Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time, I would like to welcome everyone to Welltower's Second Quarter 2024 Earnings. 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. I would now like to turn the call over to Matt McQueen, General Counsel. You may begin.

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 the 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.

Thank you, Matt, and good morning, everyone. I will review first-quarter business trends and our capital allocation priorities. John will provide an update on operational performance for our Senior Housing and Medical office portfolios. Nikhil will give you an update on the investment landscape, and Tim will walk you through our triple-net businesses, balance sheet highlights, and guidance updates. We're very pleased to report another quarter of significant bottom line growth with normalized FFO per share up 17% year-over-year or over 19% adjusted for prior year subsidies. The quarter was once again led by our Senior Housing portfolio, but with notable contributions from all other areas of the business, including investments. Last night we announced another $1 billion of acquisitions under contract since our last update at the NAREIT Conference in June, bringing our acquisition activity to approximately $5 billion year-to-date. There continues to be no shortage of capital deployment opportunities in front of us at extraordinarily attractive economics, which I'll get into shortly. Ultimately, we're pleased to once again be able to raise our full-year FFO per share guidance as we continue to capitalize on the unprecedented internal and external growth opportunity in Senior Housing. Before John goes into details, I wanted to first provide some high-level thoughts on the Senior Housing business and why we remain as optimistic as ever about its future prospects. While margins remain well below pre-COVID levels, I would note that we have made significant progress since hitting the trough levels of profitability in 2021, with further upside remaining through the scaling benefits achieved through higher occupancy, also known as operating leverage, as the operating platform begins to bear fruit. Overall, while we are pleased with the results we achieved this quarter, what we are much more excited about is the fundamental backdrop for us to dramatically improve as we look forward to '25 and beyond. It starts with end-market demand. Baby boomers are just entering their eighties, and the pickup in demand, which we have recently witnessed, will only intensify going forward. Not only is the 80-plus population growing at the fastest clip in decades, but what's even more compelling is the growth of this group of seniors will accelerate to 5% to 7% per annum as we close out the decade, driving demand even higher amid plummeting new supply. The second quarter construction starts were once again negligible, falling well below the trough levels you've seen even during the global financial crisis. It remains extraordinarily challenging to secure construction financing as regional banks, which served as the most prolific lenders to the sector in previous cycles, have effectively shut down all activity. And despite the attractive growth prospects of our industry, most developers have thrown in the towel due to a lack of development economics. We think this will continue as returns, or should I say lack thereof, were made on other people's money, which is no longer available as investors lick their wounds from the last cycle. While the beta of the Senior Housing business remains extraordinarily attractive, what truly sets us apart are our efforts to generate outsized alpha for our existing owners. This is reflected by the difficult but important steps that we continue to take to further amplify our long-term growth trajectory. This not only includes the build-out of our operating platform, which John will get into in a minute, but also involves numerous capital light transactions such as operator transitions, conversion of triple-net to RIDEA leased structures. We are confident that several operating platform initiatives will start to impact occupancy and NOI next year. Expanding on the theme of enhancing long-term growth through capitalized transactions, we announced the transition of 89 Holiday by Atria assets to six of Welltower's strongest operating partners with deep expertise and local scale in their regions. We have experienced tremendous success with hundreds of transitions we have effectuated in recent years, and we expect similar outcomes from this most recent set of assets. More importantly, we hope to achieve over $70 million of additional NOI upside when new operators stabilize these properties. And separately, we converted or agreed to convert 47 triple-net leased properties to RIDEA structure in Q2, allowing us to directly participate in the substantial growth of these properties poised to deliver in the coming years. To illustrate that in new investment terms, you need $2 billion of new acquisitions to achieve that level of NOI accretion, assuming 2% long-term accretion of our investment model. That's how impactful the math is for our near to medium-term growth, and clearly our owners will capture all the upside from the stabilization of this asset, which should enhance our long-term earnings growth trajectory as well. Turning to investment activity, last night we announced additional investment activity that brings us to nearly $5 billion of transactions closed or under contract to close year-to-date. The U.S. and U.K. comprise the bulk of our recent transactions with virtually all transactions being completed in the Senior Housing space. Our investment teams remain busy as ever as the opportunity to acquire senior housing assets continues to expand, largely as a result of the broken capital structure and other debt-driven situations that Nikhil described on the last call. Notably, while 2023 was a record year for us with $5 billion of investment, we have achieved this level of transaction activity in just the first seven months of 2024. Our pipeline beyond these transactions remains robust, visible, granular, and actionable. And yesterday, we announced the recast and upsize of our revolving credit facility to $5 billion, bringing near-term liquidity to nearly $9 billion. Our new revolver comes at improved pricing and extended term relative to our previous facility, a testament to the strengthening of our credit profile and growth outlook of our business even in these challenging times for real estate credit. We will remain disciplined in our funding of our future opportunities. But as I have previously mentioned, we have created significant debt capacity to tap into, creating another lever for us to further augment our earnings growth. With that, I'll pass it over to John.

Thank you and good morning. As Shankh mentioned, we reported another strong quarter with total same-store NOI growth, once again achieving double-digit levels led by our Senior Housing operating portfolio, which I'll provide more details on momentarily, but I'll first touch on our Outpatient Medical business. We reported 2.1% year-over-year same-store growth, which is in line with our expectations. Leasing velocity remains healthy, our retention rate remains strong at 93%, and our industry-leading occupancy continues to be stable at 94.3%. Turning to Senior Housing, we continue to be pleased with the level of same-store NOI growth being generated by this business, which once again exceeded our expectations at 21.7%. Attaining 20% plus NOI growth for any sector is an incredible achievement, but seven consecutive quarters is truly exceptional. I'd also note that the strength of our business remains broad-based, with all regions and property types posting outsized levels of growth. And as Shankh described, our confidence in generating elevated levels of growth in future years continues to grow given the extraordinarily demand-supply backdrop ahead of us and our focus on improving the operating business. In terms of same-store revenue in the quarter, we posted 8.6% growth compared to the prior year's period, with contributions from both occupancy and rate. Same-store occupancy increased 280 basis points, the highest level of year-over-year growth we've achieved in the second quarter of any year outside of 2022, when we were coming out of COVID. RevPOR growth remains healthy at 5.3%, and ExpPOR increased just 1%. On the expense side, we're witnessing a couple of different factors at play. First, we continued to see a reversal of the broader inflationary pressures which impacted the business in recent years, and second, we're benefiting from the operating leverage inherent in the business as we experience slowing incremental costs as occupancy increases. Another reflection of this trend is growth in compensation for occupied rooms, which rose just 0.9% year-over-year, well below our historical average due to the operational scaling benefits we're beginning to witness. Overall, as Shankh mentioned, our focus remains on driving the delta between RevPOR and ExpPOR substantially higher as part of our platform initiatives. To give a real-time example, over the last few months, we've gone through an extensive review of different care levels across our assisted living portfolio in an effort to create greater simplification for residents and their families. As a result of this exercise, we also made the strategic decision to focus our leasing efforts on lower acuity assisted living residents across many of our communities. While a lower acuity resident pays less than a higher acuity resident for the same room, they also consume far less human resources and tend to stay longer. This creates a healthier rent roll over a longer period of time, leading to higher NOI. We are pleased to report that these initiatives are paying off as we've been able to attract a substantially lower number of lower acuity assisted living residents during the summer leasing season. I'm proud of what our team has been able to pull off in close coordination with our operating partners. Beyond that, we continue to make important strides in our efforts to optimize our portfolio and improve the resident and employee experience through the build-out of the platform. We're going live with properties in Q3 and anticipate rolling out the end-to-end tech platform to the first operator in the near term. The excitement of the community and corporate team is palpable as we truly streamline the business, integrating and digitizing the flow of information from the website through the CRM, the ERP, and the care module, as well as other modules. Our communities will be able to eliminate most paperwork and materially reduce administrative time and simplify many processes, including the onerous move-in process. Our objective of leveraging technology to improve the overall resident experience and enabling employees to focus more of their time on residents is being realized. We continue to achieve success in other initiatives, including the creation of the Cap team at Welltower, which enables Welltower to directly execute capital, renovation, and facility projects on our sites in partnership with our operators. The result is that we are dramatically driving down costs by 20% to 50% while improving execution and enhancing the customer value proposition positioning Welltower's assets to drive compounding earnings growth for many years. Since the start of the year, we have completed or are working on about 2000 separate projects with 17 different operators at over 150 sites in three countries. As a result of the success of the teams, Welltower and our operators, we have expanded our work more than originally planned, which includes thousands of units taken offline. This important initiative will result in some near-term disruption, but has the potential to meaningfully contribute to our growth in 2025 and beyond. This tremendous amount of work requires the highest level of collaboration ever attempted and accomplished at Welltower between our operating partners, our vendors, and our corporate employees. I am grateful for the support and teamwork by all involved people and most certainly the leaders of our operators who are standing side-by-side with me as we re-envision this business focused on improving both resident and employee experience. In conclusion, another great quarter, great demand-supply dynamics, a technology platform is launching, the Cap team is executing, and many other earnings drivers are in place to enable years of compounding earnings growth. Thank you, and I'll turn the call over to Nikhil.

Thanks, John. It's hard to believe that we're almost at the end of the summer. We have worked tirelessly over the last three months since our first-quarter call, expanding on our investment activity by an additional $2.1 billion. Since we have been working at such a torrid pace, I thought it would be helpful to summarize what we have accomplished so far this year. We closed on $200 million of transactions in the first quarter and announced additional transaction activity of $2.6 billion on our first-quarter call. We subsequently signed up and announced another $1 billion of transactions at NAREIT in June and last night announced an incremental $1.1 billion of acquisitions, bringing this year's total closed or under contract transactions to $4.9 billion. We are pleased to report that as of the end of the second quarter, we have closed on $1.6 billion of these transactions, and we are diligently working towards closing the remainder of our announced transaction activity by year-end. The incremental $2.1 billion of investment activity announced since our first quarter call is essentially entirely made up of seniors and wellness housing assets in the U.S. and UK and spans a total of 17 transactions with a median transaction size of $65 million. These transactions comprise 82 communities with nearly 7000 units, an average age of seven years, and a stabilized yield above 8%. Through these transactions, we are growing our relationships with Legend, StoryPoint, QSL, Care UK, Arrow Senior Living, to name a few operators. Welltower's stellar reputation permeates globally as we remain the counterparty of choice for sellers, as evidenced by the unabated quality and pace of our investment activity. I want to highlight an emerging new trend that we have witnessed recently: inbound inquiries from Asian and continental European investors who own seniors housing product in our target markets. Perhaps driven by the strength of the dollar, we are seeing direct inquiries to acquire senior housing assets from foreign counterparties with whom we have not transacted before. During this quarter, we had net loan funding of $349 million as we originated $486 million of new loans and received repayments of $137 million across 17 loans. A vast majority of the new lending activity was with one high-quality sponsor from whom we also acquired a portfolio of seniors housing assets. As I have stated before, we are creative dealmakers with a problem-solving mindset. I spoke last quarter about the dearth of debt capital in the Seniors Housing space, and I'm pleased to announce that we have been able to close out a creative win-win transaction with a counterparty given that backdrop. We previously transacted with this counterparty last year when we acquired 10 Seniors Housing assets for $469 million. We reengaged with them this year for a follow-on transaction. In this case, for a subset of the portfolio spanning roughly 1000 units, we were able to see eye-to-eye on upfront pricing of $271 million and acquired those assets outright at a greater than 35% discount to replacement cost, assuming a maximum payout on the performance-based earn-out. For another subset of assets, we couldn't find alignment on the current valuation, but we were able to offer a creative debt solution. This $456 million first mortgage loan carries a 10% yield and spans nearly 1000 units across several newly built marquee senior housing properties with the last dollar basis at approximately half of the replacement cost of these new assets. This loan reflects a 56% loan-to-value based on our underwritten stabilized values. As with most of our loans, there are several structural enhancements to potentially convert these shorter duration debt investments into long-duration equity investments. This entire transaction is underwritten to achieve an unlevered IRR north of 10%. Moving on to capital-light transactions, as announced earlier, we are transitioning 89 former Holiday assets from Atria to six different regional managers. 69 of these transitions are already complete, and the remaining 20 are scheduled for later this week. As was our business plan all along, we have plans for significant capital investment across all these buildings. 65% of these projects are either completed or underway, with the remaining working through plans, scopes, and budgets to start soon. With an inventory of over 900 modernized units, the newly appointed regional managers are hard at work in training the sales teams to market the enhanced value proposition of these communities. While we have been disappointed with the results achieved to date, we remain optimistic that we'll soon recognize significant operational upside in this portfolio through our focused regional density strategy.

Thank you, Nikhil. My comments today will focus on our second-quarter results, performance of our triple-net investment segments, our capital activity, our balance sheet liquidity update, and finally an update to our full year 2024 outlook. Welltower reported second-quarter net income attributable to common stockholders of $0.42 per diluted share and normalized funds from operations of $1.05 per diluted share, representing 16.7% year-over-year growth or 19% year-over-year growth after adjusting for relief funds received in Q2 2023. We also reported a total portfolio same-store NOI growth of 11.3% year-over-year. Now turning to the performance of our triple-net properties in the quarter. As a reminder, our triple-net lease portfolio coverage stats are reported a quarter in arrears, so these statistics reflect the trailing twelve months ending 03/31/2024. In our Senior Housing triple-net portfolio, same-store NOI increased 4.3% year-over-year, and trailing 12-month EBITDA coverage is 1.4 times, marking a new post-COVID high in coverage. In the quarter, we reached agreements to transition 36 properties operated by StoryPoint and New Perspective from triple-net to RIDEA effective 3Q, bringing total year-to-date RIDEA transitions to 47. Consistent with our strategy over the past two years, these conversions, despite being short-term dilutive, should prove highly accretive over time. As Welltower moves into the equity position, these assets continue to benefit from post-COVID recovery in fundamentals and the industry's long-term secular growth trends. In the case of these two operators, it also moves our entire relationship to RIDEA, creating complete alignment across our portfolio of properties with them. Next, same-store NOI growth in our long-term post-acute portfolio grew 2.7% year-over-year, and trailing 12-month EBITDA coverage was 1.47 times, which represents an increase from 1.23 times last quarter as more of the recovery in the Integra Healthcare portfolio is reflected in our coverage metrics. Moving on to capital activity, we continue to equity finance our investment activity in the quarter, raising $1.6 billion of gross proceeds at an average price of $96.64 per share. This allowed us to fund $1.2 billion of net investment activity in debt paydowns and end the quarter with $2.9 billion of cash and restricted cash on the balance sheet. In July, our treasury team, led by Matt Carrus, refinanced our revolving line of credit, achieving increased capacity by $1 billion, resulting in $5 billion of total borrowing capacity while reducing our borrow costs by 7.5 basis points through reductions in facility fees and base rate to so far plus 72.5 basis points and extending the maturity by two years. I want to thank our banking group for the support they continue to provide Welltower. We deeply value these longstanding relationships. In July we also issued $1.035 billion convertible notes due in 2029. The note bears interest at 3.125% and is convertible to equity at $127.91 per share. We intend to use the proceeds from the note to address our 2025 unsecured maturities coming due next June. The combination of these efficiently priced refinancings increased the total duration of our debt stack to six years and brings our total current available liquidity to $8.7 billion. Staying with the balance sheet, we ended this quarter with a 3.68 times net debt to adjusted EBITDA, and after completing our incremental $2.7 billion in net investment activity, we expect to end the year at approximately 4.25 times net debt to EBITDA. The resiliency of our business model and trajectory of our future growth and strength of our balance sheet were recognized by S&P and Moody's in the quarter as they both moved their outlooks on our BBB+ BAA1 credit ratings to positive during the quarter. Lastly, as I move on to last night's update of our full-year 2024 guidance, I want to remind you that we have not included any investment activity in our outlook beyond the $4.9 billion to date that has been closed or publicly announced. Last night, we updated our full-year 2024 outlook for net income attributable to common stockholders to $1.52 to $1.60 per diluted share and normalized FFO of $4.13 to $4.21 per diluted share, or $4.17 at the midpoint. This guidance increase represents an incremental increase in the midpoint of $0.06 per share from NAREIT guidance and 8.5 cents per share from our first-quarter normalized FFO guidance. The 8.5 cents at the midpoint is composed of 3.5 from an improved NOI outlook in our Senior Housing operating portfolio and 6.5 cents from accretive investment and financing activity, offset partially by 1.5 cents from higher G&A expectations and near-term drag from triple-net to RIDEA conversions. Underlying this increased FFO guidance is an increase in estimated total portfolio year-over-year same-store NOI growth to 10% to 12.5%, driven by subsegment growth of Outpatient Medical 2% to 3%, long-term post-acute 2% to 3%, Senior Housing triple-net 3% to 4%, and finally Senior Housing operating growth of 19% to 23%. This is driven by the following midpoints of their respective ranges: revenue growth of 9.2%, made up of RevPOR growth of 5.25% and year-over-year occupancy growth of 290 basis points, and total expense growth of 5.5%. And with that, I'll hand the call back over to Shankh.

Thank you, Tim. In an effort to give you our owners a bit more insight on how we're thinking about the world today, we'd like to share a few macro observations. As we think about the last few decades over the years, there were several factors that provided a strong tailwind for investment returns of risk assets. Rates have gone from high to low. We printed an awful lot of money. We brought future demand forward through fiscal borrowing almost everywhere in the world, including the U.S., Europe, Japan, and China. We benefited from globalization that led to lower inflation, and we benefited, for the most part, from an era of peace and cooperation after the cold war. Our management team has and continues to debate if some of these tailwinds will turn into headwinds as we think about our investment time horizon, at the very least, questioning if these factors will become the lack of tailwind. This is especially relevant in the context of a few additional questions. First, society is aging quickly in our markets. Is this trend inflationary or deflationary? Second, given the current sovereign debt levels and fiscal policy, what will happen to the long end of the rate curve, regardless of Fed actions? Third, now that the anchor of global yield, Japan, has overcome the zero lower bound, will the norm be higher for U.S. rates? We have no idea how to answer any of these questions definitively. And to further complicate the picture is the interplay of these questions against the backdrop of substantially reduced tailwinds, which I mentioned before. We do acknowledge that they will have an impact on investments we are making today, some negatively, some positively. However, the beauty of our strategy and platform is that we don't need these tailwinds to work in our favor. Let me expand. Would we benefit from a lower rate environment in which our assets we own will be worth more? Would such an environment turn our incredibly low leverage balance sheet into a powerful asset that we prudently tap into to drive partial earnings? Absolutely. Would it be fine, if not thrive, if we remain in a world of high long rates for an extended period? Unquestionably, as construction will remain subdued for the foreseeable future and will continue to help solve broken capital structure problems. Let's consider another issue, the aging of the population. While we're extremely excited about the higher-end market demand that this trend will drive for many years, it also begs the question: is the demographic shift inflationary or deflationary in nature from a societal standpoint? If you are certain that the grain of our society is a deflationary force, then we would be investing in middle-market AL products, which we are not. We're sticking to AL products in micro markets where we have conviction that we can achieve sufficient pricing power to pass on inflation and then some. This is especially important to us given the overall lack of growth of caregivers commensurate with an older population. Hence our obsession with product-market fit. Amongst all these uncertainties we contend with on a daily basis, whether it be the direction of the economy, rates or geopolitics, what is certain is that we're in the midst of one of the most pronounced demographic shifts ever witnessed, and it's occurring at the same time as the challenges for new construction remain extraordinarily high. To put simply, we believe that we are in the very early inning of exceptional multi-year growth for the industry and adding to John's and what our operations team is doing to drive the digital transformation of the Senior Housing industry, which should result in higher employee and customer satisfaction. We're confident in our ability to compound on a per share basis over a very long period for our owners. We as capital allocators and long-term investors will take compounding per share of earnings over speculation of macro all day long. Long-term compounding is the only way we're aware of to create real shareholder wealth. As Buffett tells us, predicting rent doesn't count; building an ark does. I truly believe we have built an all-weather compounding ark that will continue to reward our owners across different environments for years into the future. As proud as I am of the exceptional execution of the Welltower team in recent quarters, I'm convinced the best days of this company are squared in front of us. And with that, let's open the call up for questions.

Our first question comes from the line of Jonathan Hughes with Raymond James. Your line is open.

Hi, good morning. Thanks for the time. Shankh, I think I heard you say there's $70 million and $40 million of future cash flow upside over the next few years from recent triple-net to RIDEA transitions and about 7.5% is in place NOIs from Seniors Housing triple-net. I realize that's going to decline as we see some of those announced transitions be completed. But how much of the 7.5% could we see or do you want to see convert to RIDEA so that Welltower can participate in more cash flow and value creation upside? Thank you.

Yes, Jonathan. We are focused on growing with a set of operators that we find to be exceptionally good in their region at their price point for their product. And there remain portfolios in our triple-net that fit that bucket, and over time, you can expect us to continue to work through that and convert into RIDEA. And there will be assets in triple-net that will remain triple-net because we think, for those assets, primarily mid-market assets, that's the right structure. We've got to think about the long-term. Obviously, as I mentioned last time, I think in our last call I mentioned that our underlying EBITDA in our triple-net portfolio is actually growing slightly faster than our RIDEA portfolio purely because of the geographic mix. That's primarily U.S. and UK. But it will not be prudent for us to think, let's just convert the whole thing because right now we have the growth. We have to think about long-term and think about the growth prospects beyond stabilization relative to what we think inflation will be over a period. But there are opportunities, and you can imagine that we're hard at work, continuing to work through with our partners to structure win-win deals.

And the next question comes from the line of Vikram Malhotra with Mizuho. Your line is open.

Good morning. Thanks for taking the question. Maybe just Shankh, building on your last comment, I mean, I don't know what innings we are in terms of the recovery, but whatever phase we're in. Can you just maybe elaborate and give us color on sort of what gets you through this next phase of growth, both internal and external? And I just mean like the components that drove internal expenses and better pricing power seemed sustainable. If you can comment on that, as well as on the external growth, just curious, the acquisitions you're doing, like how much occupancy upside do they have relative to the portfolio? Thanks.

Yes Vikram, let me see if I can remember all the questions you asked. Let's just start with the acquisitions. Roughly, you should think the industry is in low-80s occupancy, and there's no reason to believe for obviously in the aggregate amount that we are acquiring anything, but in that sort of market rate occupancy, call it low 80%. So we think there is substantial occupancy upside. And I've said many, many times, really the toughest part of the margin story is sort of call it 80% to low 80% occupancy, and the majority of the flow-through happens after that. So not only occupancy upside, you should see a tremendous amount of cash flow upside into that. We have never been yield buyers and will never be yield buyers. We are total return buyers, and that's how we think about investments, so that's sort of one aspect of your question. The second question is harder to answer, and I absolutely do not want you to sort of take this as my forward-looking comments. I have no idea. But as we are thinking about supply/demand in our markets, but more importantly, my earlier comment that all the platform initiatives that John and his team have been building towards, we should see impact starting 2025. So if you just sort of think about that aspect of it, I think occupancy can, I'm not saying it will, but can take a leg up as we think about 2025. But now if we sort of look into the different strata of pricing in different types of occupancy in our own portfolio today, I will share an observation with you that above 90%, let's take it this quarter, obviously to make a point, not to specific numbers, just if we think about 90% plus occupancy cohort of our portfolio, RIDEA portfolio, RevPOR growth was close to 7%. So our goal is for us, what we are trying to do is to get the portfolio to that level as the industry also fills up. So is it possible that as we go into a 2026, sort of summer of 2026 or summer of 2027, we see a leg up in rates again? Absolutely we can. But this is too early to comment, but we'll see what the market gives us. We're so far very pleased with how this summer season is playing out. July has been a very strong month for us, and we hope that sort of the summer season plays out strong, but it's too early to comment on how the next couple of years play out. But I wouldn't leave this question without answering the crux of what you asked. What innings we're in this growth cycle? Very early.

And your next question comes from the line of Nicholas Yulico with Scotiabank. Your line is open.

Thanks. Good morning. Just a question first on the Senior Housing guidance; can you just talk about why you didn't revise the same-store revenue guidance for the segment? And then if we look at the sequential occupancy growth in the quarter, it was a bit lighter than it's been previously in the second quarter, so just trying to understand that impact in the quarter. And then for the back half of the year, it feels like there's a bigger sequential ramp that's going to happen to get to the full-year guidance. I just want to make sure that's correct. And maybe you had some commentary on July or anything else that gives you sort of confidence in that back half of the year occupancy plan. Thanks.

Nick, let me try and I think John or Tim, you can jump in as you fit. There are several questions I'm not sure I remember of them all. First is the occupancy. I think you heard John's comment that we have thousands of units that are under renovation. A lot of units are actually offline, so that might have contributed, as John said, that will impact or has impacted some near-term fundamentals. I've said this a million times that we will always sacrifice short-term for long-term. We would expect that will augment our 2025 growth, but we are confident achieving obviously the NOI growth that we have put out; otherwise, we would not be raising that guidance. What was the other question, second half? Look, the thing is, if you think about the summer selling season, I sort of think about that June, July, August, September phenomenon. We got one month obviously in the quarter. We're pleased with June. This is the second quarter is always the second half sort of growth as we come out of the spring season, and it's really July, August, September that makes or breaks the year, and we're very pleased with July, and I have nothing more to add to that.

And your next question comes from the line of Joshua Dennerlein with Bank of America. Your line is open.

Yes, good morning, everyone. Tim, I just wanted to get your thoughts on how you plan to lean into the balance sheet as a driver of future growth. Maybe you've really taken the leverage down, and just thinking about the opportunity set as you go forward?

Thanks, Josh. So I think the key point for us is there is no plan to lean into it. As we sit here today, it just represents optionality. And so think about how, where we're at from a leverage standpoint and how we're still continuing to fund our investment pipeline. It's all about what we can't plan for, and at that point, it provides you the backstop and the ability to continue doing what we're doing, and the business model doesn't need to change in really any macro backdrop.

But Josh, if you just think about longer-term basis, there is massive organic deleveraging that's happening, and at the same time, the free cash flow generation is significantly picking up. You are onto something as you think about a longer-term capital structure. We clearly don't think if we just stay where it is and organic deleveraging continues to happen, we'll be three times leverage soon. We don't think that's where a company of our size and scale should work at. So there is definite capacity to tap into to drive partial growth. But as Tim pointed out, the optionality is what I'm focused on. It's not a question of what we will in a given period of time do. It's a question of what we can do, and as you think about worst and normalized earnings for this company, if you think about that in terms of normalized balance sheet; not a point-in-time balance sheet that's too highly leveraged or too lowly leveraged as we are.

And your next question comes from John with Wells Fargo. Your line is open.

Thank you. In your opening remarks, you mentioned the operating leverage that's inherent in the business. Maybe could you talk about the run rate where you think that that can take margins to?

I think you're asking about the long-term margin outlook, but I won't speculate on that. I will say that it depends on occupancy and various operational initiatives that John has been working on. However, we have previously stated that if we can achieve margins higher than our pre-COVID levels, you can at least expect significant savings in general and administrative costs due to both John and I stepping down. Regardless, we should be profitable either by expanding margins or by reducing G&A costs if we don't reach our targets.

And the next question comes to the line of Michael Griffin with Citi. Your line is open.

Great, thanks. I'd be curious to get some more color just on the investment environment and acquisition opportunities you're seeing out there. Has there started to be more competition for the product that you are looking to acquire, or are capital partners looking to come solely to you, I think similar to what we've seen so far this year? And then maybe if you can comment on the transaction market broadly, are you seeing mainly stabilized products trade or some more of that value-add component?

Yes. So I'll try to start. Nikhil, please jump in. So it depends on where in the product cycle you have availability of debt. So if you think about more stable products, which have in-place significant occupancy and significant in-place cash flow, that still can be financed. So if there is any competition, then that competition is there. We have no interest in buying that product. We are total return investors. You have to think about if you buy a 90%, 95% occupied Senior Housing building, no matter what cap rate you buy at, you will end up being at a basis that at least for most cases is not acceptable to us. For us, it's always about basis and staying power. That's how we invest capital. So if there is any sort of interest or it just purely on the availability of debt. We play in a space where we are much more interested in future upside, much more interested in bringing our operators to change the operating platform and operating environment, and that's why we don't; we obviously have put up this kind of investment volume purely because people are coming to us directly before they go to market. You will see things that go to market a lot of times. We have looked at it and then decided that's not a fit for our portfolio. This company is not designed to buy. We're trying to invest capital and build our regional density. So we think about assets and one asset at a time, depending on what other assets we own in those markets with those operators, and that's how we think about this business.

And your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open.

Yes, thanks. Nikhil, I wanted to touch on your comment that you made in your prepared remarks regarding foreign counterparties. Do you know, or I guess, how much seniors housing exposure do these parties have and why are they looking to exit or reduce their exposure? I mean, are they just looking to completely get out of the business or are they just looking for a partner that can help them kind of capture some of the seniors housing upside that they might not be able to do themselves?

Yes, I think I'll start with the reason they're looking to get out. It's the same as domestic counterparties, right? It's debt pressure. Now, obviously foreign counterparties have the benefit that their net outcome in their local currency is not as bad, given that the dollar is fairly strong, but the reasons are the same. And at least in the transactions that we're working on with a few of these counterparties, it has been to buy them out completely, not joint ventures or anything like that. So we're looking to do simple asset acquisitions like we have been in the U.S.

And your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.

Hi, a question for Shankh or John. You talked about platform investments starting to drive growth for the SHO business in 2025. So just curious if you can make some general comments about what success would mean for you with regard to the platform investments and the growth contributions in 2025?

I think I've already addressed this in response to Vikram's earlier question, but we are pleased with the occupancy growth over the past few years, including this year. If the initiatives John has been working on can further enhance that growth, we would be very happy. We still have some time left this year, and it's difficult to make predictions for next year, but we would be very satisfied if that occurs.

And your next question comes from the line of Michael Mueller with JPMorgan. Your line is open.

Yes, hi. Your development pipeline and commitments are about 75% Senior Housing and 25% Outpatient Medical; I guess how do you see these dollars invested and the mix between the two trending over the next few years?

Yes, I think I just want to clarify when you said 75% Senior Housing. On our development page, we provide in the stock, we provide a breakdown by units. And what you'll see is, it's predominantly Wellness Housing, which is age-restricted or age-targeted product, low service. So it's not traditional Senior Housing. I mean, there's barely any Senior Housing in there in the U.S. There are a couple of projects in the UK. But as Shankh mentioned in his prepared remarks, we have not been able to make Senior Housing developments spend, and so it makes no sense to do something that doesn't work out.

And your next question comes on the line of Jim Kammert with Evercore ISI. Your line is open.

Hi. Good morning. Thank you. Actually, just building on that prior question, when you think about the Wellness Housing segment, what is the organic growth profile there, say contrasted with, let's call it more traditional Senior Housing, the assisted living, etc.? Thank you.

I think I mentioned that two quarters ago or maybe even last quarter, I don't recall, but you can go back and check. But since 2018, we have built this business to about 25,000 units. The whole business, through a pandemic, compounded roughly between 8% to 10%. So that's obviously, as you know, these communities are highly occupied, and despite that, they're compounded at that level. I hope that gives you a sense of why we're excited about the business.

And your next question comes from the line of Ronald Kamdem with Morgan Stanley. Your line is open.

Hey, thanks so much. So looking at the cash flow statement, it looks like you generated $1 billion of operating cash flow over a six-month period, which looks to me like a first for the company. I know John is doing a lot on the operational side, which we'll see in 2025, but curious if there's any sort of thought either in working capital efficiency, CapEx, as you're thinking about free cash flow as you sort of scale and continue to grow these businesses, are there still sort of potential upside drivers to that? Thanks.

Ron, I would say we're in the very early innings of seeing upside. I think John mentioned in his prepared remarks that for the exact same scope of work in the exact same places, we're able to drive 25% to 50% lower costs on CapEx initiatives and all, and more importantly, we can drive at a much faster turnaround. Just if you think through that, the biggest question that we have in front of us is what's the frictional vacancy? Time is much more important than even money, right? Because turnaround time equates to occupancy, which equates to your higher NOI, permanently sort of your stabilized NOI. So you just think about that. We're super excited about it. There's a lot going on in the company, but we are excited about, at the end of the day about free cash flow generation. So that’s to answer the earlier question on balance sheet, I mentioned that just think through where free cash flow generation will be when we get to your definition of frictional vacancy. So we're excited about it. We're driving cash flow at the end of the day; that's all that matters, and we think we're in the very early innings of that. There's a lot to come.

And your next question comes from the line of Rich Anderson with Wedbush. Your line is open.

Hey, thanks, and good morning. So I want to talk about the longer-term growth potential of Senior Housing, assuming it's not 20%. And despite everything that you said, when you think about RevPAR or RevPOR, I know you're focused more on the spread. So even if inflation subsides, I think you still get what you want there. But then on occupancy gains, I wonder if you would agree that it's harder to get from 85 to 90 than it is to get from 75 to 80. Just generally in life, is that last mile of occupancy harder than the first mile? And so when you think about that, but then you layer in the fact this is a very small industry, it's 1 million, 1.5 million units in the U.S., and I wonder if that sort of dispels this occupancy theory I have, because there are so few options. And if you can, at the end of the day, when you roll up all these thoughts, is the growth profile of senior housing long-term still approaching 20% when you think about all this or is it something significantly less than that, but still impressive? Thanks.

So first, let's talk about what we disagree on. Let's not take the example of what you exactly said. I'll tell you, it's much harder to get to 95% than actually stay at 95%. So your basic assumption that it gets harder as you go on the occupancy assumption is exactly opposite of what our assumption is. So that's sort of the number one point. Number two is what is the future growth of senior housing as a business? We will debate that when we get there. Our first goal is, as I mentioned, you probably have picked up on my earlier comments, that as you stabilize assets, your ability to charge or your ability to get to a higher RevPOR increases pretty dramatically. Right? So that's basic supply/demand. And so first, our goal is to get the whole portfolio there. And as you know, we're constantly reloading the gun. We're constantly buying lower occupancy buildings. And Nikhil bought a bunch of buildings this quarter that are 40% occupied, 50% occupied. Right? So we have a few years of work ahead of us to get to the portfolio to where we believe frictional vacancy is. And it sounds like you and we have a very different opinion of what the frictional vacancy is. But let's just get there, and after that we'll debate what the long-term NOI growth of the business looks like. However, I'll give you a hint to think about on your own. Think about what operational leverage at different levels of occupancy is. The NOI growth is a function of at an occupancy level, what your flow-through margins are. And as you know, flow-through margins go up as occupancy goes up. Purely that's called operational leverage. Once you think through that, you can come to that conclusion yourself. But we're not going to sit here and speculate. We first need to get to the Promised Land.

And your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open.

Yes, thanks. I wanted to hit on John's comments around focusing on lower acuity customers, and I'm just curious how long the tail is to continue to draw upon that resident base. And given the longer lifecycle that you referenced, how does that play into your ability to sustain kind of the RevPOR, ExpPOR spread that you're focused on?

We have significant potential ahead, but let's clarify our position. Coming from the multifamily sector, I've observed that higher rents typically lead to better outcomes since expenses remain steady regardless of occupancy. However, in senior housing, the situation differs because elevated rents often indicate higher care needs, which come with increased costs. This means that a rise in revenue per occupied room does not automatically translate to improved net operating income. My earlier remarks and Shankh's comments indicate our focus on improving net operating income by attracting lower acuity residents who tend to stay longer. This lower level of care helps enhance our net operating income and its growth over time. We are just beginning this journey and have invested considerable effort, but it will take time to navigate the various challenges and properties involved. We have a long way to go, and this is distinct from the other operational initiatives we are pursuing, all of which positively impact both revenue per occupied room and expenses per occupied room.

And your next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.

Hi, yes. Good morning, everyone, and again, congrats on another standout quarter. I'm curious about the SHO portfolio, again the operating margin is still in the high 20s now. I'm kind of curious, what has to kind of happen to get back to pre-pandemic highs of margins in the 30s? Is it still further moderation in labor costs? Is it additional occupancy pick up even though occupancy is pretty high relative to pre-pandemic levels? I'm just wondering how we kind of think about getting back to that kind of NOI margin over the next 12 to 24 months.

Yes, Omotayo, good morning. So first, I just want to clarify that we're not just thinking about going back to pre-pandemic margins. As I said, if that's all we do, we failed. So, but what needs to happen to get to a higher level of occupancy, a higher level of margin is simply we need to get to a higher level of occupancy. So I think there's a lot of businesses you guys follow and cover, and all, and generally speaking, it's in our head that pre-pandemic was good. We have to remember that pre-pandemic for the Senior Housing business was actually pretty bad times. We got a few years of oversupply situations from call it '15 to '18; pre-pandemic wasn't a good time. So we should not target to get to pre-pandemic, but to answer your question, occupancy needs to be higher for us to get there. And hopefully, what you heard today, that we're excited about occupancy growth this year, excited about occupancy growth next year, and we hope that we will get to those margins as occupancy builds.

And your next question comes from the line of Wes Golladay with Baird. Your line is open.

Hey, good morning, everyone. Can you talk about what is the timeline to stabilize your Wellness Housing developments, and how much does falling lumber impact the development costs?

It's about 12 to 18 months. So that if we think about stabilization, just think about kind of two summers, what it takes to lease up these communities.

I think on the lumber point, that has helped, but overall cost of development has not come down. If you put everything in the blender with different contractors, different trades, labor cost, construction costs are still higher than it was a couple of years ago, meaningfully.

And your next question comes from the line of Emily Meckler with Green Street. Your line is open.

Good morning, guys. On the last earnings call, you mentioned a significant amount of distress in your housing opportunities in the market. What percentage of these at-risk properties holding roughly $16 billion inclusive of agency and bank loans outstanding? Would you consider the quality and price you'd be willing to buy?

Emily, I'm not going to try to speculate on what percent of that we will be willing to buy. We, as I've said, don't have an amount in our mind that we want to buy. We're investors; we're not deal junkies. Our entire strategy is based on something very simple, which is building regional density and growing with our operating platforms. There are operating partners, and as we see one asset at a time, we think about how it fits the assets that we own in that area; we will make a decision to acquire or not acquire at a price. So it's a very strategic decision, a deliberate decision that is taken on one asset at a time. You can see Nikhil said we acquired 7000 units to 82 different communities, and we made 82 different deliberate decisions. This is not let's go buy senior living and buy x billion dollars at y percent spread; that's exactly what we don't do. So I'm not going to sit here and speculate. But I will tell you that we see a lot of motivated counterparties who want us to help them solve that debt problem, and we're happy to do so.

And there are no further questions at this time. This concludes today's conference call. You may now disconnect.