10-QPeriod: Q3 FY2003

WELLTOWER INC. Quarterly Report for Q3 Ended Sep 30, 2003

Filed October 24, 2003For Securities:WELL

Summary

WELLTOWER INC. (WELL), operating as Health Care REIT, Inc., reported significant growth in its third quarter and year-to-date 2003 results, driven by a substantial increase in rental income. The company's real estate investments expanded considerably, with new acquisitions and construction in progress contributing to asset growth. Despite an increase in interest expense due to higher borrowings, the company demonstrated a strong ability to generate revenue, offsetting these costs and showing robust growth in net income available to common stockholders. Financially, WELLTOWER has strengthened its capital structure through a mix of debt and equity offerings, including new senior unsecured notes and preferred stock issuances. The company also successfully redeemed certain preferred stock, optimizing its capital costs. Management expresses confidence in its liquidity and capital resources to fund ongoing operations, meet financial obligations, and pursue future investment opportunities in the healthcare facility sector.

Key Highlights

  • 1Rental income increased by 35% for the third quarter and 38% year-to-date compared to the prior year, signaling strong operational performance.
  • 2Net income available to common stockholders grew to $20.6 million ($0.46 per diluted share) for the third quarter and $53.8 million ($1.28 per diluted share) year-to-date, up from $16.9 million ($0.43 per diluted share) and $42.9 million ($1.18 per diluted share) respectively in 2002.
  • 3Total assets grew to $2.03 billion as of September 30, 2003, up from $1.59 billion at December 31, 2002, driven by significant investments in real estate.
  • 4The company raised substantial capital through various offerings, including $100 million in senior unsecured notes, $96.85 million from Series D Preferred Stock, and significant common stock issuances, alongside the issuance of Series E Convertible Preferred Stock for an acquisition.
  • 5WELLTOWER successfully redeemed all 3 million shares of its 8.875% Series B Cumulative Redeemable Preferred Stock, optimizing its capital structure and reducing preferred dividend expenses.
  • 6Moody's Investor Services upgraded its rating on the company's senior unsecured notes from Ba1 to Baa3, reflecting strengths in financial leverage, debt management, and portfolio fundamentals.
  • 7The company's investment in Atlantic Healthcare Finance L.P. was sold in October 2003, expected to generate a net gain of approximately $800,000 in the fourth quarter.

Frequently Asked Questions

The primary driver of revenue growth is a significant increase in rental income, up 35% for the quarter and 38% year-to-date, which is attributed to acquisitions of new properties and expansion of the company's real estate portfolio.

WELLTOWER has actively managed its capital structure by issuing new senior unsecured notes and preferred stock, and by redeeming Series B preferred stock. The company also amended its credit facilities and senior unsecured note indentures to modernize covenants and enhance financial flexibility, while maintaining a debt-to-total capitalization ratio of 0.45 to 1.0 as of September 30, 2003.

Yes, the company has contingent liabilities related to guaranteed industrial revenue bonds and bank loans, totaling approximately $6.7 million. Additionally, there are ongoing legal proceedings related to the bankruptcy of Doctors Community Health Care Corporation, where WELLTOWER has an $18.8 million loan secured by a hospital, and potential impacts from the bankruptcy of Alterra Healthcare Corporation, though Alterra has remained current on its lease payments.

WELLTOWER anticipates making additional investments in healthcare facilities, funded by internally generated cash, asset sales, and access to capital markets. The company has an effective shelf registration statement allowing for the issuance of up to approximately $832 million in various securities, indicating a strong capacity to raise future capital for growth.