Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Welltower Inc (WELL, Financial) reported a significant bottom-line growth with normalized FFO per share up 17% year over year.
- The company announced $1 billion of acquisitions under contract, bringing the year-to-date acquisition activity to approximately $5 billion.
- Welltower Inc (WELL) raised its full-year FFO per-share guidance, reflecting confidence in continued growth opportunities.
- The senior housing portfolio posted same-store NOI growth in excess of 20% for the seventh consecutive quarter.
- The company achieved substantial margin expansion of 280 basis points year over year to 27.3%.
Negative Points
- Despite improvements, margins remain well below pre-COVID levels.
- The company faces challenges in securing construction financing due to regional banks shutting down activity.
- There is some short-term dilution expected from capital light transactions such as operator transitions and conversion of triple-net leases.
- The transition of 89 holiday assets to new operators has resulted in some near-term disruption.
- The company anticipates higher G&A expenses and near-term drag from triple-net to RIDEA conversions.
Q & A Highlights
Q: Can you elaborate on the future cash flow upside from recent triple-net to RIDEA transitions?
A: We expect over $70 million of additional NOI upside when new operators stabilize these properties. We have also converted 47 triple-net leased properties to RIDEA structures, allowing us to directly participate in the substantial growth of these properties.
Q: What are the key drivers for the next phase of growth in senior housing?
A: The key drivers include substantial occupancy upside in newly acquired properties, which are currently in the low 80% range, and the impact of platform initiatives starting in 2025. We are also focused on enhancing long-term growth through capital transactions and improving operational efficiencies.
Q: Why didn't you revise the same-store revenue guidance for the senior housing segment?
A: We have thousands of units under renovation, which impacts near-term fundamentals. However, we are confident in achieving our NOI growth targets and have seen strong performance in July, indicating a positive trend for the second half of the year.
Q: How do you plan to leverage the balance sheet for future growth?
A: We have significant debt capacity to tap into, which provides optionality for future growth. Our focus is on maintaining a strong balance sheet while driving per-share earnings growth through prudent capital allocation.
Q: What is the timeline to stabilize your wellness housing developments, and how do falling lumber costs impact development costs?
A: The timeline for stabilization is about 12 to 18 months. While falling lumber costs have helped, overall construction costs remain higher than a couple of years ago.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
