Welltower Earnings: Senior Housing Recovery Continues to Drive Company Same-Store Growth

Welltower reported third-quarter results that were slightly better than we anticipated, giving us confidence in our $103 fair value estimate for the no-moat company. Same-store occupancy for the senior housing segment improved 120 basis points sequentially to 81.7%, in line with our estimate of a 110-basis-point improvement. Rental rates increased 6.9% year over year, leading to same-store revenue growth of 9.8% for senior housing that was near our estimate of 9.6% growth. Meanwhile, same-store operating expenses only grew 5.1%, lower than our estimate of 6.8% expense growth, leading to senior housing same-store net operating income growth of 26.1% that beat our estimate of 19.6%. The company’s other segments also performed well, with the triple-net senior housing segment producing 3.9% same-store NOI growth, the medical office portfolio producing 3.4% same-store NOI growth, and the skilled nursing segment producing 5.3% same-store NOI growth. Combined, total company same-store NOI growth came in at 14.1%, ahead of our 10.1% estimate. As a result, Welltower reported normalized funds from operations of $0.92 per share in the third quarter, better than our $0.89 estimate and better than the $0.84 figure the company reported in the third quarter of 2022.