Welltower Earnings: Senior Housing's Recovery Drives Another Quarter of High Same-Store NOI Growth

Welltower reported first-quarter results that were slightly better than we anticipated, leading us to reaffirm our $98 fair value estimate for the no-moat company. Same-store occupancy for the senior housing portfolio only improved 10 basis points sequentially to 79.4%, though that is relatively in line with our estimate of a 20-basis-point sequential improvement. Rental rates improved 6.8% year over year, leading to same-store revenue growth of 10.0% in the first quarter. Same-store expenses only grew 6.7%, leading to operating margins improving 240 basis points to 22.4% and same-store net operating income growth of 23.4% that was slightly better than our estimate of 21.3% growth. The triple-net senior housing portfolio only saw same-store NOI grow 0.6% in the first quarter, below our estimate of 2.4%, though same-store NOI for the medical office portfolio grew 1.6%, in line with our estimate, and the skilled nursing segment grew 4.2%, above our estimate of 2.5% growth. Combined, same-store NOI for the whole company grew 11.0% in the first quarter, above our 8.8% estimate. As a result, normalized funds from operations came in at $0.85 per share, a penny better than our $0.84 estimate for the first quarter.