Core Viewpoint - The senior housing sector is poised for growth as the aging baby boomer population increases demand for housing options, leading to potential dividend growth for investors in this space [1][2]. Company Summary - Welltower, a leading real estate investment trust (REIT) in senior housing, benefits from a wealthy baby boomer demographic that can afford private pay options, reducing reliance on government assistance [2]. - Welltower has experienced significant growth in profits, with net operating income from its senior housing segment increasing by 23.4% year over year in the second quarter [4]. - The funds from operations (FFO) for Welltower are projected to be between $5.06 and $5.14 per share, indicating an 18% gain for the year [4]. - The company raised its dividend payout by 10.5% earlier this year to an annualized $2.96 per share, with expectations for further increases as FFO is anticipated to reach $5.10 per share by 2025 [5]. Industry Summary - The senior housing market is expected to grow steadily as the population ages, with a significant portion of revenue coming from private pay sources rather than government programs [2][4]. - The aging baby boomer generation, all of whom will be over 65 by 2030, represents a substantial market opportunity for senior housing investments [1].

Financial Data and Key Metrics Changes - The second quarter adjusted funds from operations (AFFO) were $0.77 per share, and funds available for distribution (FAD) were $0.74 per share, reflecting strong revenue and EBITDA growth primarily driven by acquisitions and active portfolio management [6][10][11] - Revenue for the second quarter was $283 million, up from $253 million in the previous year, attributed to new investments, operator restructurings, and annual escalators [10][11] - Net income for the second quarter was $140 million or $0.46 per share, compared to $117 million or $0.45 per share for the previous year [10] - NAREIT FFO for the second quarter was $213 million or $0.70 per share, compared to $189 million or $0.72 per share for the previous year [11] - The company raised and narrowed its 2025 AFFO guidance to a range of $3.40 to $3.70 per share [6][14] Business Line Data and Key Metrics Changes - The senior housing portfolio has grown to 396 facilities, representing 38% of the total operating facility portfolio [8] - The trailing twelve-month operator EBITDAR coverage for the core portfolio remained flat at 1.51 times, indicating operators' ability to cover rent [22] - Genesis filed for Chapter 11 bankruptcy, but Omega expects to receive full monthly contractual rent during this period [8][24] Market Data and Key Metrics Changes - The company has over $2 billion in liquidity with low leverage, positioning it well for growth in both senior housing and skilled nursing portfolios [9] - The UK market continues to be a significant driver of new investment activity, accounting for approximately $392 million or 65% of total new investments [29][30] Company Strategy and Development Direction - The company is focused on active portfolio management, seeking to divest underperforming facilities and source operators better suited for certain facilities [77] - Omega is exploring various investment structures to create incremental value and align interests with operators [77][94] - The company is optimistic about the long-term growth potential in both skilled nursing and senior housing sectors, supported by demographic trends [33][77] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to weather potential challenges from Medicaid funding cuts due to strong fundamentals and lobbying efforts [33][35] - The company anticipates continued improvements in coverage metrics based on preliminary results from April and May [66] Other Important Information - The company has entered into derivative instruments to mitigate foreign currency fluctuations on income from UK investments [18] - The One Big Beautiful Bill Act (OBBBA) signed into law is seen as a positive development for the industry, particularly for skilled nursing [32] Q&A Session Summary Question: Details on the investment pipeline and yields - The investment pipeline remains strong with yields around 10% across various asset classes [38] Question: Expected rent trajectory for Maplewood - Maplewood's rent is expected to increase as occupancy grows and operational efficiencies are realized [41][43] Question: Changes in balance sheet strategy - The company opted for debt issuance instead of equity to fund upcoming bond maturities, maintaining a leverage-neutral position [46][47] Question: Confidence in Genesis assets during bankruptcy - The master lease structure prevents Genesis from selectively rejecting assets, ensuring stability in rent payments [84][85] Question: Dividend increase considerations - The board is considering a dividend increase once the payout ratio is in the 80% range [82] Question: Labor market conditions - Operators are experiencing normal inflationary wage increases, with CNAs being the most challenging positions to fill [71][72]

Financial Data and Key Metrics Changes - For Q1 2025, normalized FFO per share was $0.35 and normalized AFFO per share was $0.37, compared to $0.34 and $0.35 in Q1 2024, representing a year-over-year increase of 79% for both metrics [14][15] - Cash rental income from the triple net portfolio totaled $90 million, up from $89 million in Q1 2024, despite the disposal of $115 million of real estate from the portfolio last year [15] - Cash NOI from the managed senior housing portfolio totaled $24.1 million, compared to $19.1 million in Q1 2024, driven by strong occupancy and margin gains [15][12] Business Line Data and Key Metrics Changes - Skilled nursing and triple net senior housing EBITDARM rent coverage reached new highs at 2.19 and 1.41, respectively, with behavioral health coverage at 3.77 [5] - Skilled occupancy increased by 80 basis points sequentially, while triple net senior housing occupancy rose by 50 basis points [6] - Revenue for the same store managed senior housing portfolio grew 6.3% year-over-year, with occupancy at 85.4% compared to 82.6% in Q1 2024 [11] Market Data and Key Metrics Changes - The domestic portfolio occupancy was 83%, gaining 340 basis points year-over-year, while the Canadian portfolio occupancy was 90.9%, adding 140 basis points [11] - RevPAR in the same store portfolio increased by 2.8% year-over-year, with Canadian RevPAR growing by 4.9% [11] - The company noted a robust deal pipeline, with over $200 million in awarded deals, which is more than the total for all of 2024 [7][8] Company Strategy and Development Direction - The company is focusing on internal and external growth opportunities in senior housing, with little new supply expected in the coming years [10] - Management emphasized a commitment to maintaining a balanced portfolio between senior housing and skilled nursing, avoiding large portfolio acquisitions to keep operations predictable [78] - The company is actively using its ATM program to raise equity for funding growth, with a focus on accretive capital [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued occupancy growth and potential Medicaid rate increases in the summer, which could enhance coverage [86] - The company is cautious about the skilled nursing facility (SNF) market due to challenges in structuring leases around underperforming assets [66][68] - Management believes that the current operating environment will allow for improved coverage and revenue growth, despite potential headwinds from provider taxes [85] Other Important Information - The Board of Directors declared a quarterly dividend of $0.30 per share, representing a payout of 81% of the first quarter normalized AFFO per share [19] - The company has ample liquidity of over $1 billion, consisting of unrestricted cash and available borrowings [18] Q&A Session Summary Question: Update on skilled nursing facility sale - Management confirmed that the expected $50 million skilled nursing facility sale is still on track, though regulatory hurdles have delayed the process [21] Question: Trajectory of RevPOR and expense growth - Management expects occupancy to rise, which will allow for increased pricing power, while expenses are anticipated to remain stable [22][23] Question: Guidance on acquisitions and SHOP performance - Management reiterated that acquisitions are not included in current guidance until closed, and reaffirmed expectations for low to mid-teens cash NOI growth [27][28] Question: Insights on transaction market and deal flow - Management noted a robust pipeline of deals, primarily in senior housing, with private equity firms as frequent sellers [31][33] Question: Details on $200 million of awarded deals - All awarded deals are domestic, primarily in the Eastern U.S., with growth potential embedded in the assets [40][41] Question: Changes in underwriting criteria - Management stated that underwriting criteria remain unchanged, focusing on cost of capital and accretive deals [60] Question: Concerns regarding SNF acquisitions - Management highlighted challenges in acquiring SNFs due to financial instability and the difficulty in structuring leases [66][68] Question: Expectations for SHOP occupancy cadence - Management anticipates an increase in occupancy as seasonal factors improve, particularly in Canadian assets [70] Question: Interest in large portfolio acquisitions - Management confirmed a commitment to smaller, more manageable deals to maintain operational simplicity and predictability [78] Question: Medicare reimbursement impacts - Management expressed confidence that Medicare will not be significantly impacted by current government budget discussions [97]