Welltower (HCN) is in the business of senior housing and healthcare real estate. It has 1,334 healthcare properties and ~198,000 residents. The portfolio comprises acute care, which includes hospitals, post-acute care continuum, and senior housing. An increase in the old age population should help HCN generate additional revenue. Experts estimate that the age group of 85+ will double in the next 20 years.
An aging population increases healthcare spending. According to National Healthcare Expenditure Data, personal healthcare per capita spending is $8.4 in the age group of 45–64, $15.9 in the age group of 65–84, and $34.8 for 85 and above—a drastic increase.
For diseases like Alzheimer’s and dementia, residential memory care is vitally important. The number of people affected by dementia is expected to double every 20 years. The estimated cost of dementia care is expected to be around $1 trillion by 2018.
Adapting to these, needs Welltower has made strategic changes in its portfolio. NOI (net operating income) for senior housing facilities has risen to 70% of the portfolio in 3Q17, compared to 40% in 1Q10. NOI for post-acute care decreased to 13% in 3Q17 from 31% in 1Q10. Private pay increased from 69% in 1Q10 to 93% in 3Q17.
Upper hand in competition
HCN has high-quality assets that require low maintenance. A high barrier to entry in the premier markets, mainly in cities, along with dependable and efficient operating partners and active portfolio management gives HCN an upper hand.
Welltower’s operations are in major US, Canadian, and UK markets. Its competitor HCP (HCP) is based in Irvine, California. Healthcare Trust of America (HTA) is based in Scottsdale, Arizona, and Ventas (VTR) is based in Chicago. Welltower makes up almost 2.59% of the Vanguard REIT ETF (VNQ).
Welltower (HCN) announced a dividend of $0.87 per share for 3Q17 from the previous guidance $0.86 in 3Q16. The dividend yield stands at ~5.6%.
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