2023 was a year of “solid execution” across the board for Welltower and a record year in capital deployment, laying the groundwork for a sustained level of performance and continued outsized growth into 2024 and beyond, according to CEO Shankh Mitra.
“We finished the year strong, with significant momentum to set us up for another year of solid performance in 2024,” Mitra said Wednesday during the Toledo, OH-based real estate investment trust’s fourth-quarter and full-year 2023 earnings call. “Operating performance far surpassed expectations with a record year in capital deployment.”
The REIT’s senior housing operating portfolio saw occupancy growth in the fourth quarter, with 110 basis points of sequential gains, bringing year-over-year growth to 330 basis points, the highest level of fourth-quarter occupancy growth in the history of the company.
Mitra said that he expects another year of near double-digit topline growth as occupancy continues to build at a solid pace. The company’s “outsized,” multi-year growth strategy is supported by five growth pillars, including a favorable demand-supply setup that only looks better going into 2025 and 2026, the company’s digital transformation and business process optimization, the effects of hundreds of transitioned properties, growth opportunities and a balance sheet that will continue to support capacity for additional external growth, he added.
Active investment year
2023 was the most active year in company history in terms of raising and deploying capital, with the pace of investment activity continuing into the new year, Mitra said. The company completed almost $6 billion in investments, with nearly half of those deals closing in the fourth quarter.
The company’s 2023 investment activities focused on its senior living and wellness business that resulted in additional assets in high-performing markets and a consolidation of operators, according to Chief Operating Officer John Burkart.
During 2023, the company dissolved its joint ventures with Revera and Chartwell Retirement Residences.
Welltower anticipates closing the remainder of the real estate transaction and operator transitions related to Revera’s Canadian portfolio of 85 properties during the first half of the year. As part of the transaction, Welltower intends to acquire Revera’s interest in 71 properties and sell its interests in the remaining 14 properties.
The Chartwell agreement dissolved its joint venture relationship across 39 properties in Canada. Welltower will acquire the remaining interest in 23 senior housing properties from Chartwell while selling its interest in 16 properties to Chartwell. The remaining properties will be transitioned to the Welltower/Cogir PLR platform.
During the fourth quarter, Welltower continued to expand its relationships with Cogir, closing on a 12-community senior living portfolio in Quebec. It also acquired a portfolio of 10 senior housing communities from Kayne Anderson Real Estate.
Additionally, the company expanded its relationships with StoryPoint Senior Living, Legend Senior Living and Retirement Unlimited through the acquisition of eight senior living communities, as well as with Quality Senior Living by acquiring seven properties.
Affinity Living Communities investment
Buarkart said the company is off to an “exciting start” with the announcement of a strategic partnership with Affinity Senior Living.
Since the end of the fourth quarter, Welltower entered into an agreement to acquire a portfolio of 25 age-restricted active adult communities for $969 million. The Affinity-branded portfolio includes almost 3,900 units and is concentrated largely in the Pacific Northwest, leading to an expansion of Welltower’s wellness housing portfolio to almost 2,5000 units.
Growth opportunities
Burkart said that he experienced the “Welltower hustle” of identifying and aggressively pursuing opportunities to improve the resident and employment experience, which paid off with “fantastic results.” On top of what he called industry-leading senior housing same-store net opening income growth in 2022 of 20.1%, full-year 2023 senior living NOI growth was 24.4%.
Welltower saw 23.7% of net operating income growth in the fourth quarter — the fifth consecutive quarter of more than 20% growth — in its senior housing operating portfolio. The SHOP saw 24.4% of full-year 2023 net operating income growth.
Despite those improvements and metrics, Burkart said its SHOP sits “meaningfully below” its pre-COVID NOI levels.
“In 2023, our post-COVID balance sheet recovery transitioned into strategic repositioning, ending the year with substantially upgraded metrics from prior to the pandemic and an expectation for further improvement as our senior housing operating portfolio continues to carry significant organic cash flow growth momentum into 2024,” Burkart said. “This positions us with substantial capacity to continue to make systematically opportunistic capital allocation decisions to drive shareholder returns in any market environment.”
Welltower anticipates funding an additional $819 million of development in 2024 related to projects that were underway on Dec. 31.
New operating platform rollout
Burkart said the company is “flying along” with its operating platform initiative, which will go live with the first operator in the first half of the year.
“Our focus on improving the customer and employee experience is coming together very well,” he said. “The integration of the various modules will simplify the customer experience and reduce labor around basic tasks as they allow our site teams to focus on what they love — our customers.”
