Welltower Falls 5% Even as Senior Housing Income Climbs

Shares of Welltower lost more than 5% on Tuesday, although the senior housing investor projected revenue and profit to keep rising through the end of the year. The Toledo, Ohio-based REIT is the world's most valuable publicly traded real estate firm.

Third-quarter revenue of $3.7 billion and profit of $415 million grew 38% and 47% from a year earlier. Both came in below analyst expectations. The stock fell from $240 to less than $227, wiping out roughly $5 billion in value. Market capitalisation is $163.4 billion, ahead of Prologis at $120 billion. The shares are still up more than 21% this year and have nearly tripled in value since 2021.

Welltower raised its forecasts for net income and funds from operations. It now expects the cash flow metric to grow 23% this year from 2025.

Buying spree

Welltower is the largest owner of senior housing in the U.S. and has acquired 141,000 units since 2020. According to an investor presentation published on Monday, $21 billion of investment activity is closed or under contract so far this year. Net operating income of its senior housing operating portfolio rose 21% in the quarter as occupancy grew from 87% to 90.2%.

On the earnings call, Mitra said that as communities fill up, the driver of revenue growth is handing over from occupancy to pricing. Senior housing has been one of the best-performing asset classes, with a growing elderly population meeting construction that has fallen to a 15-year low.

Among its purchases were a $100 million newly built community in San Jose, California, and a four-property portfolio in the Philadelphia suburbs with Bain Capital and Capitol Seniors Housing. In the third quarter it also bought eight nursing homes for a combined $850 million.

CEO Shankh Mitra said the company closed 196 deals in 204 business days and rejected 97% of the opportunities it screened. "If we never buy another asset, I'll be completely fine," he said.

He estimated that between $10 billion and $12 billion of senior housing debt matures in each of 2027 and 2028. "Much of this debt was originated between 2020 and '22 in a fundamentally different rate environment," he said. Owners must "recapitalize or sell", and in his view most will sell.

Crowded field

REITs have made up 36% of U.S. senior housing deals this year, up from 15% in 2023, according to Walker & Dunlop. Sales totalled $32.2 billion in the 12 months to June, a 74% annual jump. NIC Map estimates 578,000 more units are needed by 2030, while only 24,000 were under construction this summer.

Mitra also noted that Welltower was repaid a $130 million senior loan only last quarter, through the restructuring of Genesis Healthcare, a nursing home operator that filed for bankruptcy in 2024. At one point Genesis represented 20% of Welltower's earnings, he said; the company largely exited the relationship in 2021 but kept restructuring its investment in Genesis debt until this final payoff. "Genesis is now behind us," he said.

Source: Bisnow