Analyst Note| Kevin Brown |
Senior housing fundamentals may have reached the nadir of the pandemic-influenced decline in the first quarter, leading to no-moat Welltower slightly outperforming our expectations in the quarter. Still, management's guidance for the second quarter seems roughly in line with our expectations, so we don't foresee any material changes to our $78 fair value estimate. Occupancy for the same-store senior housing portfolio fell another 310 basis points sequentially to 73.9%, slightly better than our estimate of 73.3% occupancy. As a result, same-store revenue fell 14.8%, roughly in line with our estimate of a 15.2% drop. The company did manage to reduce same-store operating expenses by 2.6%, better than our estimate of flat expense growth, so the same-store net operating income decline of 44.0% was slightly better than our estimate of a 51.2% drop. The triple-net senior housing portfolio saw a much smaller 2.0% year-over-year decline in same-store NOI, while the other segments produced positive results with medical office up 3.1%, health systems up 2.8%, and skilled nursing up 0.2%. Same-store NOI for the total company declined 20.6%, in line with our estimate of a 20.3% decline. The decline in portfolio operations led to a similar 21.6% drop in normalized funds from operations, which came in at $0.80 per share in the first quarter.