Welltower Inc. · NYSE:WELL
Welltower — Investor Presentation (February 2018)
51 slides from Welltower's investor presentation, February 2018
Slide 1: The Aging Population: Driving the Future of Health Care Real Estate
The Aging Population: Driving the Future of Health Care Real Estate Corporate Presentation February 2018
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 1,279 ~198,000 16,000,000 OUTPATIENT TOTAL HEALTH CARE PROPERTIES RESIDENTS(2) MEDICAL VISITS(2) NYSE Dow Jones Moody’s S&P Fitch $36.5B Symbol: S&P Sustainability Baa1 BBB+ BBB+ Enterprise Value(1) WELL 500 Index Stable Stable Stable 1. Source: Bloomberg as of 12/29/2017. 3 2.
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 $77,073 2 Prologis Inc. Industrial $46,408 RANK C O M PA N Y 3 C OStorage Public M PA N Y Self-Storage $41,154 4 Health Car
Slide 5: Health Care Real Estate Landscape
Health Care Real Estate Landscape 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 I C E
Slide 6: Powerful Demographic Tailwinds
Powerful Demographic Tailwinds 85+ Age Group % Growth 25-34 Age Group Growth Rate 100% 80% 60% 40% 20% 0% 2017 2022 2027 2032 2037 85+ Population to Double in 20 Years Source: US Census Bureau www.census.gov as of 2014. 6
Slide 7: Aging Population Drives Health Care Spending
Aging Population Drives Health Care Spending Source: National Health Expenditure, CMS. Data as of 9/30/2015. 7
Slide 8: 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 9: Welltower's Unique Growth Platform
Welltower’s Unique Growth Platform
Slide 10: Portfolio Transformation
(1) Portfolio Transformation 1Q10 4Q17 Adjusted(4) 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 11% NOI SENIORS SENIORS HOUSING(2) HOUSING(2) 40% 72% Private Pay: 69%(3) Private Pay: 95%(3)
Slide 11: SHO Partner Diversification
• Positive Portfolio Transformation SHO Partner Diversification(1) 4Q17 SHO Portfolio 36% OTHER 24% 13% 10% In-Place NOI 8% TOP 5 PARTNERS 8% 76% 1. Based on 4Q17 SHO In-Place NOI. Numbers may not add up to 100 due to rounding. Please see non-GAAP financial measures and reconciliations at the end of
Slide 12: 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 13: Welltower Family of Brands
Welltower Family of Brands 13
Slide 14: U.S. Seniors Housing Portfolio: Major Urban Market Focus
U.S. Seniors Housing Portfolio: Major Urban Market Focus (1) (1) 94% 624 $16.9B SH Operating NOI Seniors Housing Gross Real Estate in Top 31 MSAs + Facilities Investments Coastal States 62,412 units TOP US MARKETS(2) (% OF SH OPERATING NOI) Los Angeles 15.3% Boston 9.2% New York 8.2% San Francisco 5
Slide 15: 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 15.3% Boston 9.2% New York 8.2% San Francisco 5.2% San Diego 4.2% Dallas 4.2% Chicago 3.8% Washington, D.C. 3.6% Seattle 3.2% San Jose 2.7% Source: NI
Slide 16: UK Portfolio | Urban, High Barrier to Entry Markets
UK Portfolio | Urban, High Barrier to Entry Markets 92% 106 (2) $3.0B (2) UK SH Operating NOI in Greater London & Facilities Gross Real Estate Investments Southern England (1) 75+ POPULATION 10 9.4 POPULATION 7.5 (in millions) 5.4 5 0 2017 2027 2037 Data as of 12/31/2017. NOI data based on In-Place
Slide 17: 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 (2) 75+ POPULATION (1) 6 5.4 145 5 Facilities 4 3.8 (in millions) Population (2) 3 2 2.6 $2.9B Gross Real Estate 1 Investments 0 2017 2027 2037 Data as of 12/31/2017. NOI data based on In-Place
Slide 18: Urban Market Focus: Aging in Cities Survey
Urban Market Focus: Aging in Cities Survey Welltower commissioned survey reaffirms current city dwellers desire to age in place. Seniors Wanting to Stay in Their City Boston 69% Chicago 69% Houston 66% Los Angeles 67% Miami 70% New York City 65% San Francisco 71% Seattle 68% Toronto 73% Washington D
Slide 19: Urban Market Focus: Midtown Manhattan Development
Urban Market Focus: Midtown Manhattan Development D E M A N D FA C 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 • >30,00
Slide 20: Urban Market Focus: The Sumach by Chartwell, Toronto
Urban Market Focus: The Sumach by Chartwell, Toronto D E M A N D FA C TO R S • New independent living community located in Regent Park neighborhood -- the “gold standard” for urban revitalization • 12-story building with 332 units; 5,500 square feet of retail space • Bistro-style restaurant for tena
Slide 21: Urban Market Focus: The Wandsworth
Urban Market Focus: The Wandsworth D E M A N D FA C T O R S • Urban development to meet significant and growing demand in London market • Assisted living & memory care community located in Wandsworth, London, UK • 6 story building with 98 units; c. 70,000 square feet • High end facilities offered on
Slide 22: Outpatient Medical Growth Opportunity
Outpatient Medical Growth Opportunity Health Systems & Physicians Currently Own ~65% of Outpatient Medical Real Estate 5% Properties Total Total Government/Other Value Sq. Feet 19% Investor/Private Hospital 5,461 $626B 1.6B Outpatient 33,561 $394B 1.6B 11% 51% Health Systems REIT TOTALS 39,022 $1,01
Slide 23: Procedures Driving Outpatient Medical Growth
Procedures Driving Outpatient Medical Growth Segment Demand Growth: 2016 - 2026 44.6% Opthamology -15.5% 10.5% Gynecology -8.3% 20.0% Cardiology -5.6% 37.4% Vascular -3.8% 35.4% ENT -1.2% 36.7% Orthopedics 8.1% 43.4% Obstetrics 9.4% 14.5% Oncology 9.5% 44.4% Neurology 11.3% 22.8% Neurosurgery 28.6%
Slide 24: Welltower's Full Service Outpatient Medical Group
Welltower’s Full Service Outpatient Medical Group Strategic Health Care Alliances & Innovative Care Delivery Models $5.6B INVESTED IN 240 PROPERTIES 95% 16,000,000 HEALTH SYSTEM OUTPATIENT AFFILIATED AS % MEDICAL VISITS(3) OF CORE NOI(1) Welltower proudly serves 99% IN-HOUSE many of the nation’s top
Slide 25: Transformational Retail & Health Care Real Estate Partnership
Transformational Retail & Health Care Real Estate Partnership 25
Slide 26: Welltower & Johns Hopkins Strategic Alliance
Welltower & Johns Hopkins Strategic Alliance Strategic alliance supports modern, efficient health care infrastructure and innovative care • Measure quality of care outcomes in Assisted Living and Memory Care • Educational programs for patients and care givers • Evaluate market opportunities • Delive
Slide 27: Financial Summary
Financial Summary
Slide 28: Significant Balance Sheet Strength
Significant Balance Sheet Strength Moody’s RATIO 4Q13(2) 4Q17(2) Improvement Baa1 NET DEBT / UNDEPRECIATED BOOK CAP (1) 42.5% 36.3% 620 bps Stable NET DEBT / 38.3% 31.2% 710 bps S&P ENTERPRISE VALUE (1) BBB+ NET DEBT / 6.1x 5.4x 0.7x Stable ADJUSTED EBITDA (1) ADJUSTED INTEREST Fitch 3.4x 4.1x 0.7x
Slide 29: Balanced and Manageable Debt Maturity Profile
Balanced and Manageable Debt Maturity Profile Weighted average maturity of 7.0 years 2018 2019 2020 2021 2022 2023 2024 2025 2026 Thereafter Pro Rata Secured Debt Senior Notes Lines of Credit in millions 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Thereafter Unsecured $450 $600 $697 $1,869 $60
Slide 30: Consistently Outperforming Peers
Welltower Consistently Outperforming Peers NAREIT Health Care Index Total Returns(1) 80.00% 70.00% 60.00% +45% 50.00% 40.00% 30.00% 20.00% +34% 10.00% 0.00% Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 -10.00% 15.2 % Average A
Slide 31: 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 31
Slide 32: Appendix
Appendix
Slide 33: Recognized For Sustainable Business Practices
Recognized For Sustainable Business Practices Listed to the 2018 RobecoSam EPA Green Power Partner for Sustainability Yearbook: Consumption of Renewable Industry Mover Designation Energy across Portfolio Building Certifications LEED: 14 Energy Star: 57 BREEAM: 7 33
Slide 34: Strong Growth in Projected Demand for Seniors Housing
Strong Growth in Projected Demand for Seniors Housing PROJECTED ANNUAL DEMAND GROWTH FOR SENIORS HOUSING UNITS 96,000 92,000 48,500 50,500 53,000 28,000 25,000 18,000 43,500 45,500 13,000 9,500 25,000 8,500 12,000 2010-2015 2015 - 2020 2020 - 2025 2025 - 2030 2030 - 2035 Assisted Living and Memory C
Slide 35: Growth Platform Driving the Future of Health Care Delivery
Growth Platform Driving the Future of Health Care Delivery 71% 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, privately
Slide 36: 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 37: Superior Assets Lead to Superior Operating Results
Superior Assets Lead to Superior Operating Results Outpatient Medical Outpatient Welltower (1) Medical Peers (2) Occupancy 94% 91% Average Property Size 65,630 64,803 Square Feet Health System Affiliation(3) 95% 95% NOI Margin 68% 65% NOI per Square Foot $22.92 $18.31 Annualized Lease Expirations(4)
Slide 38: Superior Assets Lead to Superior Operating Results
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 39 Years Occupancy 82% 80% 82% 82% Quality Mix 65%(5) 44% 51% 46% Private & Medicare Revenue % Data Data EBITDAR
Slide 39: Superior Assets Lead to Superior Operating Results
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) 10 20(9) Years Housing Value $531,238 $244,284(4) $216,9
Slide 40: Detailed Footnotes
Detailed Footnotes 1. Data as of 12/31/2017 for properties included in the seniors housing operating segment. Property age, housing value and household income are NOI- weighted as of December 31, 2017. The median housing value and household income is used for the US, and the average housing value an
Slide 41: Financial Disclosures
Financial Disclosures ome
Slide 42: Non-GAAP Financial Measures
Non-GAAP Financial Measures Welltower Inc. believes 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, the company considers Net Operati
Slide 43: NOI, IPNOI, SSNOI, REVPOR and SS REVPOR
NOI, IPNOI, SSNOI, REVPOR and SS REVPOR Net operating income (NOI) is used to evaluate the operating performance of the company’s properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated wit
Slide 44: Historical In-Place NOI Reconciliations
Historical In-Place NOI Reconciliations Three months Three months $s in thousands ended 12/31/17 $s in thousands ended 3/31/10 Net income (loss) $ (89,743) Net income $ 31,694 Loss (gain) on real estate dispositions, net (56,381) Loss (gain) on real estate dispositions, net (6,718) Loss (income) fro
Slide 45: In-Place NOI Concentration Reconciliations
In-Place NOI Concentration Reconciliations % of Seniors Seniors $s in thousands at Welltower pro rata SHO by % of housing housing Long-term/ Outpatient % of % of ownership Country SHO operating triple-net post-acute medical Total Total Country Annualized three months ended December 31, 2017 New York
Slide 46: SSNOI Reconciliations
• SSNOI Reconciliations SSNOI Reconciliations (dollars in thousands) Three Months Ended 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 Y/o/Y Net income (loss) $ 351,108 $ 337,610 $ 203,441 $ 89,299 $ (89,743) Loss (gain) on real estate dispositions, net (200,165) (244,092) (42,155) (1,622) (56,381) Loss
Slide 47: SHO Same Store Reconciliations
• SSNOI Reconciliations SHO Same Store Reconciliations (dollars in thousands, except REVPOR & SSNOI/unit) United States United Kingdom Canada Total 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 SHO SS REVPOR Growth: Consolidated SHO revenues (1) $ 486,000 $ 544,733 $ 67,047 $ 75,745 $ 110,548 $ 110,308 $
Slide 48: Outpatient Medical NOI Reconciliations
• Outpatient Medical NOI Reconciliations Outpatient Medical NOI Reconciliations $s in thousands, except per square foot Three months ended 12/31/2017 Total Non Core (1) Core OM revenues $ 132,411 $ (7,272) $ 125,139 OM property operating expenses (40,057) 314 (39,743) OM Core NOI $ 92,354 $ (6,958)
Slide 49: 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 50: EBITDA/A-EBITDA Reconciliations
• Quarterly EBITDA/A-EBITDA Reconciliations EBITDA/A-EBITDA Reconciliations Dollars in thousands Three Months Ended Three Months Ended December 31, 2013 December 31, 2017 Net income (loss) $ 25,696 $ (89,743) Interest expense (1) 124,485 127,217 Income tax expense (benefit) 435 25,663 Depreciation a
Slide 51: Capitalization Ratios
Capitalization Ratios Dollars in thousands 12/31/2013 12/31/2017 Net Debt to Undepreciated Book Capitalization: Line of credit $ 130,000 $ 719,000 Long-term debt obligations (1) 10,522,014 11,012,936 Cash and cash equivalents (2) (158,780) (249,620) Net debt 10,493,234 11,482,316 Accumulated depreci