Welltower Inc. · NYSE:WELL
Welltower — Investor Presentation (April 2016)
60 slides from Welltower's investor presentation, April 2016
Slide 1: Corporate Presentation
Corporate Presentation April 2016 Transforming healthcare infrastructure through premium quality properties, partners and locations London Toronto Los Angeles Boston New York San Diego Washington DC
Slide 2: Forward Looking Statements
Forward Looking Statements This document contains “forward-looking” statements as Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the company’s that term is defined in the Private Securities Litigation actual results to differ ma
Slide 3: A Global Leader in Healthcare Infrastructure
A Global Leader in Healthcare Infrastructure 45-year old company with a new brand that emphasizes wellness A strong and proven capital allocation track record $27 billion invested since 2010 Over past six years, invested on average $1.1 billion per quarter, and over 60% with existing operating partn
Slide 4: Highly Experienced Management Team
Highly Experienced Management Team Tenure Industry Experience (Yrs) (Yrs) Unparalleled Industry Experience Tom DeRosa 12 (1) 27 CEO 16-year average tenure 24-year average industry experience Scott Brinker 14 17 CIO Board members of NYSE companies & key industry associations Scott Estes 13 21 U
Slide 5: Investment Opportunity and Highlights
Investment Opportunity and Highlights 5
Slide 6: Theme one: Demographics & Trends - A Play On Aging
Theme one: Demographics & Trends - A Play On Aging Total Health Care Expenses Incurred By Age Group 35% In 2050, the U.S. population 30% aged 65 and over is 25% projected to be 83.7 million, 20% almost double its estimated 15% population of 43.1 10% million in 2012. 5% 0% U.S. Department of Commerce
Slide 7: Demographics & Trends - A Play On Aging
Demographics & Trends - A Play On Aging 74.7 131.5 US$ 46.8 million US$ million million 818 1 BILLION TRILLION 2015 2030 2015 2050 2018 46.8 million people worldwide are living with The total estimated worldwide cost of dementia in 2015. dementia in 2015 is US $818 Billion. This number will almost d
Slide 8: Welltower Solution: Innovative Seniors Housing
Welltower Solution: Innovative Seniors Housing Silverado: Redefining the Concept of Home… • Investment Relationship Since 1998 • $414m invested in 27 communities • A social and medical hybrid model of care • Physician medical directors, master level social workers and 24-hour licensed nurses • Indus
Slide 9: …While Reducing Costs and Driving Outcomes
…While Reducing Costs and Driving Outcomes Silverado Communities Clinical Outcomes (Jan – Dec 2015) Silverado Hospice Clinical Outcomes (Jan – Dec 2014) 1. Skilled Nursing Facilities source: National Quality Indicator System 2010. ER transfer source: Percent of transfers every 90 days. 2. Source for
Slide 10: Theme two: Outpatient will Continue to Dominate Care Delivery
Theme two: Outpatient will Continue to Dominate Care Delivery 36% increase in total outpatient visits since 1999, compared with 6% rise in inpatient visits 40% OUTPATIENT VISITS 35% 30% 25% 20% 15% 10% INPATIENT 5% VISITS 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 11: Welltower Solution – Outpatient Medical
Welltower Solution – Outpatient Medical Kelsey-Seybold: Houston, TX • Multi-specialty, independent physician group • 400+ physicians • 20 clinical locations • 1.2 million patient visits per year • ACO accredited (first in nation) 11
Slide 12: Adapting to a Consumer Driven Marketplace
Adapting to a Consumer Driven Marketplace HCN OWNED KELSEY-SEYBOLD OPENING IN 2016 12
Slide 13: Theme three: Transform Health Care Infrastructure by Creating Connected Delivery
Theme three: Transform Health Care Infrastructure by Creating Connected Delivery 13
Slide 14: Welltower Solution – Connected Delivery
Welltower Solution – Connected Delivery Medical Mile: Voorhees, NJ IDEAS PARTNERS SMART CAPITAL In the town of Voorhees, New Jersey, minutes from downtown Philadelphia, we worked with three of our partners across the continuum of care to build a state-of-the-art, collaborative model of health care d
Slide 15: A Model for the Future of Health Care Infrastructure
A Model for the Future of Health Care Infrastructure Brandywine Senior Living Genesis Healthcare Virtua Health System PowerBack Rehabilitation Virtua, the largest non-profit healthcare Brandywine Senior Living, known for system in southern New Jersey, had a offering the highest quality care in Genes
Slide 16: Connected Delivery – A Future Opportunity
Connected Delivery – A Future Opportunity ASPEN Healthcare: London • Four private pay hospitals operated by Aspen Healthcare located in densely populated, affluent locations in London • 92% Private Pay; 80%+ revenue from outpatient • Value creation through connectivity 16
Slide 17: Connectivity Continued – A Story of Local Scale
Connectivity Continued – A Story of Local Scale Welltower is establishing value- generating referral networks between seniors housing properties and hospitals across its UK portfolio. 17
Slide 18: Execution and Growth Strategy Aligned With Industry Demand Drivers
Execution and Growth Strategy Aligned With Industry Demand Drivers Outcome and Value-Based 1 Incentives Portfolio focus in lower-cost settings, outpatient, post-acute and Improve care & reduce cost seniors housing 2 Consumerism Innovative seniors housing and care models Modern facilities, innovative
Slide 19: Company Overview
Company Overview 19
Slide 20: Company Snapshot
Company Snapshot $39B 1,482 S&P 500 Properties Member 89% Private Pay Sources 1970 Founded as Enterprise Value 1st Healthcare-Focused REIT Global NOI Diversity Moody’s S&P Fitch US + UK + CANADA Baa2 BBB BBB+ 84% 8% 8% Positive Positive Stable Data as of 12/31/2015. Country percentages based on In-P
Slide 21: Successful Long-Term Investment Track Record
Successful Long-Term Investment Track Record Since 2010… Growing and Consolidating Health Care Real Estate Market(2) We have invested $27.3B $1 TRILLION Disposed of US Health Care $4.1B Real Estate Market Which has grown the company (1) Welltower >4.7x ~2.6% 1. As measured by consolidated enterprise
Slide 22: Diversification Creates Resiliency
Diversification Creates Resiliency Segment Diversification Partner Diversification OUTPATIENT MEDICAL TOP 5 14% PARTNERS 14.1% 45% LONG-TERM/ HOSPITAL 13.5% POST-ACUTE CARE 1% 21% 7.6% SENIORS HOUSING OPERATING 5.1% 36% 4.5% SENIORS TOP 6-10 OTHER PARTNERS HOUSING TRIPLE-NET 42% 13% 28% Data as of 1
Slide 23: Unique Strategy Leads to Superior Performance
Unique Strategy Leads to Superior Performance Premier Operating Partners and Class ‘A’ Real Estate 3.8% Portfolio average SS NOI Growth Past 19 Quarters(1) Active Portfolio 7.2% Management SH-Operating Average SS NOI Growth Past 19 Quarters(1) $693M Welltower Repeat Business Per Quarter Partners Sin
Slide 24: US Seniors Housing Industry: Construction in 15 Markets
US Seniors Housing Industry | >10% of Inventory Under Construction in 15 Markets Seniors Housing Construction: All Markets | As of 4Q15 Los Angeles 12.6% Boston 10.2% New York 9.3% Chicago 5.2% San Diego 5.1% Washington 3.8% DC Seattle 2.9% Dallas 2.5% TOP US MARKETS New Haven 2.4% (% OF SH OPERATIN
Slide 25: Welltower US Portfolio
Welltower US Portfolio | High barrier to entry major metro markets with muted supply impact SEATTLE MINNEAPOLIS BOSTON MILWAUKEE NEW YORK CHICAGO PHILADELPHIA WASHINGTON DC INDIANAPOLIS KANSAS CITY SAN FRANCISCO TOP US MARKETS LOS ANGELES (% OF SH OPERATING NOI) Los Angeles 12.6% DALLAS SAN DIEGO AT
Slide 26: UK Portfolio | Strategic Platform and Partnerships
UK Portfolio | Strategic Platform and Partnerships Unmatched local scale and market share UK 80% 112 $2.8B SH Operating NOI in Facilities Gross Real Estate Greater London & Investments Southern England 75+ POPULATION (1) 10 9.1 7.3 POPULATION 5.3 (in millions) 5 ASPEN AVERY SIGNATURE SUNRISE 0 2015
Slide 27: Canadian Portfolio | Strategic Platform and Partnerships
Canadian Portfolio | Strategic Platform and Partnerships Key Operators REVERA CHARTWELL SUNRISE AGECARE CONTINUUM Portfolio Summary 75+ POPULATION (1) 6 5.1 76% 155 $2.9B 5 4 3.6 (in millions) CN Population SH Operating NOI in Facilities Gross Real Estate 3 2.5 Top 10 Canadian Investments 2 MSAs 1 0
Slide 28: Superior Assets Lead to Superior Operating Results
Superior Assets Lead to Superior Operating Results US Seniors Housing UK Seniors Housing(13) Welltower US HC REIT Public Industry Welltower UK Industry RIDEA(1) Peers(2) Operators(3) Benchmarks RIDEA(9) Benchmarks Property Age 12 18(4) 17(4) 19(5) 8 20(10) Years Housing Value $451,581 $221,390(4) $1
Slide 29: 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 22 36 32 36 Years Occupancy 86% 83% 81% 87% Quality Mix 57% 51% 54% 39% Private & Medicare Revenue % Data Data EBITDARM C
Slide 30: Superior Assets Lead to Superior Operating Results
Superior Assets Lead to Superior Operating Results Outpatient Medical Outpatient Welltower (1) Medical Peers (2) Occupancy 95% 90% Property Size 66,592 56,862 Square Feet Health System Affiliation(3) 95% 94% NOI Margin 69% 65% NOI per Square Foot $20.94 $17.60 Annualized Lease Expirations(4) 28% 37%
Slide 31: Financial Summary
Financial Summary 31
Slide 32: Strong Balance Sheet Enables Flexibility
Strong Balance Sheet Enables Flexibility S&P RATIO 4Q13 4Q15 Improvement BBB NET DEBT / UNDEPRECIATED BOOK CAP (1) 42.6% 39.9% 270 bps Positive NET DEBT / Moody’s 38.3% 32.7% 560 bps ENTERPRISE VALUE (1) Baa2 NET DEBT / ADJUSTED EBITDA (2) 6.1x 5.6x 0.5x Positive ADJUSTED INTEREST Fitch COVERAGE (2)
Slide 33: Effective Capital Plan | Proven and Prudent Access to Capital
Effective Capital Plan | Proven and Prudent Access to Capital Capital Raised Since 1Q 2010 DEBT $23.5B RAISED COMMON & PREFERRED $2.5B 40% EQUITY Unsecured Line of Credit 60% Data as of 12/31/2015 33
Slide 34: Increasing Earnings While Driving Down Leverage
Increasing Earnings While Driving Down Leverage ) 46% $4.20 Net Debt / Undepreciated Book Cap 44% TTM FFOPS (Normalized) 42% $3.80 40% 38% $3.40 '12 '13 '14 '15 Leverage TTM FFOPS (Normalized) Data between 12/31/2011 and 12/31/2015. “Leverage” represents net debt to undepreciated book capitalization
Slide 35: We Have Delivered Stronger, More Capital-Efficient Growth Than Peers
We Have Delivered Stronger, More Capital-Efficient Growth and Value Creation Than Peers 7.0x Debt-to-EBITDA 6.5x 6.0x 5.5x 5.0x 4.5x 01/2014 04/2014 07/2014 10/2014 01/2015 04/2015 07/2015 10/2015 01/2016 (1) HCN VTR HCP Source: Green Street Advisors data 1. VTR is inclusive of CCP. 35
Slide 36: We Have Delivered Stronger, More Capital-Efficient Growth Than Peers
We Have Delivered Stronger, More Capital-Efficient Growth and Value Creation Than Peers 50% Cumulative % Growth in NAV /share 45% 40% 35% 30% 25% 20% 15% 10% 5% - (1) HCP VTR HCN Source: Green Street Advisors data 1. VTR is inclusive of CCP. 36
Slide 37: Superior Seniors Housing Operating Growth: Welltower vs Peers
We Have Delivered Superior Seniors Housing Operating Growth: Welltower vs Peers Same Store NOI Growth (1) 12.0% (2) 10.5% 10.0% 8.5% 8.0% 7.3% 7.3% 5.8% 6.0% 4.5% 4.0% 3.1% 2.7% 2.8% 2.3% 1.9% 2.0% 1.8% 2.0% 0.0% 2011 -0.3% 2012 2013 2014 2015 -0.8% -2.0% (3) HCN VTR (4) Provider-Only (BKD, ESC, CSU
Slide 38: Outstanding long term shareholder returns yet significantly cheaper valuation
Outstanding long term shareholder returns yet significantly cheaper valuation TOTAL RETURNS (1) DIVIDEND YIELD FORWARD MULTIPLES (4) 10 YR CAGR 14% 6% 5.1% 18x 17.0x 12% 11% 4.1% 16.1x 16x 8% 7% 14.7x 3% 14x 4% 1.6% 12x 0% 10x HCN RMZ S&P 500 HC 0% HCN RMZ S&P 500 HC Index HCN (2) RMZ (3) S&P 500 HC
Slide 39: Focus On Delivering Outstanding Returns
Focus On Delivering Outstanding Returns Dividend Growth (1) Total Returns (2) Welltower 4.00 S&P 500 65% 3.50 55% 3.00 45% 2.50 +40% 2.00 35% 1.50 25% 1.00 15% +15% 0.50 5% 0.00 1971 2016 -5% 12/31/13 12/31/15 5.1% 73% 83% % Average Annual Dividend Yield (1) FFO Payout Ratio (3) FAD Payout Ratio (3)
Slide 40: Appendix
Appendix 40
Slide 41: Detailed footnotes
Detailed footnotes Slide 28 1. Data as of 12/31/2015 for properties included in the seniors 8. The State of Seniors Housing 2015. Represents 2012-2014 housing segment. Age, housing value, household income, and results. REVPOR represents 4Q15 results. NOI per unit represents the 9. Data as of 12/31/2
Slide 42: Financial Disclosures
Financial Disclosures 42
Slide 43: Non-GAAP Financial Measures
Non-GAAP Financial Measures Welltower Inc. believes that net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers Net Operating Income (NOI), In-Place N
Slide 44: NOI, In-Place NOI, SSCNOI, REVPOR and SS REVPOR
NOI, In-Place NOI, SSCNOI, REVPOR and SS REVPOR Net operating income (NOI) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with
Slide 45: In-Place NOI Reconciliations
In-Place NOI Reconciliations % of Seniors Seniors In thousands at Welltower pro rata SHO by % of housing housing Long-term/ Outpatient % of % of ownership Country SHO operating triple-net post-acute Hospital medical Total Total Country Annualized three months ended December 31, 2015 New York 9.3% 6.
Slide 46: In-Place NOI by Partner Reconciliations
In-Place NOI by Partner Reconciliations Three months In thousands ended 12/31/15 Annualized In-Place NOI by partner (1) Sunrise Senior Living $ 297,876 14.1% Genesis Healthcare 285,504 13.5% Brookdale Senior Living 159,196 7.6% Revera 108,088 5.1% Benchmark Senior Living 94,072 4.5% Partners #6-#10
Slide 47: SSCNOI Reconciliations
SSCNOI Reconciliations In thousands Three months ended SSCNOI Reconciliations: 6/30/11 6/30/10 9/30/11 9/30/10 12/31/11 12/31/10 3/31/12 3/31/11 6/30/12 6/30/11 9/30/12 9/30/11 12/31/12 12/31/11 3/31/13 3/31/12 6/30/13 6/30/12 Net income (loss) attributable to common stockholders $ 69,847 $ 45,646 $
Slide 48: SSCNOI Reconciliations (Continued)
SSCNOI Reconciliations (Continued) In thousands Three months ended SSCNOI Reconciliations: 9/30/13 9/30/12 12/31/13 12/31/12 3/31/14 3/31/13 6/30/14 6/30/13 9/30/14 9/30/13 12/31/14 12/31/13 3/31/15 3/31/14 6/30/15 6/30/14 9/30/15 9/30/14 12/31/15 12/31/14 Net income (loss) attributable to common st
Slide 49: SSCNOI Growth Reconciliations
SSCNOI Growth Reconciliations In thousands Three months ended 3/31/14 3/31/15 6/30/14 6/30/15 9/30/14 9/30/15 12/31/14 12/31/15Averages Consolidated NOI (1) $ 460,376 $ 517,716 $ 482,692 $ 558,815 $ 492,366 $ 570,294 $ 504,753 $ 590,746 Pro rata adjustments (2) 6,087 8,186 9,136 5,260 8,441 (3,605)
Slide 50: SSCNOI / Unit Reconciliations
SSCNOI / Unit Reconciliations $s in thousands, except per unit Three months ended 3/31/15 6/30/15 9/30/15 12/31/15 TTM Consolidated NOI (1) $ 517,716 $ 558,815 $ 570,294 $ 590,746 $ 2,237,571 Pro rata adjustments (2) 8,186 5,260 (3,605) (5,399) 4,442 Total pro rata NOI (3) 525,902 564,075 566,689 58
Slide 51: Seniors Housing Operating REVPOR Reconciliations
Seniors Housing Operating REVPOR Reconciliations Dollars in thousands, except REVPOR Three months ended 12/31/15: CA UK US Total Consolidated seniors housing operating revenues $ 586,826 $ 586,826 $ 586,826 $ 586,826 Unconsolidated revenues attributable to Welltower (1 39,149 39,149 39,149 39,149 We
Slide 52: Seniors Housing Operating SS REVPOR Growth Reconciliations
Seniors Housing Operating SS REVPOR Growth Reconciliations $s in thousands, except REVPOR Three months ended 3/31/14 3/31/15 6/30/14 6/30/15 9/30/14 9/30/15 12/31/14 12/31/15Averages Consolidated SHO revenues (1) $ 456,319 $ 494,561 $ 468,914 $ 539,805 $ 483,791 $ 547,081 $ 488,546 $ 586,826 Pro rat
Slide 53: Outpatient Medical NOI Reconciliations
Outpatient Medical NOI Reconciliations $s in thousands, except per square foot Three months ended 12/31/2015 Total Non Core (3) Core OM revenues (1) $ 121,340 $ (7,734) $ 113,606 OM operating expenses (1) (36,347) 1,521 (34,826) OM NOI (1) $ 84,993 $ (6,213) $ 78,780 OM NOI margin 69.3% OM NOI (1) $
Slide 54: FFO & FAD
FFO & FAD 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 values have historically risen
Slide 55: FFO Reconciliations
FFO Reconciliations (in thousands, except per share information) Three months Ended 3/31/2011 6/30/2011 9/30/2011 12/31/2011 3/31/2012 6/30/2012 9/30/2012 12/31/2012 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 6/30/2014 9/30/2014 12/31/2014 3/31/2015 6/30/2015 9/30/2015 12/31/2015 Funds From
Slide 56: FFO & FAD Payout Reconciliations
FFO & FAD Payout Reconciliations In thousands, except per share Three Months Ended December 31, 2015 Net income (loss) attributable to common stockholders $ 132,931 Depreciation and amortization 222,809 Losses/impairments (gains) on properties, net (31,385) (1) Noncontrolling interests and unconsoli
Slide 57: FFO & FAD Payout Reconciliations
FFO & FAD Payout Reconciliations In thousands, except per share Three Months Ended December 31, 2015 Net income (loss) attributable to common stockholders $ 132,931 Depreciation and amortization 222,809 Losses/impairments (gains) on properties, net (31,385) (1) Noncontrolling interests and unconsoli
Slide 58: EBITDA
EBITDA EBITDA stands for earnings before interest, taxes, depreciation and amortization. Covenants in our primary line of credit arrangement, senior unsecured notes and Canadian denominated term loan contain financial ratios based on a definition of EBITDA that is specific to those agreements. Failu
Slide 59: EBITDA Reconciliations
EBITDA Reconciliations In thousands Three Months Ended Three Months Ended December 31, 2013 December 31, 2015 Net income $ 25,696 $ 149,416 Interest expense (1) 124,485 131,097 Income tax expense (benefit) 435 2,682 Depreciation and amortization (1) 243,380 222,809 Stock-based compensation 3,527 5,1
Slide 60: EBITDA Reconciliations
EBITDA Reconciliations Dollars in thousands Twelve Months Ended Twelve Months Ended December 31, 2013 December 31, 2015 Net income $ 138,280 $ 888,549 Interest expense (1) 462,606 492,169 Income tax expense (benefit) 7,491 6,451 Depreciation and amortization (1) 873,960 826,240 Stock-based compensat