Despite remaining “underwhelmed” by early-2022 results, Welltower CEO Shankh Mitra said Thursday that he’s pleased with the underlying improvements to the company’s operating platform and talent base, resulting in a rebound in performance in the fourth quarter that he characterized as strong and further improving momentum into 2023.
His optimism during a Thursday fourth-quarter and full-year 2022 earnings call was bolstered by announcements the day before regarding a new partnership with Virginia-based senior living community management company Retirement Unlimited Inc.
The Toledo, OH-based real estate investment trust also announced the appointment of Jerry Davis, former president and chief operating officer of multifamily REIT UDR, as a strategic adviser to the company as it looks to further develop its operating platform and pursue additional initiatives.
Partnership expected to grow senior housing opportunities
The RUI partnership began in November, with the East Coast seniors housing operator assuming management of the former Fountains at Washington House in Alexandria, VA. RUI unveiled a new name for the community, Elance at Alexandria, the first community under the operator’s new luxury Elance brand.
Plans are underway for numerous projects at the community, including new dining experiences, a fitness center and renovations to the salon and spa. A new MYRUI app will allow residents and their families to view activities schedules and menus, schedule salon and spa appointments, and more.
Welltower said the new partnerships with RUI will include a “robust pipeline of acquisition transition and development opportunities.” The partnership is expected to grow to more than 20 communities in the near term, spanning multiple states.
“RUI is one of the best-performing senior housing operators on the East Coast, with the highest program quality programming and care standards,” Mitra said, adding that RUI has consistently maintained occupancy levels above 90% with little use of agency staffing over the past few years.
Adviser will focus on technology optimization
Davis, the REIT’s new strategic adviser, has experience in optimizing operating platforms through property technology and processes meant to improve the customer and employee experience.
He will work with Welltower Chief Operating Officer John Burkart on the continued buildout of the REIT’s operating platform and is expected initially to focus on the deployment of various technology across the Welltower portfolio, as well as on systems and process improvements.
Burkart said that he and Davis share similar views that operational excellence requires a focus on people, processes, data and technology, resulting in a “superior experience” for residents and staff. Burkart said that Davis will help the REIT “accelerate change” in the senior housing industry.
Davis’ appointment coincides with the private letter ruling in November from the IRS, which gives the company flexibility in operating its independent living communities.
“We continue to see a tremendous opportunity to professionalize and modernize the operating side of senior living business,” Mitra said. “We remain optimistic that further investment in our platform will not only result in a better margin profile of our assets, but also will meaningfully benefit the third-party operating partners across the senior living spectrum who we choose to do business with in the future.”
Burkart said the REIT will pilot the first module of its operating platform in the first quarter and that several other modules are in the works.
Occupancy momentum continues
In January, move-ins were up 16% over 2019 levels and tour volume was up 25% compared with 2022 across the REIT’s senior housing operating portfolio.
SHOP same-store occupancy increased 200 basis points year over year, reflecting continued strong needs-based demand for seniors housing, Mitra said.
Total SHOP occupancy was 78.3% in the fourth quarter of 2022 compared with 78% in the third quarter. Same-store occupancy was 79.1% in the fourth quarter compared with 78.9% in the third quarter.
