Welltower(WELL)2024-07-30 17:27Financial Data and Key Metrics - The company reported a 17% year-over-year increase in normalized FFO per share, or over 19% adjusted for prior year subsidies [45] - Same-store NOI growth for the Senior Housing portfolio was 21.7%, marking the 7th consecutive quarter of over 20% growth [37][62] - RevPOR (unit revenue growth) came in at 5.3%, while ExpPOR (unit expense growth) was up just 1%, a near record low for the company [37] - The company updated its full-year 2024 outlook for net income attributable to common stockholders to $1.52 to $1.60 per diluted share and normalized FFO of $4.13 to $4.21 per diluted share [29] Business Line Data and Key Metrics - The development pipeline is 75% Senior Housing and 25% Outpatient Medical, with a focus on Wellness Housing, which is age-restricted or age-targeted product [9] - The Outpatient Medical business reported 2.1% year-over-year same-store growth, with a retention rate of 93% and occupancy stable at 94.3% [61] - The Senior Housing portfolio posted same-store revenue growth of 8.6%, with same-store occupancy increasing 280 basis points [63] Market Data and Key Metrics - The company closed or contracted $5 billion of transactions year-to-date, primarily in the Senior Housing space in the U.S. and UK [42][70] - The company has seen inbound inquiries from Asian and continental European investors looking to acquire senior housing assets [86] - The second quarter construction starts were negligible, falling well below trough levels seen during the GFC, due to challenges in securing construction financing [40] Company Strategy and Industry Competition - The company focuses on building regional density and growing with its operating platforms, making strategic, deliberate decisions on acquisitions [23] - The company is transitioning 89 Holiday by Atria assets to six of its strongest operating partners, expecting over $70 million of additional NOI upside [58] - The company is converting 47 triple-net leased properties to RIDEA structure, allowing direct participation in the growth of these properties [59] Management Commentary on Operating Environment and Future Prospects - The company is optimistic about the future prospects of the Senior Housing business, citing strong end-market demand as baby boomers enter their eighties [39] - The company believes it is in the early innings of an exceptional multiyear growth for the industry, driven by demographic shifts and challenges in new construction [99] - The company is focused on driving the delta between RevPOR and ExpPOR substantially higher as part of its platform initiatives [52] Other Important Information - The company recast and upsized its revolving credit facility to $5 billion, bringing near-term liquidity to nearly $9 billion [49] - The company's balance sheet leverage has declined to 3.68 times, a record low, with Moody's and S&P revising the credit rating outlook to positive [44] - The company is leveraging technology to improve the overall resident experience and enable employees to focus more on residents [69] Q&A Session Summary Question: Investment environment and acquisition opportunities - The company sees motivated counterparties looking to solve debt problems and is happy to help, focusing on basis and staying power rather than just availability of debt [3][6] Question: Development pipeline and mix between Senior Housing and Outpatient Medical - The development pipeline is predominantly Wellness Housing, with barely any traditional Senior Housing in the U.S., as the company has not been able to make Seniors Housing developments spend [9] Question: Long-term growth potential of Senior Housing - The company believes that the last mile of occupancy is harder than the first mile, with operational leverage increasing as occupancy goes up [15][16] Question: Focus on lower acuity customers and RevPOR, ExpPOR spread - The company is focusing on lower acuity assisted living residents, which consume fewer resources and tend to stay longer, leading to higher NOI [65] Question: Senior Housing guidance and occupancy growth - The company is confident in achieving its NOI growth guidance, despite some near-term disruption from renovations, and expects occupancy growth to augment 2025 growth [117] Question: Operating margin and path to pre-pandemic highs - The company needs higher occupancy to achieve pre-pandemic margins and is excited about occupancy growth this year and next [159] Question: Timeline to stabilize Wellness Housing developments - The company expects stabilization to take about 12 to 18 months, with falling lumber prices helping but overall development costs still higher than a couple of years ago [120][161] Question: Balance sheet and future growth - The company has significant capacity to tap into its balance sheet to drive partial growth, with organic deleveraging and free cash flow generation picking up [137] Question: Foreign counterparties and seniors housing exposure - Foreign counterparties are looking to exit due to debt pressure, similar to domestic counterparties, and the company is looking to do simple asset acquisitions [28] Question: Platform investments and growth contributions in 2025 - The company is pleased with occupancy growth and expects platform initiatives to enhance growth in 2025 [154] Question: Organic growth profile of Wellness Housing - The Wellness Housing segment has compounded at 8% to 10% since 2018, with highly occupied communities [142] Question: Distressed housing opportunities - The company is not designed to buy distressed assets but to invest capital and build regional density, making decisions on one asset at a time [150]