Welltower Inc. · NYSE:WELL
Welltower — Investor Presentation (November 2019)
55 slides from Welltower's investor presentation, November 2019
Slide 1: Driving the Future of Health Care Real Estate
Driving the Future of Health Care Real Estate Corporate Presentation | 3Q 2019
Slide 2: Forward Looking Statements
Forward Looking Statements This document contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimate” or similar expressions
Slide 3: Secular Themes
Secular Themes The need for innovation and disruption 3
Slide 4: Secular Theme | An Aging Population
Secular Theme | An Aging Population The Aging Population is growing exponentially, and outspends every other age cohort combined on health care 80+ U.S. Population Growth(1) Personal Health Care Per-Capita Spend by Age(2) 25 Population 80+ (M) 7% $35K $32.9K YoY Growth (%) 23 6% $30K 21 5% 2.4X $25K
Slide 5: Secular Theme | The Need for Value-Based Care
Secular Theme | The Need for Value-Based Care The US spends the most per capita on health care, yet achieves significantly lower health outcomes (1) Health and Social Spending as % of GDP Healthcare Spend vs. Life Expectancy(2) 35% 84 Investing in social care leads to better health outcomes NOR NETH
Slide 6: Secular Theme | Social Determinants of Health
Secular Theme | Social Determinants of Health Health & Exercise Safety 80% of an individual’s health and wellness Medical Care & Activity & Accessibility is influenced by social determinants(1) Socioeconomic factors Hygiene Sleep Physical 10% Environment 20% Health Care Drivers of 40% Food Security
Slide 7: Investment Theme | The Built Environment Must Change
Investment Theme | The Built Environment Must Change Key Drivers of Change Industry Response Growth Opportunity Fee-for-service model is ineffective, Vertically integrated care models increase Changing capital needs present costly, and unsustainable given care coordination, lower health costs an opp
Slide 8: Investment Thesis
Investment Thesis The built environment must be reimagined and reinvested to address the challenges of the aging population 8
Slide 9: Investment Theme | The Health and Wellness Ecosystem
Investment Theme | The Health and Wellness Ecosystem $$$ RELATIVE COST OF CARE $ ACUTE CARE POST-ACUTE CARE SENIORS HOUSING Hospital Specialty Inpatient Rehab Long-Term Skilled Nursing Memory Assisted Independent Home Inpatient Care Facility Care Hospital (LTC) Care Living Living CONSUMER DRIVEN VEN
Slide 10: Investment Theme | A $1 Trillion Opportunity
Investment Theme | A $1 Trillion Opportunity Health system real estate offers significant investment opportunity to drive synergies across the health care continuum ~65% Health Systems & Providers Properties Total Value Total Sq. Feet Investor / 24% Hospital 5,479 $616B 1.5B Private Outpatient Medic
Slide 11: The Welltower Platform
The Welltower Platform welltower
Slide 12: Welltower at a Glance
Welltower at a Glance World’s largest health and wellness real estate platform ~1,300 ~22M sq. ft. Senior Living of Outpatient $54B (1) S&P 500 Communities Facilities Enterprise Value Dow Jones Strong Balance Sheet 71% Sustainability Bloomberg Gender Equality Index BBB+ / BBB+ / Baa1 5 yr total retu
Slide 13: Welltower Platform | Market Leading Strengths
Welltower Platform | Market Leading Strengths Unique Partnerships Direct Access to Investment Capital Capabilities Competitive Advantage Predictive Population Analytics and Scale Asset management and development 13
Slide 14: Seniors Housing
The Welltower Platform Seniors Housing 14
Slide 15: Strong Case for Seniors Housing
Strong Case for Seniors Housing Penetration Rate Dependency Ratio 10.5% penetration rate(1) Demands of the aging indicates significant opportunity population outpacing to increase market acceptance supply of caregivers Fundamental Drivers Social Benefits Demographics Social factors drive health 75+
Slide 16: Investment Theme | Growing Product Acceptance
Investment Theme | Growing Product Acceptance Seniors Housing Inventory and Penetration 2010 – 2019(1) 10.5% 1,000,000 10.5% 10.4% 900,000 10.3% 800,000 10.2% 10.1% 700,000 10.0% 9.9% 600,000 9.9% 500,000 9.8% 9.7% 400,000 9.6% 300,000 9.5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 NIC MAP I
Slide 17: Investment Theme | National Senior Housing Outlook
Investment Theme | National Senior Housing Outlook Occupancy and Penetration Rates : 2010 – 2025(1) 95% Occupancy (ΔP=0 bps) Historical Projected If the penetration rate 94% increased 100 bps today, Occupancy (ΔP=60 bps) 94% occupancy would reach Occupancy (ΔP=100 bps) 94% in 2025 93% 92% 92% If the
Slide 18: The Strength of the Welltower Seniors Housing Platform
The Strength of the Welltower Seniors Housing Platform High Barrier to Entry Premier Markets Next Generation Physical Infrastructure Brandywine Living at Alexandria, VA The Sumach by Chartwell | Toronto, CA 47 Best-In-Class Operating Partners Innovative and Aligned Structuring RIDEA 3.0 Balfour at R
Slide 19: Seniors Housing Map | Urban, High Barrier to Entry
Seniors Housing Map | Urban, High Barrier to Entry 80% SH Operating NOI in Top 10 MSAs 91% SH Operating NOI in London & Southern England 79% SH Operating NOI in Top 25 MSAs SHO SH NNN Based on In-Place NOI. Please see Supplemental Financial Measures at the end of this presentation for reconciliation
Slide 20: Welltower Operator Platform
Welltower Operator Platform Operators diversified across geographies and acuity mix 20
Slide 21: RIDEA 3.0: Next Generation Management Contracts
RIDEA 3.0: Next Generation Management Contracts Maximizing Value of Real Estate, Aligning Interests and Protecting Downside Ownership Structure & Key Relationship Terms Standard RIDEA Contract RIDEA 3.0 Contract Real Estate Ownership Same Structure Operator has ownership stake in real estate ü Base
Slide 22: Outpatient Medical
The Welltower Platform Outpatient Medical 22
Slide 23: Investment Theme | Inpatient to Outpatient
Investment Theme | Inpatient to Outpatient 60% 51% increase in outpatient visits since 1999, compared to a 3% increase in inpatient admissions(1) 50% 40% 30% 20% 10% 0% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Outpatient Visits Inpatient Admissions 1. Source: American
Slide 24: Welltower Platform | What We Do – Outpatient Medical
Welltower Platform | What We Do – Outpatient Medical Strategic Health System Partnerships Integrated Real Estate Management Team Midtown Medical Plaza | Charlotte, NC Stamford Virtua Voorhees | Voorhees, NJ Predictive Market Analytics Consumer-focused Care Settings 416 N Bedford | Beverly Hills, CA
Slide 25: Growing Relationships with Key Health System Partners
Growing Relationships with Key Health System Partners Strategic Health Care Alliances & Innovative Care Delivery Models 25
Slide 26: Medical Office | Market Leading Platform
Medical Office | Market Leading Platform Diversified portfolio across geographies and health systems RSF Growing Relationships with Key Health System Partners 26
Slide 27: Case Study | Summit Medical Group
Case Study | Summit Medical Group Summit Berkeley Heights Premier Multispecialty Medical Practice 1 Largest physician-owned multispecialty medical practice in NJ with 800+ practitioners across over 80 specialties in 7 counties 2 3 Largest and most comprehensive care “hub” in hub-and-spoke 5 platform
Slide 28: Case Study | Atrium Development - Charlotte, NC
Case Study | Atrium Development - Charlotte, NC Anticipated Delivery Q2 – Q3 2020 Consumer-oriented Class “A+” Health Care Anchored Mixed-Use Buildings to house integrated specialty clinical practices for Atrium Health including the Sanger Heart and Vascular Institute Downtown Charlotte Development
Slide 29: Case Study | Providence St. Joseph - Mission Viejo, CA
Case Study | Providence St. Joseph - Mission Viejo, CA Anticipated Delivery Innovative Care Delivery Model and Q4 2019 Advanced Oncology Programs Strategic joint venture with Mission Hospital, a 345-bed acute care hospital and member of the Providence St. Joseph Health System. 105K RSF, on-campus me
Slide 30: Welltower and ProMedica | Strategic Joint Venture
Welltower and ProMedica | Strategic Joint Venture Diversified portfolio positioned for internal and external 15th largest national health system with acute, post-acute growth, investment grade balance sheet and outstanding and ambulatory care, 600K covered lives and access to capital 2,700 providers
Slide 31: Synergistic Partnership Drives Alignment across the Care Continuum
Synergistic Partnership Drives Alignment across the Care Continuum Expansion of use of Large population of seniors living Integrated Clinical and senior housing real estate Wellness Program Ability to leverage senior housing real estate for in a controlled assisted living clinical purposes environme
Slide 32: Our Competitive Advantage
The Welltower Platform Our Competitive Advantage 32
Slide 33: Sustainable Competitive Advantage
Sustainable Competitive Advantage Predictive Analytics Operator Platform Data-driven, granular approach to Diverse operating partners across market presence and growth geography, acuity, operating leverage Fundamental Drivers Health System Relationships People Integrated across asset types and Diver
Slide 34: Business Insights | Integrating Operator & 3rd Party Data
Business Insights | Integrating Operator & 3rd Party Data Education Third party Income/ data integration Health Employment Indicators Population Housing Projections Welltower’s competitive advantage: 10+ years of property-level historical performance data Demographics/ Psychographics Competition NOI
Slide 35: Micro Market Analysis | Looks can be deceiving
Micro Market Analysis | Looks can be deceiving Demographic and Psychographic Analysis across 8.2 Million Micro Markets Demand Hex Grid with Competition Overlay Top MSA | New York Demographics Psychographics Housing, Affluence, Density, Interests, Lifestyle, Values, Economic Indicators Attitudes, Beh
Slide 36: Micro Market Analysis | Beauty is in the eye of the beholder
Micro Market Analysis | Beauty is in the eye of the beholder Demographic and Psychographic Analysis across 8.2 Million Micro Markets Demand Hex Grid with Competition Overlay Secondary MSA | Kansas Demographics Psychographics Housing, Affluence, Density, Interests, Lifestyle, Values, Economic Indicat
Slide 37: Business Insights | Key Takeaways
Business Insights | Key Takeaways 1. MARKETS Sub-markets 8.2M Micro Markets Quantifiable and 2. COMPETITION Gut feel Consistent (ACUs™) Uncertain/ 3. LABOR Price Taker Predictive Labor Cost SIMILAR Outlook Defined by Statistical Similar Location 4. PROPERTIES MSA Anywhere in USA OUTPATIENT Subjectiv
Slide 38: Seniors Housing Operator Platform | Power of Diversification
Seniors Housing Operator Platform | Power of Diversification Operator Diversification across Acuity Spectrum $$$ Monthly Rent $ Low Average Portfolio Acuity High ü Acuity ü Geography ü Operating Leverage Diversity Across Platform : AL, IL, MC Micro Markets RIDEA 3.0 38
Slide 39: Commitment to Environmental, Social and Governance (ESG)
Commitment to Environmental, Social and Governance (ESG) 39
Slide 40: Environmental | Leadership through Sustainability
Environmental | Leadership through Sustainability Energy, Water and Waste Green Buildings 26,535 MWh reduction in energy consumption(1) 78 63 26 12 12 Consumed 32,467 MWh of renewable electricity in 2018 Avoided 6,837 metric tons of greenhouse gas emissions(1) 11,453 gallon reduction ~$1M in water c
Slide 41: Social | Wellness at our Core
Social | Wellness at our Core Diversity and Inclusion Workforce Development Healthcare Caregiver Employee Initiatives Minority executives 50% throughout the Company 76% of employee healthcare premiums paid Leave WELL +CORE WELL+BEING Gender parity across Employer Match $8.4M+ 1:1 the Organization to
Slide 42: Governance | Great Governance is Good Business
Governance | Great Governance is Good Business G&A as % of Enterprise Value(1) 75% 95% 0.80% 0.70% Female and Minority of Employees received refresher Independent Director Leadership training on insider trading and anti-corruption 0.60% on the Board of Directors(1) HC REIT Average 0.50% Governance S
Slide 43: Capitalizing the Opportunity
Capitalizing the Opportunity 43
Slide 44: Performance Driven Financing Strategy
Performance Driven Financing Strategy Superior Internal & Significant & Stable Investment Grade Outstanding External Growth Dividend Income Balance Sheet Access To Capital 44
Slide 45: Strategic Portfolio Optimization | Capital Recycling
Strategic Portfolio Optimization | Capital Recycling Capital Recycling 2015 – 3Q19(1) $18B $16B gross investments $16B since 2015 $14B $12B $10B $10B dispositions since 2015 $8B $6B 44% $4B 58% $2B invested in $5B Outpatient Medical and Health Systems $0B 1 Non-Core Property Dispositions Strategic A
Slide 46: Portfolio Optimization Enhances Quality of Cash Flow
Portfolio Optimization Enhances Quality of Cash Flow (1) HEALTH SYSTEM 7% OM SHO OM SHO 16% 39% 21% 44% Strategic Capital Deployment into 3Q 2016 Outpatient Medical & 3Q 2019 Health Systems LT/PAC LT/PAC 20% 9% SH NNN SH NNN 25% 19% 89% Private Pay(2) 93% Private Pay(3) 1. Based on In-Place NOI. See
Slide 47: Continued Portfolio Optimization
Continued Portfolio Optimization Strategic Acquisitions with Next-Gen Operators into High Quality Urban Seniors Housing Aligning with Premier Care Providers by Financing New Models of Health Care Delivery 47
Slide 48: Balanced and Manageable Debt Maturity Profile
Balanced and Manageable Debt Maturity Profile(1) Weighted Average Maturity of 7.8 years(2) USD Unsecured USD Secured CAD Unsecured CAD Secured GBP Unsecured GBP Secured Lines of Credit & Wtd. Avg. Interest Rate Comme rcial Paper $4,000M 5.0% 4.5% $3,500M 4.0% $3,000M 3.5% $2,500M 3.0% $2,000M 2.5% 2
Slide 49: Current Portfolio - 5 Year Cash Flow Growth Model
Current Portfolio - 5 Year Cash Flow Growth Model Incremental Bucket Assumptions Total Growth Annual Growth NOI 1 Total Stable Portfolio Growth Stable portfolio generates 2.5% unlevered annual growth 19.1% 3.6% $281M SHO portfolio leases up from current occupancy of 87.4% to 91.5% 2 SHO Occ. Stabili
Slide 50: Current Portfolio - 5 Year Cash Flow Growth Model
Current Portfolio - 5 Year Cash Flow Growth Model Incremental Bucket Assumptions Total Growth Annual Growth NOI 1 Total Stable Portfolio Growth Stable portfolio generates 2.5% unlevered annual growth 19.1% 3.6% $281M SHO portfolio leases up from current occupancy of 87.4% 4.6% 2 SHO Occ. Stabilizati
Slide 51: Supplemental Financial Measures
Supplemental Financial Measures 51
Slide 52: Non-GAAP Financial Measures
Non-GAAP Financial Measures We believe that revenues, net income and net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), are the most appropriate earnings measurements. However, the company considers Net Operating Income (NO
Slide 53: NOI and IPNOI
NOI and IPNOI We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our properties. These expenses include, but are not limited to, property-relat
Slide 54: In-Place NOI Reconciliations
In-Place NOI Reconciliations (dollars in thousands) 3Q19 3Q16 Annualized In-Place NOI by property type 3Q19 Net income (loss) $ 647,932 $ 354,741 Seniors Housing Operating $ 939,936 44.2 % Loss (gain) on real estate dispositions, net (570,250) (162,351) Seniors Housing Triple-Net 402,608 18.9 % Loss
Slide 55: In-Place NOI Concentration Reconciliation
In-Place NOI Concentration Reconciliation (dollars in thousands at Welltower pro rata ownership) 3Q19 Annualized Seniors % of SHO Housing Operating by Country New York $ 91,971 13.1% Los Angeles 84,306 12.0% Washington D.C. 40,596 5.8% San Francisco 35,225 5.0% Chicago 29,410 4.2% Seattle 28,014 4.0