Analyst Note| Kevin Brown |
The senior housing industry started to recover in the second quarter, leading to no-moat Welltower slightly outperforming our expectations and us reaffirming our $83 fair value estimate. Senior housing same-store occupancy increased 40 basis points sequentially in the second quarter to 74.3%, the first time the portfolio has seen a sequential increase since 2019. However, occupancy is still down 6.7% year over year, leading to a 6.4% decline in same-store revenue. While same-store net operating income for the portfolio fell 17.6% in the second quarter, that is a significant improvement over the declines seen in the prior four quarters and is better than the 25.9% decline we had anticipated. The rest of the portfolio held up better, with same-store NOI for the triple-net senior housing portfolio falling 2.7%, the skilled nursing portfolio falling 1.1%, the medical office portfolio up 2.2%, and the health system portfolio up 2.7%. In total, Welltower's overall same-store NOI was down 7.1% in the second quarter, slightly better than our estimate of an 8.5% decline. Welltower reported normalized funds from operation of $0.79, which is 4 cents better than our estimate.