Welltower (WELL 1.24%) continued its transformation toward where it sees the future of heathcare going by actively managing its portfolio of heathcare properties. During the quarter the company completed $1.5 billion of heathcare investments, capping a year where it added a net $3.6 billion of investments to its portfolio. These new investments drove healthy growth in cash flow and position the company for continued growth in 2016.

Welltower results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Funds from Operations

$402.4 million

$337.6 million






FFO payout ratio




Data source: Welltower.

What happened with Welltower this quarter?
Welltower's results show healthy growth:

  • Welltower delivered strong double digit FFO growth due to a combination of organic growth and acquisitions. Organically, the company benefited from a 3.1% year-over-year increase in same store net operating income growth. In addition to that, the company completed $3.6 billion of net new investments during the year.
  • During the quarter the company completed $1.5 billion of investments including $1.2 billion of acquisitions or joint ventures, $95 million in development funding, and $163 million in loans. Welltower also placed one development project into service, representing a total investment of $19 million.
  • A key part of Welltower's strategy is to recycle capital by selling non-core properties. In 2015 the company sold a total of $1.2 billion non-strategic assets to better position its portfolio for an evolving heath care industry. Among the notable sales during the quarter was the Bellevue Medical Center, which was a general acute care hospital that it sold for $130 million. That sale was important because it marked its strategic exit from owning inpatient hospitals in the U.S., which is noteworthy because it is the opposite strategy of fellow heath care REIT Medical Properties Trust (MPW 4.61%). The primary focus of Medical Properties Trust is actually on acquiring and developing acute care hospitals, among other hospital facilities, because it sees these as backbone heath care facilities.

What management had to say
CEO Tom DeRosa, commenting on the company's results, said:

Calendar 2015 was a validation of the strength of our platform...Our high-quality portfolio delivered consistent operating results across all segments...We completed $4.8 billion of new investments, originating 77% of them through existing relationships. Our operator partners remain a differentiated source of value in an otherwise highly competitive marketplace. Equally important, we disposed of $1.2 billion of non-strategic assets, as we proactively recycle capital to best position our portfolio in an evolving healthcare industry.

In a lot of ways, 2015 was a transitional year for Welltower. Not only did it change its name, but it's changing over its portfolio to focus on where it believes heathcare is going in the future. That led the company to not only continue to acquire properties in its focus area, but dispose of those that don't fit within its strategic focus.

Looking forward
Welltower will continue to trim away at the margins of its portfolio in 2016, with it expected to complete another $1 billion in asset dispositions. That said, even with these dispositions Welltower expects to deliver solid earnings growth without factoring in any acquisitions other than what's already in the pipeline. Its guidance for 2016 is for FFO to increase to a range of $4.50 to $4.60 per share, which is 3% to 5% above last year. That growth will mainly be driven by same store cash net operating income growth of 2.5% to 3% from properties currently within its portfolio. A higher growth rate, however, is possible given that the company is only factoring in $163 million of acquisitions for 2016 from to a previously announced partnership. After making a net $3.6 billion of net investments last year, it's hard to fathom the company only making a couple of minor transactions in 2016.