Shankh Mitra headshot
Welltower CEO Shankh Mitra

During his first earnings call as CEO of Welltower, Shankh Mitra said the Toledo, OH-based real estate investment trust’s strategy will not change.

“The answer to that question is an emphatic no,” he told analysts. “Welltower will continue to strive to be the premier wellness infrastructure company that allocates capital in the path of growth of healthcare and wellness trends.”

Mitra, who was appointed CEO and to the company’s board of directors effective Oct. 5, described his predecessor, Thomas J. DeRosa, as a “close friend and mentor” and a “visionary.”

“He was a visionary who saw the need of integrating senior housing into the healthcare continuum years before COVID, and now we all know the importance of that today and going forward,” he said.

Other recent leadership moves at the REIT included Kenneth Bacon, executive chairman of Link Logistic Real Estate, being named chairman of the board, succeeding DeRosa in that role, and Philip Hawkins’ appointment to the board.

Mitra promised more personnel announcements.

“In the coming weeks and months, you will see a series of promotions and new roles that will consolidate the leadership of this company — not a change per se, just a recognition of the exceptional work that the team is doing,” he said.

Move-ins accelerating

Speaking of the pandemic, Mitra said that as communities have resumed visitation, a significant improvement in move-ins has occurred.

“The experience of accelerated move-ins and the pace of move-ins tells you customers need our product,” Mitra said. “Our need-based product will likely see meaningful traction and demand.”

The exception right now, he said, is in independent living, where he said people are taking their time to make a decision.

Welltower’s COVID-19 expenses were about $17 million for the third quarter and $61 million for the year as of Sept. 30. Those expenses were related to higher labor costs and spending on personal protective equipment and other supplies. The REIT expects such expenses to remain elevated during the pandemic.

As of Oct. 23, 94% of Welltower’s senior housing communities reported no confirmed coronavirus cases, 5% reported one to two cases, and 1% have three or more cases. The REIT also reported that 96% of its communities are accepting new residents.

Occupancy in Welltower’s total seniors housing operating portfolio declined 150 basis points in the third quarter, or 30 basis points through Oct 23. The company expects spot occupancy to decline 75 to 125 basis points in the fourth quarter, relative to Sept. 30.

“Although the last seven months have been very challenging for the senior housing triple net operators, the sequential stabilization we saw between the second and third quarter, along with relief funds from [the Department of Health and Human Services] to be received in the fourth quarter, should help our operators find their footing heading into 2021,” said Tim McHugh, executive vice president and chief financial officer. 

Welltower operators expect to receive about $45 million in CARES Act Provider Relief Funds in the fourth quarter after HHS expanded eligibility of funding to assisted living communities.

Sales and acquisitions

Regarding sales in the quarter, in September, Welltower sold an 11-property senior housing portfolio in California, Washington and Nevada for $792 million. Earlier this month, it sold a portfolio of senior housing properties operated by Northbridge Companies for $200 million, rationing a 20% investment in the portfolio. The properties continue to be managed by Northbridge. 

McHugh mentioned the transition of five of the planned nine properties from Capital Senior Living to StoryPoint Senior Living as part of the first phase of an agreement with Capital Senior Living. He said he expects the other four properties to transition to the new operator by the end of the year. 

Also since the last earnings call, Welltower also entered into an agreement to acquire a portfolio of 25 assisted living and memory care communities located throughout the Midwest. After the end of the quarter, in October, the company closed in the first tranche, including 11 properties, for $90 million. The communities will be operated by StoryPoint Senior Living under a new triple-net master lease.

Mitra said Welltower has more than $1 billion of acquisitions in its pipeline and that they represent a wide range of transactions. 

“We believe we are making a real impact and anticipate creating exceptional value,” Mitra said. “We not only see this environment as an opportunity for our smart capital allocation in the financial realm, but also in the human capital area. We’re seeing what we believe to be a challenge in the marketplace today, and we’re pouncing on this opportunity as we are on the investment side.” 

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