Welltower (NYSE:WELL), an Ohio-based REIT led by CEO Shankh Mitra, has reported strong Q3 results, marked by significant growth in its senior housing operating portfolio. The company recorded 220 basis points of year-over-year average occupancy growth and anticipates further increases for Q4. Welltower's senior living portfolio also saw double-digit revenue growth and a record-high quarterly margin improvement.
The net operating income growth for the quarter stood at 26.1%, marking Welltower's fourth consecutive quarter of over 20% growth rates. However, Mitra indicated that profitability is still below pre-COVID levels and has not yet reached a point where the industry can attract long-term external capital investment.
During Q3, Welltower closed $1.4 billion in transactions, primarily driven by $618 million of senior housing operating portfolio investments. In October, following the third quarter, another $900 million in transactions was closed. Mitra stated that deal execution will depend on access to capital and noted that growing financial distress is leading owners to sell properties at discounted rates, providing more opportunities for Welltower.
The company also expressed excitement about its new operating platform and the digital transformation of the senior living industry. Welltower has made "tremendous strides" in developing the technology backbone of what Welltower 3.0 may look like. The company expects an accelerating earnings and cash flow trajectory for 2024 and 2025 due to recovery in the senior housing business, the rollout of their operating platform, and capital deployment.
In Q2, Welltower altered its relationship with Revera and dissolved an existing joint venture. It acquired interests in 110 properties from Revera while selling interests in 31 properties back to Revera. During Q3, Welltower closed on its US Revera transactions through the acquisition of 10 properties under development or recently developed by Sunrise Senior Living. The operations of 28 properties were transitioned from Sunrise to the Oakmont Management Group.
After Q3, Welltower expanded its relationship with Cogir Management, closing on a portfolio of 12 senior living communities in Quebec. This transaction included acquiring the Jazz brand and resulted in Cogir managing 62 communities owned by Welltower.
Earlier in 2023, Welltower invested $405 million in long-term and post-acute care (LTC/PAC) facilities as part of its $2.05 billion total expenditure. This led to a 5.3% net operating income increase across properties held over a year. The company owns 258 LTC/PAC facilities with 32,265 beds and added 24 more facilities at $140,000 per bed on average. Despite potential risks and high construction costs, Welltower has shown no interest in new developments.
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