With $2.2B Invested Since Q4, Welltower’s ‘Covid Class’ Sets Up Future Growth

Welltower (NYSE: WELL) has invested $2.2 billion over 29 transactions since the fourth quarter of 2020, much of that in senior housing.

The Toledo, Ohio-based company has deepened its ties with more than a dozen companies since the pandemic began, and Welltower acquired 76 senior housing and outpatient medical properties over 29 transactions since 4Q20.

In fact, Welltower has forged 15 new operator and development relationships in the 15 months since the start of the Covid-19 pandemic. This “Covid class” of relationships “lays the foundation for growth for the next decade,” CEO Shankh Mitra said during a presentation at Nareit REITweek: 2021 Investor Conference, which is being held virtually.


Three new relationships with senior housing operators include Pathway to Living, which this week added 22 communities in a $97 million transaction with the real estate investment trust (REIT); Harbor Retirement Associates (HRA), which entered Welltower’s portfolio after the REIT purchased from Healthpeak (NYSE: PEAK) a 790-unit portfolio of senior housing communities for $132 million; and Treplus Communities, which is working with Welltower in a new investment relationship.

Welltower is among the biggest owners of senior housing in the country, with about 1,300 communities in its triple-net and senior housing operating (SHO) portfolios. Senior housing made up about 61% of the REIT’s net operating income (NOI) in the first quarter of 2021.

Despite Welltower’s big investments, many of the company’s median senior housing acquisitions came at a discount to replacement costs, with a median investment of $15.8 million per community, or $161,000 per unit. To Mitra, this is evidence that Welltower’s leaders have the nuance to succeed in a fragmented senior living industry that requires careful attention to detail.


“Most real estate investors want to come and write a big check. This is not a big-check industry,” Mitra said. “You need to have an operating platform, you need to have the data, you need to have the patience to do small transactions, and if you do it, can make money.”

Welltower’s outlook is underscored by the fact that market conditions have substantially changed from before the pandemic. Demand and supply have now “flipped,” Mitra said, with demand on the rise as more baby boomers age into retirement and the current high cost of construction styming new projects and therefore new supply coming into the market. Debt and equity capital is also constrained, he noted.

Meanwhile, the company has started regaining occupancy lost during the pandemic. Welltower’s SHO portfolio spot occupancy registered at 73.8% as of June 4, which is 150 basis points higher than the company’s occupancy low point on March 12.

The REIT has identified a “Path to Recovery” of $480 million in embedded NOI growth, based on 4Q19 occupancy and margin levels.

“We’re very excited about the medium-term growth prospects, and we’re very excited about the long-term growth prospects,” Mitra added.

To help fund that growth, the company has closed an approximately $4 billion credit line, replacing its existing line of credit of about $3 billion.

At the same time, Welltower has expanded its leadership ranks. The company welcomed about 40 new employees last year, and is on track to hire more than 50 people this year, Mitra noted.

Among the REIT’s new employees is John Burkhart, who is set to join the company on July 19 as executive vice president and COO. Burkhart was executive vice president and COO for 25 years at multifamily REIT Essex Property Trust (NYSE: ESS), and has known Mitra for more than a decade.

Welltower hired Andrew Haslam, who will join the REIT as vice president of health systems strategy after finishing his tenure as head of real estate and chief asset officer with health system Providence St. Joseph.

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