Q4 2023 Welltower Inc Earnings Call

Operator: The Bulletproof Executive 2013 Good morning, and welcome to the Welltower fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good morning, and welcome to the World Tower fourth quarter 'twenty twenty-three earnings conference call.

Please note that this call is being recorded.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, press star 1 again.

If you would like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question Press Star one again.

Operator: I will now turn the call over to Matthew McQueen, General Counsel. You may begin your conference. Thank you, and good morning.

I will now turn the call over to Matthew Mcqueen General Counsel you May begin your conference.

Matthew G. McQueen: Thank you and good morning, as a reminder, certain statements made during this call maybe deemed forward looking statements in the meaning of the private Securities Litigation Reform Act, Although <unk> believes any forward looking statements are based on reasonable assumptions. The company can give no assurances that its projected results will be attained factors that could cause actual results to differ materially from those in the forward.

Matthew G. McQueen: As a reminder, certain statements made during this call may be deemed forward-looking statements. Although Welltower believes any forward-looking statements are based on a reasonable assumption, the company can give no assurances that its projected results. Factors that could cause actual results to differ materially from those in the, The Bulletproof Executive 2013, With that, I'll hand the call over to Matt. And good morning, everyone.

Matthew Mcqueen: Looking statements are detailed in the company's filings with the SEC and with that I'll hand, the call over to Sean for his remarks.

Sean: Thank you, Matt and good morning, everyone I will review, our fourth quarter and full year 2022 results and describe the high level business strength and our capital allocation priorities John will provide an update on the operational performance of our senior housing and outpatient medical portfolio and progress on our operating platform build.

Shankh Mitra: I will review our fourth quarter and full year 2023 results and describe high-level business trends and our capital allocation priority. John will provide an update on the operational performance of our senior housing and outpatient medical portfolios and progress on our operating platform build out. Nikhil will give you an update on the investment landscape, and Tim will walk you through our Triple N businesses, balance sheet highlights, and 2024 four-year guidance. First, as I reflect back on 23, it was a year of solid execution across the board with significant progress achieved in all aspects of the business. Operating performance far surpassed our initial expectations.

Nikhil will give you an update on the investment landscape.

Speaker Change: And Tim will walk you through our Triple net business is balance sheet highlights and 2020 for full year guidance.

Speaker Change: First as I reflect back on 23, it was a year of solid execution across the board with significant progress achieved in all aspects of the business operating performance far surpassed our initial expectations. We had a great year a record setting year in terms of capital deployment and we mean.

Shankh Mitra: We had a great year, a record-setting year in terms of capital deployment, and we meaningfully strengthened our balance sheet and liquidity profile. But just as importantly, perhaps, is the groundwork we laid to sustain this level of performance and continue to deliver outsized growth, not only in 2024 but also well into the future. This includes the considerable progress John and his team have made on the buildout of our operating platform, which we continue to believe will transform the industry. On top of that, as we have discussed in recent quarters, we have executed a number of operational transitions across all our geographies, as well as converted a handful of properties from TripleNet to RIDEA. All should bear fruit later this year and in 2025.

Speaker Change: <unk> fully strengthen our balance sheet and liquidity profile.

Speaker Change: Just as importantly, perhaps is the groundwork we laid to sustain this level of performance and continue to deliver outsized growth not only in 2024, but also well into the future. This includes the considerable progress John and his team have made on the build out of our operating platform.

Speaker Change: M, which we continue to believe will transform the industry on top of that as we have discussed in recent quarters. We have executed a number of operative transitions across all our geographies as well as converted a handful of properties from triple net to RIDEA all should bear fruit later this year and in <unk>.

Speaker Change: 25.

Speaker Change: We finished the year strong with significant momentum to set us up for another year of solid performance in 2020 four in terms of our senior housing operating portfolio I was particularly encouraged by the occupancy growth in fourth quarter, which is seasonally not the strongest period the portfolio saw Hyundai.

Shankh Mitra: We finished the year strong with significant momentum to set us up for another year of solid performance in 2024. In terms of our senior housing operating portfolio, I was particularly encouraged by the occupancy growth in the fourth quarter, which is seasonally not the strongest period. The portfolio saw 110 basis points of sequential occupancy gains, which translates into 330 basis points of year over year occupancy growth.

Speaker Change: And 10 basis points of sequential occupancy gains, which translate into 330 basis points year over year occupancy growth and the 330 basis points year over year occupancy growth is by far the highest.

Shankh Mitra: And the 330 basis points year over year occupancy growth is by far the highest level we have ever achieved in the fourth quarter of any year in our recorded history. Just as compelling is that looking at the intra-quarter trends, year-over-year occupancy growth strengthened each month, which is unusual given the aforementioned seasonality of the business. We're also pleased with the rate growth achieved by our managers. During our last call, I described to you that one of our largest operators, Sunrise, pulled forward Jan. 1, 2023 rate increases into 4Q 2022. This year, they have returned to their historical cadence of January 1 rate increases.

Speaker Change: Level, we have ever achieved in the fourth quarter of any year in our recorded history just as compelling.

Speaker Change: Is that looking at the intra quarter trends year over year occupancy growth strengthened each month, which is unusual given the aforementioned seasonality of the business.

Speaker Change: We're also pleased with the rate of growth achieved by our managers during our last call I described to you that one of our largest operator sunrise pulled forward Jan one 2023 rate increases.

Speaker Change: Into for Q2 thousand 22. This year they have returned to their historical cadence of Jan one rate increases while this distorts our show portfolios operate in reported Q4, 2023 or four or the unit revenue the rest of the portfolio delivered revpar growth of six 8%.

Shankh Mitra: While this distorts our show portfolio's reported Q4 2023 revenue or unit revenue, the rest of the portfolio delivered reported growth of 6.8%, reflecting the underlying fundamental strength of the business. While our 2024 guidance assumes some diminution of reported growth from full year 2023 levels of 6.6%, we still expect another year of near double-digit top-line growth as occupancy continues to build at a solid pace. For Q2023, same-store export or expense per occupied room grew 1.7% year-over-year, the lowest level of growth in Welltower's recorded history, driven by For Q2023, same-store compensation per occupied room growth, which grew 1.9% year-over-year, also the lowest growth in Welltower's recorded history. However, the normalization of agency labor usage is helping to dampen comfort growth.

Speaker Change: Reflecting the underlying fundamental strength of the business.

Speaker Change: While our 2024 guidance assumes some diminishing our revpar growth from full year of 2023 levels up six 6%, we still expect another year of near double digit topline growth as occupancy continues to build at a solid pace for Q2 thousand 23.

Speaker Change: Same store explore or expense per occupied room grew one 7% year over year, the lowest level of growth in one towers recorded history driven by for Q2 thousand 23 same store compensation per occupied room growth, which grew one 9% year over year.

Speaker Change: Also the lowest growth in World does recorded history, while the normalization of agency Labor you said is helping to dampen comp for growth.

Shankh Mitra: We are also seeing some good trends in the salary and wages line. All of these trends are resulting in a favorable spread between reported growth and export growth. The powerful combination of this revenue backdrop with continued margin expansion that should be expected due to the high operating leverage inherent in the business leaves us feeling very strongly about our 2024 NY growth setup. Tim will give you our detailed build-up of our NY guidance based on our current assumptions, but please understand that we have no false pretense about perfectly knowing what the business will look like as we move through the years, particularly the all-important summer months. But we are optimistic given the demand-supply backdrop, which improves by the day and the rising system-wide occupancy as well as the early success we have seen in John's operating platform build-out.

Speaker Change: We are also seeing some good trends in the salary and wages line. All of these trends are resulting in a favorable spread between revpar growth and explore growth. The powerful combination of this revenue backdrop with continued margin expansion that should be expected due to the high operating leverage inherent in the business.

Speaker Change: This leaves us feeling very strongly about our 'twenty 'twenty four and why growth setup, Tim will give you our detailed buildup of what NOI guidance based on our current assumptions, let's please understand that we have no false pretends about farcically, knowing what the business will look like as we move through the year.

Speaker Change: Particularly the all important summer months, but we are optimistic given the demand supply backdrop, which improves by the day and the rising system wide occupancy as well as the arlie a success, we have seen in John's operating platform build out while 24, 4% NOI growth last year.

Shankh Mitra: While 24.4% NY growth last year for our shop portfolio alone was very encouraging, it is the great trust that we have built with our 2023 counterparties that will make follow-on transactions easier to execute. These counterparties also experienced what our promise always is, that we honor our handshake irrespective of circumstances, as evidenced by our continued execution through this historic capital market volatility in the fall and winter of 2023. They know that we remain the clean shirt in an industry where retrading counterparties is the norm. It is interesting, and perhaps coincidental, that we are experiencing another bout of market volatility after a few weeks have passed. In the past few weeks, another regional banking crisis driven by USCRE debt appears to be rearing its ugly head from New York to Tokyo to Germany.

For our shop portfolio alone was very encouraging.

Speaker Change: I'm extremely pleased with our capital allocation activities as well in 2023 was the most active year in our history in terms of raising and deploying capital we completed almost $6 billion of investments in the year nearly half of which closed in Q4 alone.

Speaker Change: While I won't get into the specific transactions I will mention that they share. Some common characteristics first we generally grew with our existing operating partners in their respective markets second we acquired assets at a significant discount to replacement cost.

Speaker Change: Or funds be funds pension funds and financial institutions, who are seeking liquidity. We also added a couple of new operating partners, along the way, who I envision us growing with in the near term more to come on this topic as we progress through the year. The torrid pace of investment activity in Q4 has continued.

Speaker Change: With 2020 for starting off with a Bang in fact, I do not recall, having ever been this busy in first quarter on the deal front.

Speaker Change: While we have pre negotiated documents and structure to leverage it is great Trust that we have built with our 2023 counterparties that will make follow on transaction easier to execute these counterparties also experienced what our promise always is that we honored our handshake irrespective of circumstances.

Speaker Change: As evidenced by the continued our continued execution through this historic capital market volatility in the fall and winter of 2023. They know that we remain the clean chart in an industry, where re trading counterparties is the norm. It is interesting and perhaps coincidental that we're.

Speaker Change: Thing another bout of market volatility after a few weeks up com over the past few weeks and.

Speaker Change: And other retail banking crisis, driven by U S. CRE debt appears to be rearing. Its ugly head from New York to Tokyo to Germany. We are currently standing at approximately $16 billion of senior housing loans maturing in the next 24 months in the U S, which dwarfs roughly about cup.

Shankh Mitra: We are currently staring at approximately $16 billion of senior housing loans maturing in the next 24 months in the U.S., which dwarfs roughly about a couple of billion dollars of agency financing completed in 2023. This should generate significant equity as well as private credit opportunities for us. Suffice to say, our near-term capital deployment pipeline remains robust, highly visible, and actionable, and squarely within our circle of competence, where we can bet with house odds rather than gambler's odds. Along with what we have already done in 2023, these acquisitions that carry an attractive basis, operational upside, and significant value add from Welltower's operating platform, we will have a meaningful impact on what remains our true North Star, the With that, I will hand the call over to John.

Speaker Change: $1 billion of agency financing completed in 2023, this should generate significant equity as well as private credit opportunity for us suffice to say, our near term capital deployment pipeline remains robust highly visible and actionable and Wayne and squarely within.

Speaker Change: Our circle of competence, which where we can bet with how's odds rather than gamblers thoughts.

Speaker Change: Along with what we have already done in 2023, these acquisitions that carry an attractive basis operational upside and significant value add from all towers operating platform. We have we will will have a meaningful impact on what remains our true North star long term compounding.

Speaker Change: Our share value of our existing shortly.

Speaker Change: With that I will hand, the call over to John John Thank.

John: Thank you, Sean. Although most of my time at Welltower has been spent doing the Welltower hustle. Getting up every day, identifying and aggressively pursuing the opportunities that exist, focused on improving the customer and employee experience. I want to take a moment and reflect on how proud I am of the Welltower team for its success in doing just that, improving the customer and employee experience, which is, in part, reflected by our performance. We have all worked together to improve the customer and employee experience, which has resulted in fantastic results, on top of the industry-leading senior housing same-store NOI growth for the full year of 2022 of 20.1 percent. Our full year 2023 senior housing NOI growth was 24.4%. Often on earnings calls, you hear the words, "tough call."

John: Thank you Chuck.

John: Although most of my time at well tower has spent doing the west tower hustle getting up every day identifying and aggressively pursuing the opportunities that exist focused on improving the customer and employee experience.

John: I wanted to take a moment and reflect on how proud I am of the well tower team for success in doing just that improving the customer and employee experience, which in part is reflected by our performance focusing on senior housing for a moment the welfare of our team consists of our top operators and all of their employees.

John: Our key vendors as well as the welfare of our employees. We have all worked together to improve the customer and employee experience, which has resulted in fantastic results.

John: On top of the industry, leading senior housing same store NOI growth for the full year of 2022 of 21%.

John: Our full year 2023, senior housing NOI growth was 24, 4%.

John: Often on earnings calls you hear the words tough comps.

Speaker Change: That's certainly true here.

John: That's certainly true here, yet our guidance for 2024. Same store senior housing NOI growth at the midpoint is 18%. Therefore, based on our two full years that are completed and in the record books, 2022 and 2023, and our guidance of 18% in 2024, that indicates that the three-year compounded growth of our same store senior housing NOI in 2024 will be over 75%. That's something to reflect on.

Speaker Change: Yet our guidance for 2020 for same.

Speaker Change: Same store senior housing NOI growth at the midpoint is 18%.

Speaker Change: Therefore based on our.

Speaker Change: Two full years that are completed and in the record books 2022 and 2023.

Speaker Change: And our guidance of 18% in 2024.

Speaker Change: It indicates that the three year compounded growth of our same store senior housing NOI in 2024 will be over 75%.

Speaker Change: That's something to reflect the poll.

John: Thank you, Welltower team; our portfolio generated 12.5% same-store NOI growth over the prior year's quarter, led by the Senior Housing Operating Portfolio, with 23.7% year-over-year growth. The Outpatient Medical Portfolio produced same-store portfolio growth of 2.8% for the fourth quarter of 2023. This was driven by favorable operating expense management, increasing the operating margin by 220 basis points year-over-year to 71.4%. Notably, our proactive appeal process achieved favorable real estate tax reduction.

Speaker Change: Well, it's our team.

Speaker Change: Now back to our business.

Speaker Change: Our portfolio generated.

Speaker Change: 5% same store NOI growth over the prior year's quarter led by the senior housing operating portfolio with 23, 7% year over year growth. The outpatient medical portfolio produced same store portfolio growth of two 8% for the fourth quarter of 2023. This was driven by favorable operating expense.

Speaker Change: Management increasingly operating margin by 220 basis points year over year to 71, 4%, notably our proactive appeal process achieved favorable real estate tax reductions.

John: The 23.7% fourth quarter year-over-year NOI increase in our same store housing operating portfolio was a function of 9.7% revenue growth driven by the combination of 5.5% growth and 330 basis points of average occupancy gain and moderate expense growth. However, expenses remain in control coming in at 5.7% for the quarter over the prior year's quarter. Strong revenue growth and expense control led to continued margin expansion of 290 basis points. Our X4 growth for the quarter set a record for the lowest growth in our recorded history at 1.7%. All three regions continue to show strong same store revenue growth, starting with the U.S. at 9.4, Canada and the U.K. growing at 9.7% and 14.1%, respectively. The strong revenue growth in each region, combined with expense controls, has led to fantastic NOI growth in the U.S., Canada, and the U.K. of 21.8, 21.7, and 75.5 percent, respectively. We're flying along.

Speaker Change: 23, 7% fourth quarter year over year NOI increase in our same store housing operating portfolio was a function of nine 7% revenue growth driven by the combination of five 5% Revpar growth and 330 basis points of average occupancy gain and moderating expense growth.

Expenses remain in control coming in at five 7% for the quarter over the prior year's quarter.

Speaker Change: The strong revenue growth and expense control led to continued margin expansion of 290 basis points.

Speaker Change: Again.

Speaker Change: Our export growth for the quarter set a record for the lowest growth in our recorded history at one 7%. All three regions continued to show strong same store revenue growth starting with the U S at $9 for Canada, and the U K growing at nine 7% in 2014, 1% respectively.

Speaker Change: The strong revenue growth in each region combined with the expense control have led to fantastic NOI growth in the U S, Canada and the U K of 21, 821, seven and 75, 5%, respectively with liner long.

Speaker Change: With our integrated platform initiative, which will start to go live at our first operator in the first half of this year.

John: With our integrated platform initiative, which will start to go live at our first operator in the first half of this year, I will not go into all the details, but I will say that our focus on improving the customer and employee experience is coming together very well. The integration of the various modules will simplify the customer experience and reduce the labor around basic tasks, enabling our site teams to focus on what they love, our customers. More to come in 2024. I will now turn the call over to Tim. I'll go next.

Speaker Change: I will not go into all the details, but I will say that our focus on improving the customer and employee experience is coming together very well the integrations of the various modules will simplify the customer experience and reduce the labor around basic task, enabling our site teams to focus on what they love.

Speaker Change: Are customers.

Speaker Change: More to come in 2024, I will now turn the call over to Tim.

Nikhil: Yeah, thanks, John. On the transaction side, as Shankh mentioned, 2023 marked the most active year in the history of the company. Our new investment activity of almost $6 billion spanned more than 50 different transactions with a median transaction size of $54 million, in which we acquired 153 properties over the course of the year. I am sure you all have read about the confluence of a few factors that are creating the current investment background, namely, the Great Wall of CRE Debt Maturity, pressure on the regional bank balance, and the denominator. Welltower is uniquely positioned to capitalize on these trends and serve as a counterparty of choice for our private equity sponsors, large pension and asset managers, and entrepreneurs that are impacted by these changes. We are able to source these opportunities directly from sellers or through our operating partners, given our reputation as a good partner and a reliable and credible counterpart.

Tim: Yes, Thanks John.

Tim: The transaction side as John mentioned 2023 marked the most active year in the history of the company.

Tim: Our new investment activity of almost $6 million.

Tim: And more than 50 different transactions with a median transaction size of $34 million in which we acquired a 153 properties over the course of the year.

Tim: I am sure you all have read about the confluence of a few factors that are creating the current investment backdrop, namely the great wall of CRE debt maturities expiring sulphur caps pressure on the regional bank balance sheets and the denominator effect.

Tim: <unk> is uniquely positioned to capitalize on these trends and serve as a counterparty of choice for our private equity sponsors large pension and asset managers and entrepreneurs that are impacted by these challenges.

Tim: We are able to source these opportunities directly from sellers or through our operating partners given our reputation of being a good partner and a reliable and credible counterparty.

Tim: We are then able to analyze and underwrite quickly and in great detail. Thanks to the combination of our data analytics platform Alpha and our best in business investment team.

Nikhil: We are then able to analyze and underwrite quickly and in great detail, thanks to the combination of our data analytics platform, Alpha, and our best in business investment. Finally, and perhaps most importantly, we then execute on the business plan for each asset through our deep network of aligned operating partners backed by the operating platform that John is methodically building. These factors drive our sustainable competitive advantage for creating shareholder value. Our 2023 investment activities will be focused on granular, off-market, high-conviction transactions. A majority of the transactions were focused on our seniors and wellness housing businesses, where we acquired additional assets and markets where we already have high-performing assets. In the fourth quarter alone, we closed on nearly $3 billion of investments while remaining targeted and disinvested. We acquired 44 senior housing properties from 11 different sellers, growing our relationship with seven existing operators. We acquired roughly 8,800 units with an average age of around seven years at an average basis of $222,000 per unit at an approximately 40% discount to retail.

Tim: Finally, and perhaps most importantly, we then execute on the business plan for each asset through our deep network of aligned operating partners backed by the operating platform that John is methodically building out.

Tim: These factors drive our sustainable competitive advantage for creating shareholder value.

Tim: Our 2023 investment activity was focused on granular off market high conviction transactions a majority of the transactions were focused on our seniors housing businesses, where we acquired additional assets in markets, where we already have high performing assets.

Tim: By acquiring these assets at an attractive basis and consolidating operations under the same operator, we are able to reap the operating benefits of regional density.

Tim: In the fourth quarter alone.

Tim: Hold on nearly $3 billion of investments, while remaining targeted and disciplined we acquired 44 senior housing properties from 11 different sellers growing our relationship with seven existing operating partners. We acquired roughly 8800 units with an average age of around seven years at an average basis of 222000.

Tim: Per unit at an approximately 40% discount to replacement cost. These transactions have a low sixes year, one yield and are expected to generate unlevered IRR north of 10%.

Nikhil: These transactions have a low sixes year one yield and are expected to generate unlevered IRRs north of 10. I am also excited to provide an update on the performance of our Integra, where we have continued to see sequential improvement. For the 140 buildings that first transitioned to regional operators, we have seen annualized EBITDARM improve by more than $300 million, from losing more than $85 million in the three months prior to the transition to positive $228 million in the third quarter. While there continues to be meaningful remaining upside in performance beyond the current state, I am pleased to announce that EBITDARM coverage is now greater than one and a half. We also transitioned the last seven remaining buildings earlier this month after getting the final set of regulations.

Tim: Im also excited to provide an update on the performance of our Integra portfolio, where we have continued to see a sequential improvement in performance.

Tim: For the 140 buildings that first transition to regional operators, we have seen annualized EBITDAR improved by more than $300 million.

Tim: From losing more than $85 million in the three months prior to the transition to positive $228 million in the third quarter.

Tim: While there continues to be meaningful remaining upside and performance beyond the current state I am pleased to announce that EBITDAR coverage is now greater than one five times. We also transitioned the last seven remaining buildings earlier. This month after getting the final set of regulatory approvals.

Tim: On the back of our continued success turning around operations for our legacy Genesys and <unk> skilled nursing portfolios we have.

Nikhil: On the back of our continued success turning around operations for our legacy Genesys and ProMedica skilled nursing portfolios, we were active in deploying capital in the skilled space as we partnered with regional operators to acquire under-managed assets. And given the credit nature of our skilled nursing investments, we always strive to have meaningful downside protection through a combination of right-per-bed basis in states with favorable reimbursement landscapes and significant credit protection through personal and entity level guarantees. Looking ahead to 2024, we are off to an exciting start.

Tim: We were active in deploying capital in the skilled space as we partnered with regional operators to acquire under managed assets given the credit nature of our skilled nursing investments, we always strive to have meaningful downside protection through a combination of right per bed basis in states with favorable reimbursement landscape and significant.

Tim: Garrett protection through personal and entity level guarantees.

Tim: Looking ahead to 2024, we're off to an exciting start we are delighted to announce our strategic partnership with affinity living communities in which we are entering into a long term programmatic development relationship.

Nikhil: We are delighted to announce our strategic partnership with Affinity Living Communities, in which we are entering into a long-term programmatic development relationship and acquiring the Affinity portfolio of 25 active adult properties with an average age of less than eight years for $969 million, or $233,000 per unit after allocating the NPV of interest cost savings to the assumed below market. Darren, Scott, Charlie, and John have built a fantastic business over the last decade as they have meticulously iterated and refined the Affinity Program. Their vertically integrated platform and unwavering focus on efficiency have enabled them to grow their footprint in typically expensive Pacific Northwest markets at an attractive basis to provide moderately priced active adult housing at average rents of approximately $2,100.

Tim: And acquiring the affinity portfolio of 25 active adult properties with an average age of less than eight years for $969 million.

Tim: Or $233000 per unit after allocating the NPV of interest cost savings to the assumed below market that.

Tim: Darren Scott, Charlie and John has built a fantastic business over the last decade, as they have meticulously iterate and refine the affinity prototype they're vertically integrated platform and unwavering focus on efficiency has enabled them to grow their footprint and typically expensive Pacific northwest markets at an attractive basis.

Tim: To provide moderately priced active adult housing at average rents of approximately $2100 per month, we have been incredibly pleased with the operating performance of our moderately priced active adult business over the last few years and are excited to partner with the affinity team to further grow that business.

Nikhil: We have been incredibly pleased with the operating performance of our moderately priced active adult business over the last few years and are excited to partner with the Affinity team to further grow it. Our investment team remains incredibly busy as we continue to be the steady hand and trusted counterparty in our business and remain well positioned to capitalize on capital structure issues across. We are inundated with opportunities up and down the capital stack and continue to balance price discipline, operator selection, and capital availability to be thoughtful stewards of our shareholders. I'll now hand over the call to Tim to walk through our financial results in 20... Thank you, Nikhil.

Tim: Our investment team remains incredibly busy as we continue to be the steady hand, and trusted counterparty and our business and remain well positioned to capitalize on capital structure issues across the industry. We are inundated with opportunities up and down the capital stack and continue to balance price disciplined operators selection.

Tim: And capital available.

Tim: To be thoughtful stewards of our shareholders' capital.

Speaker Change: I'll now hand over the call to attempt to walk through our financial results in 2020 for guidance.

unknown: Thank you Neil.

Speaker Change: Common stay will focus on our fourth quarter and full year 2023 results performance of our Triple net investment segments, our capital activity, our balance sheet liquidity update and finally, the introduction of our full year 2020 for outlook.

Tim: My comments today will focus on our fourth quarter and full year 2023 results, the performance of our triple net investment segments, our capital activity, a balance sheet liquidity update, and finally, the introduction of our full year 2024 outlook. Welltower reported fourth quarter net income attributable to common stockholders of $0.15 per diluted share and normalized funds from operations of $0.96 per diluted share, representing 15.7% year-over-year growth. We also reported total portfolio, same store, and OI growth of 12.5% year-over-year. Now turning to the performance of our triple net properties in the corridor. As a reminder, our Triple Net Lease portfolio coverage and occupancy stats are reported a quarter in arrears, so these statistics reflect the trailing 12 months ending 9-30-2023. In our Senior Housing Triple Net Portfolio, Same-Storm NOI increased 2.2% year-over-year, and trailing 12-month EBITDA coverage was 0.95 times.

Neil: <unk> reported fourth quarter net income attributable to common stockholders of <unk> 15 per diluted share and normalized funds from operations of <unk> 96 per diluted share representing 15, 7% year over year growth.

Neil: We also reported total portfolio same store NOI growth of 12, 5% year over year.

Neil: Now turning to the performance of our Triple net properties in the quarter.

Speaker Change: As a reminder, our triple net lease portfolio coverage and occupancy stats reported a quarter in arrears. So these statistics reflect the trailing 12 months ending 932023.

Speaker Change: And our senior housing Triple net portfolio same store NOI increased two 2% year over year and trailing 12 month EBITDAR coverage was <unk> 95 times.

Speaker Change: It is also worth noting that our trailing three month coverage in this segment moved above one times for the first time since the pandemic.

Speaker Change: Next same store NOI on a long term post acute portfolio group grew five 2% year over year and trailing 12 month EBITDAR coverage was 136 times.

Speaker Change: Turning to capital activity, we invested $3 billion in acquisitions loans and developments in the quarter led by $2 1 billion of senior housing operating investments.

Speaker Change: In the quarter, we continued to fund investment activity and via equity issuance completing a bought equity deal in November which along with regular way ATM activity resulted in $2 $8 billion of gross proceeds in the quarter at an average price of $86 20 per share is.

Speaker Change: This equity issuance allowed us to fund investment activity, along with the extinguishment of approximately $250 million of debt in the quarter and end the year with a $2 $1 billion cash balance.

Tim: It is also worth noting that our trailing three-month coverage in this segment moved above one times for the first time since the pandemic. Next, same-story NOI in a long-term post-acute portfolio group grew 5.2% year-over-year, and trailing 12-month EBITDA coverage was 1.36 times. Turning to capital activity, we invested $3 billion in acquisitions, loans, and developments in the quarter, led by $2.1 billion of senior housing operating investment. In the quarter, we continued to fund investment activity via equity issuance, completing a bought equity deal in November, which, along with regular way ATM activity, resulted in $2.8 billion of gross proceeds in the quarter, an average price of $86.20 per share. These equity issuances allowed us to fund investment activity along with the extinguishment of approximately $250 million of debt in a quarter and end the year with a $2.1 million cash balance.

Speaker Change: Staying with the balance sheet.

Speaker Change: 2023, I want to highlight the balance sheet transformation that has occurred over the last 24 months.

Speaker Change: When COVID-19 hit in 2020, we acted quickly to protect our balance sheet by securing substantial incremental liquidity in large part by reducing cash outlays and taking advantage of strong asset values by selling long lease duration assets into a zero interest rate environment.

Speaker Change: These actions helped alleviate the impact of nearly 50% drawdown in senior housing operating NOI that bottomed out in the first quarter of 2021.

Speaker Change: Driving peak leverage to nearly seven five times X HHS funds.

Speaker Change: After stabilizing the portfolio and the <unk> in 2021, the combination of a strong recovery in senior housing performance and disciplined acquisition of external growth over the last two years.

Speaker Change: Allowed us to methodically lower leverage, finishing this year with 5.03 times net debt to EBITDA.

Speaker Change: Consistent with past commentary around the balance sheet I want to underscore that despite the improvements in metrics parent leverage still does not reflect a full post COVID-19 recovery in senior housing operating NOI.

Tim: Staying with the balance sheet, as we finish 2023, I want to highlight the balance sheet transformation that has occurred over the last 24 months. When COVID hit in 2020, we acted quickly to protect the balance sheet by securing substantial incremental liquidity, in large part by reducing cash outlays and taking advantage of strong asset values by selling long lease duration assets into a zero interest rate environment. These actions helped alleviate the impact of nearly a 50% drawdown in senior housing operating NOI that bottomed out in the first quarter of 2021, driving peak leverage to nearly seven and a half times HHS funds.

Speaker Change: And our portfolio still sits meaningfully below pre COVID-19 NOI levels, a recovery back to these levels will drive leverage well below five times.

Speaker Change: In summary in 2023, our post COVID-19 balance sheet recovery transitioned into our strategic repositioning.

Speaker Change: In the year was substantially upgraded metrics in prior to the pandemic.

Speaker Change: And expectation for further improvement as our senior housing operating portfolio continues to carry significant organic cash flow growth momentum into 2024.

Speaker Change: This positions us with substantial capacity to continue to make systematically opportunistic capital allocation decisions to drive long term shareholder returns in any market environment.

Speaker Change: Lastly, as I move on to the introduction of our full year 2024 guidance I want to remind you that we have not included any investment activity and our outlook beyond that which has already been announced publicly.

Tim: After stabilizing the portfolio in the sevens in 2021, the combination of a strong recovery in senior housing performance and disciplined equitization of external growth over the last two years has allowed us to methodically lower leverage, finishing this year with 5.03 times net debt to EBITDA. Consistent with past commentary around the balance sheet, I want to underscore that despite the improvements in metrics, current leverage still does not reflect a full post-COVID recovery in Senior Housing Operating NOI, as our portfolio still sits meaningfully below pre-COVID NOI levels. Our recovery back to these levels will drive leverage well below five times.

Speaker Change: Last night, we introduced an initial full year 2020 for outlook for net income attributable to common stockholders of $1 21 to $1 37 per diluted share and normalized <unk> of $3 94 to $4 10, polluted share or $4 <unk> at the midpoint.

Speaker Change: As mentioned in our release last night, our 2024 guidance contemplates no HHS or other government grants. So after adjusting for <unk> received in 2023, the midpoint of our initial guidance represents 11, 5% year over year growth.

Speaker Change: This year over year increase in <unk> per share is composed of.

Speaker Change: A 33% increase from higher year over year senior housing operating NOI.

Speaker Change: <unk> increased from higher NOI in our outpatient medical and Triple net lease portfolios.

Speaker Change: A <unk> <unk> headwind from higher year over year growth in G&A expenses tied mainly to the continued build out of our operating platform and finally, a 10% increase from investment activity and financing activity.

Tim: In summary, in 2023, our post-COVID balance sheet recovery transitioned into a strategic repositioning, ending the year with substantially upgraded metrics from prior to the pandemic. Next, an expectation for further improvement as our senior housing operating portfolio continues to carry significant organic cash flow growth momentum in 2024. Lastly, as I move on to the introduction of our full year 2024 guidance, I want to remind you that we have not included any investment activity in our outlook beyond that which has already been announced publicly. Last night, we introduced an initial full year 2024 outlook for net income attributable to common stockholders of $1.21 to $1.37 As mentioned in our release last night, our 2024 guidance contemplates no HHS or other government grants.

Speaker Change: Underlying this guidance is an estimate of total portfolio year over year same store NOI growth of eight 5% to 11, 5%.

Speaker Change: Given by sub segment growth of outpatient medical 2% to 3% long term post acute 2% to 3% senior housing Triple net two 5% to 4% and finally senior housing operating growth of 15% to 21%.

Speaker Change: The midpoint of which is driven by revenue growth of approximately nine 2%.

Speaker Change: Underlying this revenue growth is an expectation for revpar growth of approximately five 5% an acceleration in year over year occupancy growth to 290 basis points.

Speaker Change: And with that I'll hand, the call back over to shock.

Shock: Thank you Tim I wanted to address a few important topics before I open the call up for questions.

Shock: As you May know on November 28, we lost my personal hero mentor and friend Charlie Munger.

Shock: We are deeply saddened by his death and thank many of you for reaching out to my team and me. During this difficult time, Charlie was truly generous with his wisdom continually guiding us.

Shock: Not only on the importance of compounding, but also behaving like owners not managers and these are being great partners by being one and taking far less crowded high road and acting with conviction when the conditions were right. We witness is weight uncommon sense simplicity fashion for multi disciplined rally.

Tim: This year over year increase in FFO per share is composed of a $0.33 increase from higher year-over-year senior housing operating annualized and $0.02 increase from higher NOI in our outpatient medical and triple net lease portfolio. A $0.04 headwind from higher year-over-year growth in G&A expenses, tied mainly to the continued build-out of our operating platform. And finally, a $0.10 increase from investment activity and financing. Underlying this FFO guidance is an estimate of total portfolio year-over-year same-story and wide growth of 8.25% to 11.5%, driven by sub-segment growth of outpatient medical, 2-3%, long-term post-acute, 2-3%, senior housing triple net, 2.5-4%, and finally, senior housing operating growth of 15-21%, the midpoint of which is driven by revenue growth of approximately 9.2%. Underlying this And with that, I'll hand the call back over to Shankh.

Shock: And in it heavily to cut through noise and arrived at a right decision.

Shock: The influence he had on well tower its people and its culture is truly immeasurable.

Shock: Marine guidance and Sage principal advice has been invaluable to me in my life and my career.

Shock: He was also instrumental influence on the members of our senior leadership team to whom he gave his greatest gift of all time is time, we're grateful for the time, we spent in his presence I owe him a lifetime that that cannot be repaid, but we will carry forward his teachings in how we deal with our owners.

Shock: Partners residents employees and others.

Shock: Most profound impact on us is perhaps demented and the ground rule document that he guided me to right that you can find out find on our website moving.

Shock: Moving onto a less summer topic I want to draw your attention to some of the partners, which we forged new relationship with in 2023 beyond what we have announced so far I want to highlight affinity as our new growth partner Nikhil walked you through the investment rationale of affinity, but I would also like to express our.

Shock: Excited I am to work with data in Davidson and his team there.

Shock: As we have gotten to know Darin over last five years. He has proven to be a man of high integrity and thoughtfulness with a true campus on the future direction of how older Americans want to live.

Shankh Mitra: Thank you, Tim. I wanted to address a few important topics before I open the call up for questions. As you may know, on November 28th, we lost my personal hero, mentor, and friend, Charlie Munger. We are deeply saddened by his death and thank many of you for reaching out to my team and me during this difficult time.

Shock: Despite adding a few handful of managers to a growth platform in 2023, our partner and geographic strategy remains to go deep instead of going broad in our consolidated roster of existing managers reflect that in summary, I hope that the optimism conveyed.

Shock: By my partners today on growth prospects of our business has resonated with you while we remain focused on the execution of our 2020 for strategic and operational goals I cannot help but draw your attention to the outsized multiyear growth trajectory in front of us which is supported by.

Shankh Mitra: Charlie was truly generous with his wisdom, continually guiding us, not only on the importance of compounding, but also behaving like owners, not managers, and deserving great partners by being one, and taking far less crowded high road, and acting with conviction when the conditions were right. We witness his wit, uncommon sense, simplicity, passion for multi-discipline running, and innate ability to cut through noise and arrive at the right decision.

Shock: Five different growth pillars number one some of it is questionably is a function of favorable demand supply setup that I think you all understand this should only get better as we look into 2025 and 2026 number two a lot of my personal enthusiasm same.

Shankh Mitra: The influence he had on Welltower, its people, and its culture is truly immeasurable. His serene guidance and sage, principled advice has been invaluable to me in my life and my career. Charlie was also an instrumental influence on the members of our senior leadership team, to whom he gave his greatest gift of all time, his time. We're grateful for the time we spent in his presence. I owe him a lifetime debt that cannot be repaid.

Shock: From the digital transformation and business process optimization that John is driving we should start to see some fruits of his labor this year, but much more than 25% and 26 number three overlay that with the impact of one hundreds of properties that we have recently transitioned board agreed to transition to <unk>.

Shock: Other operators I am excited about the improving resident and employee experience that is currently underway with a financial impact. Following soon thereafter number four at our extremely targeted and disciplined growth external growth opportunities and last but not least number five our under levered balance sheet.

Shankh Mitra: But we will carry forward his teachings in how we deal with our owners, partners, residents, employees, and others. His most profound impact on us is perhaps cemented in the ground rule document that he guided me to write that you can find on our website. Moving on to a less somber topic, I want to draw your attention to some of the partners with whom we will forge new relationships in 2023. Beyond what we have announced so far, I want to highlight Affinity as our new growth partner. Nikhil walked you through the investment rationale for Affinity, but I would also like to express how excited I am to work with Darren Davidson and his team there. As we have gotten to know Darren over the last five years, he has proven to be a man of high integrity and thoughtfulness with a true compass on the future direction of how older Americans want to live.

Shock: That which Steve just described to you we will continue to experience further organic deleveraging, which will either support AA rating all provide capacity for additional external growth as we think about the next couple of years, we have never felt better about the growth.

Shock: Prospects are accelerating growth prospects of our earnings and cash flow for our company on a per share basis with that I will open the call up for questions.

Speaker Change: Thank you.

Speaker Change: This time I would like to remind everyone in order to ask a question. Please press star one.

Speaker Change: We kindly ask that callers limit themselves to one question.

Speaker Change: Your first question comes from Conor Seversky with Wells Fargo. Please go ahead.

Operator: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star one. We kindly ask that callers limit themselves to one question. Your first question comes from Connor Siversky with Wells Fargo. Please go ahead. Good morning out there.

Conor Seversky: Good morning out there. Thank you for the time and appreciate the detail in your prepared remarks. So an observation a couple of short questions on wellness housing the affinity portfolio generating a 60% operating margin not exactly comparable but seems to be above the range on a traditional assisted living facilities could achieve so first question on this and where does that 60% margins.

Shankh Mitra: Thank you for your time and I appreciate the detail in your prepared remarks. To an observation, a couple short questions on wellness housing. The Affinity Portfolio generating a 60% operating margin, not exactly comparable, but seems to be above the range that a traditional assisted living facility could achieve. So first question on the, Second, with what looks like a very solid return profile, how much do we expect Welltower to lean into this segment in the years ahead? Finally, how has REVPOR and NOI growth in that portfolio trended over the last few years? You snuck in three questions. Let me see if I can understand or remember all of them.

Conor Seversky: Sit on the Bell curve of wellness housing operating performance outcomes second with what looks like a very solid return profile how much do we expect well tower to lean into this segment in the years ahead, and finally, how has revpar and NOI growth in that portfolio trended over the last two to three years.

Speaker Change: You snuck in three questions. Let me see if I can understand remember all of them first is we laid out our strategy of how we see investing in the senior living space, which is high price point, a very affluent micro market.

Speaker Change: High acuity product, if you will where we provide a service that can be actually charged accordingly, and hire people and pay them appropriately. So that's why the strategy on the other side of the barbell, we went from no acuity and build out our business over the last six years five six years on this one.

Shankh Mitra: First, we laid out our strategy of how we see investing in the senior living space, which is a high price point, very affluent micro market, you know, high acuity product, if you will, where we provide a service that can be charged accordingly, and hire people and pay them appropriately. So that's one strategy. On the other side of the barbell, we went from no acuity and built out a business over the last six years, five, six years, on this wellness housing side with a much lower price point, but almost no services. So it's sort of from an acuity standpoint, and that provides, obviously, a much higher than Y margin. That's the two business segments that we know how to do well and make money. And that's where we are. I'm not suggesting that anything in between is not something that is right or wrong or anything like that, but just not something that we're focused on.

Speaker Change: As housing side wait much lower price point, but almost no services. So you sort of from an acuity standpoint, and that provides obviously much higher NOI margin. That's still two business segment that we know how to do well and make money and Thats why we are I am not suggesting that anything in between is <unk>.

Speaker Change: It's something that is.

Speaker Change: Right or wrong or anything like that but just not something that we're focused on now going back to your question, where that 60% or so margin sits in that well as housing spectrum I will say it says towards the upper end, probably the upper half, but no means an aberration.

Speaker Change: You think about I think about this business from mostly a mid $50 to mid 60% margin business.

Speaker Change: Your last question how is that.

Speaker Change: Growth has been in the World is housing.

Speaker Change: Historically it has been growing I would say mid to high single digit in 2023, the NOI growth for our wellness housing portfolio on a same store basis has been 12, 2% in fourth quarter alone that was 13, 1% hope I remember all your questions.

Shankh Mitra: Now, going back to your question, where that 60% or so margin sits in that wellness housing spectrum, I will say it sits towards the upper end, probably the upper half, but no means an aberration, right? Sort of you think about, I think about this business from mostly a mid 50s to mid 60% margin business. Your last question: how has the growth been in wellness housing? You know, historically, it has been growing, I would say, mid to high single digits. In 2023, the NOI growth for our wellness housing portfolio on a same store basis has been 12.2%. In the fourth quarter alone, that was 13.1%.

Speaker Change: Your next question comes from Jeff Spector with Bank of America. Please go ahead.

Jeff Spector: Great Good morning, and congratulations on a great year.

Jeff Spector: Our next bunch of questions, but I'll just focus on one.

Jeff Spector: After three years of very strong better than expected internal growth the market appears to be pricing in approximately 700 800 basis points of deceleration as we look ahead does growth.

Jeff Spector: Normalized from here or can the current growth trajectory continue.

Speaker Change: Thank you Jeff for the question I'll start probably with one of my favorite <unk>.

Shankh Mitra: I hope I remember all your questions. Your next question comes from Jeff Spector with Bank of America. Please go ahead. Good morning, and congratulations on a great year.

Speaker Change: Which is knowing what you don't know is actually lot more useful than being brilliant.

Speaker Change: So I wanted to make sure you understand that we have no hubris.

Shankh Mitra: We have a bunch of questions, but I'll just focus on one. After three years of very strong, better than expected internal growth, the market appears to be pricing in approximately 700 to 800 basis points of deceleration. As we look ahead, does growth... normalize from here, or can the current growth trajectory continue? Thank you, Jeff, for the question. I'll start with one of my favorite mongerisms.

Speaker Change: What we don't know so frankly speaking I'm pretty surprised for many months ive been reading of it is in <unk>.

Speaker Change: Research reports talking to investors that sort of this idea that if you had three to Goodyear. Some numbers, obviously that has to go down pretty meaningfully frankly speaking I don't personally understand that.

Speaker Change: I will tell you that we.

Speaker Change: We don't know how <unk> is going to completely play out we give you our best guess that Tim described to you.

Jeff Spector: It is possible that we have another year of that growth rate that sort of similar to last two years possible. If we have a strong <unk>.

Shankh Mitra: So I want to make sure you understand that, you know, we have no idea of what we don't know. So I'm, frankly speaking, I'm pretty surprised. For many months, I've been reading about this in research reports, talking to investors, this sort of idea that if you have three, you know, two good years of numbers, obviously, that has to go down pretty meaningfully. Frankly speaking, I don't personally understand that. I will tell you that we don't know how this year is going to completely play out. We gave you our best guess, which Tim described to you. It is possible that we have another year of that growth rate that's sort of similar to the last two years, possible if we have a strong summer, you know, sort of leasing season. Right.

Jeff Spector: Some are sort of leasing season, right, but I think we're going to have many great years in front of us with double digit NOI growth now with weather. This year next year. This quarter next quarter I don't know what chips will fall, but as we think about taking this portfolio to where it should be leased.

Jeff Spector: Which one.

Jeff Spector: Our opinion is we are told you there will be very disappointed if we go back to pre Covid. There is no reason, we can't even go back to where 2015 levels were because if you look forward next few as Youll see demand supply has been significantly better and our platform build out should help us get well past that we should have double digit NOI growth.

Jeff Spector: For years to come I hope that answer your question, we have no hubris.

Jeff Spector: Knowing what we don't know.

Jeff Spector: What we think is also this idea that.

Shankh Mitra: But I think we're going to have many great years in front of us with double-digit wine and growth. Now, with, you know, whether this year, next year, this quarter, next quarter, I don't know what the tipping point will be. But as we think about taking this portfolio to where it should be leased, you know, with our opinion, as we have told you, that we'll be very disappointed if we go back to pre-COVID. There is no reason we can't even go back to where 2015 levels were, because if you look forward a few years, you will see demand and supply have been significantly better.

Jeff Spector: Because our business has done so well for last two years. It has to go down it has to meaningfully decelerated as a reminds me that.

Jeff Spector: Perhaps we should have.

Jeff Spector: More.

Jeff Spector: Humility of what we don't know, we'll see how that plays out we'll see what market gives us. Thank you.

Jeff Spector: Your next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra: Thanks for taking the question I guess I wanted to you have a very strong outlook on on sharp I wanted to dig into that a bit more of this in two parts.

Vikram Malhotra: One can you talk about sort of at the high end of your guidance range. What you are and maybe the low end, what you've baked in for Revpar growth and then related to that as.

Shankh Mitra: And our platform build out should help us get well past that. We should have double-digit and wine growth for years to come. I hope that sort of answers your question. We have no hubris of, you know, sort of knowing what we don't know. But we think it's also this idea that, you know, because our business has done so well for the last two years, it has to go down. It has to meaningfully decelerate.

Vikram Malhotra: As you sort of trend towards 85 ish, 86% occupancy clearly their benefits.

Vikram Malhotra: The bottom line, but I wanted to understand you did the operators need to staff up or spend more marketing dollars is there are you know me.

Vikram Malhotra: Some.

Vikram Malhotra: <unk> trends that you can share with us to achieve that 85% of the margin flow through.

Speaker Change: Yes, I will.

Speaker Change: I'll start with the <unk>.

Shankh Mitra: It sort of reminds me that, you know, perhaps we should have more humility about what we don't know. We'll see how it plays out. We'll see what the market gives us. Thank you. Your next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Speaker Change: And then I'll hand over to John for any comment on kind of the operating expense side, but.

Speaker Change: But the rent growth think about kind of five to five five and means that drives.

John: Pluses from the bottom to the top of that range.

John: Yes.

John: How the numbers work as <unk> said for a long time.

Shankh Mitra: Morning, thanks for the question. I guess I wanted to, you have a very strong outlook on on shop, so I wanted to dig into that a bit more in two parts. One, can you talk about sort of at the high end of your guidance range, what you are and maybe the low end, what you've baked in for rest for growth. And then related to that, as you sort of trend towards 85 ish 86% occupancy, clearly, there are benefits, you know, to the bottom line. But I wanted to understand, do you think the operators need to improve or spend more marketing dollars? Is there, you know, maybe some broad trends that you can share with us to achieve that 85% of the market? Yeah, I will try it.

John: Flow through gets pretty fantastic as you get north of 80%.

John: So when you talk about staffing up that you really have I mentioned this over the last call. The physicians are in place your head chef you have here.

Speaker Change: That gave a director et cetera et cetera, So it's very incremental.

Speaker Change: As part of the curve there is a lot of money that comes to the bottom line as you increase occupancy and additionally, as we've said because of supply demand factors. That's just expected in the marketplace.

Speaker Change: We may or may not decide to spend more money on marketing to accelerate that but.

Speaker Change: The conditions are fantastic right now.

Speaker Change: Your next question comes from Jonathan Hughes with Raymond James. Please go ahead.

Jonathan Hughes: Hi, good morning, Thanks for the time.

Jonathan Hughes: I wanted to ask about the trajectory of of external growth.

Jonathan Hughes: You lay out in the business update deck the opportunity to deploy <unk>.

Jonathan Hughes: A 3 billion annually with your current stable.

Shankh Mitra: I'll start with the rep for, and then I'll end it. Thank you, John, for any comment on kind of the operating spend side, but thinking about the rent growth, think about kind of five to five and a half being kind of the range that you're at. It kind of flashes from the bottom to the top of that.

Jonathan Hughes: Terry developers and operators and on top of that are of course the opportunities.

Jonathan Hughes: Outside of those relationships that can be additive like affinity and I know you don't provide guidance on investment activity, but is it fair to assume 3 billion is Canada low and we can expect year on year out given that.

Jonathan Hughes: These partners of yours, they want to grow their businesses and they can only grow with you due to the proprietary nature of your partnerships.

Speaker Change: Yes, let me see.

Shankh Mitra: How the numbers work, as Sean Kim said for a long time, the flow through gets pretty fantastic as you get north of 80%. So when you talk about staffing up, you really have, I mentioned this in the last paragraph. The positions are in place.

Speaker Change: If I can answer that question, we will not give guidance. Our sharp is not designed to buy stuff. We only grow if we think we can grow to add value on a partial basis for existing investors that means is $3 billion 3 billion that means it's 300 million $300 million and that.

Shankh Mitra: You have your head chef, you have your executive director, et cetera, et cetera. So it's very incremental. So this arc of the curve, there's a lot of money that comes to the bottom line as you increase occupancy. And additionally, as we've said, because of supply-demand factors, that's just expected in the market. We may or may not decide to spend more money on marketing to accelerate that, but the conditions are... Your next question comes from Jonathan Hughes with Raymond James. Please go ahead. Hi, good morning.

Speaker Change: Means if it's $8 billion 8 billion, that's sort of where we are having.

Speaker Change: Having said that if you look at the page seven of our slide deck.

Speaker Change: We see there's a massive amount of loans in the senior housing space. That's a rolling that just a U S. Number we're also seeing opportunities in both UK and Canada similar ideas.

Speaker Change: And there is not enough credit in the system to refi. This.

Speaker Change: We think the opportunity set obviously in front of us is going to be very robust speaking of pipeline right now I want to reiterate the comment that I've made in my prepared remarks, we have never been this busy in Q1 as you understand them. There is a seasonality of the deal business as well right people, who are really really hard.

Speaker Change: Into the year end to close out the year and Q1 is usually very sort of you don't see a lot of activity activity starts to pick up obviously in Q2, and then that's obviously translate into heavy second half.

Shankh Mitra: Thank you for your time. I wanted to ask about the trajectory of external growth. You lay out in the business update decks the opportunity to deploy. Thank you all for joining us. Outside of those relationships that could be added, of like a finished. I know you don't provide guidance on investment activity, but is it fair to assume $3 billion is kind of the low end? We can expect year in, year out given that these partners of yours want to grow their businesses, and they can only grow with you due to the proprietary nature of your partner. Your next question comes from Tayo Okusanya with Deutsche Bank. Please go ahead. Ciao. Hello, try it. We can't hear you.

Speaker Change: And you know and that normal seasonality, we havent seen and perhaps because of the debt card that we're talking about perhaps is because of the another thing that Nikhil mentioned, which is the interest caps that are coming off and retail banks were nowhere to be found right. So with that context, I think we're going to have.

Jonathan Hughes: Record year, again, but who knows if we don't see the opportunities to invest we want but the pipeline remains robust as visible is actionable and we can see massive amount of value creation coming through that.

Jonathan Hughes: Your next question comes from Tayo Okusanya with Deutsche Bank. Please go ahead.

Jonathan Hughes: Yes.

Jonathan Hughes: Tayo.

Jonathan Hughes: Okay.

Jonathan Hughes: Hello.

Michael Knott: Sorry, we can't hear you.

Jonathan Hughes: Hello, we can hear you.

Shankh Mitra: Hello, we can hear you. Perfect. So, good morning and then congrats on a great quarter and a great outlook. On the regulatory front, again, in the past few weeks or so, there's been some discussion, you know, the House just kind of doing some hearings on senior housing and, you know, some concerns around, maybe ultimately you will also see some minimum staffing rules in senior housing. Just kind of curious what you're hearing on your end, how you kind of see that evolving over time, and what that could mean for profitability for senior housing operators. Yeah, thanks, Kyle. Obviously, we were very aware of the conversations taking place on the regulatory side.

Jonathan Hughes: Okay.

Speaker Change: Good morning, and congrats on a great quarter and a great outlook.

Jonathan Hughes: On the regulatory front again in the past few weeks since you there's been some discussion.

Jonathan Hughes: Just kind of you know.

Jonathan Hughes: Doing some hearings on senior housing and some concerns around maybe ultimately you also see some minimum staffing rules.

Jonathan Hughes: Housing.

Jonathan Hughes: Just kind of curious what you are hearing on your and how you kind of see that evolving over time on what that could mean for profitability for senior housing operators.

Speaker Change: Yes. Thanks.

Jonathan Hughes: Obviously, we were very aware of the conversations taking place on the regulatory side.

Shankh Mitra: You know, I think something that's consistent with how we talked about this in the past. There's been less on the senior housing side. We almost entirely play in a private pay business where the delivery of a high quality product and reputation in the market is the most important driver of your business on a go-forward basis. And so I think there are areas of the healthcare world where that's not the same, and you've got more of a captive demand audience, and there's more concern over how you may run a business. But on the senior housing side, what we know very well, both the good and the bad, is that the business is entirely driven by reputation.

Jonathan Hughes: I think something that's consistent with how we talked about this in the past is yes.

Jonathan Hughes: This business.

Speaker Change: On your housing side.

Jonathan Hughes: Almost entirely play in our private pay business, where the delivery of a high quality product and reputation in the market is.

Jonathan Hughes: It is the most important driver of your business on a go forward basis and so.

Jonathan Hughes: I think there is areas of the health care World, where that's not the same and you've got more of a captive demand audience and theres more concerned over how you may run a business on the senior housing side, we know very well it.

Jonathan Hughes: It goes into that is that the <unk>.

Jonathan Hughes: <unk> is entirely driven by reputation. So it continues to be the focus of ours is that what.

Shankh Mitra: So it continues to be the focus of ours that whether it's the staffing levels, the level of care, the quality of the employees, they are what drives the business day in, day out. And it's why we spend so much time focusing on creating these sustainable models at the property level. Good morning.

Jonathan Hughes: What is the staffing levels the level of care and the quality of the employees. They are what drives the business day in day out and it's why we spend so much time, focusing on creating new sustainable models the property level.

Jonathan Hughes: Your next question comes from Jim Cameron with Evercore. Please go ahead.

Shankh Mitra: Just tying some of the previous questions together, if I could, you know, thinking about affinity, those are pretty attractive margins. And obviously, they're very savvy operators. And then you tie together the opportunity set in terms of maturing loans on page seven of your deck. Are there other wellness or active adult type opportunities within that set of the 16 billion or so debt maturities? Thinking about your overall margin implications for your portfolio as it changes, I believe that the senior housing loan situation we're talking about is the traditional senior housing product. You know, some lenders can sort of define this as multifamily. Some can be senior housing, so there's no way to specifically know.

Jim Cameron: Good morning. Thank you just trying some of the previous questions together, if I could thinking about affinity theres a pretty attractive margins.

Jim Cameron: And obviously they are very savvy operators and then you tie together the opportunity set in terms of maturity loans on page seven of your deck are there other.

Jim Cameron: Wellness or active adult type opportunities within that $16 million or so of debt maturities thinking about your overall margin potential for your portfolio as it changes.

Jim Cameron: Okay.

Speaker Change: That's it.

Speaker Change: I believe that the senior housing loan situation, we're talking about is the traditional senior housing product.

Speaker Change: You can for some lender can sort of define these as multifamily some cans senior housing so theres no way to specifically no.

Shankh Mitra: We play into the mid-market segment of that active adult, the wellness housing segment. You think about there are four large, you know, players in that space that we know of. There are others, but the four major ones that we know of are Clover, Calomar, Sparrow, and Affinity.

Speaker Change: Play into the mid market segment of that active adult the Orleans housing segment, you would think about there are four large.

Speaker Change: Players in that space that we know of is it others by the four major ones that we know of Clover Palomar.

Speaker Change: Sparrow and affinity and all four of them are existing well tower partners today as I have mentioned before I believe in going deep not going broad if we find more opportunities we will obviously see.

Shankh Mitra: And all four of them are existing Welltower partners today. As I have mentioned before, I believe in going deep, not going broad. If we find more opportunities, we will obviously see how that stacks up against our growth potentials, et cetera, but we are definitely focused on growing our business. And I think you would say, starting this business six years ago to about 25,000 units today, we're doing a pretty good job of it. But growth for growth's sake is something that I just can't get my head around.

Speaker Change: <unk> stacks up against our growth potentials et cetera, but we are definitely focused on growing our business and I think you would say starting this business six years ago too.

Speaker Change: 25, 25000 units today, we're getting pretty good job of it.

Speaker Change: <unk> growth for Growth's sake is something that I, just can't get my head around our job is to create.

Shankh Mitra: Our job is to create long-term shareholder value, compounding on a partial basis what we're after. So we'll see if we can do it, but I would be optimistic that wellness housing, over a period of time, will become a very significant portion of Welltower's portfolio. Your next question comes from Austin Werschmitt with KeyBank Capital Markets. Please go ahead.

Speaker Change: Long term shareholder value compounding on a partial basis, what we after so we will see if we can do it.

Speaker Change: But I would be optimistic that wellness housing over a period of time will become a very significant portion of all of our portfolio.

Speaker Change: Your next question comes from Austin, <unk> with Keybanc capital markets. Please go ahead.

Austin: Yes. Thank you shrunk just kind of touching again on the investment pipeline and all the factors you've laid out today.

Austin: And previously as to why that opportunity continues to expand I guess I'm curious how big the investment pipeline you see today as sort of fee simple real estate deals versus the credit opportunities and how much of that expansion.

Shankh Mitra: Yeah. Austin, I just want to make sure I understand your question. A lot of the opportunity that we are seeing is driven by the current existing owner's credit situation, whether that's rate caps, whether that's LTV, whether that's DSCR, whether that's refi. So it's driven by credit situations on their end. How we execute that on our end could be credit or could be equity. And the vast majority of what we have done is equity opportunities. But we are interested in the private credit side as an equity owner. I've said this many, many times that we're just not lenders. We are owners of those properties at the last dollar basis where our credit stands.

Speaker Change: That <unk> seen in the investment pipeline more recently is a function of the credit opportunity side.

Speaker Change: Versus.

Speaker Change: A more traditional fee simple.

Speaker Change: Oh.

Speaker Change: I just wanted to make sure I understand your caution.

Speaker Change: A lot of.

Speaker Change: Opportunity that we are seeing are driven by current existing owners credit situation, whether that rate caps, whether that's LTV, whether there's DSC or whether that's refi. So it's driven by credit situations on that and how we execute that on our end could be credit or it could.

Speaker Change: Equity and vast majority of what we have done is equity opportunities, but we are interested in the private credit side as an equity owner I've said. This many many times that we are just not lenders. We are owner of those properties at the last dollar basis, where credit stance right. So that's how we.

Shankh Mitra: So that's how we think about it. In other words, we're very comfortable taking back the keys if the buyer decides to, or the owner decides to do so. However, the vast majority of our execution on our end is on the equity side, though we remain very interested in the right opportunities to play in the credit stack. However, I will tell you, we never loan against assets at a last dollar value at a given location for a product that we do not want to own. That is not what we do.

Speaker Change: Think about it.

Speaker Change: In other words that we're very comfortable taking back the keys is the buyer decides the owner decides to do so however, the vast majority of our execution on our end is on the equity side, though we remain very interested for the right opportunities.

Speaker Change: In the two play in the credit stack. However, I will tell you we never loan against assets at a large dollar value at a given location for a product that we do not want to own that is not what we do.

Shankh Mitra: So that's something that's very interesting for you to start to think through. Your next question comes from Michael Griffin with Citigroup. Please go ahead.

Speaker Change: So and so.

Speaker Change: That's something that is very interesting for you to sort of think through.

Speaker Change: Your next question comes from Michael Griffin with Citigroup. Please go ahead.

Michael Griffin: Thanks, Nick Joseph here with Michael shock, you've obviously talked about the robust acquisition opportunities a lot on the call and then the buffet here that you expect from seniors housing.

Shankh Mitra: I'm curious how you are seeing competition for both assets and loans. Is this attracting additional capital into the space? And then also just a similar question on the development side, development pickup yet, but given the multi-year growth outlook, when would you expect that? Yeah, I think from a competition perspective, as I mentioned in my prepared remarks, most of the time that all of the transactions that were executed on, They have been privately negotiated directly with the seller, not that we're not seeing any. Let me answer that question.

Michael Griffin: Curious how you are seeing competition.

Michael Griffin: For both assets in bonds is attracting additional capital into the space and then also just some more question on the development side, obviously, we haven't seen development pick up yet, but given the multiyear growth outlook.

Nick Joseph: Would you expect that to start to pick back up.

Speaker Change: Got it I think from a competition perspective.

Speaker Change: As I mentioned in my prepared remarks, most of the trend that all of the transactions that we've executed on they have been privately negotiated directly with the sellers.

Speaker Change: It's not that we're participating in auctions or anything like that big part of that is there is really no liquidity in the market.

Speaker Change: So we're not seeing any competition.

Speaker Change: And then I think.

Shankh Mitra: That was the development question. We, Nick, put out a page eight in our slide decks that could be informative from thinking about this question. You know, if you think about it, there are some interesting things to think through one. Let's just talk about things that we all know the cost of construction is up significantly, and the cost of capital. You just think about it, you know, as a senior housing development loan today, if you can get one. Good luck with that.

Speaker Change: Remind me again what was your second question, let me answer that question that was the development caution.

Speaker Change: Nick we put out a page eight in our slide decks that could be informative farm.

Speaker Change: Thinking about this caution.

Speaker Change: If you think about there are some interesting things to think through one so let's just talk about things that we all know cost of construction is up significantly cost of capital you just think about it.

Speaker Change: Our senior housing development loan today, if you can get one good luck with that.

Speaker Change: Even we are struggling to get one if we if we need one.

Shankh Mitra: Even we are struggling to get one if we, if we need one, it's three fifty four hundred over. So, you're talking about your debt cost of capital in the ninth and the tenth, right? No, we haven't seen a development performer that works.

Speaker Change: Is it $3 5400 over so youre talking about your debt cost of capital and the ninth in the tens right no. We havent seen <unk> pro forma that walks that sort of a financial aspect do you guys know then obviously paying through what it takes to an average Walter I'm not talking middle of Manhattan West L. A.

Speaker Change: West side of Boston places like that and average whilst our location in.

Speaker Change: Very wealthy micro markets.

Speaker Change: On the East coast West coast or locations like that probably takes two to three years up redevelopment and you know that it takes a couple of years. So construction after that but what is more interesting that we have noticed is last 12 to 18 months that a lot of the changes that happened because of what I just described to you.

Shankh Mitra: That's sort of a financial aspect. You guys know, then obviously think through what it takes to average. Well, I'm not talking middle of Manhattan, West LA, you know, West side of Boston, places like that.

Speaker Change: In the platforms that have Darryl up most of the senior housing assets they have been dismantled.

Shankh Mitra: An average location in a very wealthy micro market on the East or West Coast or locations like that probably takes two to three years of redevelopment and, you know, it takes a couple of years of construction after that. But what is more interesting that we have noticed in the last twelve to eighteen months are a lot of the changes that happened because of what I just described to you in the platforms that have developed most of the senior housing assets. They have since been dismantled.

Speaker Change: So if you look at page eight we have added something for you to start to ponder over is the first thing that needs to happen if people can find money and if they think it's a good thing to do is to build back the human capital side before you think about the financial capital side. The last thing I would leave you with to think about my understanding is developers.

Speaker Change: <unk> are developed product to sell at a profit when majority of their product traded in last three years at 70 cents on the dollar what confidence do you have then when you build a product for a dollar that we'll get $1 30.

Speaker Change: I don't think the confidence will be very high on the equity side and obviously you will take out financing when there is more of an acquisition financing because of rollover. We just described in the previous one we think development in any meaningful way is years away, but again as I said, we don't know the future. That's why it seems logical we'll see.

Shankh Mitra: Your next question comes from Mike Mueller with J.P. Morgan. Please go ahead. Yeah, I guess following up on the development for the affinity development program. How soon do you think we could see start there? And is there a way to size up how big the annual investment outlay could be that you could ramp up? Mike, so my question, and my answer to Nick's question was focused on senior housing development, as in what do you understand as a regular senior housing product? Affinity or wellness housing, these are apartments, right? These are not 5K that gets delivered.

Speaker Change: The future plays out.

Speaker Change: Your next question comes from Mike Mueller with JP Morgan. Please go ahead.

Michael Mueller: Yes, I guess following up on development for the affinity development program. How soon do you think we could see starts there and is there a way to size up how big the annual investment outlay could be you could ramp up to.

Speaker Change: Yes, Mike. So my question My answer to Nick's question was focused on senior housing development and then what do you understand.

Speaker Change: Regulus senior housing product affinity our wellness housing. These are apartments right. These are not quite clear to get delivered so that these are housing product as a rental housing product.

Shankh Mitra: So these are housing products; these are rental housing products. You know, how can it be? I'll tell you probably, just think about it. Nikhil said the average age is eight years, and the portfolio size is 25. So just call it three, four starts a year.

Speaker Change: How can it be I would tell you probably think about it Nikhil said average age is eight years.

Speaker Change: <unk> 25, so just call it three or four starts a year.

Shankh Mitra: You know, something like that would be something that I would expect. But we don't know, it depends on where the product is year over year, what the current pipeline is, but something like that can be expected over time. Your next question comes from John Pawlowski with Green Street. Please go ahead. Hey, thanks for the time.

Speaker Change: Something like that would be something that I would expect but we don't know it sort of depends on where the product is year over year. What the current pipeline is but something like that can be expected.

Speaker Change: Overtime.

Speaker Change: Your next question comes from John Pawlowski with Green Street. Please go ahead.

John Pawlowski: Thanks for the time, John I was curious if you could share a current stat on the average age of moving for your traditional senior housing portfolio, how that compares to pre COVID-19 and just any.

John: John, I was curious if you could share a current stat on the average age of move-in for your traditional senior housing portfolio, how it compares to pre-COVID, and just any big shifts you guys are seeing in terms of the demographics coming in the door, or the behavior of the current tenants, again, versus pre-COVID, we'd love to hear. Yeah, that's a good, good question. And what I am seeing is a little bit longer stay. As far as for the details of that, I don't have that specific information. I can look to see if I can get it and get it back to you offline. John, I'll just add that if you look at the coming out of the pandemic, average age and acuity went up, right, just coming out of the pandemic and sort of the first three, six, something like that months, where we've seen the acuity has gone up and the average age has gone up as we sort of things have normalized. I will say, we're hearing more and more comments from our operating Please go ahead. Thanks.

John Pawlowski: Any big shifts you guys are seeing in terms of the demographics coming in the door or the behavior of the current tenants again versus pre COVID-19.

Speaker Change: Good to hear.

Speaker Change: Yeah. That's a good good question and what I am seeing is a little bit longer stays as far as for the details of that I don't have that specific information I can look to see if I can get it and get it back to you offline John I'll just add that if you look at the coming out of the pandemic average age.

Speaker Change: And acuity went up right just coming out of the pandemic on sort of.

Speaker Change: First three six something like that months, while we've seen the acuity has gone up and the average age has gone up as we sort of things have normalized I will say, we're hearing more and more comments from our operating partners that average age is coming down and length of stay because of that acuity is coming down but length of stay is going up because of that.

Speaker Change: Your next question comes from Michael Carroll with RBC capital markets. Please go ahead.

Michael Carroll: Yes. Thanks.

Shankh Mitra: I'm impressed with your guys' occupancy gains reaccelerating. Is that mostly driven by move-ins coming in? Or is it kind of the dynamic that you're talking about in the last question related to move-outs as you're seeing longer lengths of stays? So maybe move-outs are trending a little bit lower to help that occupancy gain re-accelerate in 2024? So, Mike, let me try to answer that question. I was just looking at it a couple of days ago. Interestingly, as we looked at the fourth quarter data, obviously, we're talking about the contest sort of seasonal trends that we have seen in the fourth quarter, specifically looking at that. Both move-ins and move-outs were better.

Michael Carroll: Crossroads here guys is occupancy gains re accelerating is that mostly driven by move ins coming in or is it kind of the dynamic that you are talking about and the last question related to move outs as youre seeing longer length of stay so maybe move outs or are trending a little bit lower to helping that.

Michael Carroll: Occupancy gain reaccelerate in 2024.

Speaker Change: Yes, so Mike let me try to answer that question I was just looking at this couple of days ago.

Speaker Change: Interestingly as we looked at the fourth quarter data is obviously, we're talking about.

Speaker Change: Contact you sort of seasonal trends that we've seen in fourth quarter, specifically looking at that both move ins and move outs were better.

Shankh Mitra: So we have seen better moving rates, moving trends, and we have seen better mobile trends. So that sort of both created this unusual seasonal pattern. As you have noted, not only was the quarter kind of interesting or, frankly, confounding in a positive way from a seasonality standpoint, but what happened intra-quarter was even more confounding. Because as you go, you know, sort of get through deeper and deeper into winter, we see the business slows down just seasonally, and this year, the exact opposite happened. So what's the reason?

Speaker Change: So we have seen better moving rates.

Speaker Change: Moving trends and we have seen better move out trends. So that's sort of both created this.

Speaker Change: Unusual seasonal pattern as you have noted not only the quarter wise.

Speaker Change: Kind of interesting or frankly confounding in a positive way from a seasonality standpoint, but what happened intra quarter was what even more confounding because as you go sort of get through more deeper and deeper into winter, we see the business slows down just seasonally and Dci exactly opposite happened. So what's the reason just from.

Shankh Mitra: Just from a pure math perspective, as I said, both movements and move-outs are better. But obviously, we're not projecting that into the future, but we'll see how it plays out as we get through the year. Your next question comes from Rich Anderson with Wedbush. Please go ahead. Thanks. Good morning.

Speaker Change: The pure math perspective, as I said, both move ins and move outs are better, but obviously, we're not projecting that in the future, but we'll see how it plays out as we get through the year.

Speaker Change: Your next question comes from Rich Anderson with Wedbush. Please go ahead.

Richard Anderson: Good morning.

John: So, I guess a question for John and, you know, the optimization process that you're going through. Thanks for the information. You know, a lot of it is. It's very interesting and believable, the work that you're putting into it, but it has yet to be sort of quantified. And I'm curious if, very soon, or in some reasonable period of time, we might see sort of this optimization, a new line item on your slide, page 19, where, you know, you're bringing some of the work into real dollars and cents in terms of the effort. Because right now, you know, It's not really something you can model, and I wonder if that would be more in the way of expense savings, which I would expect, or maybe there'd be less frictional vacancy, so it would impact the revenue side, sort of triangulate it all, quantifying your effort or when that might come for all of us. Great question.

Richard Anderson: So I guess a question for John.

Richard Anderson: The optimization optimization process that youre going through skilled senior housing.

Richard Anderson: A lot of it is sort of it's very interesting and believable. The work that you are putting into it but yet to be sort of quantified and I'm curious if very soon or some some reasonable period of time that we might see sort of this optimization line a new line item on your <unk>.

Richard Anderson: Slide <unk>.

Richard Anderson: Page 19, where youre, bringing some of the work into real dollars and cents in terms of the effort because right now.

Richard Anderson: It's not really something you can model.

Richard Anderson: And I wonder if that will be more in the way of expense savings, which I would I would expect maybe there'd be less frictional vacancy. So it impacted the revenue side I'm. Just curious if you can sort of triangulate at all.

Richard Anderson: Putting some quantified numbers into your effort or when that might come for all of us to look at.

Speaker Change: Great question.

John: I, as you know, tend to avoid a lot of details because everyone tends to copy things and it's better to execute. I think what you're seeing in our numbers, there are real numbers coming through, so it's not just discussing it. You're seeing it in the output.

Speaker Change: As you know I tend to avoid a lot of details because everyone tends to copy things and it's better to execute I think what youre seeing in our numbers theres real numbers coming through so it's not just discussing it youre seeing it in the output, but I do appreciate you want to get to.

John: But I do appreciate you wanting to get some more specifics. You mentioned frictional vacancy, but we're nowhere close to that right now.

Speaker Change: More specifics you mentioned frictional vacancy.

Speaker Change: We're nowhere close to that right now.

John: You know, the opportunity to just literally increase vacancy without worrying about frictional vacancy is there all day long. And so there is really both a level of opportunities to reduce expenses, but that really relates to productivity because, you know, again, as I said, over and over, our focus is on improving the customer experience. It's not about trying to cut anything.

Richard Anderson: <unk> just literally.

Richard Anderson: Increased vacancy without worry to worry and concern about frictional vacancy.

Richard Anderson: Is there all day long and so there is really both there is some level of opportunities on the expenses, but that.

Richard Anderson: That really relates to productivity because again as I said over and over our focus is on improving the customer experience is not about trying to cut anything so to the extent there is some productivity opportunities there, which.

John: So, to an extent, there are some productivity opportunities there, which. You know, the platform is focused on, you know, in the sense that, as I mentioned last time, sometimes it takes hours to move someone in because of the paperwork, and having a unified platform will solve for that and eliminate that wasted time, enabling our staff to spend more time with the customers. A lot of the opportunity, though, really is focused on the revenue side, whether it be increasing occupancy because we're just simply out executing. Frankly, we're answering the phones and delivering. That quality customer experience that's driving occupancy, or because we're changing the value proposition, and the market says this is worth it. Hopefully, that Your next question comes from Nick Yulico with Scotiabank. Please go ahead. Thanks.

Richard Anderson: The platform is focused at the sensor mentioned last time, sometimes it takes hours to move somewhat in because of the paperwork and having a unified platform will solve for that eliminate that waste of time, enabling our staff to spend more time with the with the customers.

Richard Anderson: Lot of the opportunity that really is.

Richard Anderson: Focused on the revenue side, whether it be increasing occupancy because we are just simply out executing frankly, we're answering the phones and delivering that quality customer experience that is driving occupancy.

Richard Anderson: Or because we're changing the value proposition in the market says this is worth more hopefully that helps.

Richard Anderson: Your next question comes from Nick <unk> with Scotiabank. Please go ahead.

Nick Joseph: Thanks, Jim maybe a question for Tim on the balance sheet. If you look at substantial amount of cash at the end of the quarter and then you know the.

Nick Joseph: You outlined to have another billion dollars of asset sales in guidance. It just seems like.

Tim: Maybe a question for Tim. On the balance sheet, if we look at a substantial amount of cash at the end of the quarter and then the outline to have another billion in asset sales and guidance, it just seems like, Yeah, thanks, Nick. So you're correct on the excess debt side or the excess cash side. I will highlight that, as indicated in the past, we have 1.35 billion of unsecured maturities here in the first quarter. So 450 million of which matured in January, and we paid off, and the remainder we paid off in March. So that's one component of the use.

Nick Joseph: Relative to the acquisitions, you've announced so far that you are sitting in a significant excess cash situations. So maybe you could just give us a feel.

Tim: I feel for how you're thinking about I don't know if theres any planned debt repayments or anything else, we should be thinking about there.

Speaker Change: Yeah. Thanks, Nick So you are correct on the excess debt side.

Speaker Change: Cash side I will highlight that.

Speaker Change: As indicated in the past we have 135 billion.

Speaker Change: Unsecured maturities here in the first quarter so.

Speaker Change: $450 million of which matured in January we paid off and the remainder will be paid off in March so thats one component.

Richard Anderson: Component of the users and I think what you are hearing.

Tim: And I think what you're hearing from the rest of our team today is a lot of optimism about opportunities to put cash to work. So I think the balance sheet is very well positioned. Your next question comes from Wes Goloday with Baird. Please go ahead. Hey, good morning, everyone.

Richard Anderson: The rest of our team today is a lot of optimism around opportunities to put cash to work.

Richard Anderson: So I think the balance sheet is very well positioned for that.

Richard Anderson: Your next question comes from Wes Golladay with Baird. Please go ahead.

Wes Golladay: Good morning, everyone could you speak to the share gains you might be seeing that senior housing versus the local competitive when you look at that 330 basis points of expansion this year.

Wes Golladay: Whereas I missed the first part of your question can you. Please repeat the question and get closer to your phone.

Shankh Mitra: Could you speak to the shared gains you might be seeing in senior housing versus the local competitors when you look at that 230 basis points of expansion? Well, I missed the first part of your question. Can you please repeat the question and get closer to your phone?

Speaker Change: Yeah, Okay, sorry can you hear me now.

Speaker Change: Oh, Yeah, Yeah can you speak to the shirt. Yeah can you speak to the share gains you might be seen in the senior housing versus the local competitive set you did mentioned the 330 basis points this year, which was a record year.

Speaker Change: Yes so.

Shankh Mitra: Yeah, so look, we have a very large portfolio. It's hard to speak in generalities and, obviously, across three countries. But if you look at all the other industry data, you will see that our portfolio has meaningfully outperformed both in rate growth as well as occupancy growth. But what's new about that?

Speaker Change: Look we have a very large portfolio, it's hard to speak in generalities and obviously across three countries, but if you look at all other industry data that you will see our portfolio has meaningfully outperformed both in rate growth as well as occupancy goes, but what's new about that.

Shankh Mitra: But, you know, you can probably look at the NIC data and others and decide that we've got to that point. But, you know, as I said, we don't know what the future will bring us, what our endeavors, what I promised to you that we would put 200 percent of our effort to outperform the market. And that's what we are trying to do. And so far, what I've seen, John mentioned a stat that if we do achieve our NY growth guidance in the SHOP portfolio this year, there's no guarantee we will. But if we do, that'll be, you know, 75 percent compounded growth over three years, right? There is, I don't believe there's any precedent for that in a large, broad, you know, sort of portfolio.

Speaker Change: But.

Speaker Change: You can probably look at the Nic data and other incentives to decide that.

Speaker Change: I get to that point, but you know as I said, we don't know what the future will give us our.

Speaker Change: Our what we endeavor, what our promise to you that we'll put 200 person effort to outperform the market and Thats. What we are trying to do and so far what I've seen I mean, John John mentioned, a stat that if we do achieve our.

Speaker Change: Our NOI growth guidance in the shop portfolio. This year. There is no guarantee we will but if we do that will be 75% compounded growth over three years. So there is I don't believe theres any precedence of that.

Speaker Change: In a large broad.

Speaker Change: Sort of a portfolio. So we are meaningfully outperforming the market.

Shankh Mitra: So we are meaningfully outperforming the market, and that gap is widening, and I think it will continue to widen. Your next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead. Hi, good morning.

Speaker Change: That gap is widening and I think it will continue to widen.

Speaker Change: Your next question comes from Juan Sanabria with BMO capital markets. Please go ahead.

Juan Sanabria: Hi, Good morning, just a question on pricing trends for new customers.

Shankh Mitra: Just a question on pricing trends for new customers. One, how has that evolved through the fourth quarter, just to think about that relative to occupancy? And I guess the second part would be, you mentioned operating leverage changes as occupancy improves and you're fully staffed. So how should we think about, what are you thinking about the trade-off between occupancy and price? Um, going into the rest of 24 and into 25. Let me try to answer that question.

Juan Sanabria: One how is how is that.

Juan Sanabria: Evolved through the fourth quarter, just to think about that relative to occupancy.

Juan Sanabria: And I guess the second part would be you mentioned the operating leverage changes as occupancy improves.

Juan Sanabria: We're fully staffed so how should we think about how are you thinking about the trade off between occupancy and price.

Juan Sanabria: Yeah.

Juan Sanabria: Going into the rest of $24 25.

Speaker Change: Let me try to answer that of course since the fourth quarter. If you look at I am actually pretty very pleased with the pricing trends as you know that we have a lot of the portfolio sort of Ratably turn through the year right. So we are in.

Shankh Mitra: So fourth quarter, if you look at, I'm actually pretty very pleased with the pricing trends. As you know, we have a lot of the portfolio sort of radically turned through the year, right? So we haven't, you know, and so if you just look at the sunrise situation that I talked about, repo growth was up, you know, 6.8%. That's a very, very strong number.

Juan Sanabria: And so if we just look at this.

Juan Sanabria: Sunrise situation that I talked about.

Juan Sanabria: Revpar growth was up six 8%, that's a very very strong number and with that kind of occupancy growth you don't expect that kind of numbers, but put that aside let's just think about what next year's looked like and we passed that downward Jan one.

Shankh Mitra: And with that kind of occupancy growth, you don't expect that kind of number. But put that aside, and let's just think about what next year's numbers will look like. And we passed Jan 1. A lot of operators in Jan 1, a lot of operators, you know, sort of have moved from Jan 1 to February 1. I think I talked about that two years ago. Just not just the after holidays sort of moved a little bit out of that.

Speaker Change: A lot of operators and Jan why a lot of operators sort of have moved from Jan one to the February one I think I talked about that two years ago, just not just be after holiday sort of moved a little bit out of that so just generally speaking talk about.

Shankh Mitra: So just generally speaking, talk about the half of the portfolio that's sort of rolling in Q1, specifically, rather than just talking about Jan 1. I would say existing customer rent increases have been relatively in the same ballpark as last year, but probably 100 to 150 basis points lower. This generally feels right, you know, around that level. So, you know, if it was 10 last year, it's 90 this year, something like that. I'm not saying; don't hold me specific.

Speaker Change: The half of the portfolio that sort of rolling into Q1, specifically rather than just talking Jan one I would say existing customer rent increases has been relatively in the same ballpark of last year, but probably 100 to 150 basis points lower there's generally feels right in around that level.

Speaker Change: If it was 10 last year at 93 or something like that I am not saying, Hey don't have any specific some operators have done more than 10, less Jeremy and generally speaking in that range of probably 100 150 basis points lower and we will see what the rest of the portfolio does as we go through the year does also remember.

Shankh Mitra: Some operators did more than 10 last year. So, generally speaking, in that range of probably 100, 150 basis points lower. And we will see what the rest of the portfolio does as we go through the year. But also remember, REPOR is not just a function of ECRI, our existing customer rent increases, but it's also a function of sort of market rent, right, what your mark to market is. And we will see, we don't know, usually speaking, you know, market rent is lower in Q1 and sort of goes up from the summer months. And we'll see how this all plays out. You know, there's a math aside, we feel that the second part of your question, which is a brilliant question, sort of thinking about this kind of occupancy, just call it mid 80s occupancy.

Speaker Change: By Revpar is not just a function of <unk>, our existing customer rent increases, but it's also a function of sort of market rent right what that your mark to market.

Speaker Change: And we will see we don't know usually speaking market rents are.

Speaker Change: Lower in Q1 and sort of goes out from the summer months and we'll see how this all plays out.

Speaker Change: There is a math aside.

Speaker Change: We feel that the second part of your question, which is a brilliant question sort of thinking about in this kind of occupancy just call. It mid <unk> occupancy what is that sort of efficient frontier pricing versus occupancy that caution is harder to answer on a conference call, but I will tell.

Shankh Mitra: What is that, you know, sort of efficient frontier pricing versus occupancy? That question is hard to answer on a conference call, but I will tell you what you are going after is a very important one because of operating leverage, because of operating leverage, how your incremental margins work. While it is in the late 70s and early 80s, it is obvious that you should go after the rate.

Speaker Change: What you are going after is a very important one because how operating leverage because of operating leverage how your incremental margins work. While it is in the late <unk> early <unk>. It is obvious that you should go after the right now the occupancy that may not be true in the mid Eighty's, where your optimized level.

Shankh Mitra: Not the occupancy; that may not be true in the mid 80s, where your optimized level could be some occupancy and some rates. We'll see how this plays out. But we are, you know, we think it's our guess as we sit here today, and nothing but a guess, that will be largely in the same ballpark of close to double-digit revenue growth that we saw last year. Your final question comes from Ronald Campton with Morgan Stanley. Please go ahead.

Speaker Change: Could be some occupancy some rates we will see how this plays out but we are we think it's our guess as we sit here today and nothing but I guess that will be largely in the same ballpark up close to double digit revenue growth that we've seen last year.

Speaker Change: Your final question comes from Ronald Camden with Morgan Stanley. Please go ahead.

Shankh Mitra: Hey, I just want to sort of close the thought on occupancy, just because the sequence, www.thevenusproject.com. Coming at it a different way, is this like how much of this should we think of as an industry-wide phenomenon where we should expect other operators? Occupancy Accelerate versus John's operating platform creating that alpha is sort of part one. Part two would be when you think about that occupancy recovery slide in your deck. Are we at the point where we should start thinking about 91 as the new target versus 88 because, based on the guidance, you're going to be at 85 at the end of the year? Just trying to get a sense of how much growing conviction you have and getting back to that.

Ronald Camden: Hey, I just wanted to sort of close the thought on the occupancy just because the sequential sort of improvement as well as the guidance acceleration coming out of it a different way is this like how much of this should we think of as an industry wide phenomenon, where we should expect other operators to see occupancy.

Ronald Camden: <unk> versus sort of John's operating platform, creating that alpha is sort of part one part two would be when you think about that occupancy recovery slide in your deck are we at the point, where we should start thinking about 91 as the new target versus the 88 because based.

Speaker Change: On the guidance Youre going to be at 85 at the end of the year, just trying to get a sense of how much conviction on growing conviction you have in getting back to that peak occupancy level.

Shankh Mitra: Occupy. Ron, let me try to answer that question. The second part is an easier one.

Speaker Change: Ron Let me try to answer that question. The second part is an easier one.

Shankh Mitra: If all we do is end up at 91% occupancy, which is sort of 2015 achieved, then we, frankly speaking, we didn't add a lot of value. Because if you think about, I don't know, just pick a number, two years, three years, whatever your number of years is, demand, supply, I think you understand, starts to get materially better starting at 25, 26, right? And the delivery schedule, if you look at it, you know what the starts are, which is not much, right?

Ron: If all we do is we ended up at 91% occupancy, which is sort of 2015 achieved and we frankly speaking we didn't add a lot of value because if you think about I don't know pick a number two years three years whatever your number of year. It is demand supply I think you understand.

Speaker Change: Starts to get materially better starting 'twenty five 'twenty six right.

Speaker Change: And the delivery schedule. If you look at it you know what the stock side, which is not much right. You can see the demand supply imbalance gets really interesting next year and the year. After right. So at least we can say that because we don't know if there is other people that you know.

Shankh Mitra: You can see the demand-supply imbalance gets really interesting next year and the year after, right? So, at least we can say that, because we don't know if there's other people that, without our knowledge, are building. It's unlikely, but we don't know. But at least we can sort of see the next two years with reasonable clarity. You know, and we don't believe that the frictional vacancy of this business is 9%. Right, John? Is that it?

Speaker Change: Without our knowledge is building unlikely, but we don't know, but at least we can sort of see next two years with a reasonable clarity.

Speaker Change: And.

Speaker Change: We don't believe that frictional vacancy of this business is 9% that John is that it.

Shankh Mitra: It's absolutely not. It's a financial calculation, and it is not, not an option. So do we believe that we'll end up at 91? I'll be very disappointed if that's the case, but we shall see what the market gives us. What was the first part of your question, Ron, that I missed? Sure, it was just, so we expect every operator to see occupancy re-accelerate in 2024. Or what are you guys doing that's different? Yeah, so look, I can't speak for others, right? But clearly, what do I know about others?

Speaker Change: It's absolutely not it's a.

Speaker Change: Financial calculation and it is not 9% it is substantially less so thats just not an option. So do we do we do we believe that do we believe that we will end up at 91 I'll be very disappointed if that's the case, but we shall see what the market gives us.

Speaker Change: What was the first part of your question Ron that I missed share. It was just show. So we expect every operator to see occupancy rate for or what are you guys doing that's different.

Speaker Change: Yes, so look I can't speak for others, clearly what do I know about others.

Speaker Change: My promise to you and our fellow shareholders have always been that we will put it.

Speaker Change: <unk> percent effort to outperform the market. So far we have done it I don't think Q4 numbers will be much different and I think our hope will be.

Shankh Mitra: My promise to you and our fellow shareholders has always been that we will put a thousand percent effort into outperforming the market. So far, we have done it, right? I don't think the Q4 numbers will be much different, and I think our hope will be that we will continue to do so. My confidence in our ability to outperform the average of the industry is increasing. I think that gap is widening, and my confidence is increasing. But we still have to, this is February 14th; we have to see what the year gives us. There are no further questions at this time. This will conclude the Welltower fourth quarter 2023 earnings conference call. Thank you all for joining us today. You may now disconnect.

Speaker Change: With that we will continue to do so my confidence in our ability to outperform the average of the industry is widening I think that gap is widening and my confidence is increasing but we still have to this is February 14th we have to see what the year gives us.

Speaker Change: There are no further questions at this time this will conclude the wild tower fourth quarter 2023 earnings conference call. Thank you all for joining US today you may now disconnect.

Speaker Change: [music].