Welltower(WELL) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Welltower reported normalized funds from operations (FFO) of $0.84 per diluted share, representing a 6.2% growth year-over-year, marking the second consecutive quarter of year-over-year growth since the pandemic began [46] - The company achieved a total portfolio same-store NOI growth of 7.2% year-over-year [47] - The fourth quarter guidance for net income attributable to common stockholders is projected to be between$ 0.08 to $0.13 per diluted share, with normalized FFO expected to be between$ 0.80 to $0.85 per diluted share [55] Business Line Data and Key Metrics Changes - In the senior housing operating business, same-store revenue increased by 10.8% year-over-year, with same-store NOI growth of 17.6% [8][11] - The outpatient medical business reported same-store NOI growth of 1.4% year-over-year, with a retention rate of 93% [36] - The senior housing triple-net portfolio saw same-store NOI increase by 1.6% year-over-year [47] Market Data and Key Metrics Changes - The U.S. senior housing operating portfolio experienced over 20% same-store NOI growth, while Canada and the UK reported growth of 6.3% and 9.8%, respectively [40] - The company noted a significant surge in applications and net hiring, with total portfolio monthly contract labor spend being the lowest since August 2021 [10] Company Strategy and Development Direction - The company is focused on capital allocation priorities and is optimistic about the recovery in the senior housing sector, expecting continued growth driven by demographic trends [6][17] - Welltower is restructuring its lease with ProMedica Health System, aiming for improved financial stability and operational efficiency [22][29] - The company is exploring various capital deployment opportunities, including share repurchases, while maintaining a favorable capital position [52][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the labor market improving, which is expected to benefit the sector significantly [11][41] - The company anticipates a continued recovery in senior housing, with expectations of 4.5% growth in the 80-plus population in 2023 [17] - Management highlighted the importance of maintaining a strong capital position to navigate the current volatile market environment [32][60] Other Important Information - The company has raised approximately$ 760 million through its ATM program to enhance balance sheet strength [52] - The transition to Integra Health is expected to improve the financial state of ProMedica while providing a well-capitalized partner for skilled nursing properties [50][51] Q&A Session Summary Question: Sustainability of pricing power across regions and impact of flu - Management indicated that pricing power is expected to remain strong due to rising market rents and occupancy improvements, with early renewals showing promising trends [62][63] - COVID protocols are in place to mitigate flu impacts, which should positively affect community health [65] Question: Share repurchase program details - The company finds its stock attractively priced and is considering share repurchases as part of its capital deployment strategy, though timing remains uncertain [68][70] Question: Differences in margins between assisted living and independent living - Management noted that while there are naturally different margins, improvements are expected across both segments due to operational enhancements [72][73] Question: Trends in senior housing project types - Assisted living is experiencing robust recovery due to its need-based nature, while independent living is recovering more slowly but remains a strong business [77][79] Question: Opportunities in the medical office space - Management has not seen foreclosures yet but noted increasing cap rates, indicating potential investment opportunities in the future [81][84] Question: ProMedica joint venture details - The reserves from ProMedica are earmarked for operating losses and working capital, with a focus on improving portfolio quality [93] Question: Strategic direction of skilled nursing segment - The company is partnering with Integra for skilled nursing, leveraging their expertise while ensuring downside protection for Welltower [96][100]