Welltower Inc. · NYSE:WELL
Welltower — Q2 2021 Earnings Presentation
45 slides from Welltower's earnings presentation, July 2021
Slide 1: Business Update
Business Update July 2021 welltower
Slide 2: Forward Looking Statements and Risk Factors
Forward Looking Statements and Risk Factors This document contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When Welltower uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimat
Slide 3: Welltower at a Glance
Welltower at a Glance S&P $49B 2.9% Baa1 BBB+ 500 Enterprise Value(1) Dividend Yield(1) 100,000+ ~22M sq. ft. Seniors Housing & Outpatient Facilities Wellness Housing Units World's largest health & wellness real estate platform 1. Bloomberg, as of 6/30/2021 3
Slide 4: Portfolio Overview
Portfolio Overview Health System Seniors Housing 10% Operating 37% Outpatient 24% Medical 2Q 2021 IPNOI(1) 6% Long-Term/ 23% Post-Acute Care Seniors Housing Triple-Net 1. Based on In-Place NOI. See Supplemental Financial Measures at the end of this presentation for reconciliations. 4
Slide 5: Recent Developments | Second Quarter 2021 and Seniors Housing Highlights
Recent Developments | Second Quarter 2021 and Seniors Housing Highlights 2Q2021 Highlights • Seniors Housing Operating (SHO) portfolio spot occupancy increased 190bps in 2Q2021, exceeding initial guidance of an approximate gain of 130bps • Seniors Housing Triple-Net properties achieved similar seque
Slide 6: Recent Developments | Investments and Balance Sheet Update
Recent Developments | Investments and Balance Sheet Update Investments Update • Following completion of the Holiday transaction, WELL will have executed approximately $4.0 billion of pro rata gross investments(1) since 4Q2020 at an initial yield of 6.7% • Completed $256 million of pro rata gross inv
Slide 7: Recent Developments | 3Q2021 Guidance
Recent Developments | 3Q2021 Guidance 3Q2021 Guidance • Third quarter 2021 net income attributable to common stockholders: $0.44 - $0.49 per diluted share(1) • Third quarter 2021 normalized FFO : $0.78 - $0.83 per diluted share(1). Key assumptions include: • SHO Portfolio Occupancy: Midpoint of norm
Slide 8: Leadership Team
Leadership Team SHANKH MITRA TIMOTHY G. MCHUGH JOHN F. BURKART MATTHEW G. MCQUEEN AYESHA MENON JOSHUA T. FIEWEGER Chief Executive Officer & Chief Financial Officer Chief Operating Officer General Counsel & Senior Vice President Chief Accounting Officer Chief Investment Officer Corporate Secretary We
Slide 9: New Paradigm for Growth with Lower Entity-Level Risk
New Paradigm for Growth with Lower Entity-Level Risk PAST FIVE YEARS DO NOT REFLECT OUTLOOK FOR NEXT FIVE YEARS Where we Were (2015- 2020) Where we’re Going (2021 and beyond) SENIORS HOUSING DEMAND • Relatively flat demographic growth of key seniors housing demographic resulting from “Baby Bust” of
Slide 10: Seniors Housing
Seniors Housing welltower
Slide 11: Seniors Housing Operator Platform | Power of Diversification
Seniors Housing Operator Platform | Power of Diversification Monthly $$$ Rent Diversity across Acuity, Geography and Operating Model $ Low Average Portfolio Acuity High 11
Slide 12: Demographic Backdrop | Rapidly Aging Population
Demographic Backdrop | Rapidly Aging Population 80+ Population CAGR | Historical and Projected(1) 10 Year Population CAGR by Age Cohort | 2020 - 2029 4.0% US UK Canada 2010 - 2019 2020 - 2029 3.8% 4.0% 4.0% 4.0% 3.8% 3.6% 3.5% 3.6% 3.1% 3.0% 3.1% 3.0% 3.0% 3.0% 2.5% 2.0% 2.0% 2.0% 2.3% 1.7% 2.0% 1.4
Slide 13: Seniors Housing Supply | Construction remains well below peak levels
Seniors Housing Supply | Construction remains well below peak levels Seniors Housing Historical Supply(1) Seniors Housing Historical Supply(1) NIC Primary and Secondary Markets NIC Primary and Secondary Markets 14K 5.0% Construction Starts Construction Starts (% Inventory) 80K Units Under Constructi
Slide 14: Seniors Housing Supply | Surging Construction Costs
Seniors Housing Supply | Surging Construction Costs Material increase in cost of development for ALL RESIDENTIAL property types including SENIORS HOUSING Lumber Cement Copper 1,800 550 11,000 1,600 500 10,000 1,400 1,200 450 9,000 1,000 400 8,000 +99% since 2016 +94% since 2016 800 350 +58% since 20
Slide 15: Post-COVID Recovery | Growth Opportunity
Post-COVID Recovery | Growth Opportunity US 80+ Population Growth(1) 20M 7.0% 3.6% CAGR 6.0% Demographic-driven 15M 5.0% Occupancy Recovery 1.3% CAGR 4.0% 3.0% 2.0% 10M 1.0% 0.0% 5M -1.0% Supply Deceleration Seniors Housing Construction Starts vs. Inventory(2) Rolling Four Quarters 5.0% 4.5% 4.0% 3.
Slide 16: SHO Portfolio | 2Q2021 Observations
SHO Portfolio | 2Q2021 Observations Revenues • SHO portfolio spot occupancy increased 190bps in 2Q21, exceeding initial guidance of an approximate gain of 130bps • 2Q2021 Same store REVPOR(1) (2Q2021 vs. 2Q2020): • Assisted Living properties increased 3.2% • Independent Living properties increased 2
Slide 17: SHO Portfolio | Occupancy Trends
(1) SHO Portfolio | Occupancy Trends Total Portfolio +90 US 75.0% 75.0% +120 +50 74.0% 74.0% -80bps +70 +50 +10 73.0% +90 73.0% -60bps +50 72.0% 72.0% 71.0% 71.0% 70.0% Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun -210bps UK +120 81.0% Canada 68.5% -110bps 80.0% -90 67.5% +10 +90 79.0% -40 -30 -1
Slide 18: SHO Portfolio | Move Ins & Move Outs
(1) SHO Portfolio | Move Ins & Move Outs Move Ins as % 2019 Move Ins Move Outs as % 2019 Move Outs 120% 120% 102% 101% 99% 98% 100% 100% 90% 86% 87% 86% 87% 84% 84% 80% 81% 80% 80% 80% 74% 74% 70% 66% 67% 60% 60% 60% 56% 57% 60% 54% 40% 40% 20% 20% 0% 0% 1. Move ins and move outs presented at Wellto
Slide 19: SHO Portfolio | COVID-19 Impact
(1) SHO Portfolio | COVID-19 Impact COVID-19 Impact Resident Case Counts Remain Near Pandemic Lows • Trailing Two Week resident COVID-19 cases ✓ Lead generation for many communities has exceeded pre-COVID levels have remained near pandemic lows despite an increase in national cases across the US and
Slide 20: UK Resident Cases Remain Near Pandemic Lows Despite Surge in National COVID-19 Cases
UK Resident Cases Remain Near Pandemic Lows Despite Surge in National COVID-19 Cases Cases, Hospitalizations and Deaths(1) UK COVID-19 Update(1,3) England COVID Daily New Cases by Age(2) 7-Day Moving Average 7-Day Moving Average 70K Cases Hospitalizations (RHS) Deaths (RHS) 5K • Most recent COVID wa
Slide 21: COVID-19 | US & Canada Case Count & Vaccination Update
(1,2) COVID-19 | US & Canada Case Count & Vaccination Update Significant decline in new COVID cases in Canada during recent months 300K US COVID New Daily Cases US COVID Weekly Hospitalizations Canada US COVID COVIDNew Daily Daily Cases(3) NewDeaths 7-Day Moving Average 7-Day Moving Average 7-Day Mo
Slide 22: SHO Portfolio | Additional Community Details
(1) SHO Portfolio | Additional Community Details Nearly ALL COMMUNITIES across US, UK and Canada allowing VISITATION, IN-PERSON TOURS and COMMUNAL DINING Visitation Communal Dining % of communities % of communities 100% 100% 80% 80% 60% 60% 40% Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21
Slide 23: SHO Portfolio | Path to Recovery
SHO Portfolio | Path to Recovery Category NOI ($M) $71 million in annualized NOI $437 million embedded NOI growth in return to $1,200M recovered 1Q21 to 2Q21 Pre-COVID levels A) 1Q21 Portfolio – Core 1Q21 IPNOI (ex. HHS) 519 $29M B) 1Q21 to 2Q21 Core IPNOI Growth 71 $1,000M $108M C) Core 1Q21 Portfo
Slide 24: Sunrise UK Portfolio Optimization
Sunrise UK Portfolio Optimization Overview • Sunrise to exit the United Kingdom to refocus on North America growth initiatives including: ground-up development, redevelopment, lease-up of recently opened communities, and strategic acquisition of new management contracts • Management of Sunrise prope
Slide 25: Holiday Acquisition | Operational Update
(1) Holiday Acquisition | Operational Update Recent operational strength consistent with WELL US SHO Portfolio ✓ All communities are open and accepting new residents Occupancy Gain of 440bps Since March ‘21 Trough ✓ Portfolio spot occupancy has increased approximately 180bps during 2Q2021 88% 78% •
Slide 26: Balance Sheet & Investments Update
Balance Sheet & Investments Update 26
Slide 27: Balance Sheet & Investment Highlights
Balance Sheet & Investment Highlights In millions 2021 Year To Date Highlights Sources Balance Sheet: Cash and Cash Equivalents(2) $764 • On June 4, 2021, closed on an expanded $4.0 billion unsecured revolving line of credit bearing interest of LIBOR plus 77.5 bps, representing a 5bps improvement fr
Slide 28: Net Debt to Adjusted EBITDA
Pro Forma Leverage Nearly 0.7x reduction in pro forma Net Debt/Adjusted EBITDA since 1Q2021 7.20x 7.14x 7.00x Net Debt to Adjusted EBITDA 6.80x 6.88x 0.05x 0.06x 0.18x 6.60x 0.13x 6.40x 6.45x 6.20x 6.00x 1Q21 Ex HHS (1) 2Q21 Ex HHS (2) 7/28/21 Transaction (3) Holiday Acquistion (4) Settlement of Equ
Slide 29: Well-Laddered Debt Maturity Schedule
(1,2) Well-Laddered Debt Maturity Schedule Weighted Average Maturity of 7.4 Years USD Unsecured USD Secured CAD Unsecured CAD Secured GBP Unsecured Term Loan Weighted Average Interest $4,000 $3,500 5.0% 4.5% $3,000 4.1% 3.8% 3.8% $2,500 3.3% 3.2% 3.1% 3.0% 3.1% 2.8% $2,000 2.4% $1,500 $1,000 $500 $0
Slide 30: Capital Deployment | Value-Driven Investment Thesis
Capital Deployment | Value-Driven Investment Thesis Capital Deployment Volume since 4Q20 Granular & Off-Market Transactions Significant Discount to Replacement Cost 37 TOTAL TRANSACTIONS(1) $161k per unit Average Last dollar basis US transactions $4.0B GROSS INVESTMENTS (1) 181 17,163 OM and SH PROP
Slide 31: Foundation for Long-Term Growth Established
Foundation for Long-Term Growth Established Opportunity to deploy in excess of $10 billion across ALL asset classes over next decade NEW and PROPRIETARY long-term relationships with best-in-class developers and operators with either exclusive rights or right of first offer $1B Expected average annua
Slide 32: HC-One Investment
HC-One Investment • Agreed to first follow-on transaction with HC-One through acquisition of newly developed 71-unit community Follow-On • Acquisition is expected to be immediately accretive to WELL’s normalized FFO attributable to common stockholders per diluted share Investment • WELL holds Right
Slide 33: Holiday Acquisition | Transaction Summary
Holiday Acquisition | Transaction Summary Significant Upside Potential Through Occupancy Growth & Operating Margin Expansion Opportunity Meaningful Alignment of Interest Between Atria & Welltower WELL to acquire 86 Holiday communities for approximately Atria to assume operations of the portfolio fol
Slide 34: Supplemental Financial Measures
Supplemental Financial Measures 34
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures We believe 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, we consider Funds From Operations ("FFO"),
Slide 36: FFO and Normalized FFO
FFO and 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. However, since real estate values have historically risen or
Slide 37: Earnings Outlook Reconciliation
Earnings Outlook Reconciliation Outlook Reconciliations: Quarter Ending September 30, 2021 (in millions, except per share data) Current Outlook Low High FFO Reconciliation: Net income attributable to common stockholders $ 191 $ 212 Impairments and losses (gains) on real estate dispositions, net (1,2
Slide 38: NOI, IPNOI, REVPOR & SS REVPOR
NOI, IPNOI, REVPOR & SS REVPOR We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our properties. These expenses include, but are not limited t
Slide 39: In-Place NOI Reconciliations
In-Place NOI Reconciliations (dollars in thousands) 2Q21 In-Place NOI by property type 2Q21 % of Total Net income (loss) $ 45,757 Seniors Housing Operating $ 605,268 37 % Loss (gain) on real estate dispositions, net (44,668) Seniors Housing Triple-Net 386,148 23 % Loss (income) from unconsolidated e
Slide 40: SHO REVPOR Growth Reconciliation
SHO REVPOR Growth Reconciliation (dollars in thousands, except SS REVPOR ) 2Q21 2Q20 SHO SS REVPOR Growth Consolidated SHO revenues $ 742,549 $ 773,650 Unconsolidated SHO revenues attributable to WELL(1) 45,032 42,416 SHO revenues attributable to noncontrolling interests (2) (59,346) (63,480) SHO pr
Slide 41: SHO SS REVPOR Growth Reconciliation (cont.)
SHO SS REVPOR Growth Reconciliation (cont.) (dollars in thousands, except SS REVPOR ) As Reported: Assisted Living/Memory Care (1) Independent Living (1) Seniors Apartment Total 2Q21 2Q20 2Q21 2Q20 2Q21 2Q20 2Q21 2Q20 SHO SS revenues(2) $ 445,053 $ 478,141 $ 193,879 $ 206,841 $ 14,211 $ 13,102 $ 653
Slide 42: 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 Internal Revenue Code (“IRC”) Section 1031 deposits. We expect to ma
Slide 43: Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA (dollars in thousands) Three Months Ended Three Months Ended June 30, March 31, June 30, March 31, 2021 2021 2021 2021 Net income $ 45,757 $ 72,192 Lines of credit and commercial paper(1) $ — $ — Interest expense 122,341 123,142 Long-term debt obligations(1,2) 13,572,816
Slide 44: Proforma Net Debt to Adjusted EBITDA
Proforma Net Debt to Adjusted EBITDA (dollars in thousands) Three Months Ended March 31, Q1 Government Grants Received Three Months Ended March 31, 2021 (Actual) (1) (2) 2021 (Pro Forma) Adjusted EBITDA $ 459,432 $ (35,682) $ 423,750 Annualized Adjusted EBITDA $ 1,837,728 $ (142,728) $ 1,695,000 Net
Slide 45: Proforma Net Debt to Adjusted EBITDA
Proforma Net Debt to Adjusted EBITDA (dollars in thousands) Three Months Q3 Announced Announced Holiday June 30, 2021 Held- Three Months Ended Ended June 30, Q2 Government Q2 Acquisitions and Acquisitions and Retirement ATM Forward Sale for-Sale June 30, 2021 (Pro 2021 (Actual) (1) Grants Received (