Welltower Inc. (WELL) Q4 2025 Earnings Call Transcript

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Overview

The earnings call presents a positive outlook with strong strategic initiatives like Welltower 3.0, significant acquisitions, and increased guidance for 2025. The Q&A highlights a focus on value creation, operational improvements, and high occupancy growth. Although some responses lacked specific quantitative details, the overall sentiment is optimistic, supported by strategic capital allocations and growth in senior housing demand.

Key Financial Performance

Revenue Growth 36% year-over-year increase. This growth was attributed to strategic capital allocation, including the launch of a private funds management business and significant investments in systems and talent.

EBITDA Growth 32% year-over-year increase. This was driven by operational improvements and strategic initiatives such as the Welltower Business System.

FFO per Share Growth 22% year-over-year increase. This was achieved while deleveraging the balance sheet and investing in future growth.

Senior Housing Operating Portfolio Same-Store NOI Growth 20.4% year-over-year increase in Q4 2025. This marks the 13th consecutive quarter of over 20% growth, driven by 400 basis points of occupancy gains and healthy rate growth.

Operating Margins Increased by 270 basis points in Q4 2025. This improvement was attributed to the implementation of the Welltower Business System and operational leverage.

Total Portfolio Same-Store NOI Growth 15% year-over-year increase in Q4 2025. This was driven by strong performance in the senior housing operating portfolio.

Net Investment Activity Nearly $11 billion in 2025, primarily in high-growth senior housing properties. This was funded largely through the sale of the outpatient medical business for $7.2 billion.

Unlevered IRR and Money Multiple on Integra Portfolio Achieved an unlevered IRR of 25% and a 3.1x unlevered money multiple over 7 years. This was due to strategic recapitalization and operational improvements.

Normalized FFO $1.45 per diluted share in Q4 2025, representing a 28.3% year-over-year growth. This was driven by strong NOI growth and strategic capital allocation.

SHOP Portfolio Concentration Increased to approximately 70% of in-place NOI in 2025, up from prior levels. This shift was due to strategic acquisitions and dispositions.

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Operating Highlights

Private Funds Management Business: Launched in 2025, this business aims to amplify long-term per share growth. It includes the closing of Senior Housing Equity Fund I and the launch of Senior Housing Debt Fund I.

Welltower Business System (WBS): Proprietary operator tailored end-to-end operating platform implemented to drive operational efficiencies and improve resident and employee experiences.

Tech Quad: Created to advance the company's technology journey, including hiring a new Chief Technology Officer and other key technology leaders.

Senior Housing Acquisitions: Completed $11 billion of net investment activity in 2025, primarily in high-growth senior housing properties. Started 2026 with $5.7 billion in acquisitions and $2.5 billion in new deals.

Outpatient Medical Business Sale: Sold for $7.2 billion, with $5.8 billion already closed, to fund senior housing investments.

Integra Portfolio Sale: Sold $1.3 billion of skilled nursing assets, achieving a 25% unlevered IRR and a 3.1x unlevered money multiple over 7 years.

Revenue and NOI Growth: Achieved 36% revenue growth, 32% EBITDA growth, and 22% FFO per share growth in 2025. Senior housing operating portfolio saw 20.4% same-store NOI growth.

Occupancy and Margins: Reported 400 basis points of year-over-year occupancy gains and 270 basis points of margin expansion in Q4 2025.

Operational Leverage: Focused on leveraging fixed costs and regional densification to drive future margin expansion.

Shift to Senior Housing: Increased SHOP concentration to 70% of NOI by divesting lower-growth assets and acquiring high-growth senior housing properties.

Capital Allocation Strategy: Focused on long-term growth by redeploying capital from mature assets to higher-growth opportunities.

Talent and Incentive Structure: Overhauled incentive structures to retain top talent and align with long-term growth objectives.

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Risk or Challenges

Geopolitical and macroeconomic uncertainty: The company acknowledges a challenging macro and geopolitical backdrop, which could impact operations and strategic execution.

Senior living operational challenges: The senior living business is described as inherently difficult, with nuanced and varied resident needs, requiring significant operational focus and resources.

Transition and transformation difficulties: The company has undergone a decade-long transformation, including overhauling its asset base, operators, and contracts, which has been described as incredibly difficult and ongoing.

Supply chain and construction costs: High long-term interest rates and construction costs are noted as challenges, although the company feels positive about the supply-demand balance.

Competition in acquisitions: Increased competition for acquisitions in the senior housing sector is highlighted, with the company emphasizing its focus on off-market transactions and operational integration.

Talent retention and operational execution: The company has invested heavily in talent and operational systems but acknowledges the need for continued focus on retaining high-caliber talent and ensuring operational excellence.

Regulatory and contractual constraints: The company avoids assets with long-term management contracts, which it views as restrictive and potentially detrimental to cash flow.

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Guidance & Outlook

Occupancy and Pricing Power: The company expects another year of strong occupancy upside in 2026, along with strong pricing power.

Demand and Supply Dynamics: End market demand for senior living products is highly visible and expected to improve as the 80-plus population grows rapidly. New construction remains at trough levels, and long-term interest rates and construction costs are high, supporting a favorable supply-side environment.

Margin Expansion: The company anticipates multiple opportunities to drive margins meaningfully higher in the coming years, including the continued implementation of the Welltower Business System (WBS).

Acquisition Activity: 2026 is shaping up to be another banner year for acquisitions, with $5.7 billion of acquisitions already closed or under contract in the first six weeks of the year and a robust pipeline of opportunities.

Capital Allocation: The company plans to continue its focus on capital allocation, including acquisitions and dispositions, to shape the portfolio for future growth. This includes intensifying focus on rental housing for the aging population.

Senior Housing Operating Portfolio Growth: The company expects operational leverage to play a significant role in driving margins higher, with significant occupancy runway and healthy rate growth anticipated in the coming years.

Private Funds Management Business: The company announced the closing of Senior Housing Equity Fund I and the launch of Senior Housing Debt Fund I, representing a new business vertical to support long-term growth.

2026 Financial Guidance: The company introduced a full-year 2026 outlook for normalized FFO of $6.09 to $6.25 per diluted share, representing an $0.88 per share increase at the midpoint from 2025 results. Total portfolio same-store NOI growth is expected to range from 11.25% to 15.75%, driven by strong growth in the senior housing operating portfolio.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you provide a quantitative framework for understanding the compounding aspect of your portfolio, particularly in terms of RevPOR margin and the impact of WBS systems?

A:Shankh Mitra stated that it is difficult to speculate on future numbers but emphasized focusing on earnings and cash flow growth. He mentioned the importance of mix shift and noted that assets with over 90% occupancy show significant pricing power. He also highlighted the company's unlevered balance sheet and the potential for long-term margin expansion.

Q:What challenges remain in the senior housing space, and is there potential for monetizing your technology platforms?

A:Shankh Mitra explained that while the data science platform is mature and already monetized, the operational technology side is still underdeveloped. He emphasized that the company will not sell its operating software to competitors but is open to helping partners on the platform.

Q:Does the sale of the SNP portfolio indicate that the entire SNP portfolio is now considered a source of funds for future acquisitions?

A:Nikhil Chaudhri clarified that the Skilled Nursing Portfolio is viewed as a structured credit investment. The strategy involves acquiring, stabilizing, and exiting assets, with proceeds redeployed based on opportunities. There is no fixed allocation for the portfolio size.

Q:What are the characteristics of the non-same-store SHOP portfolio, and how is it growing relative to the stabilized portfolio?

A:Tim McHugh stated that the non-same-store portfolio makes up over half of the total portfolio due to recent acquisitions. It is less occupied but has significant upside potential. The non-same-store portfolio is heavier in the U.K. compared to the same-store portfolio.

Q:How do you drive occupancy performance, and what role does WBS play in outperformance compared to the industry?

A:Shankh Mitra noted that the company outperformed NIC data on occupancy growth, achieving 400 basis points compared to NIC's 250. John Burkart added that the focus on marketing, customer experience, and execution at each site drives occupancy performance.

Q:How long can you continue acquiring unstabilized SHOP assets, and does the presence of a fund vehicle buying stabilized assets pose a problem?

A:Shankh Mitra emphasized that acquisitions depend on market opportunities and the goal of creating per-share value. He noted that the company has been very active, with 37 transactions in the first six weeks of the year. Nikhil Chaudhri added that value creation is not limited to occupancy but also includes operational improvements.

Q:How should we contextualize SHOP occupancy growth and RevPOR growth guidance versus last year?

A:Shankh Mitra explained that RevPOR growth is impacted by pool changes and occupancy stabilization. He encouraged focusing on underlying cash flow growth, noting that initial FFO guidance started at 16%-17%.

Q:What is the expected spread between RevPOR and ExpPOR growth, and is there conservatism in the guidance?

A:Tim McHugh stated that ExpPOR growth is expected to be below 1.5%, similar to last year's initial outlook. He noted that occupancy scaling benefits ExpPOR, and the guidance reflects appropriate probability framing.

Q:How is the company addressing the issue of widespread ownership and attracting a broader investor base?

A:Shankh Mitra stated that the focus is on executing the business and driving per-share growth. He noted that the company's size is attracting more attention from investors, and the capital markets team is engaging with them.

Q:What is the trajectory of the funds business, and will it become a larger part of the story?

A:Nikhil Chaudhri described the funds business as opportunistic and tactical, focused on making money for capital partners. Shankh Mitra emphasized that the company will not become an asset gatherer and will only take capital if significant returns can be achieved.

Q:How should we think about CapEx for senior housing, and what is being done to future-proof assets?

A:John Burkart explained that newer assets require less CapEx, but some need investment due to prior capital stack issues. The company is focusing on life cycle cost optimization to lower long-term costs. Shankh Mitra highlighted two anomalies: Holiday and HC-One portfolios, which require significant investment but were acquired at low costs.

Q:What is the expected spread between RevPOR and ExpPOR growth over the next few years?

A:Shankh Mitra stated that the spread should widen as occupancy increases, but factors like utility costs and real estate taxes could offset this. He emphasized focusing on bottom-line growth, noting high FFO and cash flow per share growth in the fourth quarter.

Q:What levels of NOI growth are expected across different regions and business segments in 2026?

A:Tim McHugh stated that overall portfolio NOI growth is expected to be 15%-21%, but no specific guidance was provided for sub-portfolios.

Q:How is the company addressing shifting customer preferences for larger residential units in senior housing?

A:Shankh Mitra acknowledged the importance of optimizing location, product, price point, and operations. He noted that the company avoids functionally obsolete buildings with excessive studio units and focuses on a balanced unit mix.

Q:Is the debt fund capital focused on assets that Welltower would ultimately like to own?

A:Nikhil Chaudhri clarified that the debt fund is not a loan-to-own strategy but focuses on lending to quality assets with strong sponsors. Shankh Mitra added that the fund is a simple first mortgage lending vehicle for acquisition credit.

Q:Review of Unclear Management Responses

A:Management avoided providing specific quantitative details or projections for future performance, particularly in response to questions about the compounding aspect of the portfolio, stabilized portfolio metrics, and the spread between RevPOR and ExpPOR growth. Responses often emphasized general strategies and optimism without concrete data.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

WELL Transcript

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WELL Slides

Welltower Q4 2025 slides: 20% NOI growth continues as portfolio transformation accelerates

2026-02-10

WELL Report

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