Although acknowledging that senior housing operators “still have a long way to go” to recover from the pandemic, Welltower CEO Shankh Mitra on Wednesday said the Toledo, OH-based real estate investment trust saw another strong quarter that “exceeded our expectations.”
During Wednesday’s first-quarter 2023 earnings call, executives also discussed the REIT’s tests of an operating platform using machine learning.
During Wednesday’s first-quarter 2023 earnings call, Mitra said that performance was driven by “outsized growth” in its senior housing operating portfolio, or SHOP, which saw sharp declines in agency labor and other expenses.
Assisted living continued to outperform independent living, although independent living pricing is starting to strengthen. And Welltower’s Canadian portfolio is rebounding after “a disappointing couple of years.” The CEO said that the company is seeing a consistent increase in demand for seniors housing and remains confident in the prospect of the business.
“Our optimism regarding the long-term growth trajectory of the business remains firmly intact,” Mitra said. “Top line growth remains strong, expenses are moderating and our external growth opportunities continue to expand.”
In the REIT’s senior housing portfolio, Sunrise Senior Living continued to produce strong top and bottom line results, and StoryPoint Senior Living is expected to show meaningful growth from its large, regionally concentrated portfolio. Oakmont Management Group’s portfolio sits at 86% occupancy and growth.
Mitra said that Welltower is just beginning to capture significant net operating income from properties that it transitioned to its strongest operators as those buildings return to pre-COVID-19 occupancy levels.
“The needs-driven nature of our product gives me hope that we will outperform the majority of the asset classes — not just real estate,” Mitra said.
SHOP total occupancy was at 79% for the first quarter, with same-store occupancy at 79.4%.
Chief Operating Officer John Burkart said that senior housing saw 23.4% year-over-year net operating income growth in the first quarter, with a 240-basis-point year-over-year increase in average occupancy, driven by assisted living and memory care communities. Senior housing also experienced another quarter of “healthy pricing power,” he said.
SHOP year-over-year same store revenue increased 10% in the first quarter. This movement represents the fifth consecutive quarter of double-digit revenue growth, according to Welltower’s business update.
Agency labor use continued to decline, leading to a 53% year-over-year expense decrease for the same-store portfolio in the first quarter.
Operating platform moves to pilot stage
Without going into detail, Mitra said that Welltower is moving its operating platform initiatives using machine learning into more tangible pilots, adding that he is optimistic that the company is on the verge of “creative breakthroughs.”
Burkart said that one of the challenges reported by operators using the platform is keeping up with the increase in qualified leads — “a very good problem to have.”
“I’m grateful for the diversity of operational experience, engagement and enthusiasm of those operators who understand how the platform will transform the business, lead to consolidation and great success for the operators who leverage our best-in-class platform to improve the delivery of service to our customers, the quality of life of the employees and returns for our owners,” Burkart said.
