Welltower's Q3 2025 Earnings Call: Contradictions Emerge on Incentive Alignment, Occupancy Dynamics, Investment Strategy, and Acquisition Strategy

Date of Call: October 28, 2025

Financials Results

• EPS: $0.41 per diluted share (net income); normalized FFO $1.34 per diluted share, up 20.7% YOY
• Operating Margin: Same-store operating margins up 260 basis points year-over-year

Guidance:

• Full-year 2025 net income attributable to common stockholders: $0.82–$0.88 per diluted share.
• Normalized FFO 2025: $5.24–$5.30 per diluted share (midpoint $5.27).
• Total portfolio same-store NOI growth expected 13.2%–14.5%; senior housing operating growth 20.5%–22%.
• Revenue guidance: ~9.6% growth (occupancy +390 bps; RevPOR +5.1%); expense growth ~5.25%.
• MOB sale: ~$1.9B gain (≈$400M in Q4, ~$1.5B in 2026); ~$1.1B upfront comp cost to hit Q4 net income (adjusted out of normalized FFO).

Business Commentary:

• Record Financial Performance:
• Welltower reported net income of $0.41 per diluted share and normalized FFO of $1.34 per diluted share, representing 20.7% year-over-year growth.

• This growth was driven by strong performance in its senior housing portfolio and strategic capital allocation decisions.

• Senior Housing Portfolio Growth:

• The senior housing portfolio experienced 12 consecutive quarters of same-store NOI growth exceeding 20%, with 20.5% to 22% growth expected for Q3.

• The increase was attributed to a 400 basis point occupancy gain and strong pricing power, reflecting the company's operational excellence and effective capital planning.

• Capital Allocation Strategy:

• Welltower completed approximately $14 billion of new investments, including $5.4 billion closed through Q3 and another $7 billion expected to close by mid-2026.

• The focus on senior housing acquisitions and strategic divestitures aims to enhance long-term growth potential and transform Welltower into a pure-play rental housing platform.

• Operational and Technological Transformation:

• The company is retooling its organization to emphasize operations and technology, aiming to enhance customer and employee experiences.
• This includes hiring experienced talent from industries with higher standards and investing in technology and business systems to increase operational efficiency.

Sentiment Analysis:

Overall Tone: Positive

• "it was another record quarter with occupancy, margins and net operating income, all exceeding our already very high expectations." Q3 normalized FFO $1.34 (+20.7% YOY) and total portfolio same-store NOI growth 14.5% YOY; leadership described $33B YTD transaction activity and transformative strategy Welltower 3.0 focused on ops/tech and alignment of incentives.

Q&A:

• Question from Vikram Malhotra (Mizuho Securities USA LLC, Research Division): You outlined many changes and Welltower 3.0; is there a specific goal you're trying to prove and how should we think about the growth engine from a cash flow standpoint?
  Response: Management: The goal is alignment and duration of growth—transform operations/technology to compound cash flow over time rather than prove near-term metrics.

• Question from Jonathan Hughes (Raymond James & Associates, Inc., Research Division): Can you share more details on the new comp plan—was it presented as a team/all-or-nothing package and will the operator unit structure be extended to other partners under RIDEA 6.0?
  Response: Management: The Board designed the plan to meet five tenets (simple, significant, team-earned, duration-matched, nongamable); the three named operators are a founding class and the structure could be extended to others over time.

• Question from John Kilichowski (Wells Fargo): For the acquisitions announced, why not issue equity to fund some investments instead of doing the asset sales?
  Response: Management: Asset sales were chosen for opportunity-cost reasons—management believes the long-term cost/benefit and duration of growth make selling preferable to issuing equity now.

• Question from Michael Carroll (RBC Capital Markets, Research Division): How do the Barchester and HC-One portfolios compare to Welltower's current portfolio in asset quality and private-pay percentage; does that affect growth outlook?
  Response: Management: Nikhil: Blended quality and metrics are very similar to Welltower's existing portfolio; no material change to growth outlook.

• Question from Farrell Granath (BofA Securities, Research Division): Can you discuss the rationale for the MOB disposition structure?
  Response: Management: The structure preserves upside for shareholders while freeing management to focus on senior housing and protects downside through preferred equity and profit participation.

• Question from Nicholas Yulico (Scotiabank Global Banking and Markets, Research Division): Is the implied cap rate ~6.25% on the $7.2B MOB sale; what's the preferred coupon and is there seller financing?
  Response: Management: Nikhil: The ~6.25% is in the right ballpark; preferred is $1.2B at an 8% coupon, net proceeds ≈$6B; no seller financing.

• Question from Omotayo Okusanya: How do RIDEA 6.0, compensation alignment and data/latency improvements fit together for Welltower 3.0 and what does that set you up for?
  Response: Management: Shankh: Reducing latency via WBS and new tech hires plus incentive alignment creates network effects—faster operational decisions, better resident response times and scalable growth.

• Question from Michael Goldsmith (UBS Investment Bank, Research Division): How are you managing execution risk across acquisitions, dispositions and leadership changes and where are you focused operationally?
  Response: Management: Shankh: Execution risk mitigated by experienced deal teams, expanded ops focus via WBS, targeted hires from high-standard industries and a culture that retains talent.

• Question from Ronald Kamdem (Morgan Stanley, Research Division): Could all 12 executives be included in the incentive structure and how do you protect the moat against competition for talent/technology over 10 years?
  Response: Management: Shankh: Board is working on retention for broader leadership; long-term innovation requires permanent capital and long attention span—Welltower seeks permanent-capital-like commitment to sustain advantage.

• Question from Nicholas Joseph (Citigroup Inc., Research Division): Balancing going all-in on senior housing versus increased earnings volatility as the company becomes less diversified—thoughts?
  Response: Management: Shankh: They welcome volatility but focus on mitigating permanent capital risk via low leverage and operational risk reduction through WBS and balance-sheet discipline.

• Question from Juan Sanabria (BMO Capital Markets Equity Research): Thoughts on single-family and manufactured housing opportunities vs. seniors/active adults?
  Response: Management: Shankh: Outside their circle of competence; they will remain focused on senior housing where they have expertise.

• Question from Richard Anderson (Cantor Fitzgerald & Co., Research Division): With heavy tech and ops investment, is there concern about rent fatigue or needing to scale back internal investments if pricing becomes pressured?
  Response: Management: Shankh: Tech investments deliver P&L-level ROI that outweighs real-estate returns; rent increases are moderated by short resident durations, and they prioritize long-term customer/employee value over short-term rent maximization.

• Question from James Kammert (Evercore ISI Institutional Equities, Research Division): How was the ~$1.1B noncash comp charge calculated?
  Response: Management: Tim: The plan splits into an upfront ~$1.1B expense and an additional ~$200M amortized over the following 10 years.

• Question from Wesley Golladay (Robert W. Baird & Co., Research Division): Is the Welltower Business System transferable to the U.K. or is it plug-and-play?
  Response: Management: Shankh/Nikhil: Yes—WBS is largely plug-and-play and the UK presents similar operational opportunity; local partners welcome the improvements.

• Question from John Pawlowski (Green Street Advisors, LLC, Research Division): How is NOI performing on the 2024 vintage of senior housing acquisitions vs underwriting?
  Response: Management: Shankh/Nikhil: Generally in line or better than underwriting except for underperformance at 'Holiday' assets.

• Question from Austin Wurschmidt (KeyBanc Capital Markets Inc., Research Division): What percent of SHO NOI do the three RIDEA 6.0 operators represent and how do you expand that alignment?
  Response: Management: Tim/Shankh: They represent ~20% of SHO NOI today; the founding class can be expanded regionally as opportunities arise.

• Question from Michael Mueller (JPMorgan Chase & Co, Research Division): What's the initial blended yield on the $14B of announced investments and range across components?
  Response: Management: Nikhil: They don't disclose yields until transactions close; activity yields are broadly similar to recent years' acquisitions.

Contradiction Point 1

Incentive Alignment and Insider Ownership

It involves differing perspectives on the importance of insider ownership and the alignment of incentives, which are crucial for corporate governance and long-term success.

Can you provide details on the new comp plan, and will it be extended to other partners? - Jonathan Hughes (Raymond James)

2025Q3: A significant portion of management hasn't sold any Welltower stock. Incentive alignment is crucial for shared success. The strategy is to have personal net worth align with company interests. - Shankh Mitra(CEO)

How are you aligning incentives and increasing insider ownership? - Omotayo Tejumade Okusanya (Deutsche Bank)

2025Q2: The goal is not to prove anything but to contribute and align people's interests with owners. The focus is on elongating growth curves by digital transformation to enhance customer and employee experience. - Shankh Mitra(CEO)

Contradiction Point 2

Occupancy and Demand-Supply Dynamics

It involves differing perspectives on the impact of occupancy levels on demand-supply dynamics and pricing power, which are critical for strategic decision-making.

Were all 12 executives eligible for the new incentive structure, and how will Welltower protect its moat against competition? - Ronald Kamdem (Morgan Stanley)

2025Q3: Below 80% occupancy lacks pricing power. Above 90%, pricing power significantly improves, driving demand-supply dynamics. - Shankh Mitra(CEO)

What are the competitive dynamics for senior housing investments, especially with rising occupancy? - Juan Carlos Sanabria (BMO Capital Markets)

2025Q2: There's no shortage of opportunities to improve cash flow profiles due to fragmented market dynamics. Economics drive construction activity, and the focus is on high-quality, difficult-to-build locations. Economic rather than supply-driven thinking is essential. - Nikhil Chaudhri(CIO)

Contradiction Point 3

Investment Strategy and Asset Sales

It involves changes in the company's investment strategy, particularly regarding asset sales and the use of equity vs. debt, which are critical for financial management and investor expectations.

Why not issue equity instead of selling assets to fund investments? - John Kilichowski

2025Q3: The decision is based on opportunity cost, with a view that the current spot cost of equity is higher than the cost of asset sales. The focus is on the long-term growth and value creation, rather than short-term FFO accretion. - Shankh Mitra(CEO)

Why choose debt over equity despite a lower cost of equity? - Unknown Analyst (Bank of America)

2025Q1: Our cost of equity is much higher. We consider long-term growth prospects when evaluating cost of capital. Tim McHugh: The leverage increase is due to cash being put to work off the balance sheet, not issuing new debt. - Shankh Mitra(CEO), Tim McHugh(CFO)

Contradiction Point 4

Occupancy and Revenue Growth Expectations

It involves differing expectations regarding occupancy growth and revenue per occupied room (RevPOR) growth, which are critical indicators for understanding Welltower's financial performance and strategic direction.

What are the goals of recent changes, and how should we view the growth engine from a cash flow perspective moving forward? - Vikram Malhotra (Mizuho Securities USA LLC, Research Division)

2025Q3: The company sees a significant opportunity to increase RevPOR by optimizing the customer experience and enhancing the value proposition for residents. - Shankh Mitra(CEO)

Is occupancy growth driven by retirement age acceleration or execution? - John Kilichowski (Wells Fargo)

2024Q4: Occupancy growth is a mix of execution and market activity. Operational execution at Welltower has resulted in significant operational alpha. - Shankh Mitra(CEO)

Contradiction Point 5

Acquisition Strategy and Market Opportunities

It involves differing perceptions regarding the availability of acquisition opportunities and the company's strategy for exploiting them.

Can you explain the rationale for structuring the MOB disposition? - Farrell Granath (BofA Securities, Research Division)

2025Q3: Given the supply and demand dynamics, we continue to see this as a great opportunity to acquire high-quality properties, for example, the latest acquisition of Trophy Investments. And we will continue to pursue this strategy. - Nikhil Chaudhri(CIO)

Does limited new development affect growth opportunities via acquisitions, especially with fewer newer properties? - Jonathan Hughes (Raymond James)

2024Q4: The activity suggests the answer is no, as the business is complex, requiring specific toolkits for success. Opportunities exist in underperforming assets regardless of the oversupply cycle post-GFC. - Nikhil Chaudhri(CIO)