Occupancy growth in Welltower’s (NYSE: WELL) senior housing portfolio is ahead of previous assumptions for the first quarter of 2022.
The Toledo, Ohio-based real estate investment trust (REIT) on Tuesday reported in a business update that average year-over-year occupancy growth for its senior housing operation (SHO) portfolio in 1Q22 is expected to exceed the company’s past projections for an increase during the period of 420 basis points.
The company also expects sequential average occupancy growth between 4Q2021 and 1Q2022 to exceed the REIT’s previous expectation for approximately flat growth in that time.
Spot occupancy increased approximately 40 basis points during the first quarter of this year, with the company noting “significant acceleration” into April. At the same time, occupancy growth is outpacing typical seasonality.
The company’s leaders see an embedded $565 million opportunity in net operating income (NOI) growth ahead, provided Welltower can return to pre-pandemic occupancy levels of 87.1%. The REIT’s leaders also noted that there is “potential for additional upside” assuming a future return to Welltower’s 2015 peak occupancy rate of 91%.
Welltower leaders filled out the positive outlook by noting a variety of tailwinds in the latest business update, including an “unprecedented” amount of absorption in recent quarters, a relative decline in new senior housing units under construction, and an expected decrease of agency labor usage in the second half of this year.
Since 4Q20, Welltower has made $7 billion in gross investments. The REIT also has acquired more than 29,000 senior living units in that time, representing an average investment of $20.6 million per property.
The REIT has announced or completed approximately $1.3 billion of capital deployment in the first quarter of 2022 alone, making it one of the most active starts to the year for investment activity in the company’s history.
Recent notable transactions include a $548 million acquisition of 33 communities with Storypoint Senior Living, and a new strategic partnership with Related Cos. and Atria Senior Living to develop two high-end projects, to be located in Silicon Valley.
Looking ahead, Welltower could see a potential capital deployment of over $25 billion over the next decade, with an opportunity to deploy $2.5 billion annually.
In seperate update for investors Tuesday, Chicago-based REIT Ventas reported NOI in 4Q2021 of $82 million. Leaders at Ventas believe the company has a $296 million annualized opportunity as of 4Q21 to return its senior housing operating portfolio (SHOP) same-store NOI to pre-pandemic levels.
Average occupancy across Ventas’ same-store SHOP segment in the U.S. and Canada was 82.8% in March, well above the 78.8% occupancy reported in 1Q2021. The company also saw strong move-in activity through March 26.
The company also noted an approximate net operating income recovery opportunity of $900 million, which would occur with an occupancy rate of 88%.
