Welltower (NYSE: WELL) has in the last 45 days closed or is under contract on a pipeline of $2 billion, representing 27 transactions, mostly in senior living – a pace that CEO Shankh Mitra said he’s never seen in his almost decade with the company.
The transaction volume underscores the company’s position as “the preferred counterparty for those seeking certainty and rapid execution in the current challenging capital markets environment,” Mitra noted.
“Our ability to close such a significant volume of transactions and in a short time frame demonstrates our strong market position and efficient dealmaking capabilities,” Mitra said Wednesday during the company’s fourth quarter 2024 call with analysts and investors. “Our transaction model is simple: Acquire communities in our targeted micro markets, continue to build on our regional density with our aligned operating partners in those markets and treat our counterparties with fairness and respect.”
Mitra and the executive team at Welltower are optimistic about the road ahead given that senior housing demand is surging while the rate at which new communities are opening is at a near-record low.
Mitra added the outlook for new development has “gotten even worse in recent months” due to tariffs, immigration policies and higher interest rates that will continue to dampen the economics needed for new development. And he even sees some aspirant senior living developers as having a “fundamental misunderstanding” of profiting from new development, likening them to South Park’s underpants gnomes in that they can visualize demand and profit, but not what’s required to get there.
“[Step] one is there is a lot of demand coming … step number three is, we should be able to make profit from that by developing more,” Mitra said. “The step number two, in the middle, is missing.”
Those conditions have spurred the Toledo, Ohio-based real estate investment trust (REIT) to upsize its holdings and launch new ventures to accelerate its purchasing power. Late last month, the REIT launched a new private funds management business, which is acquiring NorthStar Healthcare Income and its 40 senior housing communities in a $900 million transaction.
Welltower also is looking to further improve the retention of associates working for operating partners in its senior housing operating portfolio (SHOP) and it is taking inspiration from other companies such as Costco.
An investor note from BMO Capital Markets, written by Juan Sanabria and John Kim, states “fundamentals remain robust with Welltower’s balance sheet [being] a powerful differentiator,” and shares are expected to perform well at this time.
Welltower’s senior housing holdings include 1,085 communities in its SHOP segment and 306 communities under triple-net leases.
Welltower’s stock was priced at $146.50, up 2.2% from the previous close.
Welltower continues acquisition momentum in Q4
Among Welltower’s biggest current strengths is its ability to buy senior housing communities at a discount to replacement cost, according to management. During the fourth quarter of 2024, the REIT completed $2.4 billion of investments, representing $2.2 billion for acquisitions and loan funding and $233 million for development funding.
Welltower Co-President and Chief Investment Officer Nikhil Chaudhri said the REIT transacted on similar properties as it has in the past generally newer-vintage assets in the low 80% range for average occupancy.
“We’ve had a long term track record of success of finding under-operating buildings,” Chaudhri said during the earnings call. “At the end of the day, what we care about is NOI and every single line item has room for optimization.”
Mitra added that “there are plenty of people who need help on the liquidity side.”
Management also noted that the company’s newly launched private funds management business has the ability to source up to $2 billion to invest in stable or near-stable properties. In addition to its plan to acquire NorthStar, the business has invested in a portfolio of six senior housing communities for $240 million.
In 2024, Welltower executed more than 54 transactions, representing more than 12,000 units across 119 properties with an average cost of $265,000 per unit – a “substantial discount to replacement cost,” Chaudri said. Nearly one-third of the acquisition activity took place in markets outside of the U.S., such as the U.K.
Future success hinges on performance
As Welltower acquires new senior living communities, it is also preparing them to achieve higher levels of performance. That includes renovating communities to better appeal to residents and staff and giving operators more data and tools with which to increase occupancy and margins.
All told, Welltower sees $515 million in embedded NOI growth ahead if its operating partners can return to pre-Covid occupancy and margins at today’s average resident rates.
In the fourth quarter of 2024, Welltower and its operating partners notched same-store NOI growth of almost 24% for its SHOP segment, representing the ninth consecutive quarter of NOI gains over 20%.
The segment averaged total occupancy of 84.8% in the fourth quarter of 2024, representing a gain over the segment’s total occupancy rate of 2.6% in the fourth quarter of 2023.
Between the third and fourth quarter of 2024, the SHOP segment achieved 120 basis points of occupancy growth, representing one of the strongest sequential occupancy gains the REIT has seen since the start of the Covid-19 pandemic, according to Welltower Vice Chairman and COO John Burkart.
The delta between the company’s revenue and expense growth also “reached the widest level in Welltower’s recorded history” in 4Q24, totaling 320 basis points of year-over-year margin expansion, according to Welltower.
Mitra said Welltower is anticipating an even stronger revenue per occupied room (RevPOR) environment after the summer leasing season of 2026.
“It’s hard to predict where things go, and as we are fundamental believers, it’s not about predicting, it’s about positioning. And we’re in the business of duration,” Mitra said.
Another priority for Welltower in 2025 is investing in employee retention strategies to drive better community operations. The company renovated dozens of communities to add “Costco break rooms” for employees who work there, Mitra said, likening the company’s efforts to what Costo builds for workers at its warehouse-sized retail locations.
Freshening up break room spaces – including by adding new furniture, stainless steel appliances and cabinets – gives employees an “inviting and rejuvenating experience when they take their break.”
According to the REIT, communities with renovated break rooms saw turnover fall 41% in the last quarter versus the start of last year. Those communities’ turnover rates also were 13% below that of unrenovated properties within the same operators’ portfolios
“We see this as an important step to hire and retain talent,” Mitra said.
Another tool in Welltower’s toolbox is the data platform it has rolled out and ramped up in recent quarters. The new platform began rolling out to Welltower’s first properties in the third quarter of 2024 and more are anticipated for the remainder of the first quarter of 2025.
Burkart said the rollout will take the next couple of years to complete, but the end goal will be a platform that provides “realtime, actionable data” to employees. Burkart added the experience would compare to the time he spent working at Costco’s predecessor Price Club when in college, where he would receive the sales of every item in a row, so he could see the impact of moving items around.
“We’re at the very cusp of providing our employees with real time, actionable data, enabling them to positively impact the business,” Burkart said. “We’re going as fast as possible, but we have to do it right, and so it does take a little bit of time.”
