Welltower Q3 FFO超预期并上调全年指引，但股价盘中跌超5%，强业绩遭遇高预期与利率压力

Welltower (NYSE:WELL) released third-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Welltower reported strong financial performance, with 38% revenue growth and 35% adjusted EBITDA growth driven by high demand for luxury senior living and effective capital deployment.
The company raised its full-year FFO outlook midpoint to $6.50 per share, reflecting 23% year-over-year growth, and emphasized its focus on long-term compounding of earnings.
Operational highlights included a 16% increase in same-store NOI, with a shift toward pricing as a key revenue driver as occupancy rates improve and pricing power strengthens.
Welltower executed $21 billion in investment activity year-to-date, focusing on granular, off-market opportunities rather than large-scale M&A while maintaining a low-leverage balance sheet.
Management stressed the importance of product-market fit and technology in sustaining growth, while highlighting strong performance in its senior housing operating portfolio despite macroeconomic challenges.
Full Transcript
OPERATOR
Hello and welcome to the Welltower third quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. I would now like to turn the conference over to Matt McQueen, Chief Legal Officer and General Counsel. You may begin.
Matthew McQueen (Chief Legal Officer and General Counsel)
Thank you and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be attained. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company’s filings with the SEC, and with that, I’ll hand the call over to Shankh for his remarks.
Shankh Mitra (Chief Executive Officer)
Thank you, Matt, and good morning, everyone. I will review business trends and our capital allocation priorities and the team will follow the usual cadence. Our business continued to fire on all cylinders during the third quarter as the all-weather compounding engine we have built continues to deliver exceptional results for our existing investors. The strong end-market demand for our luxury senior living product, coupled with attractive capital deployment opportunities, drove revenue growth of 38% and adjusted EBITDA growth of 35%. Most notably, we delivered nearly 25% FFO per-share growth while maintaining an extremely low-leverage balance sheet and doubling down on our investments in operations and technology.
These results, coupled with momentum that we are carrying into the fourth quarter, enabled us to raise the midpoint of our full-year FFO outlook by $0.10 per share to $6.50, which, if achieved, would represent a 23% year-over-year growth. What matters to us, however, is not simply the magnitude of the growth in a given quarter or year, but the duration of that growth. We believe that a favorable demand-supply backdrop, when combined, more importantly, with an affluent customer base and the digital transformation of our portfolio through the Welltower Business System, gives us a long runway to compound per-share earnings and cash flow growth for existing investors. To be clear, our recent results and outlook are not simply a byproduct of demographic trends or the expansion of our footprint.
Instead, they are a function of our long-held view that enduring businesses simply cannot respond to change; they must continue to reinvent themselves ahead of it. In that vein, we have retooled nearly every aspect of the company over the past decade, from capital allocation to improving the resident and employee experience, in addition to meaningfully deleveraging our balance sheet. These actions have positioned us not to simply withstand an increasingly uncertain economic landscape, but to remain on offense and continue to deliver outsized growth almost irrespective of macro conditions.
Turning back to the quarter, our total portfolio same-store net operating income increased nearly 16%, the second-highest level of growth achieved in our recorded history. This is largely a function of the mix shift of our portfolio, which we have discussed previously, as our seniors housing operating portfolio, or SHOP, now represents 70% of total same-store NOI, and our SHOP performance remains strong, delivering 9.1% organic revenue growth driven by another period of both healthy occupancy gains and robust pricing power.
Against a backdrop of growing macroeconomic uncertainty, the demand for luxury senior living remains resilient during the summer months, with 120 basis points of average occupancy increase from the second quarter. This gain exceeded the sequential occupancy increase recorded during the same period last year, reflecting the uncorrelated demand for our product offering. And while it is still early, we’re encouraged by the trends we’re seeing at the start of the fourth quarter.
Unless the strong sequential tailwind we experienced in Q2 and Q3 subsides, we should be in a position to deliver another year of favorable occupancy growth next year. However, as communities are filling up, the deliberate and methodical handover from occupancy to pricing as the driver of revenue growth is taking place under the surface. Our all-in measure of pricing, or REVPOR, or unit revenue, increased by 5.3% during the quarter, highlighting the strong pricing power maintained by our operators. If we zoom into the U.S., where occupancy crossed 90%, the portfolio achieved REVPOR growth of 5.5%. If you further zoom into our traditional senior living business, the same number was 5.8%.
Though quarterly numbers are irrelevant, as we are focused on the long term, the underlying trend perhaps provides a peek into the future, which is inherently uncertain. Taking a first-principles approach, it makes fundamental sense that rate should continue to move higher as capacity in the system grows increasingly scarce. But more importantly, our operators’ pricing power reflects a luxury product in premium locations, coupled with the strong value proposition of the service that our operating partners provide to residents and their families.
On the expense side, cost growth across our senior housing portfolio remained well contained even amidst broader inflationary pressure. Expenses in SHOP grew 4.3%, or below 1% on an expense basis, due to operating leverage inherent in our high fixed-cost business. Alongside early wins from the Welltower Business System, the favorable spread between REVPOR and expense growth persisted during the third quarter, driving another period of outsized margin expansion of 300 basis points.
Going forward, we continue to see sustained opportunity for margin expansion as this delta is expected to remain wide while WBS initiatives continue to bear fruit. As John will describe momentarily, the flow-through margin of our SHOP business reached a record high in the high 60s%, resulting in more cash flow dropping to the bottom line for each incremental dollar of revenue. When assessing the future earnings power of this platform, this relationship is important to consider along with the pricing-versus-occupancy dynamic mentioned above.
From a capital allocation standpoint, there was no let-up in activity across the U.S., U.K., and Canada. After a record-setting year of capital deployment in 2025, we have completed or announced over $21 billion of investment activity year to date. Similar to last year, we got lucky again with unprecedented interest rate and macro volatility this year, which drove this significant opportunity set. It didn’t hurt that we were prepared with both an underlevered balance sheet and the most pristine reputation in this business, as an entrepreneurial shop which operates at lightning speed and the highest level of transaction integrity. $21 billion could very well be the size of a large-cap REIT, but the total acquisition volume is the least relevant measure of what we have accomplished. Instead of large-scale M&A we shun like the plague, we completed 196 granular transactions with a median size of $35.5 million in 204 business days. More importantly, please see page 9 of our business update for the number of transactions we rejected due to issues concerning price, location, product-market fit, management, contract, or other issues.
Nonetheless, as Nikhil will describe shortly, our pipeline opportunities remain robust, visible, and actionable across our regions. As we have discussed previously, the vast majority of our acquisitions are granular, off-market opportunities with a clear path to driving meaningfully higher cash flow post-closing. Said differently, we’re not spread-investing shadow banks that are fixated on cap rate, relative size, and near-term earnings accretion. Those metrics take on outsized importance when there is little ability to drive excess operational cash flow from the underlying portfolio.
We’re playing a different game, buying at an attractive basis and compounding cash flow over time through simple and yet extraordinarily difficult post-closing execution. This advantageous divergence is only widening, and it is critical to how we think about creating long-term value for existing investors. At the same time, I would be remiss not to mention that we continuously seek opportunities to refine the portfolio through selective dispositions. With $6 billion of dispositions this year, we’re clearly willing to accept some near-term dilution to extend and amplify the duration of our per-share earnings and cash flow growth. Lastly, given the current macro backdrop, it’s worth highlighting that our balance sheet remains in excellent shape. Tim will provide the details, but we maintain exceptionally low leverage.
With a meaningful ramp in free cash flow expected in the coming years, our financial flexibility will be enhanced even further. With that, I will turn it over to John.
John Olympitis (Executive Vice President, Head of Corporate Development)
Thank you and good morning everyone. We reported solid third quarter results with continued strength across the business. Total portfolio same-store NOI increased 15.8%, driven by another standout performance from our senior housing operating portfolio, which boasted 21% year-over-year growth. This marks the 16th consecutive quarter, or four full years, of compounding growth in which the SHOP same-store NOI growth exceeded 20%. As Shankh mentioned, our niche seniors housing portfolio remains largely insulated from growing economic uncertainty and heightened geopolitical turbulence. And while macro conditions may ebb and flow, our operating partners remain unwavering in their focus on maximizing NOI through a combination of occupancy, rate, and expenses, while also providing a superior resident and employee experience.
In that light, during the quarter we reported a healthy occupancy gain of 320 basis points, but were particularly pleased with an acceleration in RevPAR growth to 5.3%. The dual revenue drivers of occupancy and rate resulted in another quarter in which organic revenue growth exceeded 9%. A handoff from occupancy to rate as the primary driver of top-line growth is now taking shape as we expected, with communities rapidly leasing up and further reinforced by the substantial affluence of residents across our micro-markets.
In communities above 90% occupancy, which represent nearly two-thirds of the portfolio, our operators are driving RevPAR growth above 6%. We are also delighted with our operators’ expense management, with same-store opex increasing just 4.3% year over year. More importantly, after adjusting for occupancy gains during the period, ExPOR, a more relevant measure of underlying cost growth, increased only 80 basis points. In Canada, ExPOR growth was essentially flat, reflecting occupancy moving in the low 90% range and benign underlying expense pressure.
While operational scaling has undoubtedly contributed to muted ExPOR growth, of equal if not greater importance are our ongoing efforts to leverage technology, systems, processes, and data through WBS to improve efficiency while simultaneously enhancing the resident and site-level employee experience. In terms of labor, our largest expense item by a wide margin, wage growth has been subdued relative to prior years, while labor availability and retention trends have generally improved.
As a result, CompOR, or compensation per occupied room, increased just 90 basis points. Looking ahead, we expect further improvement in key metrics, including employee turnover, driven by WBS initiatives, our regional densification strategy, and the Munger grant. From an overall profitability standpoint, SHOP achieved a same-store NOI margin of 31.7%, up 310 basis points year over year. Notably, the flow-through margin for the quarter came in at 66%, a post-COVID high-water mark for the company. While operator leverage provides meaningful flow-through, rental rate growth is a more powerful driver, as incremental revenue carries essentially no associated cost.
We are encouraged by another quarter of favorable results, but as you know, we take nothing for granted. Senior housing is a 24/7 business where execution at the micro level remains critically important. This is anything but a commodity business. Even within the same micro-market, differences in operator acumen and product-market fit can mean the difference between 2% growth and 20% growth. This is exactly why, together with our best-in-class operators, our priority remains creating a modern digital experience for our residents, their families, and site-level employees through the Welltower Business System.
The data it generates is what enables our partners to optimize execution at that micro level. To sum it up, it was another strong quarter for Welltower and our operators, but we remain squarely focused on the future. I’m grateful for all the hard work by our site team members, our operating partners, and the Welltower team. The opportunity set to drive cash flow from our existing portfolio continues to expand and remains our top priority. We’re thrilled with the caliber of talent we continue to attract and excited about what the broader team will deliver in 2027 and the years beyond.
With that, I’ll turn it over to Nikhil.
Nikhil
Thanks John and good morning everyone. Since our last call, the macroeconomic environment has continued to deteriorate. In September, the Fed raised rates for the first time since 2023. The ECB and the Bank of Japan raised rates the same month, taking Japan’s policy rate to its highest level since 1995. Inflation reaccelerated to 3.7% in September and markets are now pricing more hikes, not cuts. At the long end, the picture is starker. The 30-year Treasury moved above 5.3% in August, a level last seen in 2007, and earlier this month the 10-year touched 5.36%, its highest level since 2002.
Meanwhile, the war in the Middle East has widened rather than resolved, with attacks on Gulf energy infrastructure pushing oil back above $100 a barrel. The stress from a highly volatile macro and geopolitical environment is showing up exactly where you would expect. For equity capital, we are seeing core capital seek double-digit core-plus returns without stepping up on the risk curve. On the credit side, private credit defaults are running near 6% once PIK amendments and extensions are counted versus historic averages of 2 to 2.5%, and global regulators now designate the sector a systemic risk.
CMBS delinquencies have climbed above 8%, the highest since late 2020, and special servicing rates are the highest since 2013. Spreads on the lowest-rated corporate credit are the widest since 2022. Let me be clear about what this means for our sector and for us. After roughly $8 billion of U.S. seniors housing debt comes due in 2026, annual maturities step up further in ’27 and ’28 to between $10 and $12 billion. Much of this debt was originated between 2020 and ’22, in a fundamentally different rate environment. The owners of these assets face a critical decision: recapitalize or sell. While some owners may recapitalize, most will sell as the impact of rising rates offsets improved industry fundamentals.
That is where Welltower comes in. When financing markets turn volatile, sellers stop asking who will pay the most on paper. They ask who will actually close on time at the agreed price without a retrade. Our reputation has been built on exactly that: speed, quality and ease of execution, and honoring our word through the life of a transaction. We have strategically positioned our balance sheet to support that reputation through an entire cycle, with the liquidity and flexibility to honor our commitments and capitalize on opportunities when others are constrained.
In a handshake business, we have a balance sheet that no one ever questions. As the 2027 maturity wall and higher-for-longer interest rates come into focus, we are seeing our investment activity expand. We remain extremely disciplined in the opportunities that we pursue, acquiring less than 3% of the assets that we screen by leveraging our proprietary and irreplaceable data science platform. Even at that hit rate, since our last call our investment activity has increased by another $5.5 billion, bringing our year-to-date investment activity to $21 billion.
With $13.3 billion closed through the end of the third quarter, our team is working diligently to close the remaining $7.7 billion across 50 different transactions. Nearly 85% of the $7.7 billion of activity was sourced off-market, and more than 50% involves the sellers taking at least some portion of the sales proceeds in Welltower OP units. I want to reflect on this for a moment. In a market where cash is scarce and expensive, these owners have a choice.
They can cash out or they can roll their equity into Welltower and stay invested in the sector alongside us. Increasingly they are choosing the latter. They are choosing our balance sheet over their own. We take that as the most meaningful vote of confidence a counterparty can give. They are not just selling to us, they are investing alongside us. Digging into the third quarter, we completed more than 30 transactions totaling $3.8 billion with a median transaction size of $38 million. Seventy percent of this activity spanned 43 communities in our seniors housing operating portfolio. These assets have an average age of 4 years, an average size of over 160 units, and are currently 66% occupied. These communities have a blended RevPAR in excess of $10,000 per month and represent amongst the highest-quality cohorts of our acquisition activity.
In the last few years, these assets were acquired at an approximately 10 to 15% discount to replacement cost, with material growth potential as we lease them up and stabilize operations by working closely with our operating partners and leveraging WBS. I encourage you all to review some of the images of these communities in our earnings presentation. In addition to these seniors housing properties, our roughly $850 million of SNF acquisitions in this quarter spanned eight different transactions, with 100% of them sourced off-market, a reflection of our deep network in that part of the business.
Staying on skilled nursing for a moment, I am pleased to report that Genesis Healthcare has completed its Chapter 11 process and Welltower received full repayment of our $130 million of senior secured term loans. When we substantially exited this relationship in 2021, we reported an 8.5% unlevered IRR on our investments since 2011. Since then, interim payments and this final repayment take that IRR to nearly 9%. When this management team took over nearly 11 years ago, Genesis, a highly levered and underperforming company, represented almost 20% of our earnings, with our loan exposure sitting at more than $600 million. The Street would have preferred we split the company, as others did, or sell at the bottom and move on. We chose to fight. We sold a large portfolio to a private equity buyer financed through one of the largest CMBS transactions in healthcare real estate.
We formed the sector’s first direct joint venture with Asian capital and later bought it back at a discount. We recapitalized and invested as participating preferred equity in other assets with a stronger operator with a better track record than our own. We restructured out of court in the middle of a pandemic and, finally, we saw it through a long and messy bankruptcy. I’ll be candid, a sub-10% return is nothing to celebrate. But Genesis taught us the skilled nursing business and its many intricacies, allowing us to overcome our negative bias of the space. Through this experience, we learned to underwrite operators, not just buildings, and to structure for the downside because we had lived it. And it showed us something about our own team that a good investment never could. When things go wrong, we lean in. In good times, everyone looks like a great investor.
Hard times reveal character. Genesis is now behind us. The lessons will stay with us for a very long time. With that, I’ll turn the call over to Tim to walk through our financial results.
Tim McHugh (Co-President and CFO)
Thank you, Nikhil. My comments today will focus on our third quarter 2026 results, the performance of our triple-net investment segments, our capital activity, a balance sheet and liquidity update, and finally an update to our full year 2026 outlook. Welltower reported third quarter net income attributable to common stockholders of $0.54 per diluted share and normalized funds from operations of $1.67 per diluted share, representing 24.6% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 15.8%, driven by 21% growth in our SHO portfolio.
Now turning to the performance of our triple-net properties in the quarter. In our senior housing triple-net portfolio, same-store NOI increased 4.2% year over year and trailing 12-month EBITDA coverage was 1.22 times. Next, same-store NOI in our skilled nursing portfolio grew 2.8% year over year and trailing 12-month EBITDAR coverage was 1.32 times. Moving on to capital activity, during the third quarter we raised $4.4 billion of capital comprised of $3.1 billion through share issuance and OP unit funding, $480 million of capital recycling, and $835 million through our return to the Canadian unsecured market, which was our first Canadian issuance since 2019. This capital, along with retained cash flow, allowed us to fund $4.1 billion of gross investment activity and retire over $600 million of debt while ending the quarter with $2.4 billion of cash on hand and net debt to adjusted EBITDA of 3.02 times.
On the Canadian issuance, we raised C$1.15 billion of senior unsecured notes at a blended coupon of 3.95% and an average term of roughly six years, allowing us to extend the duration of our liabilities at attractive pricing and highlighting the efficiency with which we are able to source global capital. Our $2.4 billion of cash on hand, together with recent capital activity and approximately $1.9 billion of expected dispositions, position us to fund approximately $7.7 billion of incremental investment activity.
Taken together, this net investment activity and continued cash flow growth in the in-place portfolio are expected to result in year-over-year net debt to adjusted EBITDA ending in the low 3s, reflecting the timing of our net investment activity. Before turning to guidance, I want to spend a moment on the earnings growth implied by the midpoint of our refreshed full year guidance range: 22.9% normalized FFO per share growth for 2026, now ahead of our full year growth we delivered in 2025 and off a meaningfully larger base. On the fourth quarter call earlier this year, I highlighted how the transformation of our portfolio, anchored by the disposition of our outpatient medical portfolio, would change both the structural growth rate of the enterprise and the capital efficiency of that growth.
Senior housing operating revenue as reported in the third quarter now approximates $12.5 billion annualized, and the growth of that revenue base is becoming more durable and visible as RevPAR growth accelerated again in the quarter and flow-through also moved higher, with our SHO portfolio converting approximately 66% of incremental revenue into net operating income. As occupancy continues to trend higher, unit economics should continue to improve further.
That is exactly what is coming through in these results: an improving portfolio mix, flow-through that continues to move higher, and revenue growth increasingly led by rate, and we believe each of these trends has room to run. Moving on to guidance, last night we updated our full year 2026 outlook for net income attributable to common stockholders to $3.31 to $3.37 per diluted share and normalized FFO to $6.47 to $6.53 per diluted share, or $6.50 at the midpoint. Our normalized FFO guidance represents a $0.10 increase at the midpoint from our prior normalized FFO range. This increase is comprised of a 3 cent increase from senior housing operating NOI, a 5.5 cent increase from investment and financing activity, and a 1.5 cent increase from FX and income tax, slightly offset by higher expected G&A. Our updated outlook assumes total portfolio year-over-year same-store NOI growth of 15% to 16.25%, driven by sub-segment growth of outpatient medical 2% to 3%, long-term post-acute 2% to 3%, senior housing triple-net 3.5% to 4.5%, and finally senior housing operating of 20.25% to 21.75%, which is driven by the following midpoints of their respective ranges: revenue growth of 9.3% comprised of RevPAR growth of 5.1% and year-over-year occupancy growth of 350 basis points, and expense growth of 4.6%, equating to approximately 60 basis points.
Before handing the call back to Shankh, I’d like to take a moment to highlight several enhancements we’ve made to our disclosure, including combining our earnings release and supplemental into a single integrated document and expanding transparency across our operating performance, growth drivers, and capital-light businesses. These changes were shaped by feedback from our investors and analysts, and we appreciate the continued engagement. We believe these enhancements will streamline how you engage with our results while providing greater visibility into our business and the core drivers of long-term per-share cash flow growth.
And with that, I’ll hand the call back over to Shankh.
Shankh Mitra (Chief Executive Officer)
Thank you, Tim. As I reflect on the current state of the industry, I’d like to reiterate a point I’ve been making for years, which is plainly stated on our website itself, and that is we believe there is no data in the business of senior living. This is not a homogenous industry. The cyclical post-COVID bounce in occupancy we have witnessed across the sector has masked the fact that a rising tide does not lift all boats. We’re now entering a period in which pricing power should become an increasingly important driver of performance as occupancy clips 90%, reflecting a simple reality: in a consumer-oriented business, differentiated premium product commands pricing power that commodity product simply won’t. Looking forward, it is differentiated operations and product-market fit that will increasingly define revenue growth and thus margin expansion and cash flow growth. This is where much of the mid-market product may begin to falter, and the early signs of that are already emerging among some investor participants. While passive capital has once again taken an approach that allocating money to this newfound industry is a sure bet, riding the silver tsunami, they once again will learn a costly lesson when the returns don’t come through.
An institutional investor at a conference in Chicago last week asked me, how hard can it be given the rising tide? I asked her to check her firm’s own track record in the sector over the last decade to answer that question. After all, as Mark Twain once said, it ain’t what you don’t know that gets you in trouble; it’s what you know for sure that ain’t so. As far as we at Welltower are concerned, we remain obsessive over product-market fit and continue to further hone our portfolio by allocating capital with house odds instead of gambler’s odds. Our $6 billion asset sale this year, with our extreme selectivity that I described earlier, hopefully paints a clearer picture for you. Perhaps we’ll be proven wrong, and catchphrases like demographics or silver tsunami will bail out everyone. Let me make it abundantly clear: we don’t think so.
The world is becoming more complex, more interconnected, and more volatile by the day. Sudden shifts in technology, geopolitics, culture, and capital that once unfolded over years or decades now can happen in the blink of an eye. These abrupt changes are not simply rewriting the rules; they’re changing the game itself, pushing our society and markets into increasingly unfamiliar territory. We welcome these environments and, as you may have noticed over the years, tend to thrive in them. Our team performs unusually well in volatile, ambiguous, and high-stakes situations, drawing on sheer grit, intellectual curiosity, the humility of a beginner’s mind, and the temperament of a stoic. Perhaps it helps that we operate in a need-based business with enormous opportunity for improvement, regardless of the noise around us. Perhaps it also helps that we sit at the center of a deeply human-centric business, where our success does not depend on predicting winners and losers across many cross currents shaping the markets.
Yet one broader trend is difficult to ignore: the quiet and steady erosion of human agency in our society. Today, in an increasingly complex and chaotic world, we are determined to move in the opposite direction. In the moments that matter the most, we want to provide our residents with attentive, empathetic, and delightful human interactions rooted in dignity and compassion. We do not believe the future, however uncertain, is something that we simply inherit.
It is something we have a responsibility to help shape, and where we can, to build. And with that, I’ll open the call up for questions.
OPERATOR
Thank you. If you would like to ask a question, please press star-one on your telephone keypad. If you would like to withdraw your question, simply press star-one again. In the interest of time, please limit yourself to one question and rejoin the queue if needed. Thank you. Your first question comes from Farewell Granif with Bank of America. Your line is open.
Farewell Granif (Analyst at Bank of America)
Thank you and good morning. My first question is really around the added commentary and the added slide in your deck when it came to your investment volumes and specifically the execution of the 196 granular deals, your added commentary about the 2027 maturities as well as only executing less than 3% of the deals that you’re evaluating. And so when it comes down to it, the question is, why is Welltower winning these deals? Is it the pricing opportunity that you are presenting?
Is it the operations or platform that you are able to pretty much show in your portfolio, or is it the co-investing opportunity that you also outlined?
Shankh Mitra (Chief Executive Officer)
It just comes down to reputation, right? I mean, we are paying a fair value on the seller’s cash flow, and then no one questions the speed, the conviction, the ability to close, and we just bend over backwards to deliver a high-quality transaction experience to whoever we do business with. It comes down to every step of the way, from the speed, the quality, the practical-mindedness of how you negotiate documents and how you move things along. It’s just a pleasant experience.
And just think about anything you do in life: if you have a pleasant experience with something, you’d like to do more of that, right? So there’s a lot of repeat business with folks we do business with. I mentioned a lot of folks are taking OP units as part of the consideration. So there is a choice to be made where they decide that between party A, B, or C, whose currency do they want to take? And the proof’s in the pudding, right? You’re seeing folks with actions.
And we’re doing all of this while being incredibly disciplined, executing at a very granular level. 196 transactions is a lot of transactions. It’s almost one transaction closed per business day of the year. It’s a lot. But it’s a detailed business, it’s a granular business. And we are fortunate to have the data science tools that allow us to have that level of neighborhood-level granular view of an asset and a really strong view on what we can do with the asset once we own it.
And so that’s how we execute.
OPERATOR
Your next question comes from Vikram Malhotra with Mizuho. Your line is open.
Vikram Malhotra (Analyst at Mizuho)
Morning. Thanks for taking the question. I guess, you know, Shankh, you referenced pricing power a couple of times and the differentiation. So I guess my question is, like, if we were two years forward, you know, looking back, what would differentiate Welltower from an operating standpoint and similarly from an external growth standpoint, just given your size, are we running into sort of a law of large numbers? So just if you can give a sense of like what really will differentiate two, three years from now when we look back.
Shankh Mitra (Chief Executive Officer)
Thank you, Vikram. So a couple of things I would mention. First is, let’s start with the first question, which I think is the most important one. I think we have obsessed—if you sort of think about last 10 years—completely changed this company portfolio from selling tens of billions of dollars of assets and then building a significant data science platform that doesn’t exist in the business of commercial real estate. To really focus on, hone in on micro markets, understand psychographics, understand sort of driving patterns, cell phone data, all of these to come together, what we think where we can offer with our operating partners, the premium operating partners, an exceptional performance for that performance these discerning customers are willing to pay. It’s very important that you understand that people have choice; if they’re choosing to live with us, that’s a responsibility we have to deliver that premium service, that premium product.
And for that people are willing to pay. And that will become a differentiator. As you sort of think about the easier occupancy growth story is increasingly behind us as the industry fills in. So that’s the most important point. And you could recall that last year in summer I said this on this call: as we get closer to end of ’26 and the industry gets to 90 plus percent occupancy, that will become the main driver. And I’m glad that that is happening. We have not seen—you know, roughly 11 years of doing this—a better pricing environment than we saw, you know, this summer, this fall.
Right. So this is very important, but very importantly for a discerning customer. They will only be willing to pay that for a discerning product and service offering. That’s sort of the first, the answer to a first question. The second question is an interesting one, which is a size point. If our goal was the size of a balance sheet or size of a company, I 100% agree. The idea of a smaller balance sheet relative to a larger balance sheet would be the right way to think about it. And frankly speaking, the reason that a lot of people think about it is the historic triple-net nature of this business. But remember, that’s not our goal. Our goal is to drive per share cash flow and earnings.
And per share cash flow or earnings is really driven by, from our standpoint, what we own and not what we can buy. So it’s a different understanding. That’s what I mean. This is clearly a shadow bank mentality and I understand why that’s the case. But understand our ability to drive, post closing, our ability to drive cash flow is what drives that per share earnings and cash flow. If we never buy another asset, I’ll be completely fine. I hope that answers your question.
OPERATOR
Your next question comes from Ronald Camden with Morgan Stanley. Your line is open.
Ronald Camden (Analyst at Morgan Stanley)
Hey, great. Just thinking about the total occupancy of the portfolio. It’s still at 88.3. Obviously, I appreciate acquisitions are coming in. I know historically we’ve talked about the 95% plus occupied cohort. I guess I was curious, number one, if we could get an update on those. And number two, if you had a view of what the structural vacancy of the portfolio is. Thanks.
Shankh Mitra (Chief Executive Officer)
Let me try to answer that question first. When I’m really emphasizing on price, that does not mean that we think that occupancy growth is not available. We believe that we have a very significant number or percent of our portfolio is above 90% occupied and we believe there’s no reason we cannot take the whole portfolio up there if we freeze the portfolio where it is today. You made the point that obviously as we buy, as Nikhil said on the call, this quarter’s acquisitions were 66% occupied.
So you think about mix-shift aside of product coming in. If you freeze the portfolio today, there is no reason that we would not be able to take the whole portfolio there. What was the other part of the question, Ron, that I did not answer?
Ronald Camden (Analyst at Morgan Stanley)
Performance of the 95% cohort. How that’s sort of trending.
Tim McHugh (Co-President and CFO)
The performance of the 90 plus percent of the cohort had REVPOR growth above 6% and NOI growth above 21%.
OPERATOR
Your next question comes from Michael Goldsmith with UBS. Your line is open.
Michael Goldsmith (Analyst at UBS)
Good morning. Thanks a lot for taking my questions. Chuck, it seems like capital doesn’t appear to be the constraint today, and the acquisition opportunities seem to be expanding. So as you think about Welltower over the next five years, what ultimately becomes the binding constraint to compound your cash flow? You know, is it acquisitions, is it operating partner capacity, WBS? Just trying to get a sense of what could prevent that constraint from becoming the bottleneck.
Shankh Mitra (Chief Executive Officer)
Yeah, so I want to be—I think I was trying to answer that question when Vikram asked it. I want to be abundantly clear. Acquisition first is we’re not capital constrained. We’re opportunities constrained. If we were not opportunity constrained, you know, we wouldn’t be this selective. Right. You know, our selectivity suggests to you that we are extraordinarily focused on the long-term pricing and sort of opportunity to compound cash flow. So we see everything that happens in this business, and then we see the majority of it before anybody else sees it.
That’s how you get to 90 plus percent of sort of off-market opportunity, off-market execution that we have in this business. So capital is not a constraint, opportunity is the constraint. Right. But if you just think about that, your question is more focused on if you think about next five years of compounding of cash flow, which we define as per share cash flow, not just cash flow. Right. It will entirely depend on our execution of our existing portfolio, what we are able to achieve from a Welltower Business System perspective, while our operating partners are able to provide an exceptional product and a service to a very discerning customer.
It will be that. It will not be about whether we can buy or sell another property.
OPERATOR
Your next question comes from Juan Sanabria with BMO Capital Markets. Your line is open.
Juan Sanabria (Analyst at BMO Capital Markets)
Hi, good morning. Just hoping, Nikhil, maybe you could talk a little bit about the SNF investments that you made, the trends in kind of price per unit or yields, the opportunity set, and the competitive dynamics with higher rates in the market today.
Nikhil
Yeah, Juan. So it’s about $850 million across eight different transactions, four different states, 100% off market, and rent yields in skilled nursing have always been around 9%. Right. So that’s where they are. Then the question is what’s behind the scenes? What’s the risk exposure? And as you’ve known, we’ve been executing on turnaround skilled nursing transactions for many years now and have a really good track record in doing that. So there’s more of the same.
A lot of the former Integra subtenants, 20 plus different operators that we’ve got good relationships with and have had a lot of success together, they’re consistently feeding us opportunities. And based on that we evaluate and see what makes sense for us to execute. One new trend we’re starting to see is we’re seeing HUD for the first time impose single-borrower limits on how much capital they’ll finance for any particular person through HUD. And, you know, with that obviously a follow-through effect of that is if HUD is shut for some owners, then the bank market will pull back because their takeout is gone. And so what you’re seeing is a lot of high-quality portfolios with a lot of trapped equity, given the value appreciation and the improvement to operations, that they just are not able to tap.
And so that’s a new type of environment or new type of transaction that we’re seeing. We’ll see what comes of it, but that’s a relatively new trend that we started seeing over the last couple of months.
OPERATOR
Your next question comes from Nick Ulico with Scotiabank. Your line is open.
Nick Ulico (Analyst at Scotiabank)
Oh, thanks. Good morning. I was hoping to hear how the performance of the non-same-store pool is in SHOP and just wondering, you know, because the metrics—I know it’s helpful you guys give those metrics in the SUP—but they are kind of lagging on, you know, occupancy, margin growth. And I know it’s not perfect since the pool’s changing, but maybe you just talk about the performance there relative to the same store and also whether the UK and Canada—how those acquisitions are performing since, and I think they’re going to start entering the same-store pool over the next year.
Tim McHugh (Co-President and CFO)
Yeah, so I’ll start with that, Nick. So I think, you know, we enhanced our disclosure this quarter with our non-same-store properties and I think that’s what you’re kind of referencing. I think there’s two things going on in that pool you should be cognizant of. When there’s developments that open, those are all sitting in there, thinking about size, impact, thinking about margins and occupancy. And also for the second straight quarter, Nikhil has highlighted how we’re actively seeking out and successfully buying low-occupied assets.
So those are rolling in. If you strip those out and look at the assets that have been in the pool for kind of like-for-like periods, you get closer to 90 basis points of sequential occupancy increase. So we continue to see performance in this pool of assets that’s, you know, in line with what we have in our—what we see in our same-store portfolio. And I think in regards to kind of geographic portfolios, we continue to be very optimistic about how those are going to play out in 2027.
Shankh Mitra (Chief Executive Officer)
And just, Nick, just see Tim’s comments in light of the disruption that comes with operator change. Right. Everything we’re buying, we’re effectively changing operators. So that disruption is also there, which is—we don’t mind taking disruption if it is the right decision for the communities in the long term. But those assets are performing well and we think there is obviously significantly more upside over next few years as you lease up those assets and then get into sort of that trend where you get pricing as a bigger opportunity for growth.
OPERATOR
Your next question comes from Nick Joseph with Citi. Your line is open.
Nick Joseph (Analyst at Citi)
Thanks. How are you thinking about the magnitude of the pricing power opportunity for the portfolio, and then what metrics do you focus on to understand pricing power for an individual unit?
Shankh Mitra (Chief Executive Officer)
Yeah, so Nick, one of the important things as you think about REVPOR is a combined pricing unit. There are many different types of pricing you have to think about. If you think about sort of existing customer rent increases, I have a longstanding belief that I wrote in last annual letter in a section called Trade-Offs that we will not be supportive of significant customer rent increases beyond sort of—call it—high single digit, because, you know, we just don’t want to do that.
And we believe that ultimately running a portfolio below market is very good for us. It’s not a problem. Right. We’re not in a hurry; at some point we will get that unit back to the market. So if that’s the case and REVPOR is accelerating through the year, which really shouldn’t happen given that the majority of the customers get their rent increases in the beginning of the year, that gives you one idea, right? What has changed? What is different is street rates.
Right. So if ECRI remains relatively same—you get most of your ECRI at the beginning of the year—then the only thing that’s changed is your street rates. So we are seeing meaningfully changed, you know, enhanced street rates as discerning customers are increasingly realizing the differentiation of product and services that our premium operating partners provide, and as I said, in at least 11 years of this team doing this, we have never seen a better pricing environment than we see today.
OPERATOR
Your next question comes from Mike Mueller with J.P. Morgan. Your line is open.
Mike Mueller (Analyst)
Yeah, hi. Appreciate the new export disclosure in particular. Curious. Can you talk a little bit about the runway for keeping that growth sub 1% we are today, or even sub 2%?
Shankh Mitra (Chief Executive Officer)
Mike, we’re not going to anchor ourselves to a specific number. But, as you know, there are two things at play. One is there’s a relatively large fixed cost component of the business. Operating leverage does matter. That is generally for the business, but for us specifically, you know, business system is a very, very specific driver. If you just think about how the industry works, you get sort of flat files on a monthly basis from the operators and they’re relatively high-level numbers. Versus you think about when the communities sit on our side of the ledger, you can understand every detail line item all the way through where the invoice sits. That gives you an opportunity to understand different cost items on a granular basis and then think about what is necessary versus not, or how you optimize that.
It’s a line-item-by-line-item conversation. It’s not a broad line-item conversation. And that’s what our team is focused on with our operating partners to see where the business, as it gets really transformed by technology and systems, what part of the business side can be enhanced. That’s obviously completely different from the care side of the business, which is the people side, which we have a very, very clear idea, which is we want the best talent and we’re willing to pay above market for the best talent. So that’s different, right?
We’re focusing on the business side versus the people side. Hopefully that gives you a sense of how we’re thinking about this.
OPERATOR
Your next question comes from James Feldman with Wells Fargo. Your line is open.
James Feldman (Analyst at Wells Fargo)
Great. Thank you for taking the question. I mean, I know the market seems focused on some of the core drivers, occupancy, RevPAR today in the stock move. But maybe just taking a step back, because I know, Shank, whenever we speak to you, it’s all about earnings growth, long-term growth. Can you just talk more about—one of the comments that stuck with us that you made is just how fast things are changing. Clearly geopolitically, a lot’s changing. Sovereign debt balance sheets are changing. Can you talk about the long-term view of expansion of the business across the globe, where you think the long-term growth opportunities might be, or even domestically, where maybe macroeconomic is changing across geographic markets as well, as you think about the long term?
Shankh Mitra (Chief Executive Officer)
Thank you. So, if you just think about this, we truly believe in expertise, right? Remaining within someone’s circle of competence is an extraordinarily important concept for us. As you have seen, we have effectively sold out on most of the businesses and have focused on a very, very narrow set of businesses. This narrowing of focus is extraordinarily important for us. So you can be rest assured that we’re not looking to go in different countries. We’re just—that’s without a question. Even within our own, say, U.S., we’re a prolific investor. We have a very focused product-market fit and that’s what we’re saying. In fact, we are becoming more and more selective about what product-market fit that we’re after and have narrowed the business meaningfully into one idea.
So, from our standpoint, we made our bets on what product we want and what we think that we can do well and provide a strong value for our customers while still providing strong value for owners. Beyond that, we have no interest. So then it’s just a question of, okay, in these environments, beyond what’s going on in the macroeconomic environment, how do you drive additional value? And that is where we are doubling down and tripling down every day in our investments in technology and people and how we transform the business.
And that, I think, will be the biggest driver of the business going forward.
OPERATOR
Your next question comes from Omotayo Okusanya with Deutsche Bank. Your line is open.
Omotayo Okusanya (Analyst at Deutsche Bank)
Yes, good morning everyone. Just wondering if you could talk a little bit about the growth opportunities in your other asset-light, income-driven businesses, specifically the funds business and licensing of the data science platform. Just interest in those two platforms, how you expect it to kind of grow over the next two to three years.
Tim McHugh (Co-President and CFO)
Yeah. So, you know, in the capital-light business, we added some additional disclosure in our supplemental and you’ll see we expect that the revenues from that business should continue to go up. We’ve had an incredible start to our fund management business. I think I previously described the full deployment of our first equity fund, the raising of a credit fund that’s going well, and we’re raising a subsequent equity fund. On data science partnerships, we’re in conversations with many groups. We’re making good progress there as well. And you’ll continue to see progress in those in the supplemental as we keep getting more things completed.
OPERATOR
Your next question comes from Jim Kamert with Evercore. Your line is open.
Jim Kamert (Analyst at Evercore ISI)
Good morning. Thank you. Apologize for the line here. Are you willing to disclose kind of the current SHOP—pardon me—wellness housing NOI contribution as a portion of the total, and the margin for the wellness—
Shankh Mitra (Chief Executive Officer)
—housing. It’s about 10% of the SHOP portfolio, and margins is in the mid-50s. Tim?
OPERATOR
Your next question comes from Rich Hightower with Barclays. Your line is open.
Rich Hightower (Analyst at Barclays)
Good morning everybody. Question on dispositions. I know, Shank, you’ve mentioned several times that obviously product, market, and fit are sort of critical components to the portfolio that you would retain over time. So, is it safe to assume that whatever’s been sold this year somehow doesn’t check one or more of those boxes? And then also, could you add a little context around the recent Brookdale transaction that was made public earlier this month?
John Olympitis (Executive Vice President, Head of Corporate Development)
Yeah, I think on the dispositions, you know, a decent amount of the numbers you’re seeing is the medical office transaction that we talked about last year that’s obviously closed in tranches as we’ve gotten ground lessor and tenant approvals. But look, in general, our view on dispositions is that if we think certain assets are optimized or will not keep up with the growth of the rest of the company, just like the disposition of a significant portion of our medical office business, there’s other hands that find more value in them.
And that’s a good thing, right. So that’s how we decide what we’re keeping versus what we’re selling. It’s all dependent on the contribution it has to the go-forward growth of the company. And what was the other question?
Rich Hightower (Analyst at Barclays)
Brookdale.
John Olympitis (Executive Vice President, Head of Corporate Development)
Brookdale, yeah. I think the Brookdale transaction obviously is two public companies and there’s disclosure out there, but it’s a win-win transaction. I mean, I think for Brookdale—you should ask them—but they have a strategy of continuing to want to own more of their assets. And our general view is we want to own seniors housing assets in an equity structure, AKA RIDEA, wherever we can. And for this subset of assets, it made sense for Brookdale to continue on with their plan, owning more assets.
And we were happy with the price we got. And so it was a win-win transaction.
OPERATOR
Your next question comes from Austin Werschmidt with KeyBanc Capital Markets. Your line is open.
Austin Werschmidt (Analyst at KeyBanc Capital Markets)
Great, thank you. Shankh, you’ve spoken about the importance of product demographics and wealth and the benefits that that’s going to have on pricing power as the occupancy growth kind of hands off to higher RevPAR growth. But you’ve also said that development really only pencils at the high end. And I know there’s a very limited amount of new starts today, but any concern that when supply ramps that it will be at that higher end and luxury side of the business and limit your ability to push rates?
Shankh Mitra (Chief Executive Officer)
So if you think about it, supply where it makes economic sense today—which I have seen very few, right—if you just think about it, is, with all the talks of supply, and the best development pitch that somebody has given me at the NIC conference was a seven and a half percent. I will tell you that in our books is a negative development spread. We can do untrended acquisition yields today that is in high sevens, low rate after we buy an asset and then improve cash flow.
So the returns are clearly not there. But where it would make sense is where you have unlimited pricing power, such as Brookline. The thing is that if you go and try where supply probably would make sense—say Cupertino, say Brookline—that’s where it will take you a decade to actually get the supply. So it will make sense for somebody—let’s say you want to build an asset in Cupertino—and that actually might make sense on a spreadsheet. The question is, can we execute on it?
So we do not believe that we’re going to live in a world that will be oversupplying Cupertino and, you know, if that happens, we’re willing to live through that, because we do believe that that’s where you will have the best pricing power. But, you know, anything is possible. I don’t consider that as probable, but we’ll—
OPERATOR
Your next question comes from Michael Carroll with RBC Capital Markets. Your line is open.
Michael Carroll (Analyst at RBC Capital Markets)
Yep. Thanks. With the comments in the prepared remarks that Welltower’s portfolio is starting to transition to more RevPOR gains from occupancy gains—now, I understand that RevPOR should pick up when occupancy gets into that lower to mid-90% range—but is this RevPOR increase similar to the incremental scaling you get from occupancy gains? I guess I’m just trying to understand, does the spread between RevPOR and ExPOR, does that hold steady as you start to push RevPOR more aggressively when occupancy kind of gets up into that low to mid-90% range?
Tim McHugh (Co-President and CFO)
Yeah. Mike, what we’re seeing right now in the portfolio—and this is why we kind of talk about it from where we see our assets 95% plus occupied, and as that makes up a bigger part of the pool now, it’s about 35% of our total properties in the same-store pool—it just gives us a good view into how assets will perform, or how more of the portfolio performs, as it hits that level. And we are seeing RevPAR–ExPOR spreads there that are comparable, if not greater, than what we see in the rest of the portfolio.
Shankh Mitra (Chief Executive Officer)
Mike, I personally—this is obviously—I personally think that, obviously, pricing has a bigger impact on flow-through margin. Not necessarily—we’re just thinking just RevPOR–ExPOR. You got the answer from Tim. But on the margin, whether it’s from a dollar of revenue from occupancy versus pricing, you will have bigger impact if it comes from pricing on flow-through margin. So if you think about the total dollar of profitability, that absolutely is shifted higher as you sort of think about more pricing than occupancy.
And that’s sort of where the comments came from. And you saw that this quarter’s numbers, and I think you will see that as sort of next few years play out.
OPERATOR
Your next question comes from Richard Anderson with Cantor Fitzgerald. Your line is open.
Richard Anderson (Analyst at Cantor Fitzgerald)
Hey, good morning everyone. Great quarter. I wanted to go back to Nikhil’s comment around Genesis and the lessons that will stay with you for a long time. Can you talk about what those lessons are specifically and what you won’t do again in context with that Genesis situation? And maybe you can also extrapolate that to other swings and misses that you might characterize other transactions in your past and how that informs you going forward.
Shankh Mitra (Chief Executive Officer)
Thanks, Rich. I would let Nikhil answer that question, but I would be particularly focused on the framing of that question you had, which is what we wouldn’t do again is not the right framing because we did not do Genesis. Our predecessor company did. And it will start with not making $600 million loans to a broken balance sheet would be a good start. Nikhil, I’ll let you answer the question.
Nikhil
Yeah, I think, Rich, beyond, you know, Shank stole kind of my lone thunder. Don’t make a problem by, you know, make it bigger by lending to it. But look, I think our initial reaction of skilled nursing when we were starting to clean up Genesis was that it’s a bad business, but it’s a bad business where you cannot get decent skilled mix. It’s a bad business where, you know, like, unlike the senior housing business, where if you make a building beautiful, you spend money improving the quality of it, you have a good reputation, you have good relationships, that none of that matters.
At the end of the day, you’re going to have a building that just has a 10% margin for lack of better terms. But then as we dug into, I think the preferred equity investment we made was one of the best things we did as a company. Small check, but we did a joint venture with one of the operators that had a really good track record. And we just, out of intellectual curiosity, we said, why is it that if you try to sell some assets, 10 folks show up to try and buy assets? Folks have made a lifetime worth of living by buying assets from Genesis and other similar companies and turning them around.
I mean, you saw what we did with the Integra portfolio of the former manager assets. So it was just digging into the business, not being a bad business as we originally thought. It came down to execution. It came down to specificities on how you manage a business, how you manage hospital relationships, operating expenses. And if you do enough things right, it can be a good business. So those are the big things we learned. And we had to keep questioning our own biases. We had to keep questioning our own views. But we did that through data, through incremental information, and as the facts change, our views changed. And that’s what you got
OPERATOR
Your next question comes from Michael Strojek with Green Street. Your line is open.
Michael Strojek (Analyst at Green Street)
Thanks and good morning. Can you just touch on the senior housing transaction market and valuations across the U.S., UK and Canada? Where have you seen the most repricing in recent months? And can you just give us some sense for the magnitude of repricing that’s occurring relative to, call it, three or so months ago before rates ran up a bit?
OPERATOR
This concludes the question and answer session and we’ll conclude today’s earnings call. Thank you for joining. You may now disconnect.
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