Welltower Earnings: Double-Digit NOI Growth Continues for the Senior Housing Portfolio

Fourth-quarter results for no-moat Welltower were better than we anticipated, giving us confidence in our $103 fair value estimate. Senior housing same-store occupancy improved 110 basis points sequentially to 83.3%, ahead of our 82.6% estimate. Rental rates increased 5.3% year over year, slightly below our estimate of 6.0% rate growth, leading to same-store revenue growth of 9.7% that was in line with our 9.6% estimate. However, fourth-quarter senior housing operating expenses were only up 5.7%, below our estimate of 6.9% expense growth, so same-store net operating income, or NOI, for the senior housing portfolio grew 23.7%, which was higher than our 19.5% estimate. Same-store NOI growth in the fourth quarter was 2.2% for the triple-net senior housing portfolio, 2.8% for the medical office portfolio, and 5.2% for the skilled nursing portfolio. As a result, total same-store NOI growth was 12.5%, which was better than our estimate of 9.2% growth. Welltower reported normalized funds from operations, or FFO, of $0.96 per share in the fourth quarter, four cents better than our $0.92 estimate.