Welltower Inc. (WELL) 2024 Q2 Earnings Call Summary

Optimistic Highlights

Significant Bottom Line Growth: Welltower reported a 17% year-over-year increase in normalized FFO per share, or over 19% adjusted for prior year subsidies, led by the Senior Housing portfolio.
Acquisition Activity: Announced another $1 billion of acquisitions under contract since the last update, bringing the year-to-date acquisition activity to approximately $5 billion.
Senior Housing Portfolio Performance: The SHO portfolio posted same-store NOI growth in excess of 20% for the 7th consecutive quarter, fueled by strong revenue growth and moderating expenses.
Balance Sheet Strength: Balance sheet leverage declined to 3.68 times, a record low for the company, with Moody's and S&P revising the credit rating outlook to positive.
Investment Activity: Closed or under contract transactions totaled $4.9 billion year-to-date, with a robust pipeline for future transactions.

Short-term Disruption from Renovations: Approximately 2000 separate projects with 17 different operators at over 150 sites are expected to cause some near-term disruption but are anticipated to contribute to growth in 2025 and beyond.

Positive Outlook for Senior Housing: Welltower remains optimistic about the future prospects of the Senior Housing business, driven by demographic trends, low new supply, and strategic initiatives to enhance long-term growth.
Guidance Update: Raised full-year FFO per share guidance, reflecting confidence in continuing to capitalize on growth opportunities in Senior Housing.
Macro Observations: Management discussed potential macroeconomic headwinds and tailwinds, emphasizing the company's strategy and platform as resilient across different environments.

Q: Can you discuss the future cash flow upside from recent triple-net to RIDEA transitions? (Jonathan Hughes, Raymond James)
A: We are focused on growing with operators that are exceptionally good in their region. There remains portfolios in our triple-net that fits that bucket and over time, you can expect us to continue to work through that and convert into RIDEA. (Shankh Mitra)
Q: Could you elaborate on the next phase of growth, both internal and external? (Vikram Malhotra, Mizuho)
A: The acquisitions we're doing have substantial occupancy upside. We're total return investors focused on basis and staying power. We're in the very early innings of this growth cycle. (Shankh Mitra)
Q: How do you plan to lean into the balance sheet as a driver of future growth? (Joshua Dennerlein, Bank of America)
A: The key point for us is there is no plan to lean into it. It just represents optionality. The business model doesn't need to change in any macro backdrop. (Timothy McHugh)
Q: What is the timeline to stabilize your Wellness Housing developments, and how much does falling lumber impact the development costs? (Wesley Golladay, Baird)
A: It's about 12 to 18 months to stabilize these developments. While falling lumber has helped, overall construction cost is still higher than it was a couple of years ago. (Nikhil Chaudhri)