Welltower Inc. WELL recently closed the previously-announced buyout of a portfolio of Class A health care facilities for $1.25 billion from CNL Healthcare Properties. The accretive acquisition will enable the company to expand its outpatient medical and health system footprint across 16 states.
In fact, the portfolio of Class A medical office and outpatient facilities, spanning 3.3 million rentable square feet of space, offers significant synergies to Welltower's existing outpatient medical footprint. Further, the 55 properties are currently 94% occupied and carry average annual rent escalations of 2.4%.
Also, 92% of these properties are affiliated with some of the nation's best healthcare systems, such as Novant, Memorial Hermann and Cleveland Clinic. The portfolio, which will likely offer initial cash yield of 5.7%, is supported by high quality and strong credit-backed cash flow.
Notably, with a differentiated portfolio of seniors housing and medical office assets, the company is well poised to capitalize on the growing demand for healthcare assets. Hence, Welltower is making strategic investments to expand its senior housing and medical office portfolios.
In fact, in first-quarter 2019, Welltower accomplished $367 million of pro-rata gross investments. This included $259 million in acquisitions, $80 million in development funding and $28 million in loans. Such portfolio-optimization efforts are aimed at enhancing operating and financial performance, attracting top-class operators and improving the quality of the company's cash flows.
Encouragingly, over the past six months, shares of this Zacks Rank #3 (Hold) company have outperformed the industry it belongs to. During this period, the stock has rallied 11.9% compared to the industry's growth of 8.5%.
Nevertheless, any hike in interest rate is a concern for Welltower as the company has substantial exposure to long-term leased assets. The properties under long-term triple-net leases generally have fixed rental rates, which are subject to annual increases.
Stocks to Consider
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Host Hotels & Resorts' funds from operations (FFO) per share estimates for the ongoing year have been revised marginally upward to $1.81 in the past week.
PS Business Parks' Zacks Consensus Estimate for 2019 FFO per share remained unchanged at $6.59 over the past month.
Lamar's FFO per share estimates for the current year remained unrevised at $5.81 over the past week.
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