Glance Driving The Evolution of Healthcare Infrastructure And Value Based Care 1,375 ~210,000 16,000,000 OUTPATIENT TOTAL HEALTH CARE PROPERTIES RESIDENTS(2) MEDICAL VISITS(2) NYSE Dow Jones Moody’s S&P Fitch $38.5B Symbol: S&P Sustainability Baa1 BBB+ BBB+ Enterprise Value(1) HCN 500
Slide 4: Real Estate Investment Trust (REIT) Overview
Real Estate Investment Trust (REIT) Overview LARGEST U.S. PUBLIC REAL ESTATE COMPANIES by ENTERPRISE VALUE(1) Rank Company Sector $ (mm’s) 1 Simon Property Group Regional Malls $78,977 2 Public Storage Self-Storage $43,451 RANK C O M PA N Y 3 COM Prologis Inc.PA N Y Industrial $42,428 4 Health Care
Slide 5: Powerful Growth Trends for Health Care Real Estate
Powerful Growth Trends for Health Care Real Estate
Slide 6: Health Care is Moving To Lower Cost Settings
Health Care is Moving To Lower Cost Settings LOWER AVERAGE COST HIGHER AVERAGE COST ACUTE CARE POST-ACUTE CARE CONTINUUM SENIOR HOUSING Hospital Long-Term Inpatient Skilled Nursing Memory Assisted Independent Care Hospital Rehab Facility (LTC) Care Living Living HOME OUTPATIENT / M E D I C A L O F F
Slide 7: Powerful Demographic Tailwinds
Powerful Demographic Tailwinds 85+ Age Group % Growth 25-34 Age Group 100% 80% 60% 40% 20% 0% 2016 2020 2024 2028 2032 2036 85+ Population to Double in 20 Years US Census Bureau www.census.gov 7
Slide 8: Aging Population Drives Health Care Spending
Aging Population Drives Health Care Spending Source: National Health Expenditure, CMS. Data as of 9/30/2015. 8
Slide 9: Dementia / Alzheimer's: Residential Memory Care is the Answer
Dementia / Alzheimer’s: Residential Memory Care is the Answer Alzheimer’s Disease is the only “Top 10 Cause of Death” in the U.S. that cannot be prevented, 131.5 slowed or cured 74.7 million million 46.8 Number of people with dementia million globally will almost double every 20 years Total es
Slide 10: Welltower's Unique Growth Platform
Welltower’s Unique Growth Platform
Slide 11: Portfolio Transformation
Portfolio Transformation(1) 1Q10 1Q17 LIFE SCIENCE OUTPATIENT 2% OUTPATIENT MEDICAL MEDICAL HOSPITALS 19% 17% 8% LONG-TERM/ LONG-TERM/ POST-ACUTE CARE In-Place POST-ACUTE CARE In-Place 31% NOI 13% NOI SENIORS SENIORS HOUSING(2) HOUSING(2) 40% 70% Private Pay: 69%(3) Private Pay: 93%(3) 1. Based on I
Slide 12: Portfolio Transformation: Partner Diversification
• Positive Portfolio Transformation Partner Diversification(1) 1Q17 15.5% TOP 5 PARTNERS 40% 7.6% OTHER In-Place 7.0% 44% NOI 5.7% 4.4% TOP 6-10 PARTNERS 15% 1. Based on 1Q17 In-Place NOI. Numbers may not add up to 100 due to rounding. Please see non-GAAP financial measures and reconciliations at th
Slide 13: The Definition of a "Class A" Health Care Portfolio
The Definition of a “Class A” Health Care Portfolio High Barrier to Entry Premier Markets Merrill Gardens at the University, Seattle, WA Best-In-Class Operating Partners Midtown Manhattan Development Chartwell Toronto Development Active Portfolio Management Welltower Outpatient Center, Sunrise Conne
Slide 14: Welltower Family of Brands
Welltower Family of Brands (1) $755mm PER QUARTER OF REPEAT BUSINESS WITH EXISTING PARTNERS 14 1. Quarterly average of gross investments with existing partners from 1/1/2013 - 3/31/2017.
Slide 15: U.S. Seniors Housing Portfolio: Major Urban Market Focus
U.S. Seniors Housing Portfolio: Major Urban Market Focus 94% 640(1) $16.5B(1) SH Operating NOI Seniors Housing Gross Real Estate in Top 31 MSAs + Facilities Investments Coastal States 63,506 units TOP US MARKETS (% OF SH OPERATING NOI) Los Angeles 15.5% Boston 10.0% New York 7.8% San Francisco 5.5%
Slide 16: Strategic Focus: Urban, High Barrier to Entry Markets
Strategic Focus: Urban, High Barrier to Entry Markets Seniors Housing Construction: All Markets TOP US MARKETS(1) (% OF SH OPERATING NOI) Los Angeles 15.5% Boston 10.0% New York 7.8% San Francisco 5.5% San Diego 4.9% Chicago 4.3% Washington, D.C. 3.7% Seattle 2.9% San Jose 2.8% Dallas 2.1% Source: N
Slide 17: UK Portfolio: Urban, High Barrier to Entry Markets
UK Portfolio | Urban, High Barrier to Entry Markets 91% 98(2) $2.4B(2) UK SH Operating NOI in Greater London & Facilities Gross Real Estate Investments Southern England 75+ POPULATION (1) 10 9.4 POPULATION 7.5 (in millions) 5.4 5 0 2017 2027 2037 Data as of 3/31/2017. NOI data based on In-Place UK S
Slide 18: Canadian Portfolio: Urban, High Barrier to Entry Markets
Canadian Portfolio | Urban, High Barrier to Entry Markets CN 76% SH Operating NOI in Top 10 Canadian MSAs 75+ POPULATION (1) 6 5.4 145(2) 5 Facilities 4 3.8 (in millions) Population 2.6 3 2 $2.7B(2) 1 Gross Real Estate 0 Investments 2017 2027 2037 Data as of 3/31/2017. NOI data based on In-Place Can
Slide 19: Urban Market Focus: Midtown Manhattan Development
Urban Market Focus: Midtown Manhattan Development D E M A N D FAC T O R S • Manhattan has a vast, highly under-served population of aging New Yorkers • Current availability of assisted living is 5x less than national average • Currently, only 70 fully licensed memory care beds in Manhattan • >30,000
Slide 20: Outpatient Will Continue to Dominate Care Delivery
Outpatient Will Continue to Dominate Care Delivery Outpatient visits Inpatient visits 40% 35% 30% 25% 20% 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 36% increase in total outpatient visits since 1999, compared with 6% rise in inpatient visits Source: Ame
Slide 21: Outpatient Medical Growth Opportunity
Outpatient Medical Growth Opportunity Health Systems & Physicians Currently Own ~82% of Outpatient Medical Real Estate Properties Total Total 10% REIT Value Sq. Feet Hospital 5,606 $596B 1.6B 25% Physician/ Provider Outpatient 37,322 $363B 1.4B TOTALS 42,928 $959B 2.9B 8% Investor/ Private 57% Healt
Slide 22: Welltower's Full Service Outpatient Medical Group
Welltower’s Full Service Outpatient Medical Group $5.6B INVESTED IN 255 PROPERTIES 95% 16,000,000 HEALTH SYSTEM OUTPATIENT AFFILIATED AS % MEDICAL VISITS(3) OF NOI(1) Welltower proudly serves 99% IN-HOUSE many of the nation’s top health systems MANAGED PROPERTIES AS % OF SF(2) Data as of 3/31/2017 a
Slide 23: Welltower & Johns Hopkins Collaboration
Welltower & Johns Hopkins Collaboration Strategic alliance supports modern, efficient health care infrastructure and innovative care Welltower Market Footprint Hopkins Footprint • 50 Seniors Housing Communities • 42 Post Acute Care Facilities • 6 Hospitals • 12 Outpatient Medical Buildings • 4 Surge
Slide 24: Connecting Outpatient Medical, Post Acute Care and Seniors Housing
Connecting Outpatient Medical, Post Acute Care and Seniors Housing In Voorhees, New Jersey, a suburb of Philadelphia, Brandywine Welltower has connected three of its partners to Living create a collaborative care model known in the local community as the “Medical Mile.” Three innovative health f
Slide 25: Financial Summary
Financial Summary
Slide 26: Significant Balance Sheet Strength
Significant Balance Sheet Strength Moody’s RATIO 4Q13(2) 1Q17(2) Improvement Baa1 NET DEBT / UNDEPRECIATED BOOK CAP (1) 42.5% 35.8% 670 bps Stable NET DEBT / 38.3% 28.8% 950 bps S&P ENTERPRISE VALUE (1) BBB+ NET DEBT / 6.1x 5.3x 0.8x Stable ADJUSTED EBITDA (1) ADJUSTED INTEREST Fitch 3.4x 4.3x 0.9x
Slide 27: Balanced and Manageable Debt Maturity Profile
Balanced and Manageable Debt Maturity Profile Weighted average maturity of 7.5 years 18.2% 16.2% 14.8% 9.9% 6.9% 7.1% 7.0% 6.4% 6.0% 5.5% 2.1% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Thereafter Pro Rata Secured Debt Senior Notes Lines of Credit in millions 2017 2018 2019 2020 2021 2022 202
Slide 28: Focus On Delivering Outstanding Returns
Focus On Delivering Outstanding Returns $4.00 $3.50 $3.48 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 1971 2017 Dividend Growth 4.9% 83% Dividend Yield (1) FFO Payout Ratio (2) 1. Data as of 3/31/2017, adjusted for stock splits. The 2017 dividend represents the approved dividend rate for 2017, subject
Slide 29: Consistently Outperforming S&P 500
Welltower Consistently Outperforming S&P 500 S&P 500 80 Total Returns(1) 70 60 50 +55% 40 30 +37% 20 10 0 Average Annual Return 15.3% Since Inception (1) 29 1. Data as of 3/31/2017, adjusted for stock splits. Total return assumes reinvestment of dividends.
Slide 30: Performance Driven Strategy
Performance Driven Strategy Investment Grade Balance Sheet & Outstanding Access to Capital Significant and Stable Dividend Income Superior Internal & External Growth Best-in-Class Real Estate & Operating Investment in the Partners “Silver Economy” & Aging 30
Slide 31: Appendix
Appendix
Slide 32: Recognized For Sustainable Business Practices
Recognized For Sustainable Business Practices One of eight real estate CDP Climate Change companies named to Score of A- (Leadership Dow Jones Band), S&P edition, Sustainability North 2016 Global Climate America Index (DSJI) Change Report NAREIT Leader 57 Energy Star Certified in Light Award 9 LEED
Slide 33: Strong Growth in Projected Demand for Seniors Housing
Strong Growth in Projected Demand for Seniors Housing PROJECTED ANNUAL DEMAND GROWTH FOR SENIORS HOUSING UNITS Source: Seniors Housing Analytics, PGIM-A silver lining: Investment Implications of an Aging World. 33
Slide 34: Growth Platform at the Intersection of Aging and Health Care
Growth Platform at the Intersection of Aging and Health Care 70% Seniors Housing(2) (Independent Living, Assisted Living & Memory Care) Portfolio Mix (1) • Invest in top metro markets with high barriers to entry, concentrated along U.S. coastlines • Strategic partnerships with best-in-class, private
Slide 35: Procedures Driving Outpatient Medical Growth
Procedures Driving Outpatient Medical Growth GROWTH OF Inpatient - U.S. Market Outpatient - U.S. Market OUTPATIENT 2013 – 23 2013 – 23 PROCEDURES Service line g r o w t h rates (1) Orthopedic & Spine Neurosciences Cancer Obstetrics Pediatrics General Medicine/General Surgery Cardiovascular (1) Sourc
Slide 36: Superior Assets Lead to Superior Operating Results: Outpatient Medical
Superior Assets Lead to Superior Operating Results Outpatient Medical Outpatient Welltower (1) Medical Peers (2) Occupancy 95% 91% Property Size 66,753 63,205 Square Feet Health System Affiliation(3) 95% 95% NOI Margin 68% 67% NOI per Square Foot $22.04 $19.32 Annualized Lease Expirations(4) 27.5% 5
Slide 37: Superior Assets Lead to Superior Operating Results: Post-Acute
Superior Assets Lead to Superior Operating Results Post-Acute and Long-Term Care WELLTOWER HC REIT Public Industry PAC/LTC (1) Peers (2) Operators (3) Benchmarks (4) Property Age 19 36 32 38 Years Occupancy 81% 82% 81% 82% Quality Mix 63%(5) 52% 52% 47% Private & Medicare Revenue % Data Data EBITDAR
Slide 38: Superior Assets Lead to Superior Operating Results: Seniors Housing
Superior Assets Lead to Superior Operating Results US Seniors Housing UK Seniors Housing Welltower US HC REIT Public Industry Welltower UK Industry RIDEA(1) Peers(2) Operators(3) Benchmarks RIDEA(1) Benchmarks Property Age 15 19(4) 20(4) 21(5) 9 20(9) Years Housing Value $506,769 $269,207(4) $216,91
Slide 39: Detailed Footnotes
Detailed Footnotes 1. Data as of 3/31/2017 for properties included in the seniors housing segment. Property age, housing value and household income are NOI-weighted as of March 31, 2017. The median housing value and household income is used for the US, and the average housing value and household inc
Slide 40: Financial Disclosures
Financial Disclosures
Slide 41: Non-GAAP Financial Measures
Non-GAAP Financial Measures Welltower Inc. believes that revenues, net operating income from continuing operations (NOICO), 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
Slide 42: NOI, IPNOI, SSNOI, REVPOR and SS REVPOR
NOI, IPNOI, SSNOI, REVPOR and SS REVPOR As discussed in Note 17 to our consolidated financial statements, net operating income from continuing operations (NOICO) is used to evaluate the operating performance of the company’s properties. We define NOI as the pro rata version of NOICO which is total r
Slide 43: In-Place NOI Reconciliations
In-Place NOI Reconciliations %of S e nio rs S e nio rs $ s in tho us a nds a t We llto we r pro ra ta S HO by %of ho us ing ho us ing Lo ng-te rm / Outpa tie nt %of %of o wne rs hip C o untry S HO o pe ra ting triple -ne t po s t-a c ute m e dic a l To ta l To ta l C o untry Annua lize d thre e m o
Slide 44: In-Place NOI by Partner Reconciliations
In-Place NOI by Partner Reconciliations Thre e m o nths $ s in tho us a nds e nde d 3/31/17 C o ns o lida te d NOI fro m c o ntinuing o pe ra tio ns (NOIC O) (1 ) $ 552,129 NOI a ttribtua ble to unc o ns o lida te d 21,279 NOI a ttributa ble to no nc o ntro lling (27,542) P ro ra ta ne t o pe ra tin
Slide 45: Historical NOI and In-Place NOI Reconciliations
Historical NOI and In-Place NOI Reconciliations Three mo nths Three mo nths $ s in tho us ands ended 3/31/17 $ s in tho us ands ended 3/31/10 Net o perating inco me fro m co ntinuing o peratio ns (NOICO) (1) $ 552,129 Net o perating inco me fro m co ntinuing o peratio ns (NOICO) (1) $ 140,431 NOI at
Slide 46: SSNOI Reconciliations
• SSNOI Reconciliations SSNOI Reconciliations (do lla rs in tho us a nds ) Thre e M o nths Ende d 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 Y/o /Y (1 ) C o ns o lida te d NOI fro m c o ntinuing o pe ra tio ns $ 597,414 617,825 605,453 583,486 552,129 NOI a ttributa ble to unc o ns o lida te d inve s
Slide 47: SSNOI Growth Reconciliations
• SSNOI Reconciliations Growth Reconciliations (do lla rs in tho us a nds ) Unite d S ta te s Unite d Kingdo m C a na da To ta l 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 S HO S S R EVP OR Gro wth: C o ns o lida te d S HO re ve nue s (1) $ 433,425 $ 498,942 $ 71,784 65,939 $ 100,160 106,985 $ 605,369
Slide 48: Seniors Housing Operating REVPOR Reconciliations
• Seniors Housing Operating REVPOR Reconciliations Senior Housing Operating REVPOR Reconciliations Do llars in tho us ands , except REVP OR Three mo nths ended 3/31/17: CA UK US To tal Co ns o lidated s enio rs ho us ing o perating revenues $ 106,985 $ 65,939 $ 498,942 $ 671,866 Unco ns o lidated re
Slide 49: Outpatient Medical NOI Reconciliations
• Outpatient Medical NOI Reconciliations Outpatient Medical NOI Reconciliations $ s in tho us a nds , e xc e pt pe r s qua re fo o t Thre e m o nths e nde d 3/31/2017 To ta l No n C o re (1 ) C o re OM re ve nue s $ 129,654 $ (933) $ 128,721 OM pro pe rty o pe ra ting e xpe ns e s (41,818) 503 (41,3
Slide 50: Normalized FFO & FAD
• Normalized FFO & FAD Normalized FFO 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 and amortization. However, since real estate va
Slide 51: Normalized FFO & FAD Payout Reconciliations
• Normalized FFO & FAD Payout Reconciliations Normalized FFO Payout Reconciliation In tho us ands , except per s hare Three M o nths Ended M arch 31, 2017 Net inco m e (lo s s ) attributable to co m m o n s to ckho lders $ 312,639 Depreciatio n and am o rtizatio n 228,276 Lo s s es /im pairments (ga
Slide 52: EBITDA and Adjusted EBITDA
• EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA 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
Slide 53: Quarterly EBITDA/A-EBITDA Reconciliations
• Quarterly EBITDA/A-EBITDA Reconciliations Quarterly EBITDA/A-EBITDA Reconciliations In tho us a nds Thre e M o nths Ende d Thre e M o nths Ende d De c e m be r 31, 2013 M a rc h 31, 2017 Ne t inc o m e $ 25,696 $ 337,610 Inte re s t e xpe ns e (1) 124,485 118,597 Inc o m e ta x e xpe ns e (be ne f
Slide 54: Capitalization Ratios
Capitalization Ratios Do lla rs in tho us a nds 12/31/2013 3/31/2017 Ne t De bt to Unde pre c ia te d B o o k C a pita liza tio n: Line o f c re dit $ 130,000 $ 522,000 Lo ng-te rm de bt o bliga tio ns 10,522,014 10,932,185 C a s h a nd c a s h e quiva le nts (1) (158,780) (380,360) Ne t de bt 10,49