Welltower Earnings: Reports Eighth Straight Quarter of Senior Housing NOI Growth Above 20%

Third-quarter results for no-moat Welltower were slightly better than our expectations, and the company has executed on several significant transactions, leading us to raise our fair value estimate to $123 from $107. Senior housing same-store occupancy improved 120 basis points sequentially to 85.9%, slightly better than our estimate of a 90-basis-point gain. Combined with rental rates being up 5.0% year over year, senior housing same-store revenue was up 8.9% year over year in the third quarter. Meanwhile, same-store operating expenses were only up 4.6%, leading to same-store net operating income growth of 23.0% for the segment, which was better than our estimate of 18.2% growth and is the eighth straight quarter above 20%. The triple-net senior housing segment saw 5.8% same-store NOI growth, skilled nursing saw 3.0% growth, and medical office saw 2.2% growth. Combined, Welltower reported same-store NOI growth for the whole company of 12.6% in the third quarter, better than our estimate of 9.0% growth. As a result, Welltower reported normalized funds from operations of $1.11, better than our $1.08 estimate.