Resilient Balance Sheet
Welltower (HCN) has kept its balance sheet in good shape. It has a cash balance of $236 million and $2.6 billion in credit line availability.
As per HCN’s debt schedule, the majority of its debt comprises senior notes, and ~$4,563 million is expected to mature from 2018 to 2021—which is ~30% of its total debt outstanding. As rates are rising, HCN may be forced to roll over its debt at a higher rate.
On the other hand, it should also increase interest expenses in the next few years. Interest expenses accounted for ~11% of the total revenues in 3Q17 and ~12% of total revenue in 2Q17.
Net debt—calculated as total debt less cash and receivables—stands at $12.3 billion. While this an absolute number may look considerable, it’s ~12x HCN’s free cash flow and therefore should be manageable.
Management continuously tries to refine its capital structure and takes advantage of any new developments or acquisitions. It’s also planning to dispose of assets that offer a lower return than the risk and release capital.