How Welltower Fared in Terms of Cost Control in 2Q17


Aug. 2 2017, Published 8:57 a.m. ET

Income generated in 2Q17

Welltower (HCN) reported higher-than-expected core FFO (funds from operations) of $1.60 per share, beating the Wall Street estimate of $1.05 per share. Higher same-store NOI (net operating income) and a strong demand for premium senior housing facilities drove profits during the quarter.

Total NOI stood at $473.7 million compared to $459.9 million a year ago. NOI growth was driven by senior housing same-store NOI growth of 3.5%. While senior housing’s triple net segment reported a growth of 3.0% in NOI, the long-term secured portfolio rose 3.1% during the quarter. However, the outpatient medical portfolio reported growth of only 1.6%.

General and administrative expenses stood at $32.6 million for 2Q17, a significant 18.0% fall from a year ago, backed by enhanced operational efficiency.

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Expenses expected to rise in 2Q17

Welltower expects to go forward with its cost-reduction initiatives and thus gear up its operational efficiency. It expects G&A (general and administrative) expenses to be lower in the range of $130.0 million–$132.0 million compared to $135.0 million expected previously.

Based on strong results in the first half of the year, the company expects same-store NOI (net operating income) to be 2.25%–3.0% from the previously expected range of 2.0%–3.0%.

Welltower’s close competitors are HCP (HCP), Healthcare Trust of America (HTA), and Ventas (VTR). HTA and VTR reported NOI of $107.0 million and $442.6 million, respectively, for 2Q17. HCP is expected to report NOI of $287.2 million.


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