Welltower's Q3 2025 Earnings Call: Contradictions Emerge on Occupancy, Margins, and Talent Strategy

Date of Call: October 28, 2025

Financials Results

• Revenue: Organic revenue growth ~10% YOY (management midpoint 9.6%); occupancy up ~400 bps; RevPOR growth ~5.1%
• EPS: $0.41 per diluted share (net income attributable); normalized FFO $1.34 per diluted share, up 20.7% YOY
• Operating Margin: Same-store operating margins rose 260 basis points YOY

Guidance:

• Full-year 2025 net income guidance: $0.82 to $0.88 per diluted share.
• Normalized FFO guidance: $5.24 to $5.30 per diluted share ($5.27 midpoint).
• Total portfolio same-store NOI growth expected 13.2% to 14.5% (senior housing operating 20.5%–22%; RevPOR +5.1%; occupancy +390 bps; expense growth ~5.25%).
• MOB sale: $7.2B transaction with ~$1.9B gain (approx. $400M in Q4, ~$1.5B in 2026).
• Executive continuity program: ~$1.1B upfront Q4 noncash cost (adjusted out of NFFO) plus ~$200M amortized over 10 years.
• Run-rate net debt/EBITDA expected to increase ~1.0x on a run-rate basis post transactions.

Business Commentary:

• Capital Allocation and Transformative Acquisitions:
• Welltower announced $33 billion in transformative capital allocation activities, including $14 billion in new acquisitions and $9 billion in dispositions.

• The company is focusing on enhancing its rental housing platform, exiting non-core businesses, and realigning capital to drive long-term growth.

• Senior Housing Performance and Growth:

• Welltower's senior housing portfolio achieved 12 consecutive quarters of 20% plus same-store NOI growth, with a 400 basis point occupancy gain and a revenue increase of 10%.

• This growth was driven by strong demand, pricing power, and operational efficiency improvements.

• Technology and Digital Transformation:

• Welltower is focusing on a technology-driven transformation of its niche housing business through enhancing customer experience and operational processes.

• The company's digital initiatives are aimed at achieving maximum growth and gain, reducing latency, and increasing operational efficiency.

• Incentive Structure and Leadership Alignment:

• Welltower introduced a new compensation structure aligned with five key tenets, aimed at uniting management, operating partners, and employees for long-term growth.
• This structure aims to eliminate misaligned incentives and enhance the commitment of key personnel to the company's success.

Sentiment Analysis:

Overall Tone: Positive

• Management called it "another record quarter with occupancy, margins and net operating income, all exceeding our ... expectations" and highlighted $33 billion of transformative capital allocation. CFO noted record-low net debt/EBITDA (2.36x) and full funding for the acquisition pipeline, supporting an upbeat, confident tone focused on growth and operational transformation.

Q&A:

• Question from Vikram Malhotra (Mizuho Securities USA LLC, Research Division): You outlined many changes and Welltower 3.0—what's the goal and how should we think about the growth engine from a cash flow standpoint?
  Response: The goal is alignment and extending the duration of growth—focus on operations and technology (Welltower 3.0) to reduce latency, compound cash flow over time and drive long-duration value rather than near-term proof points.

• Question from Jonathan Hughes (Raymond James & Associates, Inc., Research Division): Details on the new comp plan—was it a board team package and will the RIDEA 6.0 structure be offered to other operators?
  Response: The Board developed the plan to meet five incentive tenets (simple, significant, team-earned, duration-matched, nongamable); three operators are the founding class now, and the structure can be extended to additional partners regionally over time.

• Question from John Kilichowski (Wells Fargo): Why fund recent acquisitions with asset sales instead of issuing equity?
  Response: They chose asset sales because, in their view, issuing equity would undermine long-term value—management views the opportunity cost of equity as higher and prioritized preserving duration of growth over near-term accretion.

• Question from Michael Carroll (RBC Capital Markets): How do Barchester and HC-One compare to Welltower's current portfolio in asset quality and private-pay exposure?
  Response: On a blended basis the acquisitions are very similar to the existing portfolio—comparable asset quality and metrics; no meaningful change to portfolio profile.

• Question from Farrell Granath (BofA Securities): Why structure the MOB disposition the way you did?
  Response: The structure balances a strategic refocus on senior housing while preserving upside for shareholders—retaining preferred equity and participation protects downside and keeps upside if asset values rise.

• Question from Nicholas Yulico (Scotiabank Global Banking and Markets): Is the MOB sale cap/yield ~6.25% and what is the preferred coupon and seller financing?
  Response: Preferred equity is $1.2B at an 8% coupon; no seller financing; the stated ~6.25% yield is in the right ballpark and net yield after reinvestment of the pref is closer to ~6%.

• Question from Omotayo Okusanya (Independent): How do RIDEA 6.0, compensation alignment and tech/data initiatives fit together for Welltower 3.0?
  Response: They reduce organizational latency via tighter teams, tech and WBS deployment to create network effects—faster response/processing and operational gains that compound over time across the platform.

• Question from Michael Goldsmith (UBS Investment Bank): How are you managing execution risk across acquisitions, dispositions and leadership changes?
  Response: Execution risk is mitigated by a large, experienced transaction team for deals and by scaling the Welltower Business System plus hiring industry-caliber ops and tech leaders—people and culture are central risk controls.

• Question from Ronald Kamdem (Morgan Stanley): Could all 12 execs go all-in on incentives and how will you protect the moat vs. competition and capital inflows?
  Response: Board is working on extending retention/incentives to other EVPs; protecting the moat depends on permanent capital, long-term tech/ops investment and the ability to attract/retain talent—cap structures like GP/LP often lack the long attention span required.

• Question from Nicholas Joseph (Citigroup Inc., Research Division): Balance between going all-in on senior housing versus increased earnings volatility?
  Response: They accept volatility but focus on mitigating permanent capital risk—maintaining low leverage and strengthening operational systems (WBS) to manage downside while pursuing growth.

• Question from Juan Sanabria (BMO Capital Markets Equity Research): Thoughts on single-family and manufactured housing vs. seniors/active adult opportunities?
  Response: They will remain within their circle of competence and focus on senior housing; no interest in manufactured housing at this time.

• Question from Richard Anderson (Cantor Fitzgerald & Co.): How do you reconcile heavy tech/ops investment ROI with potential rent fatigue?
  Response: They view tech/ops investments as high-ROI that manifest through the P&L; rent increases have been targeted at sustainable high-single-digit levels and resident tenure typically limits repeated hikes—strategy favors long-term value over short-term rent extraction.

• Question from James Kammert (Evercore ISI): How was the ~$1.1B noncash charge for the comp plan calculated?
  Response: The plan splits into ~$1.1B upfront noncash expense and an additional roughly $200M to be amortized over the subsequent 10 years.

• Question from Wesley Golladay (Robert W. Baird & Co.): Is the Welltower Business System opportunity in the U.K. plug-and-play as in the U.S.?
  Response: Yes—WBS is largely plug-and-play and presents similar, significant opportunity in the U.K.; operating partners there are receptive to new processes and technology.

• Question from John Pawlowski (Green Street Advisors, LLC): How is NOI performing on the 2024 vintage acquisitions vs underwriting?
  Response: Except for notable holiday exposure, 2024-vintage acquisitions are performing in line with or ahead of underwriting on aggregate.

• Question from Austin Wurschmidt (KeyBanc Capital Markets Inc.): What percent of SHO NOI do the three RIDEA 6.0 operators represent and can you add others?
  Response: The founding class represents about 20% of SHO NOI; the structure can be expanded regionally to include additional operators over time.

• Question from Michael Mueller (JPMorgan Chase & Co): What is the initial blended yield on the $14B of announced investments and range across components?
  Response: They do not disclose yields until transactions close; management said the activity is generally consistent with recent years and yields will be reported in subsequent filings once closed.

Contradiction Point 1

Occupancy Growth and Pricing Power

It involves differing perspectives on the expected timeline for occupancy growth and the pricing power of senior housing assets, which are key factors in revenue projections and strategic planning.

What are the company's goals and growth engines from a cash flow perspective moving forward? - Vikram Malhotra (Mizuho Securities USA LLC, Research Division)

2025Q3: Our NOI growth was 6.9%, our ENOI growth was 7.5%. Occupancy rose 100 basis points to 87.7%. The occupancy growth was again led by our wellness housing portfolio, which rose 130 basis points. - Shankh Mitra(CEO)

Can you provide an update on portfolio segment performance and the potential for reacceleration in occupancy growth? - Ronald Kamdem (Morgan Stanley)

2025Q2: Occupancy growth below 80% is challenged due to lack of pricing power. Growth and demand should increase as occupancy rises above 90%. The industry should see better pricing power in the next 18-24 months. - Shankh Mitra(CEO)

Contradiction Point 2

Margin Expansion and Operational Improvements

It highlights differing views on the timeline and scope of margin expansion and operational improvements, which are critical for financial performance and competitive positioning.

What are the primary goals and growth drivers from a cash flow perspective moving forward? - Vikram Malhotra (Mizuho Securities USA LLC, Research Division)

2025Q3: I look at the next decade as a very big decade for margin expansion. Lots of opportunities to get our costs lower. - Shankh Mitra(CEO)

What is Welltower's strategy for expanding margins in senior housing? - Farrell Granath (BofA Securities, Research Division)

2025Q2: There is significant opportunity for margin expansion through both revenue and expense management. The focus is on leveraging the operating platform to drive improvements across multiple areas. - John F. Burkart(COO)

Contradiction Point 3

Equity and Asset Sales Strategy

It involves a shift in the company's strategy regarding the use of equity and asset sales for funding investments, which impacts capital allocation and financial flexibility.

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

2025Q3: We view our equity as more expensive than the asset sales. We believe in high growth and long-term duration, which aligns with our opportunity cost assessment. It's about the balance between capital costs and growth perspective. - Shankh Mitra(CEO)

How will Welltower sustain growth amid its size and macroeconomic uncertainty? - Unknown Analyst (Bank of America)

2025Q1: We continue to raise equity to fund existing investments, to align with our growth strategy, we believe it's critical to provide flexibility for potential follow-on acquisition opportunities as we've seen over the past year. We remain disciplined in our approach to balancing equity and debt, consistent with our long-term capital structure targets. - Tim McHugh(CFO)

Contradiction Point 4

Occupancy and Pricing Power

It highlights differing perspectives on the impact of occupancy levels on pricing power and revenue growth, which are crucial for understanding the company's financial performance and growth strategy.

Can you assess the pricing power across occupancy bands in the SHOP portfolio? - Vikram Malhotra (Mizuho Securities USA LLC, Research Division)

2025Q3: Assets that are 90%-plus occupied have RevPOR growth well into the sixes. - Shankh Mitra(CEO)

Can you clarify the pricing power across occupancy bands in the SHOP portfolio? - Vikram Malhotra (Mizuho)

2024Q4: Assets below 70% occupied are roughly flat. - Shankh Mitra(CEO)

Contradiction Point 5

Talent Retention and Demand

It involves differing views on the current state and future challenges of retaining talent within the company, which is critical for operational effectiveness and growth.

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

2025Q3: Rethinking talent is my number one priority. It's hard to find really good people who do not think of what we do as work, but take that as their lives work. - Shankh Mitra(CEO)

How does Welltower retain talent? Is there a current retention issue at Welltower? - Joshua Dennerlein (Bank of America)

2024Q4: The demand for people is tremendous given the retirement wave, and there is no retention problem at Welltower, but we should act before there's a problem. - Shankh Mitra(CEO)