WELLTOWER INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Business Trends: Welltower had a strong Q3 with a 21% increase in FFO per share, fourth guidance raise, and quarterly revenue exceeding $2 billion. Senior housing same-store NOI grew 23%, and outpatient medical business showed stable performance.
• Capital Deployment: Announced $1.2 billion of transactions completed or under contract since last update, with year-to-date investment activity over $6 billion, focusing on bolt-on acquisitions in the senior housing sector.
• Balance Sheet: Leverage at 3.7 times, $10 billion liquidity, and deleveraging progress with net debt to adjusted EBITDA expected to end the year below 4 times.
• Operating Platform: Tech platform went live with first operators, simplifying move-in processes, improving employee experience, and costing less than legacy systems.

Segment Performance

• Senior Housing Operating Portfolio: Year-over-year same-store NOI growth was 23%, with same-store topline growth at 9% driven by 310 basis points occupancy growth and strong rate growth. The spread between RevPOR and ExpPOR remains at historically wide levels, resulting in 300 basis points year-over-year margin expansion.
• Outpatient Medical Business: Posted year-over-year same-store NOI growth of 2.2%, with stable same-store occupancy at 94.5% and healthy leasing activity and tenant retention.
• Senior Housing Triple-Net Portfolio: Same-store NOI grew 5.8% year-over-year, with trailing 12-month EBITDAR coverage reaching a post-COVID high.
• Long-Term Post-Acute Portfolio: Same-store NOI growth was 3% year-over-year, with trailing 12-month EBITDAR coverage of 1.74 times.

Guidance

• FFO per share guidance raised to $1.75 to $1.81 per diluted share, with normalized FFO at $4.27 to $4.33 per diluted share (midpoint $4.30).
• Total portfolio year-over-year same-store growth expected 11.5%-13%, driven by senior housing operating growth 22%-24%, with revenue growth 9.2%, RevPOR growth 5.25%, occupancy growth 300 basis points, and expense growth 5%.

Risks

• Macroeconomic uncertainty and geopolitical tensions posing potential impacts on performance.
• Constrained lending environment affecting investment activity.
• Volatility in interest rates and potential effects on borrowing costs.

Q: Segments driving occupancy gains and export benefit?

A: Occupancy gains across assisted living and independent living, with labor cost trends moving in favorable direction.

Q: SHOP portfolio vs total portfolio occupancy and margins cadence?

A: Non-same store assets with lower occupancy grow faster, and non-same store will converge to same-store margins over time.

Q: Tech rollout annualized margin improvement at property level?

A: Not speculating on exact improvement, but optimistic about higher margins in future due to operating platform.

Q: SHOP portfolio percentage of NOI going forward and optimal exposure?

A: SHOP portfolio will continue to grow as a percent of NOI, with resounding yes to continued growth, and focus on long-term portfolio management as discussed in investor materials.