Welltower Inc (WELL) — Q1 2025 Earnings Call Transcript

Thank you and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be sustained. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. And with that, I'll hand the call over to Shankh for his remarks.

Thank you, Matt, and good morning, everyone. I'll review business trends and our capital allocation priorities. Tim will follow the usual cadence. I'm pleased to report that we began the year on a positive note, delivering approximately 19% growth in FFO per share, driven by better-than-expected results from our seniors' housing operating portfolio and significant acquisition activity. These results and our refreshed outlook for the remainder of the year have enabled us to raise the midpoint of our full-year FFO guidance by $0.10 per share to $4.97. Before getting into some of the details, I first want to mention that our achievements this quarter extend well beyond operational execution and attractive capital deployment. Our years of unrelenting effort culminated in the announcement of several major achievements, which I believe will allow us to both augment our growth and extend its duration even further into the future. These achievements include, one, the launch of our private fund management business, two, significant advancement in the Welltower business system, our proprietary end-to-end operating platform, three, solidifying our leadership through several key promotions, four, our successful rollout of a corporate rebranding that reflects Welltower’s transformation from a healthcare real estate deal shop to a data science and technology-driven operating company in a real estate wrapper. And finally, and most recently, an upgrade to our credit ratings by both S&P and Moody's to A- and A3, respectively. I'm humbled by the unwavering dedication of our team in achieving these major milestones. Turning to fundamentals, the senior housing operating business remains strong. There is no reduction in the momentum that we carried into the year as reflected by our 10th consecutive quarter in which same-store net operating income growth has exceeded 20%. From an occupancy perspective, following a period of exceptional results in 2024, we reported 400 basis points of year-over-year growth in Q1, the highest level of growth we have witnessed in any quarter outside of post-COVID recovery. Perhaps even more impressive is that despite seasonal headwinds that we typically encounter early in the year, the portfolio's sequential average occupancy growth of 60 basis points was the strongest we have reported in the first quarter of any year in our recorded history. Please look at our Slide 6 of our business update to reflect on what kind of seasonal outlier Q1 was. The business also maintained strong pricing power with growth in RevPOR or unit revenue of nearly 6%, with the 90% occupancy cohort experiencing 7%-plus growth. Excluding the impact of leap year, RevPOR growth was still strong at 5.1%, and unit expense growth would have been 1.3%, with same-store revenue growth of 9.9%. With the spread between RevPOR and ExpPOR remaining at a historically wide level, we achieved another period of outsized margin expansion of nearly 300 basis points year-over-year, with a significant runway for further growth that John will touch on shortly. As we look ahead, the demand-supply backdrop for the senior living sector continues to strengthen, setting us up for a multi-year period of attractive growth. And we continue to augment that growth by taking market share with our best-in-class operating partners and bolstering our business system execution. Nonetheless, we are acutely aware of the rise in macroeconomic uncertainty, particularly as we approach the summer leasing season. We are encouraged by the strong trends we have observed thus far this year, but we also need to see what the market gives us during the all-important summer leasing season. The need-based, private-pay nature of our product provides optimism around our ability to outperform not only other forms of real estate, but also major asset classes. However, as you know, we have no dilution of certainty. Shifting to the transaction environment, as we have discussed in recent quarters, the opportunity for compelling investments has grown meaningfully, and our recent activity clearly reflects that momentum. In mid-February, we announced $2 billion of pro-rata acquisitions. In March, we announced the $4.6 billion Canadian acquisition of Amica Senior Living. Today, we are pleased to announce another $1 billion of additional acquisitions, bringing our total pro-rata acquisition activity to roughly $6.2 billion for the year. To put this into perspective, we have closed $6 billion of investments in all of 2024. As we reach the end of April, we have already invested more of our precious capital this year than in any previous year in the company's history. However, as you know, our focus is not on the volume of investment, but the value they deliver. Transactions that we completed this quarter were secured at significant discounted replacement costs and are expected to meaningfully enhance our growth in the coming years. This includes 38 community Amica portfolios, the highest quality senior housing portfolio in North America. This trophy portfolio of 38 communities is located in highly affluent neighborhoods of Toronto, Vancouver, and Victoria, with an exceptional outlook for long-term growth. Nikhil will provide more details, but we are thrilled to form a long-term partnership with Robert, Gant, and their team, who share our vision of delivering a killer value proposition for residents and a dynamic environment for site-level employees to grow and thrive. If you want to look at another example of what great management does to thriving communities, please look at another Canadian example. In the fourth quarter of 2023, we bought the Jazz portfolio for CAD885 million. While the portfolio was highly occupied at the time of acquisition, in the last 18 months, Matthew, Frederic, and the team have taken the portfolio to 97% occupancy and a 47% margin, well exceeding our high expectations. Another great example of a similar win-win success story is taking place in the U.S., our partnership with Timber Cannon and Legend. Through our idea conversion, acquisitions, and transition, we have collaboratively created a much bigger pie to share in, together by expanding the portfolio to 53 communities. Legend has since grown the legacy portfolio cash flow to nearly 2.5 times, and has also received non-linear benefits as greater regional density drives higher management and incentive fees, higher real estate values, and improved employee retention across all Legend communities. Before turning it over to John, I wanted to quickly touch base on our balance sheet. As I mentioned earlier, our efforts in recent years to reduce leverage and bolster our liquidity profile were recognized by S&P and Moody's through an upgrade of our credit rating. During the quarter, our net debt to adjusted EBITDA further declined to just 3.3 times, another record low for the company as a result of prudent funding of our acquisition activity and strong cash flow growth. Additionally, with nearly $9 billion of balance sheet liquidity, we are not only in a position to endure any further capital market volatility, but also to deploy capital as opportunities arise. All in all, we are pleased with our execution thus far this year, but we have a long and busy year in front of us. With that, I'll pass it over to John.

Thank you and good morning, everyone. As Shankh mentioned, the momentum that continued to build through the fourth quarter of 2024 has carried into the early part of this year. We reported total portfolio same-store NOI growth of 12.9%, driven by another quarter of solid senior housing operating portfolio growth of 21.7%. I'll start with the outpatient medical segment, which remains steady, posting 2.7% year-over-year same-store NOI growth. Same-store occupancy trended higher on both a year-over-year and sequential basis, coming in at 94.5%, while tenant retention also remained healthy at over 94%. Now shifting to the senior housing operating portfolio, we continue to be pleased with our performance, with Q1 marking the 10th consecutive quarter in which year-over-year same-store NOI growth exceeded 20%. This incredible feat isn't just a function of the attractive demand-supply backdrop for senior housing, however. Welltower's alpha continues to be driven more so by our best-in-class operating partners and deployment of the Welltower business system, our proprietary end-to-end operating platform, and our focus on deepening regional density across the portfolio. These initiatives continue to bear significant fruit. During the quarter, year-over-year same-store revenue growth of 9.6% was clearly the highlight, driven by a remarkable 400 basis points of occupancy growth and strong RevPOR growth of nearly 6%. Revenue growth was generally consistent across all three of our regions, led by the U.S. at 9.8%, followed by the UK at 9.3%, and Canada at 8.3%. Importantly, we also reported nearly 300 basis points of year-over-year margin expansion during the quarter, as revenue continues to solidly outpace unit expense growth. And while NOI margins remain below pre-COVID levels, the inherent operating leverage in our business, combined with the widening of our moat through Welltower business systems, position us well for substantial margin expansion well into the future. Although I tend to keep quiet about various Welltower business system initiatives for proprietary reasons, I have commented on the technology platform, which is foundational to the customer and employee experience, as well as driving alpha. These efforts have continued, and we're on pace with our 2025 rollout plans. Currently, multiple operators have some portion of their assets on our technology platform, and we continue to add assets monthly, collaboratively working with our operating partners to address pain points and drive efficiencies in the business. While it's early and the peak leasing season is ahead of us, we're pleased with our results thus far. The need-based and private-pay nature of the business has clearly proven its resilience, but we'll take nothing for granted and will continue to operate with the same level of dogged determination and vigilance across all aspects of operations, with a focus on providing a delightful customer experience and driving site-level employee satisfaction higher. I'd like to take a moment to commend both our internal Welltower team and our world-class operating partners for their efforts in generating our industry-leading results. We remain relentlessly focused on operational excellence as we strive to deliver an unmatched service offering for residents and their families while making our communities the most desirable places to work in the industry. I'll now turn the call over to Nikhil.

Thanks, John. As we've discussed over the past few quarters, we have observed a noticeable expansion in capital deployment opportunities, resulting not only from debt-driven challenges, but also from pension funds seeking liquidity and other institutions reducing exposure to commercial real estate. This backdrop has resulted in year-to-date investment activity, which has already surpassed our acquisition volume for all of last year, which in itself was a record year for the company. In addition, our investment pipeline remains robust, with recent capital markets' volatility presenting additional opportunities for us. Turning to the quarter, we completed $2.66 billion of new investments in the first quarter. On our last call in February, we had previously announced $2 billion of year-to-date activity. Since then, in the last two and a half months, we have expanded our investment activity by $4.2 billion, bringing our total year-to-date balance sheet investment activity to $6.2 billion. This additional activity is comprised of the $3.2 billion acquisition of Amica Senior Lifestyles announced last month, and an additional $1 billion plus of new granular activity. Of this additional $1 billion, $660 million has already closed in Q1, with the remaining transactions expected to close in the coming months. Zooming in on our Amica transaction, which is expected to close around year-end, we are already incredibly excited to announce our partnership with one of the strongest senior housing operators in Canada. Alongside Cogir, one of Welltower's most valued growth partners, Amica's inclusion in our portfolio further enhances our partnership with best-in-class operators in the country. As Shankh mentioned earlier, the quality of the Amica portfolio is simply unparalleled, as demonstrated by its locations within highly affluent neighborhoods and its performance track record. This ultra-luxury portfolio, which is comprised of 38 locations in Vancouver, Victoria, and the Greater Toronto Area, boasts home values of $2 million to $4 million within the immediate vicinity of the community, or three to four times the average home values in those respective provinces. Living in an Amica building is a matter of great pride and prestige for the residents, and the service offering and the food quality are truly five-star. The total consideration of CAD4.6 billion is comprised of the following components: 31 in-place operational assets with an average age of 11 years. These properties include 24 in-service assets with in-place occupancy in the mid-90s. These assets have sustained occupancy at these levels for a long period of time and boast margins in the low to mid-40s. Given their strong reputation, these assets have demonstrated a CAGR RevPOR growth of nearly 7% during the last five years. Beyond the stable 24, there are seven in-place assets that are newly built and currently in lease-up with average in-place occupancy of approximately 70%. Amica has demonstrated an incredible lease-up track record with their last 10 development projects leasing up in just 18 months on average. The next bucket includes seven projects that are currently under construction and will be acquired at a preset price upon construction completion without Welltower bearing any construction and cost-related risk. These projects are expected to be completed between 2025 and 2027. The final real estate component includes nine development parcels which have gone through elongated multi-year entitlement processes. These parcels comprise of expansion opportunities for existing Amica buildings or de novo developments in the most desirable and supply-constrained locations in Vancouver, Victoria, and the greater Toronto area. In addition to these components, the transaction includes the assumption of CAD560 million of CMHC debt priced attractively at 3.6% and an approximately one-third ownership of the Amica management company along with an aligned dry DFI 5.0 contract. The non-development components of the transaction are underwritten to generate an unlevered IRR in the double-digit range with additional upside expected from the expansion and development projects as their respective business plans are executed over the coming years. Zooming back out to our first-quarter activity, 93% of our activity was off-market and 75% of this was with repeat counterparties. Our activity was comprised of 26 different transactions with a median size of 55 million. I want to let this sink in: 26 different transactions in 13 weeks are on average two transactions a week. We acquired 88 properties comprising nearly 10,000 units across all three countries in asset classes that we invested in. Just within the U.S., we invested capital across 23 states in the first quarter. The team members sitting across just three offices in the U.S. and one office each in the UK and Canada were able to invest in a granular manner due to the strength of our data science and machine learning platform. Our data science solutions, which have been created over the past decade by Swagat and his team, provide us with a unique view of the terrain, giving us a neighborhood-level view of over 10 million micro-markets in the U.S., allowing us to attain a level of scale that is truly unprecedented in real estate. When combined with our investment team's intellectual curiosity and relentless drive to get it right, not just to be right, with the disciplined execution of our high-performing operating partners, backed by the proven strength of the Welltower business system, we are able to create significant value and consistently deliver strong returns and durable growth for our investors. I will now pass the call over to Tim to cover our financial results and updated guidance for 2025.

Thank you, Nikhil. My comments today will focus on our first-quarter 2025 results, performance of our triple net investment segments, our capital activity, balance sheet liquidity update, and finally, an increase to our full year 2025 outlook. Welltower reported first-quarter net income attributable to common stockholders of $0.40 per diluted share and normalized funds from operations of $1.20 per diluted share, representing 18.8% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 12.9%. Now turning to the performance of our triple net properties in the quarter. As a reminder, our triple net lease portfolio coverage stats were reported a quarter in arrears. So these statistics reflect the trailing 12 months ending 12/31/2024. In our seniors housing triple net portfolio, same-store NOI increased 5.1% year-over-year, and trailing 12-month EBITDA coverage increased to 1.16 times. Coverage in this portfolio continues to strengthen, now well exceeding pre-pandemic levels, as fundamentals aligned with those of our operating portfolio, a trend we expect to continue going forward. Next, same-store NOI in our long-term post-acute portfolio grew 2.8% year-over-year, and trailing 12-month EBITDA coverage is 1.56 times. Moving on to capital activity. During the quarter, we funded $2.3 billion of net investment activity with equity and retained cash flow. We issued $2.2 billion of equity in the quarter with over 10% of our investment activity funded through the issuance of units directly to sellers, ultimately ending the quarter with $3.6 billion of cash and lower leverage than we had at year-end. As Shankh mentioned, we ended the quarter with a net debt to adjusted EBITDA ratio of 3.33 times, the lowest level recorded in Welltower's history. As a result of our current capital position and the improvement in the outlook for full-year operating results announced last night, we still expect run rate net debt adjusted EBITDA to end the year at 3.5 times, while adding $4.2 billion to our planned 2025 acquisition activity since our initial balance sheet guidance was provided in February. Before we dive into our updated guidance, I want to quickly spotlight a key milestone from this past quarter, the credit upgrades we received from both S&P and Moody's. A strong balance sheet has always been a pillar of our strategy, not just in terms of lower leverage, but also in the quality of our asset base. Well before the onset of the pandemic, we initiated a deliberate transformation of our business, repositioning the portfolio, driving greater alignment in our operating agreements, and building out our asset management capabilities, resulting in a platform with a risk profile that is virtually unrecognizable compared to where we started. It's gratifying to see that transformation recognized by both agencies. Importantly, we have never managed to a rating, and there's no finish line here. This is an ongoing, deliberate effort to ensure we are optimally positioned for whatever lies ahead. That discipline gives us the strongest possible foundation for uninterrupted compounding through any market environment. Lastly, as I turn to our updated 2025 guidance, we have not included any investment activity in our outlook beyond the $6.2 billion that has been closed or publicly announced to date. As a reminder, there's no expected earnings contribution in 2025 from our acquisition of the Amica portfolio, which is expected to close at year-end. Last night, we updated our full year 2025 outlook for net income attributable to common stockholders of $1.70 to $1.84 per diluted share and normalized FFO of $4.90 to $5.04 per diluted share, or $4.97 at the midpoint. Our normalized FFO guidance represents a $0.10 increase at the midpoint from our prior normalized FFO range. This increase is composed of a $0.02 increase from higher NOI in our Senior Housing Operating Portfolio, a $0.07 increase from accretive capital allocation activity, $0.02 increase from FX and Income Taxes, offset by $0.01 from higher expected G&A in the year. Underlying this FFO guidance is an estimate of total portfolio year-over-year same-store NOI growth of 10% to 13.25%, driven by sub-segment growth of outpatient medical, 2% to 3%, long-term post-acute, 2% to 3%, senior housing triple net, 3% to 4%, and finally, senior housing operating growth of 16.5% to 21.5%. This is driven by the following midpoints of their respective ranges: revenue growth of 9%, driven by increased expectations for both full-year RevPOR and occupancy growth, now at 5% and 350 basis points respectively, and expense growth of 5.25%. And with that, I will hand the call back over to Shankh.

Thank you, Tim. Before I open the call up for questions, I wanted to quickly reflect on the current macroeconomic environment. Please note that during our second-quarter call last year, we described our base case macro view for the next few years. Without fully repeating my comments, I'll summarize them by saying that we appear to be entering a potentially long period of higher inflation and higher interest rates, a prior contrast to the market conditions over the past 40 years. As a result of that shift, the tailwind which has lifted asset prices, including that of real estate, for the past few decades is not just subsiding, but also may very well turn into a headwind. Additionally, the current macro uncertainty may introduce another layer of complexity in the near term. Cyclical pressure on economic growth unfolding against a backdrop of elevated rates and persistent inflation that you can observe in consumer confidence and other high-frequency economic data. While we are not in the business of forecasting economic trends, we are keen observers of market-based signals. Higher interest rates coupled with significant widening of credit spreads across investment grade, high yield, and all asset-backed financing markets warrant caution as it relates to asset prices going forward. In other words, in our world of real estate, we expect higher rates along with wider debt spreads will put downward pressure on asset prices. In our recent call, while we have repeatedly discussed the wall of debt maturities and lack of credit availability, the other trend we are paying close attention to is on the equity side. Following the slow return of capital to LPs this cycle and the impact of denominator effects, after many years of pension funds and endowments steadily marching towards the Yale-Swanson model, many large pools of capital are reducing their exposure to private assets, including private real estate. These phenomena have potential to exacerbate the negative credit-driven impact on asset prices which I just described. We at Welltower are focused on risk, reward, and duration when deploying capital, and we perceive a higher level of risk than we did 90 days ago. While we hope that these clouds will pass, we do not believe hope is a strategy. We believe capital allocation is all about positioning, not predicting. To that point, I want to thank Tim and our capital markets team for putting us in an enviable position in terms of our balance sheet strength and liquidity to protect our owner's capital on one hand, and take advantage of the market opportunities that may arise on the other. Ultimately, we believe that the days of generating returns through financial wizardry and leveraged beta are over. Instead, as an operating company in a real estate wrapper, we're convinced that the only path to delivering satisfactory returns will be through compounding of cash flow generated by superior operations and supplemented with capital allocation to sub-optimize assets, further growing our network effect. With that, I will open the call for questions.

Good morning, thanks for your question. Congrats on the strong internal and external results. I wanted to focus on the platform or the business systems that you've been talking about for a while. I mean you're clearly having very strong internal and external activity. And I'm wondering how the business system overlay now. I think it's been two years. How does that parlay into both sort of the margins but also CapEx control? Just I guess, accentuating both the magnitude and the duration of the performance. If you could kind of help frame it perhaps with some numbers? Or just give us more details that would be helpful. Thanks.

Thank you, Vikram. The potential for margin expansion we've discussed is not exclusive to our asset class; we observed similar trends in multi-families during the '90s and 2000s, as well as in self-storage and single-family rentals. As the last asset class to undergo institutionalization, our success in this journey will depend on both our execution within the Welltower business system and the efforts of our top-tier operators who manage daily operations. This business is complex and challenging, but we are committed to working closely with our operating partners. The Welltower business system is designed as a complex adaptive system that balances chaos and order, capable of self-organizing based on dynamic feedback and adapting to changing conditions. We rely heavily on our operating partners, who possess a talented workforce, and we enhance that talent with our expertise to address their challenges, including those faced by customers and employees. The main objective of the Welltower Business System is to employ system-wide thinking to eliminate bottlenecks, streamline processes, and reduce friction in all interactions within these communities, whether between families and residents or caregivers and staff. We aim to create a smooth interaction flow while allowing our operating partners to tackle the unavoidable intricacies inherent in our business. To clarify, we focus on providing the Welltower Business System to equip site-level employees with real-time, actionable insights, thereby freeing up their time to foster meaningful connections with residents. If we achieve this, we foresee significant potential for margin expansion in our business.

Thank you, good morning. Shankh, we really enjoyed your annual shareholder letter this year. Something we found particularly interesting was the section on how your data science platform has improved your velocity to market in the transaction process. Would you mind walking us through the process in a bit more detail? And then also maybe giving some color around what percentage of your pipeline do you believe this proprietary technology is directly responsible for?

Yes, I won't go into all the details I wrote about how general markets function in a marketed transaction. However, if you take the time to review it, you'll see the overall process. Real estate tends to move very slowly. When you're a seller looking to sell, you hire a broker and go through a lengthy process before closing a deal, which generally takes about 5 to 10 months depending on the financing needs of the counterparty. In our industry, participants focus mainly on NIC 99-level information, which unfortunately isn’t very comprehensive. Our proprietary platform, as Nikhil highlighted, analyzes over 10 million micro markets across the country using unique data accumulated from over 100 senior housing operators over two decades. This approach allows us to assess any asset at a neighborhood level and generate initial interest in just a few minutes. We can predict performance within a day, down from two to three days, thanks to increased computing power. This enables us to provide initial pricing feedback within a week, allowing for definitive terms to be agreed upon within two weeks. At Volta, we pride ourselves on never walking away from a handshake, which has fundamentally changed the traditional dynamics of this business that have remained stagnant for years. For sellers, there’s little to lose; if they're not satisfied with our response within a week, they can always revert to the longer process that takes 5 to 10 months. Our goal is to significantly reduce the latency found in this slow-moving industry. This latency is crucial when considering network effects, which are often absent in industries that progress slowly. By enhancing speed to market, we're disrupting the traditional real estate landscape. As latency decreases, the network effect intensifies, paving the way for unprecedented growth and advantages that are not typically seen in industries with slow momentum. Reflecting on our journey, it's clear that while we can't pinpoint just one factor, diminishing latency stands out as a critical driver of our transformation and success in this space.

Hi, good morning. Thanks for taking questions. I was curious, just given your current size, how can you frame how you continue to think about sustained growth going forward?

That's a great question. If Welltower relied solely on financial engineering as a means to invest, growth would likely become problematic at some stage, with size potentially inversely related to growth. I'm not sure when exactly that would occur, and different industries have reached varying conclusions about it. However, as I mentioned earlier, we have transformed this company, which used to primarily focus on real estate transactions and was dependent on capital markets and the associated cost of capital. Over the past decade, we have evolved into an operating company within a real estate framework. When you view it as an operating company, the opposite effect actually occurs due to the network effect I spoke of earlier. As we grow, we gather more data, and two of our main competitive advantages—our data science platform and the Welltower Business System—continue to strengthen, thereby enhancing our competitive edge and widening the performance gap between us and our competitors. In the types of leveraged investment models you mentioned, as those companies grow larger, their performance relative to the market typically diminishes. Back in 2018 during our Investor Day, I addressed this topic, stating that even though we had outperformed our competitors up to that point, that gap would widen. The data since then confirm this; our market performance has indeed improved because we shifted from being a real estate deal shop to an operating company within a real estate context. This is not only unique to us; many operating companies have thrived because of their success. Companies like Home Depot, Costco, and Amazon have achieved their success due to their growth, not in spite of it. This success stems from the network effect and the ability to capture data, which I previously discussed. In our case, larger size contributes positively to growth rather than negatively, making this an exceptionally vital topic. Thank you.

Hi, good morning. Thank you for the prepared remarks and commentary. Tim, you reiterated the 3.5 leverage target by year-end. That's up from 3.3 today, so leveraging up in the next few quarters. I guess, why utilize debt when your cost of equity is arguably lower and would be more accretive and it never has to be refinanced? I'm just trying to better understand that near-term leverage target and how you think about the right capital structure or target capital structure on a longer-term or normalized basis? Thank you.

Jonathan, before Tim gives you an answer, I'll just say that we fundamentally disagree with your assumption that our cost of equity is lower than our cost of debt. Our cost of equity is much higher than you think. And that's probably because we think our potential growth in our long-term business is much higher, right? You got to think about your cost of equity on a long-term arc, not just your spot cost of equity. Anyway Tim?

Yeah, Jonathan, I'd just say what's driving our view on leverage higher is putting the cash to work off the balance sheet. It's not the assumption that we're issuing debt; it's just part of the mechanics of the cash coming off the balance sheet, putting it to work. With the guidance we provided last night, we're fully funded for all the capital activity. In fact, we're even paying off $1.25 billion in debt in those assumptions.

Hey, I have a question. Clearly, occupancy increased this quarter, and you included a couple of slides in the presentation showing the progression from January to March. I'm interested in understanding your long-term expectations for occupancy in your markets. Is this current pace sustainable, or could it potentially accelerate? How are you approaching this? I would appreciate some insight.

Ron, I would just say our expectation of what we think occupancy growth this year, as Tim just described to you, so I have nothing to add to that. Long term, we believe that as we sort of optimize this business with fewer and fewer operating partners who increasingly have a much greater regional density. We believe that frictional vacancy is a lot lower than we thought, and John talked about this in the call as you lead two, three calls ago. And so we believe we have a long journey in front of us to a much higher level of occupancy. And obviously, I'm not talking about optics. I'm talking about the current portfolio because remember, Nikhil continues to add a lot of under-occupied buildings. So we think we have a long journey in front of us. But we're just thinking about this year, right? We're giving you our best guess. Remember, it's a guess. And our business is a June to October type of business, right? It's a summer leasing system business. We'll go through summer, and we'll tell you what we see. But if we didn't feel good about the current face some activity, current phase of sort of future resident engagement, we would not have raised guidance in Q1 for both occupancy and rates, right? But that's what we see today. We'll see what tomorrow brings us.

Great, thanks. Shankh, just kind of wanted to hit on your comments that you wrapped up in the prepared remarks. You discussed this period of potentially higher inflation with cyclical pressure on economic growth as well as the potential for a negative impact on asset prices from the reliance on credit over the last few decades. I guess with many seniors utilizing savings and equity from their homes and retirement in that backdrop, how do you think senior housing performs based on what you outlined? Thanks.

That's a great question. I'll start and you can chime in as needed. We have a solid case study to reference. It's clear that a significant amount of senior wealth isn't in the equity market, but rather in fixed income or real estate assets. We don't believe housing prices will drop as drastically as they did during the global financial crisis. Even if we are mistaken and prices do fall, we saw during the financial crisis that the asset class held up relatively well, despite housing prices dropping by 50%. The future is inherently uncertain, which is an important point to acknowledge. We believe that success lies more in positioning rather than in making predictions. Given the current situation, we think that this asset class will perform better than all real estate and many other sectors. We'll see how things unfold. As shown by our history, in the event of disruption—which is not our primary expectation—we respond predictably. Our strong balance sheet supports this. If disruption occurs, it may put downward pressure on asset prices, especially for those with high leverage. Our approach is conservative and we are confident about our business over the next several decades. In fact, we would welcome disruption, although we don't anticipate it as our main scenario.

Hi, good morning. You kind of mentioned in the opening remarks that the pipeline is expanding given the capital markets dislocation. Can you kind of quantify the expansion and kind of what portion of that expansion would be of the type of assets that you would be interested in potentially acquiring?

Seth, we are not going to sit here and try to speculate on what our pipeline may or may not do. We do believe that when this kind of capital markets disruption happened, people who are absolutely looking for liquidity, whether that's equity driven or debt driven that Nikhil talked about. We'll need to access liquidity. If it is that their expectation is commensurate with today's reality of rates and spreads, we'll provide them that liquidity? And if not, we'll not. We are not in the business of doing deals. We're an operating company. We only add assets in our markets and in our micro markets where we feel we can build regional density. So if we can, we will do it. If not, we'll just sit here and wait.

I would like to emphasize that we previously discussed Welltower's execution pace compared to the typical market timeline for completing transactions, which ranges from 6 to 10 months. Reflect on the significant events that have occurred during this timeframe, including Federal rate cuts and the election. Consider the sellers who chose to partner with different entities; they lacked price certainty throughout this period. The macroeconomic shifts have led to a rollercoaster of experiences for them, including deal fatigue and numerous failed agreements. When deals fall through, we receive inquiries. We are currently evaluating numerous opportunities, but as Shankh pointed out, we are concentrating on areas where we have strong conviction in our target markets and where we already possess considerable scale.

Thank you. Good morning. It was a great quarter. Shankh, you mentioned having fewer operating partners that are more concentrated in their locations. I’m curious about how many operating partners you think is ideal for three to five years from now. Also, do you anticipate any challenges given the current business environment with operators in Canada and the UK? What factors come into play regarding your plans to reduce the number of operators in your portfolio? Thank you.

That's a very good question. It's a question that we reflect on in our shop all the time. So let's just take a step back and think about it. If you're looking for a numeric answer, I'll just say fewer. There is no question that we are focusing on regional density, focusing more and more concentrating on our existing partners who have performed really well. There is no question that every year we look at, obviously, a lot of new operating teams. We added one or two, and then obviously a lot of people also fall by the wayside. Generally speaking, I would say is there a pushback? Look, we're fair people. We're entirely focused on performance, we're entirely focused on the outlook of how some of our operating partners think about the future, right? This is all about the future. There are two types of operators, right? You think about what we call Gen 1 operators in our business, people who have been around our company, with George Chapman and others, and they're absolutely killing it. Tim Bacano would be a great example, right? Then there are operators that I grew up in this business with who are sort of, say, Gen 2 operators who have built the business as with us such as Matthew at Cogir or say Dan at Story Points, right? These are the operators that I grew up in the business with a tremendous amount of respect for what they do and how they do it. Frankly speaking, the outlook for the future. They want to get better every day, do new things, try things, fail fast, and move the business forward. Do we find new operating partners who share that view? Amica would be a very good example of that. Amica is an exceptionally good operator. We have founded Care UK in UK would be a great example of that, right? The exceptional team. But generally speaking, our view is as the business has grown, we want to reduce complexity by focusing on think about what we're trying to do. We're trying to deploy our business system across, grow with our operators. It is a moving target. We have not seen any pushback, obviously, from all these sort of UK and Canada. In fact, we see Canadian businesses are growing fabulously. We expect that both of those businesses will continue to grow significantly. But that's kind of what I have to say at this point in time. I always sort of think about in the current context of assets we have. Remember, our assets, Nikhil, is making our job harder every day by growing the asset base significantly. We'll see where these things land, but philosophically, we want to be with people who are right or wrong. We're not pointing out that we were right and somebody else is wrong. It's just that we're philosophically aligned with us on where we're trying to take the business. That's a very important point; we want to be with people who are shoulder to shoulder with us no matter what.

Hi, good morning, everyone. Just a couple of questions on senior housing. First, given that we are in a more uncertain macro environment, I was hoping to get a feel for how leading indicators for senior housing looked in April, such as maybe tour volume, leads, conversions into move-ins, how those are tracking versus a year ago? And then in terms of the guidance and the decision to raise the revenue guidance in senior housing clearly, you have some confidence in the business. But maybe just give us a feel about how, again, the macro environment might have impacted that guidance? And do you even build in some cushion there, preventing and, let's say, there would have been an even bigger raise in sort of a more clear economic environment? Thanks.

Let me try to start and Tim will really give an answer to your question. So you just think about it, I have very clearly stated, I think, last year that 90 days is a short enough time frame for a company of our size and scale to even comment on things, let alone talk about month-to-month what's happening, right? Clearly, we have walked away from all monthly sort of what's going on this month, this week. We really honestly are not focused on that. Having said that, Nick, the fundamental premise of your question is the right one. We know how April up to this point has progressed. Frankly speaking, if we didn't feel good about that data, we wouldn't have given you sort of in Q1; we would not have raised both occupancy and rate assumptions, which again, I want to make it abundantly clear, that's our guess, right? It's an educated guess, but it's a guess. We've not done it sitting at the end of April. We really like what we see, but we have no dilution of certainty. Remember, this business is a June to October type of business, right? It is a summer leasing system business. We'll go through summer and we'll tell you what we see. If we didn't feel good about the current phase of activity, the current phase of resident engagement, we would not have raised guidance in Q1 for both occupancy and rates. But that's what we see today. We'll see what tomorrow brings us.

Thank you. I wanted to discuss your perspective on the difference between RevPOR and ExpPOR. The current difference looks strong and is higher than historical averages. How do you see this trend developing in the future? Is it reasonable to think it might remain at this level, considering there is some sensitivity regarding push rates, or do the Welltower business system rollouts change that somewhat, allowing for potential further expansion?

I think we've been pretty clear. Our expectations are to grow margins over time. That definitely indicates that we continue to outgrow revenue beyond per unit expenses. So, yeah, we see a lot of run rate with that. I'm not going to repeat what Shankh said earlier, but the Welltower business system, what goes on there enables us to drive that margin for many years into the future.

Good morning. Hoping you could talk a little bit about the skilled nursing investments you made in the quarter; it looks like it was about $1.2 billion. Is that fee simple? Was the loan investments if you could talk about kind of the coverage there or just the portfolio of assets that was driving that? Thank you.

The skilled nursing business serves as a credit business for us. Sometimes that comes in the form of a debt investment, while sometimes it comes in the form of a triple net lease investment, but they're both underwritten from a credit investment perspective. The large transaction this quarter had a lot of things that we're really excited about. The first thing is it was a broken transaction; there was some softness in the market. Welltower was able to come in with a dual-path solution. One was we brought an operator to the table that the deal was lacking; the other was obviously a certainty to close. So the first thing is we leveraged the fact that it was a broken deal to get a favorable price adjustment to the tune of a couple of hundred million dollars in our favor. The operator that we brought in is an operator, we have an existing book of business like Aspire that has done an incredibly good job for us. We bought a turnaround portfolio towards the end of '23, and their performance in just a matter of five, or six quarters has been quite incredible. It took a portfolio that was on an EBITDAR basis losing around $15 million and improved cash flow so significantly that today that EBITDAR is north of $90 million. Given the scaled portfolio, just given the dollars we're talking about here, we have an operator with a proven track record of improving performance pretty substantially. In this case, unlike the Florida case, you have significant in-place cash flow that covers on day one. On top of that, there are additional credit enhancements in terms of guarantees, and there's north of $0.5 billion worth of net worth in assets outside of skilled, making that sit behind this transaction to support it. You have quality assets, checks; quality operator checks; in-place cash flow with room to the upside checks; and additional credit protection checks, right? You found a great transaction that was broken. All investments are within your question, and that is in the bucket that we had in the quarter on once we put, no loans.

Hey, good morning, everyone. You talked about your outlook for development in Canada. And once you close Amica, do you envision any starts next year?

Yes. As I mentioned in the prepared remarks, there are nine development parcels that we're acquiring as part of the transaction. These have had extended multi-year entitlement processes. Now some of those will be expansions, while others are de novo projects. As you can imagine, expansions are easier to pencil as the operating cost load that you will add to the incremental units is, in most cases, minimal or just a fraction of what you would have for a de novo project. Those projects continue to make a lot of sense and will develop. A handful of the de novo projects are in the highest quality, highest rent markets, and those we'll evaluate. Once the dust settles a bit on tariffs and cost certainty, we'll see if it makes sense to start them today or in the future, but just given that there are a bunch of expansion projects, we certainly expect to see some starts next year.

Good morning. Thanks for the time. What percentage of the properties as Welltower's operating platform has been rolled out to? And have you received any pushback from operators that has maybe delayed the rollout?

Starting with the pushback. The answer is no. We work with our operators, listen to them. They have great feedback. As Shankh said, it's shoulder to shoulder. We iterate with them on how to move forward with the platform. As far as for the percentage, I don't give out the details. When I talk about the platform, there's broad look at the platform. We're really working with all the different operators with different aspects of our platform. So I'm not going to give much more detail than that. But the reception has been fantastic and appreciative and at this point, quite successful.

Emily, I'll just add. Mike asked this question on the last call; I think, John, you said that the whole rollout will be a two to three year process. So you derive any conclusion that you want from this percent as percent, but real businesses are not driven from Excel spreadsheets. We’ll see where we get to.

Yeah, hi. The same-store show portfolio, it looks like it's about 88% occupied, but what portion of it is stabilized or close to it? And how has RevPOR growth in those assets compared to the 6% average?

I mentioned, Mike, in my prepared remarks that the 90%-plus occupied part of the portfolio, which is a SIM, was like 40% to 50%, about 50%. That has grown RevPOR by 7% plus. The other end of that, I believe, Tim said last quarter, it's like roughly a quarter of the portfolio wherever is lucky flat. I think it was up 1% or 2%, something like that. It's just sort of you think about the gradient of that; everything is in between, right? It's simple demand and supply of how many units you need to sell versus if you fold.