Welltower Q1 2025 Earnings Report

Welltower EPS Results

• Actual EPS: $1.20
• Consensus EPS: $1.15
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $1.01

Welltower Revenue Results

• Actual Revenue: $2.42 billion
• Expected Revenue: $2.40 billion
• Beat/Miss: Beat by +$28.06 million
• YoY Revenue Growth: +30.30%

Welltower Announcement Details

• Quarter: Q1 2025
• Date: 4/28/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 9:00AM ET

Welltower (NYSE:WELL) (NYSE:WELL), a real estate investment trust ("REIT") and S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. Welltower invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people's wellness and overall health care experience. Welltower owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties.

Welltower Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Thank you for standing by. My name is Kaylyn. I will be your conference operator today. At this time, I would like to welcome everyone to the Welltower First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise.

[Operator]

After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Matt McQueen, Chief Legal Officer and General Counsel. You may begin.

[Matthew McQueen, Chief Legal Officer and General Counsel at Welltower]

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 obtained. 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 Sean for his remarks.

[Shankh Mitra, CEO at Welltower]

Thank you, Matt, and good morning, everyone. I'll review business trends and our capital allocation priorities, and the team 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 into an 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.

[Shankh Mitra, CEO at Welltower]

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 WorldTower'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 a credit rating by both S and P and Moody's to A minus and A three respectively. I'm humbled by this unwavering dedication of our team in achieving these major milestones. Turning to fundamentals. Seniors Housing operating business remains strong.

[Shankh Mitra, CEO at Welltower]

There is no diminution of the momentum, which we carried into the year as reflected by our tenth 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 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 six of our business update to reflect on what kind of seasonal outlier Q1 was. The business also maintained strong pricing power with growth in RevPAR or unit revenue of nearly 6%, with 90% occupancy cohort experiencing seven plus percent growth.

[Shankh Mitra, CEO at Welltower]

Excluding the impact of leap year, RevPAR growth was still strong at 5.1% and export or unit expense would have been 1.3% and same store revenue growth of 9.9. With the spread between RevPAR and export remaining at the historically wide level, we achieved another period of outsized margin expansion of nearly 300 basis points year over year with a significant runway of further growth, which John will touch on shortly. As we look ahead, the demand supply backdrop for senior living sector continues to strengthen, setting us up for a multiyear period of attractive growth. And we continue to augment that growth by taking market share with our best in class operating partners and bolt on business system execution. Nonetheless, we're acutely aware of the rise in macroeconomic uncertainty, particularly as we approach the summer leasing season.

[Shankh Mitra, CEO at Welltower]

We're encouraged by the strong trends we have observed thus far in the year, but also need to see what 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 transaction environment. As we have discussed in recent quarters, the opportunity set for compelling investments has grown meaningfully, and our recent activity clearly reflects that momentum.

[Shankh Mitra, CEO at Welltower]

In mid February, we announced $2,000,000,000 of pro rata acquisitions. In March, we announced the CAD 4,600,000,000.0 acquisition of Amica Senior Living. Today, we're pleased to announce another $1,000,000,000 of additional acquisition, bringing our total pro rata acquisition activity to roughly CAD 6,200,000,000.0 for the year. To put this into perspective, we have closed $6,000,000,000 of investments in all of 2024. As we reached the April, we have already invested more of our precious capital this year than in any previous years in the company's history.

[Shankh Mitra, CEO at Welltower]

However, as you know, our focus is not volume of investment, but the value they deliver. Transactions that we completed this quarter were secured at significant discount to replacement cost and are expected to meaningfully enhance our growth in coming years. This includes 38 community AMECA portfolio, 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, Jens 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.

[Shankh Mitra, CEO at Welltower]

If you want to look at another example of what great management does to thriving communities, please look at another Canadian example. In fourth quarter of twenty twenty three, we bought the Jazz portfolio for CAD885 million. While the portfolio was highly occupied at the time of acquisition, in last eighteen months, Matthew, Frederic and the team has taken the portfolio to 97% occupancy and 47% margin, well exceeding our high expectations. Another great example of similar win win success story is taking place in The U. S, our partnership with Timber Cannon and Legend.

[Shankh Mitra, CEO at Welltower]

Through our idea conversions, 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 2.5x and also received non linear benefit 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 was recognized by S and P and Moody's through an upgrade of our credit rating. And 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.

[Shankh Mitra, CEO at Welltower]

Additionally, with nearly $9,000,000,000 of balance sheet liquidity, we are not only in position to endure any further capital market volatility, but also to deploy capital as opportunities arise. All in all, we're pleased with our execution so far in the year, but we have a long and busy year in front of us. With that, I'll pass it over to John. John?

[John Burkart, Executive VP & COO at Welltower]

Thank you, and good morning, everyone. As Shankh mentioned, the momentum that continued to build through the fourth quarter of twenty twenty four 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 remained steady posting 2.7% year over year same store NOI growth. Same store occupancy trended higher on both the year over year and sequential basis coming in at 94.5%, while tenant retention also remains healthy at over 94%.

[John Burkart, Executive VP & COO at Welltower]

Now shifting to the senior housing operating portfolio. We continue to be pleased with our performance with Q1 marking the tenth 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.

[John Burkart, Executive VP & COO at Welltower]

During the quarter, year over year same store revenue growth of 9.6% was clearly the highlight driven by 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 widening of our moat through Welltower Business System position us well for substantial margin expansion well into the future.

[John Burkart, Executive VP & COO at Welltower]

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 in 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 we'll 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.

[John Burkart, Executive VP & COO at Welltower]

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.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

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.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

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 $2,660,000,000 of new investments in the first quarter. On our last call in February, we had previously announced $2,000,000,000 of year to date activity. And since then, in the last two and a half months, we have expanded our investment activity by 4,200,000,000.0 bringing our total year to date balance sheet investment activity to $6,200,000,000 This additional activity is comprised of the USD 3,200,000,000.0 acquisition of Amica Senior Lifestyles announced last month and an additional $1,000,000,000 plus of new granular activity.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

Of this additional $1,000,000,000 6 60 million dollars 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, and incredibly excited to announce our partnership with one of the strongest seniors housing operators in Canada. Alongside Cozier, 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 that is comprised of 38 locations in Vancouver, Victoria, and the Greater Toronto area, boasts home values of 2 to $4,000,000 within the immediate vicinity of the communities, or three to four times the average home values in those respective provinces.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

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 4,600,000,000.0 Canadian dollars 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 nineties. These assets have sustained occupancy at these levels for a long period of time and both margins in the low to mid forties.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

Given their strong reputation, these assets have demonstrated CAGR rep for 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 eighteen 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 well tower bearing any construction and cost related risk. These projects are expected to be completed between 2025 and 2027.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

The final real estate component includes nine development parcels, which have gone through elongated multiyear entitlement processes. These parcels comprise of expansion opportunities for existing AMCA 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 CAD $560,000,000 of CMHC debt priced attractively at 3.6% and an approximately one third ownership of the Amica management company along with an Align Dry DF five point o contract. The non development components of the transaction are underwritten to generate 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.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

Our activity was comprised of 26 different transactions with a median size of 55,000,000. I want to let this sink in. 26 different transactions in thirteen weeks or on average two transactions a week. We acquired 88 properties comprising nearly 10,000 units across all three countries and asset classes that we invested. Just within The US, we invested capital across 23 states in the first quarter.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

With team members sitting across just three offices in The US and one office each in The UK and Canada, we're 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 10 plus million micro markets in The US, allowing us to attain a level of scale which 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 get the air just right. This setup enables us 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.

[Tim Mchugh, Chief Financial Officer at Welltower]

Thank you, Nikhil. My comments today will focus on our first quarter twenty twenty five results, performance of our triple net investment segments, our capital activity, our balance sheet and 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 $1.2 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.

[Tim Mchugh, Chief Financial Officer at Welltower]

As a reminder, our triple net lease portfolio coverage stats reported a quarter in arrears. So these statistics reflect the trailing twelve months ending twelvethirty onetwenty twenty four. In our seniors housing triple net portfolio, same store NOI increased 5.1% year over year and trailing twelve month EBITDAR coverage increased to 1.16 times. Coverage in this portfolio continues to strengthen, now well exceeding pre pandemic levels, as fundamentals align 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 twelve month EBITDAR coverage is 1.56 times.

[Tim Mchugh, Chief Financial Officer at Welltower]

Moving on to capital activity. During the quarter, we funded $2,300,000,000 of net investment activity with equity and retained cash flow. We issued $2,200,000,000 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 $3,600,000,000 of cash and lower leverage than we had at year end. As Shankh mentioned, we ended the quarter with 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 $4,200,000,000 to our planned 2025 acquisition activity since our initial balance sheet guidance was provided in February.

[Tim Mchugh, Chief Financial Officer at Welltower]

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 and 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 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.

[Tim Mchugh, Chief Financial Officer at Welltower]

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 $6,200,000,000 that has been closed or publicly announced to date. And as a reminder, there is 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 $1.7 to $1.84 per diluted share and normalized FFO of $4.9 to $5.04 per diluted share or $4.97 at the midpoint.

[Tim Mchugh, Chief Financial Officer at Welltower]

Our normalized FFO guidance represents a $0.10 increase at the midpoint from our prior normalized FFO range. This increase is composed of $02 increase from higher NOI in our senior housing operating portfolio, dollars $0.07 increase from accretive capital allocation activity, zero two increase from FX and income taxes offset by $01 from higher expected G and 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 five percent and three fifty basis points respectively and expense growth of 5.25.

[Tim Mchugh, Chief Financial Officer at Welltower]

And with that, I will hand the call back over to Shankh.

[Shankh Mitra, CEO at Welltower]

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 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 rate, a stark contrast to the market conditions over the past forty years. As a result of that shift, the tailwind which have lifted asset prices, including that of real estate, for the past few decades are not just subsiding, but also may well very well turn into a headwind.

[Shankh Mitra, CEO at Welltower]

Additionally, the current macro uncertainty may introduce another layer of complexity in the near term. Cyclical pressure on economic growth unfolding against the backdrop of elevated rates and persistent inflation that you can observe in the 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 based financing markets warrant cautions as it relates to asset prices going forward. Said in another way, in our world of real estate, we expect higher rates along with wider debt spreads will put downward pressure on asset prices.

[Shankh Mitra, CEO at Welltower]

On our recent calls, 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 capitals are reducing their exposure to private assets, including private real estate. This phenomenon has potential to exacerbate the negative credit driven impact of asset prices, which I just described. We at Welltower are focused on risk, reward, and duration when deploying capital, and we perceive a high level of risk than we did ninety days ago. While we hope that these clouds will pass, we do not believe hope is a strategy.

[Shankh Mitra, CEO at Welltower]

We believe capital allocation is all about positioning, not predicting. And 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 owners' 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 levered 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. And with that, I will open the call for questions.

[Operator]

Our first question comes from the line of Vikram Malhotra with Mizuho. Your line is open.

[Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.]

Good morning. Thanks for taking the question and 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 business system overlay now, you know, I think it's been two years.

[Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.]

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.

[Shankh Mitra, CEO at Welltower]

Thank you, Vikram. So the margin expansion possibilities that we have talked about, Vikram, which is not unique to our asset class, it's just that we're the last ones. And from an asset class standpoint, you could observe in multi families in the nineties and February and self storage industry, single family rentals and so on and so forth. And that's true institutionalization of these asset classes. And we're sort of the last one going through this, our asset classes going through this.

[Shankh Mitra, CEO at Welltower]

I'll tell you whether whether we're successful in this journey or not, and how far we're successful will matter both on our side on Walter Business System execution, as well as our best in class operating, you know, operators who'll who are doing this, obviously, this execution on a day to day basis and a hand to hand combat, frankly. It's a complex business. It's not an easy business to pull off. But we are with our operating partners shoulder to shoulder no matter what. But if you just think about reflecting a little bit on what what what our business system is or what is designed to be, it is a complex adaptive system that aims to balance chaos and order and can self organize based on dynamic feedback loop and adapt to changing conditions.

[Shankh Mitra, CEO at Welltower]

That's what we are focused on. Right? So if you think about just sort of what I mentioned that we're not you know, we're relied on our operating partners who have great talent pool in these companies, and we're augmenting that talent pool with our talent pool with coming in to solve their problems, customers' problem, employee pain points, etcetera. So ultimately, the goal of Walter Business System is to bring system level thinking to remove bottlenecks, streamline flow, and minimize friction in all human interactions that you see in these communities, which is, you know, family to residents and obviously our caregivers and our, employees. And it's sort of in a round robin manner.

[Shankh Mitra, CEO at Welltower]

Right? So that's sort of what we are focused on to streamline that flow and minimize that friction in all those human interactions and focus solely in areas where scalability creates a strategic advantage, while relying on our operating partner to solve the unremovable complexities that are inherent in our business. So what do we mean by that? So we are focused on providing Walter Business System to offer site level employees that, you know, John mentioned, obviously, his early college days of Costco experience last call. Walter Business System to provide site level employees with real time actionable business insights, and free up valuable time to provide a real human touch to our residents.

[Shankh Mitra, CEO at Welltower]

And if we think we can do this, we have a long runway of margin expansion in our business.

[Operator]

And your next question comes from the line of John Kieliczewski with Wells Fargo. Your line is open.

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

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?

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

And then also maybe giving some color around what percentage of your pipeline you believe this proprietary technology is directly responsible for?

[Shankh Mitra, CEO at Welltower]

Yes. So I'm not gonna walk you through. I wrote in a very detailed format of how jail market sort of structure works in a a marketed transaction. But if you go back and read it, you will see the path is sort of a real estate is a very glacially moving slow business. Right?

[Shankh Mitra, CEO at Welltower]

So if you just think about what the whole process looks like, John, when you say you are a seller, you are looking to sell something, you hire a broker, you go through all this to ultimately, you close the deal. That whole process takes about five to ten months depending on whether the, you know, the counterparty needs financing or not financing and all of those kind of things. Right? So if you just think about, you know, in our business, let's just say that focus on just our business, market participants in our business, not most, all of them are focused on sort of Nick 99 or that kind of information, which is sort of, you know, that's not great level of information, but that's kind of what you have. Level of information that sort of MSA level information, and then sort of that whole process rolls out.

[Shankh Mitra, CEO at Welltower]

For us, as Nikhil mentioned, you know, our proprietary platform analyzes 10 plus million micro markets nationwide, leveraging a unique and nonreplicable dataset accumulated over a hundred plus senior housing operators over twenty years. Right? So this granular machine learning approach, powered by long time series of data across diverse properties and operators, enables us to take a neighborhood level view of any asset and provide initial interest, within our team within a few minutes. And it determines a narrow range of predicted performance within a day. It used to be two to three days.

[Shankh Mitra, CEO at Welltower]

We have brought it down, with significant more compute power within a day, allowing us to provide initial, you know, sort of preliminary pricing feedback within a week that we can live with. Subsequently, to the assets and have a handshake on definitive terms within two weeks that we can again, we can stand by. Remember, at Worlds Out, we have nowhere walked away from a handshake. Right? So it's not just a question, oh, we'll look at our broker proforma and give people or throw people a number.

[Shankh Mitra, CEO at Welltower]

That's how real estate industries work. Right? So ultimately, close that deal in forty five to sixty days. So just think about that velocity to market makes us the first call to more sellers. Because frankly speaking, and obviously our reputation that we never walk away from a handshake, has fundamentally upended the status quo in this business, the real estate industry, which hasn't changed in decades.

[Shankh Mitra, CEO at Welltower]

Right? Because if you're a seller, what do you have to lose? If you don't like your answer within a week, you go go do that process anyway. Right? That we described that will take you five to ten months.

[Shankh Mitra, CEO at Welltower]

So think about so what are we trying to do? We're trying to bring down latency that is inherent in a glacially moving industry in a significant way. And latency is a very important concept when you study network effect. In most industries that move in that glacial phase, no different in our industry, as I said, in real estate. And that is a very, very thing that we're trying to disrupt by reducing latency in our system by completely turning the velocity to market in its head.

[Shankh Mitra, CEO at Welltower]

And as latency shrinks, materially as we talked about just talked about, the network effect kicks into high gear, creating a new paradigm of maximum growth, maximum gain that simply doesn't occur in businesses and industries that moves at a glacial pace. Right? So that's how it works. If you think about the journey of our journey of, you know, what we have been able to achieve, and you wanna point out to one thing, as Tim mentioned, you can't point out to one thing. This is a long decade long journey of transforming this industry and the transforming the business.

[Shankh Mitra, CEO at Welltower]

But if you want to point out one thing that will be reducing that latency. Right? That's how you sort of go into a paradigm of maximum growth, maximum gain, and that sort of create another level of, you know, network effect that kicks into the high gear.

[Operator]

And your next question comes from the line of Farrell Grunoff with Bank of America. Your line is open.

[Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch]

Hi. Good morning. Thanks for taking the question.

[Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch]

I was curious, just given your current size, how can you frame how you continue to think about of sustained growth going forward?

[Shankh Mitra, CEO at Welltower]

Farrell, that's a really, really good question. If World Tower was a spread investing vehicle that that is relied on financial engineering, I would say growth at some point should be a problem. Size and the growth should be somewhat inversely correlated at some point. And I don't know what that is, frankly speaking, and you can see different industries and come to different conclusions. However, if we can see, as I've mentioned before, we have changed this company, which frankly was that what exactly you are describing, it was a real estate deal shop, which was reliant you know, capital markets and, frankly speaking, cost of capital.

[Shankh Mitra, CEO at Welltower]

We have it was a decade long effort for us to change this company into a operating company in a real estate wrapper. So if you just think about as an operating company, the opposite trend actually happens due to network effect that I was just talking about to John's question earlier. As we have grown, just think about that for a second. Right? We capture more and more data, and two of our key competitive advantage, our data science platform and Walter Business System, continues to strengthen, further expanding our mode and driving a wider performance gap between ourselves and our competitors.

[Shankh Mitra, CEO at Welltower]

So you think about that what you are describing, which happens in some of these of levered beta spread investing vehicles, you will see as they get bigger, their performance spread to market actually shrinks. If you go back and see that we had our Investor Day in 2018, and there, in that Investor Day, I talked about this topic. And I said that despite our outperformance to our competitors, up to leading up to that point, that will widen. And if you just see what happened since then, it has widened. Our market our performance to market has widened.

[Shankh Mitra, CEO at Welltower]

And that happened because we had transformed this company from a real estate deal shop to an operating company and a real estate wrapper. And and, you know, I would like to tell you that's unique. It's not. If you just look at all operating companies, you will see they have achieved success because of their success. Look at Home Depot.

[Shankh Mitra, CEO at Welltower]

Look at Costco. Look at Amazon. Not in spite of their success. And that's because of the network effect, and that's because of the impact these companies have and the data capture and everything else I talked about to John's question earlier, where your size becomes positive to your growth, not negative. But it's an extraordinarily important question.

[Shankh Mitra, CEO at Welltower]

Thank you.

[Operator]

And your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open. We'll go ahead and go to our next question with Jonathan Hughes with Raymond James Financial Inc. Your line is open.

[Jonathan Hughes, Managing Director at Raymond James Financial]

Hi, good morning. Thank you for the prepared remarks and commentary. Tim, you reiterated the 3.5 turn leverage target by year end, that's up from 3.3 today. So implying the levering 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 you know, the right capital structure or or target capital structure on a longer term or normalized basis?

[Jonathan Hughes, Managing Director at Raymond James Financial]

Thank you.

[Shankh Mitra, CEO at Welltower]

Jonathan, before Tim gives you an answer, I'll 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 rate in our long term business is much higher. Right? You gotta think about your cost of equity on a long term mark, not just your spot cost of equity.

[Shankh Mitra, CEO at Welltower]

Anyway. Tim?

[Tim Mchugh, Chief Financial Officer at Welltower]

Yeah, John.

[Tim Mchugh, Chief Financial Officer at Welltower]

And I just say the the what's driving our view on leverage higher is putting the cash to work off the balance sheet. It's not 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 all the capital activity. In fact, we're even paying off, 1,250,000,000.00 in debt in those assumptions.

[Operator]

And your next question comes from the line of Ronald Kamdem with Morgan Stanley. Your line is open.

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Hey, just my question is, look, clearly occupancy jumped off the page this quarter and you guys put a couple of slides in the presentation, including the acceleration from January, February to March. I guess I'd love to sort of I know occupancy and pricing matters, but just staying on the occupancy front, just internally, what are expectations sort of long term for your markets? And then is this phase sustainable? Could it accelerate? Just how are you guys thinking about that?

[Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley]

Would love some high level color.

[Shankh Mitra, CEO at Welltower]

Ron, I would just say our expectation of what we think occupancy growth this year is 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, I believe, 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 I'm not

[Shankh Mitra, CEO at Welltower]

talking about optics. I'm talking

[Shankh Mitra, CEO at Welltower]

about current portfolio because remember, Nikhil continues to add a lot of under occupied buildings. So so we think we have a long journey in front of us. And but we're just think about this year. Right? We're giving you our best guess.

[Shankh Mitra, CEO at Welltower]

Remember, it's a guess. And our business is a June to October type of a business. Right? It's of a summer leasing season business. We'll go through summer and we'll tell you what we see.

[Shankh Mitra, CEO at Welltower]

But if we didn't feel good about the current pace of activity, current pace of, you know, 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.

[Operator]

And your next question comes from the line of Austin Gutchmidt with KeyBanc. Your line is open.

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

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?

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

Thanks.

[Shankh Mitra, CEO at Welltower]

So that's a really, really good question. Why don't I start and then jump in as you see fit? You know, we have a pretty good case study of how that might turn out. We can see obviously a lot of senior wealth is not in the equity market, right, clearly. Majority of them actually not.

[Shankh Mitra, CEO at Welltower]

And they are in, other fixed income or, housing type assets. And, we believe that, you know, we don't see a case of why housing prices will collapse like it has during GFC. But let's just say that we're wrong. And you can see, even during, global financial crisis, which was driven by housing, and even and housing, you know, collapsed 50%. You could see even then how the asset classes held up.

[Shankh Mitra, CEO at Welltower]

Right? So look, the thing is the future is uncertain by definition. And it's a redundant statement, but it's a very important one. And we fundamentally believe that life is about positioning, not predicting. And, you know, given where we are, whether the near term, you know, we go into I believe that the asset class will hold up better than all real estate and many, many other industries.

[Shankh Mitra, CEO at Welltower]

We'll see what happens, you know. And if as you have seen from our, you know, our track record, that if there is disruption and again, that's not my base case view, there will be disruption. But if there's disruption, you know how we'll behave. We're perfectly predictable. That's why we have a terrific balance sheet for.

[Shankh Mitra, CEO at Welltower]

Right? And if there is disruption, you will see, obviously, that will put more pressure in asset prices, more pressure on people who have sixty, seventy, 80 percent leverage. Our leverage is, what, 10%. Right? And we will go lean into it.

[Shankh Mitra, CEO at Welltower]

We are very optimistic about our business for next, you know, five, ten, fifteen, twenty, thirty years. And frankly speaking, we'll welcome disruption. But that's not our best case scenario.

[Operator]

And your next question comes from the line of Seth Berge with Citi. Your line is open.

[Seth Bergey, Senior Research Associate at Citi]

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 type of the type of assets that you would be interested in potentially acquiring?

[Shankh Mitra, CEO at Welltower]

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 happen, people who absolutely looking for liquidity, whether that's the equity driven or debt driven that Nikhil talked about, will need to access liquidity. And and if it is that their expectation is commensurate with the today's reality of rates and spreads, we'll provide them that liquidity. And if not, we'll not. We know we're not in the business of doing deals.

[Shankh Mitra, CEO at Welltower]

We're an operating company. We only add assets in our, you know, in our markets and in our micro markets where we feel we can build retail density. So if we can, we will do it. If not, we'll just sit here and wait. Thank you.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

Yeah. I think the only thing I'd add to that is, you know, we talked earlier about what wall towers, you know, pace of execution is versus what the conventional market timeline is to bring a transaction home. And that six to ten months that we talked about, just think about what has happened in the last six to ten months, you know, between, you know, fed rate cuts, the election, liberation day. And so just think about, you know, sellers that chose to work with somebody else, and, you know, they did not have ultimate price certainty from then to until now. And just given how macro has changed, imagine the ups and downs and the deal fatigue that they've gone through.

[Nikhil Chaudhri, Co-President and Chief Investment Officer at Welltower]

And so there's a lot of broken deals. And when there's broken deals, we we get the call. So we're actively looking at a lot. But as Shankh mentioned, we are squarely focused on playing in places that we have high conviction in our in markets that we already have a lot of scale in.

[Operator]

And your next question comes from the line of Rich Anderson with Wedbush. Your line is open.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Hey, thanks and good morning. Great quarter, of course. So Shankh, you said something fewer operating partners that are deeper and more densified in their geographies. I'm paraphrasing, but something like that. So where do you see that sort of that optimal sort of cadence in terms of how big of a pie chart of operating partners is the right number for you guys, call it three, five years from now?

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

And out of curiosity, do you sense any sort of pushback given the current climate doing business with operators in Canada and The U. K? What are some of the sort of variables as it relates to that ultimate plan to reduce your operator the number of your operators in your portfolio? Thanks.

[Shankh Mitra, CEO at Welltower]

Yes. 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 so the the if you are looking for a numeric answer, I'll just say it's fewer. And that sort of noise, no question that we are, focusing on regional density, focusing more and more concentrating concentrating on our existing partners who have performed performed really well.

[Shankh Mitra, CEO at Welltower]

There is no question that every year we look at, you know, we look at obviously a lot of new operating teams, and we added one or two. And then, obviously, a

[Shankh Mitra, CEO at Welltower]

lot of people also fall to

[Shankh Mitra, CEO at Welltower]

the wayside. But generally speaking, I will say, is there a pushback? Look. We're fair people. We're entirely focused on performance, and we're entirely focused on outlook of how some of our operating part part you know, sort of partners that think about the future.

[Shankh Mitra, CEO at Welltower]

Right? This is all about the future. And that is nothing to do with frankly speaking. There are two types of operators. Right?

[Shankh Mitra, CEO at Welltower]

Think about what we call gen one operators in our business. People who have been around with in with our company, with George Chapman and others, and they absolutely killed it. Tim Buchanan would be a great example. Right? Then there are operators that I grew up in this business with who are sort of, say, gen two operators, who have built the business as we with us, such as, you know, Matthew at Cozier or, say, Dan

[Shankh Mitra, CEO at Welltower]

Right? So so 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. And may frankly speaking, their outlook for the future. They want to get better every day, do new things, try things, fail fast, and move the business forward.

[Shankh Mitra, CEO at Welltower]

Do we find new operating partners, you know, sort of, who share that view? Amica would be a very good example of that. Right? Amica is an exceptionally good operator who have founded. Care UK and UK would be great example of that.

[Shankh Mitra, CEO at Welltower]

Right? They're exceptional team. But generally speaking, 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 well, to our business system across, grow with our operators, and, you know, so it's just today, it's a moving target. We have not seen any pushback, obviously, from all these, you know, sort of in UK and Canada.

[Shankh Mitra, CEO at Welltower]

In fact, we can Canadian businesses are growing, fabulously, and we expect that both of those business 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 current context of assets we have. But remember our, assets, Nikhil is making our job harder every day by growing the asset base, significantly, and we'll see where these things land. But philosophically, we want to be with people who right or wrong.

[Shankh Mitra, CEO at Welltower]

This is not a we're not pointing out that we're right, somebody else is wrong. It's just like we're philosophically aligned with us on where we're trying to take the business. And so that's kind of very important point is we want to be with people who are, you know, shoulder to shoulder with us no matter what.

[Operator]

And your next question comes from the line of Nick Yulico with Scotiabank. Your line is open.

[Nicholas Yulico, Managing Director at Scotiabank]

Hi. Good morning, everyone. Just a couple questions on senior housing. First, know, given that we are in a more uncertain macro environment, I was hoping to get a feel for, you know, how leading indicators for senior housing looked in April, such as, you know, maybe tour volume, leads, conversions into move ins, you know, how those are tracking versus a year ago? And then in terms of the guidance and decision to raise the revenue guidance in senior housing, clearly, you have some confidence in the business.

[Nicholas Yulico, Managing Director at Scotiabank]

But maybe you just give us a feel about how, you know, the again, the macro environment might have impacted that guidance? And, you know, did you even build in some cushion there, you know, preventing and, let's say, there would have been an even bigger raise, in sort of a, you know, a more, clear economic environment? Thanks.

[Shankh Mitra, CEO at Welltower]

Let me let me try to, 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 ninety days is short enough time frame for a company, you know, of our size and scale to even comment on things, let alone talk about month to month what's happening. Right? So clearly, have walked away from all monthly, you know, sort of what's going on this month, this week.

[Shankh Mitra, CEO at Welltower]

We're really honestly 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. And frankly speaking, if we didn't feel good about that data, we wouldn't give you, you know, sort of in q one where we would not have raised both rev, you know, occupancy and rate assumption, which, again, I want to make it abundantly clear. That's our guess.

[Shankh Mitra, CEO at Welltower]

Right? It's an educated guess, but it's a guess. We've not done it at sitting at the April. So what we see we really like what we see, but we have no dilution of certainty. Remember, this business is a June to October business, and we need to see how, June to October plays out, and we'll tell you as we see.

[Shankh Mitra, CEO at Welltower]

Tim?

[Tim Mchugh, Chief Financial Officer at Welltower]

Yeah. I'll I'll just add to that. Nick, I like the way you asked that on the guidance side. Clearly, when when you provide projections or forecast, the, you know, having more uncertainty and outlook, you know, drives a little bit of a wider range of outcomes. And so that's always factored in.

[Tim Mchugh, Chief Financial Officer at Welltower]

That being said, the biggest piece of it, the anchor to it is what Shankh just said, what are we actually seeing in the business? And if we're not seeing trends change, that's gonna drive the biggest piece. We don't see it as kind of our part of our job here to make to forecast what may or may not happen beyond what we're seeing and then taking a reasonable range of outcomes into it. So I think your your view that some sort of increased uncertainty will be taken into account would be correct. And I think Shankh's comments on current business shows no signs of weakness goes along with that.

[Operator]

And your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open.

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

Yes, thanks. I just wanted to touch on like how you guys view the spread between RevPOR and ExPOR. I know the current spread has been solid and is well above or at least higher versus historical levels. I mean, how can that trend going forward? I mean, it fair to assume that

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

it could stay at this level just because

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

I know there's some sensitivity to push rate? Or does like the Welltower business system rollouts kind of change that formula a little bit and there is some room for that to continue to expand?

[John Burkart, Executive VP & COO at Welltower]

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

[Operator]

And your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Good morning. Hoping you could talk a little bit about the skilled nursing investments you made in the quarter. Looks like it was about 1,200,000,000.0. Is that fee simple? Was that, loan investments?

[Juan Sanabria, Managing Director at BMO Capital Markets]

If you could talk about kind of the coverage there or or just the the portfolio of assets maybe that that was driving that? Thank you.

[John Burkart, Executive VP & COO at Welltower]

Yeah. Once there was a couple of different transactions, but, you know, in in this particular quarter, you know, look, we've used the skilled nursing business as a credit business for us. Sometimes that comes in the form of a debt investment. Sometimes it comes in the form of a triple net lease investment, but they're they're both underwritten from a credit investment perspective. The the large transaction this quarter, you know, has a lot of things that we're really excited about.

[John Burkart, Executive VP & COO at Welltower]

So the first thing is, you know, it was a broken transaction with and there was some softness in the market. Deal fell apart. Welltower was able to come in and come in with dual path solution. One was we brought an operator to the table that the deal was lacking, and then the other was obviously a certainty to close. So first thing is, you know, we leverage that, the fact that it was a broken deal, to get a favorable price adjustment, you know, to the tune of a couple hundred million bucks in our favor.

[John Burkart, Executive VP & COO at Welltower]

Then the operator that we brought in is an operator we've, you know, we have an existing book of business with Aspire that has done an incredibly good job for us. You know, with Aspire, we we bought a turnaround portfolio towards the end of twenty three, and their performance, you know, in just a matter of five, six quarters has been quite incredible. They took a portfolio that was, you know, on the EBITDAR basis losing, call it, $15,000,000, and improved cash flow such so significantly that today that EBITDAR is, you know, north of $90,000,000. So given and there was a scaled portfolio just given the dollars we're talking about here. So given, you know, their strength and the quality of execution, this portfolio, given its size, made a lot of sense for them.

[John Burkart, Executive VP & COO at Welltower]

And from a performance perspective, in place, this portfolio is generating enough cash flow to cover rent, you know, one o year one or in place. And that's that occupancy in the mid sixties. So we have an operator that has a proven track record of, you know, improving performance pretty substantially. But in this case, unlike the Florida case, you have significant in place cash flow that covers rent day one. And on top of that, there is additional credit enhancements in terms of guarantees.

[John Burkart, Executive VP & COO at Welltower]

There's north of a half a billion dollars worth of net worth, you know, that is in assets outside of skilled nursing that is sitting behind with this transaction to support. Right? So you've got, you know, quality assets check, quality operator check, in place cash flow with room to the upside check, and additional credit protection check. Right? So that's that's the setup here.

[John Burkart, Executive VP & COO at Welltower]

And, you know, we just found a a great transaction that was broken.

[Shankh Mitra, CEO at Welltower]

All investments, want your question, and that is in the bucket that we paid in the quarter of of what people put. No loans. Correct.

[Operator]

And your next question comes from the line of Wes Golladay with Baird. Your line is open.

[Wesley Golladay, Senior Research Analyst at Robert W. Baird & Co]

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

[John Burkart, Executive VP & COO at Welltower]

Yeah. So, look, as I mentioned in the prepared remarks, there is nine development parcels that we're acquiring as part of the transaction. And, you know, they've had extended multi year, five, six, seven year entitlement processes. Now some of those are expansions. The other are de novo projects.

[John Burkart, Executive VP & COO at Welltower]

As you can imagine, expansions are easier to pencil just given that the operating cost load that you're gonna add to the incremental units is is, you know, in most cases de minimis or in a fraction of what you would have for a de novo project. So those projects continue to make a lot of sense and and will develop. And and the the the handful that are de novo, you know, they are in the highest quality, highest rent market. And those will evaluate. Right?

[John Burkart, Executive VP & COO at Welltower]

We'll we'll evaluate to see if, you know, once the dust on settle you know, settles a bit on tariffs and cost certainty, we'll see if it makes sense to start them today or or or in the future. But, you know, just given that there's a bunch of expansion projects, we'll certainly expect to see some starts next year.

[Operator]

And your next question comes from the line of Emily Meckler with Green Street. Your line is open.

[Emily Meckler, Equity Research Analyst at Green Street Advisors, LLC]

Good morning. Thanks for the time. What percentage of the properties has Welltower's operating platform been rolled out to?

[Emily Meckler, Equity Research Analyst at Green Street Advisors, LLC]

And have you received any pushback from operators that has maybe delayed the rollout?

[John Burkart, Executive VP & COO at Welltower]

Starting with the pushback, the answer is no. The we work with our operators, listen to them. They have great feedback. As Shankh has said, it's shoulder to shoulder. And so we iterate with them on on how to move forward with, with the platform.

[John Burkart, Executive VP & COO at Welltower]

As far as for the percentage, I don't give out the details. And when I talk about the platform, there's a a a broad look at the platform. We're really working with all the different operators with different aspects of our platform, so I'm not gonna give much more detail than that. But, the the reception has been fantastic and appreciative and, at this point, quite successful.

[Shankh Mitra, CEO at Welltower]

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.

[John Burkart, Executive VP & COO at Welltower]

Sure. Yeah.

[Shankh Mitra, CEO at Welltower]

So you derive any conclusion that you want from this percent, last percent, but it's a real businesses that are not driven from Excel spreadsheet. And so, you know, we'll see where we get to.

[Operator]

And your next question comes from the line of Michael Mueller with JPMorgan. Your line is open.

[Michael Muller., Analyst at JP Morgan]

Yes. 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 RevPAR growth in those assets been compared to the 6% average?

[Shankh Mitra, CEO at Welltower]

I mentioned, Mike, in my prepared remarks that 90% plus occupied part of the portfolio, which is, think, what's, like, 40 to 50% of Yeah. Yeah. Yeah. It's about 50%. That has grown report seven plus percent.

[Shankh Mitra, CEO at Welltower]

And now that end of that, I believe Tim said, like, less than 80% cohort, I think Tim said last quarter was, like, roughly a quarter of the portfolio. Wherefore, it's left and flat. I think it was up one or 2%, something like that. So it just sort of that sort of you think about the gradient of that, everything is in between. Right?

[Shankh Mitra, CEO at Welltower]

This is simple demand supply of how many units you need to sell versus, you know, if you're full.

[Operator]

And there are no further questions at this time. This does conclude today's conference call and you may now disconnect.

Participants

Executives

• Matthew McQueen, Chief Legal Officer and General Counsel
• Shankh Mitra, CEO
• John Burkart, Executive VP & COO
• Nikhil Chaudhri, Co-President and Chief Investment Officer
• Tim Mchugh, Chief Financial Officer

Analysts

• Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.
• John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo
• Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch
• Jonathan Hughes, Managing Director at Raymond James Financial
• Ronald Kamdem, Managing Director & Head of US REITs and CRE Research at Morgan Stanley
• Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets
• Seth Bergey, Senior Research Associate at Citi
• Richard Anderson, Managing Director - Equity Research at Wedbush Securities
• Nicholas Yulico, Managing Director at Scotiabank
• Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets
• Juan Sanabria, Managing Director at BMO Capital Markets
• Wesley Golladay, Senior Research Analyst at Robert W. Baird & Co
• Emily Meckler, Equity Research Analyst at Green Street Advisors, LLC
• Michael Muller., Analyst at JP Morgan