Barnstorming Welltower Has $1.2B in Transactions Since Q2

Welltower announced that it had $1.2 billion of transactions closed or under contract since the 2024 second-quarter earnings release — which came out on July 29, 2024. That made $6.1 billion in transactions year to date, a record for the company.

The company said that the $1.2 billion in new investment activity was underwritten to gain an internal rate of return in the “low double-digit range” with senior housing assets carrying an average age of less than 5 years.

CEO Shankh Mitra said in the earnings call that “as with the past few quarters, most of our investments have been bolt-on acquisitions within [the] senior housing sector, improving and benefiting from our already-established regional density. Our goal remains to go deep in our markets, not broad.”

Vice President and Chief Financial Officer Timothy McHugh said that the $1.2 billion came out of a $15 billion “universe of opportunities we looked at.” Although the balance varies by quarter, what the company transacts is typically 10% of the total deals they consider.

The net operating income of the seniors housing operating portfolio grew 23.0%, the eighth consecutive quarter of growth that surpassed 20%. Topline year-over-year revenue growth was 8.9%, showing 310 basis points of growth in occupancy across all regions and geographies. Total portfolio year-over-year same-store NOI growth was 12.6%. The major driving force for growth was same-source NOI growth in their seniors housing operating portfolio of 23.0%.

“As I have described in our recent calls, the backdrop of our Senior Housing business is only getting better as growth of 80-plus population picks up from here,” Mitra said. “Starting next year, 5,000 Americans will turn 80 every day. And remember that we are only at the front end of this trend with the crest of the silver tsunami not being seen until well into the future.”

He added that the supply outlook was favorable, with construction starts continuing to drop, reaching the second-lowest level on record since the second quarter of 2019. Banks have continued to reduce their exposure to senior housing loans and are reluctant to “put new capital to work.” The result is reduced supply to meet increased demand, providing strong support for pricing.

“And given the extended timeline to build a new senior living community in our market … we may not face the impact of new supply in our markets for years,” said Mitra. “Frankly, in today’s construction cost and financing cost environment, it makes no economic sense to build.”