Welltower announced its first quarter earnings last week, and the REIT caused a bit of a buzz by cutting its May 2020 dividend to $0.61 per share from the previous dividend of $0.87 per share. Cutting dividends is not as rare an event these days, just ask Sabra Health Care REIT or Diversified Healthcare Trust, but if you’re a REIT, this may be the best time to do it. Welltower further added to its liquidity by settling forward equity sales agreements totaling $588 million and closing a $1 billion unsecured, two-year term loan that bears interest at LIBOR plus 120, and adding $110 million of incremental cash flow retained per quarter by cutting the dividend. The REIT also completed pro rata dispositions totaling $717 million at a blended yield of 5.4%, and has about $2.36 billion of capacity under its $3 billion unsecured revolving credit facility.
Like everyone else, Welltower did see significant declines it its SHOP occupancy, falling from near 86% at the end of February to 82.7% as of May 1. We’ve seen worse drops, but this is only the beginning, unfortunately, and the fall was steepening throughout April. The company said that it expected SHOP occupancy to end the quarter about 500-600 basis points lower than the end of Q1. Also not surprising, Welltower incurred $7 million in additional COVID-19-related expenses at the property level in March, stemming from both higher labor costs and PPE purchases. And those expenses may rise by approximately 5% by the end of Q2 compared with Q1.
As far as rent collection, it was again typical of the other REITs, with Welltower collecting 97% of April rent in its triple-net portfolio. EBITDAR coverage for the seniors housing assets remained at 1.03x in the first quarter (identical to Q4:19), but the skilled nursing and post-acute care facilities saw a drop from 1.50x to 1.47x, quarter over quarter. That makes sense, since SNFs felt the immediately impact from COVID-19 with a freeze on elective surgeries and new admission lockdowns as early as March.
