Welltower (NYSE: WELL) CEO Shankh Mitra is feeling more bullish on the senior living industry, a mood that was reflected in the company’s newly upped financial guidance for the rest of the year. Recent promising performance and “major breakthroughs” in data are a big part of the reason why.
On Monday, the Toledo, Ohio real estate investment trust (REIT) raised its 2023 guidance range for normalized funds from operations (FFO) in 2023 to between $3.51 and $3.60 per diluted share, up from a previous guidance range of between $3.48 and $3.59. Mitra on Tuesday highlighted some of the positive fundamentals pushing the real estate investment trust forward during a presentation at the Bank of America Global Real Estate Conference.
Rather than focusing on the old adage “location, location, location,” he contended the way companies can succeed is through an “optimization game” with four variables: Location, product, price point and strategic operating partners.
“It’s not maximizing one thing versus another,” Mitra said during the event. “If you optimize those four things, you can make a lot of money.”
Mitra highlighted how Toledo, Ohio-based REIT’s leadership team was “changing a business and bringing it to the 21st century.” For the comparison, Welltower highlighted the global success touted by McDonald’s (NYSE: MCD) to create a standardized process for business operations.
“This happened in all other asset classes. It happened to multifamily 30 years ago, it happened to storage 15 years ago, it happened to single-family rentals 7 to 10 years ago,” Mitra said. “Those are the sort of structural changes that are happening, and you’re going to see that will come through for a long time to come.”
He added that the company’s balance sheet was something that “we can lean on to create value.”
During the event, Mitra highlighted a “breakthrough” Welltower and other companies had realized several years ago after starting to leverage cell phone data to show consumer patterns and migration habits. With the evolution and creation of its own self-operating model, Mitra noted that macro data investment and performance data is now “getting married with simple operating data” thanks to efforts from leaders like John Burkart, the company’s COO.
“I want to know, when you hover on my website, where you hovered more … or are you interested in a one-bedroom or two-bedroom?” Mitra said. “This is the operating data that, finally, with all the things I mentioned, is now getting integrated into a system so we have a very clear view of how we want to price.”
Mitra mentioned that the data is now so precise that it’s possible to accurately predict resident rates of any multifamily or senior housing property within a margin of error of just $10. This pairs with Welltower’s machine and statistical learning data science tool known as “Alpha.”
When asked about an update regarding the company’s senior housing fundamentals, Mitra said that he was “pleased with what we have seen so far.”
Since 2020, Welltower has completed $10.7 billion of gross investments, with Mitra highlighting the company’s favorable prospects of buying distressed assets and bringing them up to stabilization and 80% and above occupancy.
Recently transitioned properties to Oakmont Senior Living and Avery in the U.K. have generated “stronger than anticipated results,” the company’s business update shows as expenses continue to moderate and full-time employee hiring improves.
This follows Welltower selling its stake in one of the nation’s largest operators, Sunrise Senior Living, while gearing up for launching its self-operating platform in Canada known as “Project Transformer.”
“Our performance relative to the industry is widening and it will continue to widen,” Mitra said.
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