Welltower has spent more than $400 million on long-term and post-acute care investments so far in 2023, while also experiencing a 5.3% increase in net operating income across such properties it has held for at least a year.
While much of the real estate investment trust’s third quarter activity was in its much larger senior living portfolio, company officials outlined several positive developments affecting nursing home holdings.
“I’m pleased to report another strong [quarter of] operating results, which continue to exceed our expectations,” CEO Shank Mitra said during a call with investors Tuesday morning. “Our senior housing portfolio posted another quarter of exceptional revenue growth, which continues to approximate double-digit levels, driven by both strong pricing power and occupancy build.”
On the senior housing side, occupancy acceleration brought Welltower-affiliated properties to their highest level over the last two years: 81.8% for facilities the REIT operates and 80.9% for facilities the REIT leases. In skilled nursing, average occupancy hit 80.3% in the third quarter.
Ohio-based Welltower now has 258 long-term care and post-acute facilities with a combined 32,265 beds, according to supplementary information shared along with third-quarter earnings information this week.
So far in 2023, the company has purchased 24 LTC/PAC facilities, representing nearly 2,900 beds, at an average price of $140,000 per bed. Of the $2.05 billion it has spent so far this year overall, Welltower has invested $405 million in LTC/PAC.
The company is focused on buying assets with occupancy rates in the 70% to 80% range, giving those places room to build, Mitra said.
“From a capital allocation standpoint, we have never been busier,” he added. “Last quarter we spoke about a pipeline of $2.3 billion. We closed $1.4 billion in Q3, and roughly another $900 million in October. Additionally, we have another $1 billion of deals just about to cross the finish line. Beyond these billion dollars of investments under contract, our pipeline remains large and near-term actionable. But the execution of these deals will depend on our access to capital.”
Mitra said about 80% of the pipeline deals are in the senior living sector, with some “creative opportunities on the skilled side” too.
Welltower has reduced its expenses too, company leaders said. Much of that has to do with staffing, with the provider moving to eliminate agency where possible.
“Our focus on materially reducing agency labor improves both the customer and employee experience, as both are benefited by permanent high-quality employees, compared to the random agency employees lacking relationships with our customers and knowledge of the community systems and processes,” said COO John Burkart.
“Additionally, eliminating the agency or middlemen enables us to ensure the hard working people at our communities receive a fair compensation package with vacation and benefits as well as competitive pay, and our shareholders benefit from the reduced leakage to the agency company owners,” Burkhart added.
Mitra added that employee turnover is coming down “significantly.”
“We are seeing that overall availability of employees who want to be part of our business and part of the communities is increasing significantly,” he said. “And we are seeing that our operating partners are getting better using technology and other resources to attract talent and keep them in the business. … Whenever you get hit by a crisis, people figure out ways to do things better. Every crisis makes the business better if it survives, right? And that’s what we are seeing.”
One area the company has little interest in? That would be starting new developments on either its skilled or senior living sides. Mitra called any such moves too risky to consider, especially given the current price of construction.
