DaVita & Fresenius Tenant Report
DaVita
Tenant Overview
DaVita Inc., headquartered in Denver, Colorado, is a leading healthcare provider specializing in outpatient dialysis services. With a strong presence in the US, DaVita operates over 2,800 centers, offering life-sustaining treatment to patients with end-stage renal disease. Additionally, the company operates in 13 countries outside of the United States, serving over 200,000 dialysis patients globally. With a strong commitment to quality, innovation, and community, DaVita is dedicated to improving the lives of patients, families, and healthcare professionals worldwide.
Current on Market Data
- # of Properties: 46
- Avg. Cap Rate: 6.68%
- Avg. Lease Term Remaining: 10.55 Years
- Avg. Price: $3,436,261
- Lowest Cap Rate: 5.23%
- Highest Cap Rate: 10.00%
Earnings Call Summaries
2024 Q3
DaVita Inc. reported solid financial performance for Q3 of 2024, with consolidated revenues reaching $3.264 billion and operating income of $535 million.
In their real estate update, DaVita reported closing 15 dialysis centers in the United States during the third quarter of 2024, while opening three new centers domestically.
Additionally, DaVita incurred charges of approximately $18.3 million and $48.2 million for U.S. dialysis center closures during the third quarter and nine months ended September 30, 2024, respectively.
The increased costs are related to the company’s strategic review of outpatient clinic capacity requirements and utilization. This review, which began in 2022, was prompted by declines in patient census due to the COVID-19 pandemic.
The various costs associated with closing underutilized dialysis centers include:
- Net losses on assets retired: Costs related to the disposal or retirement of assets, like equipment and facilities.
- Lease termination costs: Expenses incurred when terminating leases for closed centers.
- Asset impairments: Reductions in the value of assets, like property and equipment, due to their decreased utility or obsolescence.
- Accelerated depreciation and amortization: Increased depreciation and amortization expenses due to the shortened useful life of assets associated with closed centers.
2024 Q2
DaVita reported consolidated revenues of $3.187 billion and operating income of $506 million in Q2. They also acquired and opened 10 new dialysis centers in the US during Q2 2024, while closing three centers. Internationally, they acquired 24 centers, opened three, and closed two. The company also incurred charges of approximately $15.3 million related to US dialysis center closures during Q2 2024. These charges increased patient care costs by $6.5 million, general and administrative expenses by $8.7 million, and depreciation and amortization expense by $0.1 million.
2024 Q1
DaVita’s real estate updates for the first quarter of 2024 include the closure of 13 dialysis centers in the United States, while acquiring and opening 11 new centers. Internationally, they acquired 67 centers, opened two, and closed nine.
Additionally, DaVita incurred charges of approximately $14.6 million related to U.S. dialysis center closures during the quarter. They also reported consolidated revenues of $3.071 billion, operating income of $484 million, and adjusted operating income of $463 million.
2023 Q4
DaVita’s Q4 2023 earnings report highlighted strong financial performance, demonstrating resilience and strategic progress. Revenue for the quarter was $3.15 billion, representing a year-over-year growth of 7.8%, also beating estimates of $3.01 billion. These results reflected improved patient census trends, increased treatment volumes, and effective cost management efforts.
Key updates from the earnings call included:
- Operational Adjustments: DaVita plans to consolidate or close around 50 dialysis centers while opening 20 new ones in 2024. This aligns with efforts to optimize operational efficiency and adapt to demand.
Looking ahead, DaVita projects 2024 treatment volume growth of 1-2%, with revenue per treatment expected to rise by 2.5-3%. The company is also navigating increased labor costs, including the impact of minimum wage increases in California.
These results and plans position DaVita to maintain its strong standing in the healthcare sector while pursuing strategic growth opportunities.
Fresenius Medical Care
Tenant Overview
Fresenius Kidney Care, a subsidiary of Fresenius Medical Care is a German healthcare company providing dialysis treatments to over 332,000 patients globally. Since it’s foundation in 1996, Fresenius’ presence has grown to include over 4,000 clinics in 150 countries, with roughly 2,600 locations in the United States. They are also a market leader for the production of hemodialysis machines with 40 production sites in over 20 countries. In 2024, Fresenius implemented its strategic optimization plan, which included clinic closures as part of efforts to streamline operations. Approximately 200 clinics were closed globally, primarily targeting underperforming locations.
Current on Market Data
- # of Properties: 28
- Avg. Cap Rate: 6.90%
- Avg. Lease Term Remaining: 7 Years
- Avg. Price: $3,799,200
- Lowest Cap Rate: 5.20%
- Highest Cap Rate: 10.19%
Earnings Call Summaries
2024 Q3
Fresenius Medical Care (FMC) reported strong financial results for the third quarter of 2024, showcasing substantial growth in profitability but with some decline in overall revenue due to strategic divestments.
Insights
- Net Income: Up 153% year-over-year to approximately $225 million, driven by operational efficiencies and improved dialysis volumes.
- Operating Income: Increased by 43% to roughly $490 million, reflecting a margin improvement to 9.7% from 6.6% in the prior year.
- Revenue: Declined by 3.6% to approximately $5 billion, attributed to the divestiture of non-core operations in regions like Curaçao, Guatemala, and Peru.
Population Density
- FMC continues optimizing its portfolio, exiting non-core markets to focus on more profitable operations. This includes the sale of certain clinics in the Americas.
- These divestitures contributed to a reduction in revenue in international markets by 22%, which was partially offset by organic growth in remaining assets.
2024 Q2
Revenue remained stable at approximately $5.3 billion, reflecting slight organic growth, offset by challenges in certain markets. Operating income grew 19% to $468 million.
Regarding real estate, Fresenius continued its strategy of optimizing its network of clinics. The company reduced exposure to less profitable acute care contracts, and divestments accounted for part of its financial and operational adjustments during the quarter. No major closures of clinics were reported specifically in Q2, but the overall portfolio management aligned with their cost control and efficiency strategy.
2024 Q1
Fresenius continued its portfolio optimization strategy, divesting dialysis clinic networks in Brazil, Colombia, Chile, and Ecuador. Agreements were also signed for exits in Guatemala, Peru, and Curacao, completing Fresenius’ withdrawal from Latin America’s dialysis operations. In addition, Fresenius closed the sale of its dialysis clinic network in Turkey and Cura Day Hospitals in Australia. These transactions are expected to generate approximately $700 million in cash proceeds but are forecast to impact 2024 earnings negatively by about $270 million due to related charges and adjustments.
