Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wild Tower second quarter 2025 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 during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We would ask that you limit yourself to one question and re-cue if you have any further questions. Thank you. I would now like to turn the call over to Matt McQueen, Chief Legal Officer and General Counsel. Please go ahead.

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 Welthauer 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 silence with the SEC. And with that, I'll hand the call over to Sean for his remarks.

Thank you, Matt, and good morning, everyone. As usual, I'll review business trends and our capital allocation priorities, and the team will follow the usual cadence. Second quarter marked another period of solid execution across the board at WorldTower, from operations to investment activity and a further strengthening of our balance sheet. We also made significant progress on the rollout of our operating platform, which John will discuss shortly. Ultimately, we're pleased to have delivered another quarter of strong FFO per share growth of 22%, exceeding our already high expectations. These results, coupled with increased conviction for the back half of the year, has enabled us to once again raise the midpoint of our full year FFO guidance, this time by $0.13 to $5.10 per share. For the quarter, we reported 23.4% same-store and wide growth for our senior housing operating portfolio, representing the 11th consecutive quarter in which the growth has exceeded 20%. Organic revenue growth came in at 10%, driven by 420 basis points of occupancy gains, the highest level of growth we have achieved outside the post-COVID recovery. Notably, our UK portfolio posted a 600 basis points of pickup in occupancy and 27% same-story online growth, reflecting strong in-market demand and our favorable positioning of our purpose-built portfolio in highly selective and attractive micromarkets. Growth in RedPore, reflective of pricing power, was approximately 5% and remained healthy across all regions. We expect a farther strengthening of RedPore in coming years as portfolio and industry-wide capacity continues to diminish. I will also highlight the spread between RedPore or unit revenue and export or unit expense remains at historically wide level, driving additional 330 basis points of margin expansion in SHOP. Our consistent pace of growth has allowed us to achieve two significant milestones this quarter as both in-place annualized NOI for SHOP assets have surpassed $2 billion and overall annualized company revenue and reclips $10 billion for the first time. While the demand supply dynamic remains a drastic for the industry, we do not believe that the fundamentals alone will drive durable, long-term performance in such an operational intensive business. As in the past, we'll continue to leverage insights from our industry-leading data science platform and wealthier business systems to drive additional portfolio and asset management efforts we believe have been key contributors to our historical outperformance. For example, from a capital allocation standpoint, over the past five years, we have completed roughly $29 billion of investment activity through the scale achieved from our data science platform. But it's often forgotten that we also sold $16 billion worth of assets over the past decade to improve the quality and growth trajectory of overall portfolio as we enter the perceived golden age of the industry. We have painstakingly transitioned hundreds and hundreds of properties over the past few years to best-in-class aligned regional operators to unlock full operational potential of these communities. This includes the transition of 10,000 units holiday by Atria portfolio, which we announced last summer, the largest portfolio of transition to date. For background, holiday was acquired in 2021 at a price we believe to represent an extraordinary value, but so far it has turned out to be our biggest capital allocation mistake by yours truly. We have increasing conviction that our initial execution plan and structuring was flawed, But regardless of the reason, we consider the deal a failure so far and our biggest disappointment over the past decade as we have so far been unable to make money for you, our fellow shareholders. As you have come to know, we do not take such shortcomings lightly and as always prepare to take decisive action when outcomes fall shy of our high standards. So in the middle of last year, we announced the transition of the portfolio to six of our existing regional operators. This was not an easy feat, given the size of the portfolio, geographic disruption, and the challenge inherent in any operative transition, coupled with the value-add nature of the original business plan. While we have a long way to go, we are encouraged by the early results. Since the beginning of this year, this portfolio has delivered a 560 basis points of improvement in occupancy, which you are not seeing the benefit of in our reported numbers, as these properties are not yet in same store. I would encourage you to take a look at the slide 13 and 14 of our business update presentation for more details. While the NOI has yet to recover as operators tweak the service model, we're optimistic about the momentum in occupancy and estimate that the NOI will turn the corner in Q4. We believe that substantial upside remains not only from this portfolio, but also other transitions we have announced over the past few years. I'm grateful to the Wealth Hour team for our best-in-class and our best-in-class operating partners for their tireless efforts, and I look forward to providing further updates in future quarters. Shifting to capital deployment, even after announcing a historic level of investment activity in the first quarter, which exceeded the level of acquisitions completed in all of 2024, our investment team has never been busier. Nikhil will provide you more details, but year-to-date we have closed, or under contract to close, approximately $9.2 billion worth of highly attractive acquisitions across all of our regions. We remain pleased with the state of our pipeline, which remains robust, visible, actionable in all three countries that we do business in. And lastly, turning to our balance sheet, following the current rating upgrade we received last quarter from both S&P and Moody's to A, our balance sheet has trended even farther. Another quarter of strong cash flow growth coupled with prudent funding of our balance sheet has driven net debt to adjust the dividend below three times and interest coverage over six times and lifted our total liquidity to $9.5 billion. dollars. Our upcoming debt maturity has been modest, and we have created significant flexibility to fund future investment activity. Overall, it has been an incredibly active first half of the year, and I'm proud of what we have accomplished. However, our work is far from being complete this year. Our team shows up every day to win, and we have a long journey ahead of us. With that, I'll pass it over to John.

Thank you, and good morning, everyone. We delivered another strong quarter, reflecting the ongoing momentum across the business. In Q2, total portfolio of same-store NOI increased 13.8% year-over-year, led by another standout performance from our senior housing operating portfolio. First, I'll touch on the outpatient medical business, which remains stable, delivering year-over-year same-store NOI growth of 2.6%. leasing velocity remains healthy and our retention rate remains consistent at 94.2 percent same store occupancy which continues to lead the peer group also remains steady at 95 reflecting the high quality nature of the portfolio turning to the senior housing operating portfolio performance continues to be outstanding with the 11th consecutive quarter same store noi growth well in excess of 20%, a remarkable piece. The broad-based strength witnessed across the regions and property types resulted in another upward revision to show portfolio guidance, which Tim will detail shortly. Top-line growth remained resilient at 10.1% year-over-year, supported by positive trends across all three regions. Canada delivered 8.5% growth, while the U.S. and U.K. posted increases of 10.2 and 11.5, respectively. We're particularly pleased with another quarter in which occupancy growth surpassed 400 basis points, reflecting healthy end-market demand for a needs-based product. In terms of rental rates, rent-for-growth remains strong at 5%. We're pleased to report that expense pressures remain subdued, with year-over-year growth in X4 or unit expense reaching the lowest level in our reported history at just 0.2%. This is largely a function of the scaling benefits received from the rapid increase in occupancy. We're also encouraged by trends within the labor market with agency labor and employee turnover well below pre-COVID levels. From a margin perspective, the continued historically wide gap between Rev4 and X4 growth resulted in another leg higher in operating margins, up 330 basis points year-over-year to 30.7%. And as Schalke indicated, while we have essentially returned to pre-COVID levels of margins, we still expect significant upside going forward, driven primarily by three factors. First, as we've noted before, given the high fixed-cost nature of seniors' housing business, flow-through margins are expected to rise alongside further occupancy gains. Said another way, the operating leverage inherent in the business will be recognized in a more meaningful way going forward. Second, continued benefits from the ongoing realignment of the portfolio. We're increasing our portfolio concentration with our key growth operators and continuing collections of assets, creating collections of assets, allowing us to increase efficiency by sharing various employees, contractors and marketing similar to what's been done in multifamily finally the impact of wbs or well-powered business system our end-to-end operating platform which is benefiting from the synergistic partnership with our operators as we continue to improve our existing systems and add to our robust wbs roadmap as i've said many times coke doesn't give out the recipe nor do i give out the proprietary details of our business that said i will say that we are touching many parts of the business via wbs in partnership with the operators and finding both opportunities and successes which will translate to years of improved operations and margins tangible evidence of our work this quarter can be seen in utilities we have bent the curve with an increase of only 2.8 overall on a year-over-year basis and utilities actually declined 2.1 year-over-year on a per occupied day basis yes even a line item that many people believe cannot be improved such as utilities has opportunity for improvement and we're all over it working with our partners we're finding numerous opportunities in every aspect of the business wbs is transforming all aspects of the senior housing business and although the path is never smooth i continue to have confidence in years of margin expansion as we continue to improve the customer and employee experience in this business. While we're encouraged by our results and the initial rollout of the operating platform, the team is running very hard. We've trained over 8,000 site employees who are now benefiting from using WBS on-site. The more time you spend with our operating partners going through the details of the business, the more opportunities we identify to improve the customer and employee experience and address numerous inefficiencies which exist in the industry and even after bringing significant operating expertise into the company in recent years we continue to seek and attract high caliber talent from outside the industry who bring their experience and share our vision of disrupting the senior housing business a vision that we share with our best-in-class operating partners who are working shoulder to shoulder with well tower team to implement the platform while continuing to deliver exceptional exceptional care and support to our residents and their families. We continue to be grateful for their unrelenting efforts and the quality of care they're delivering. More to come in the coming quarters, and with that, I'll now turn it over to Nikhil.

Thanks, John, and good morning, everyone. Since our first quarter call in April, we've expanded our investment activity by an additional $3 billion, bringing our year-to-date closed or under contract volume to $9.2 billion. As of late July, our 2025 activity already exceeded all of 2024 by 50%, and that was the most active transaction year in our company's history. While volume is notable, it's never our measure of success. We've remained focused on the quality of assets, the basis at which we acquire them, and most importantly, our ability to execute the business plan and deliver attractive risk suggested returns. As many of our friends, family, and peers spent the summer on lakes or golf courses, the Love Tower team was out pounding the pavement, engaging in the art of old-school deal-taking, looking people in the eye, shaking hands, and operating with honor and integrity, doing first-class business in a first-class way. Our $9.2 billion in year-to-date activity includes $3.7 billion in closed transactions through the first two quarters, with the remaining $5.5 billion under contract and expected to close in the coming months. While we've already discussed the $3.2 billion AMICA transaction, the remaining $2.3 billion spans 26 separate transactions, 90% of which were privately negotiated and are predominantly focused on our seniors and wellness housing businesses. This speaks to the depth of our sourcing network and the trust and relationships we've built across the industry that continues to unlock high-quality, top-market opportunities. During the second quarter, we closed on $1 billion of transactions on our balance sheet. Excluding the draw-out portion of our investment in developed our U.S. Senior Housing Fund, our on-balance sheet activity spanned 10 transactions, covering over 2,500 yields. Notably, 90% or 900 million of this activity was also sourced on an off-market basis, underscoring our ability to uncover and execute on differentiated opportunities. With a blended occupancy of 76% and a median asset age of just three years, This newer vintage portfolio is well positioned to deliver strong cash flow growth and compounding as we execute our business plans alongside our best-in-class operating partners. This quarter's investments also reflect an expansion of our relationships with several key partners, including StoryPoint and Cogier, among others. While strong industry fundamentals can certainly make it more challenging to uncover high-quality the opportunities the tremendous outside our investment activity this year demonstrates that there is no shortage of attractive opportunities if you're willing to work hard and big deeper and that's exactly what we're supposed to do the transactions that i described weren't just negotiated in conference rooms or on the globe they were also forced in living rooms in canada at a pub on a street corner in paris on a rooftop terrace in london and even at the bar at the city conference as a diplomat hotel in Hollywood, Florida. These moments, and the people behind them, are what makes this business fun, and they're a big part of why we continue to find and create value where others might not be looking. This is also what makes this work so rewarding. As I reflect on our activity this year, I genuinely cherish the many moments where we sat across from counterparties and shook hands on deals built on trust and mutual respect. In a fragmented industry where our opportunity set spans three countries and tens of millions of micro markets with significant variation in operating outcomes across owners and operators, our team continues to identify opportunities to enhance the value of assets under our platform. This is made possible by our exceptional operating partners and our ever-expanding operating moat powered by the well-covered business system. I want to take a moment to express my deep gratitude to our team and our operating department. The unity of purpose, clarity of vision, and mutual respect that define our culture are what make this platform so special. We all take the responsibility of being fiduciary seriously and it shows in the care, discipline, and passion with which our team approaches every opportunity. We often reflect internally on the quality of the opportunity to continue to unlocked and how years from now we'll look back on this period as one that meaningfully enhanced the strength of our business and the quality of our workforce the actions we're taking today are mainly foundation for long-term compounding of earnings and cash flow and we couldn't be more excited about what lies ahead with that i'll turn the call over to tim to walk through our financial results. Thank you Nikhil.

My comments today will focus on our second quarter 2025 results, performance of our triple net investment segments, our capital activity, a balance sheet liquidity update, and finally an update to our full year 2025 outlook. Welltower reported second quarter net income attributable to common stockholders of 45 cents per limited share, and normalized fund operations of $1.28 per limited share, representing 21.9% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 13.8%.

Now, turning to the performance of our triple net properties the quarter.

As a reminder, our triple net lease portfolio coverage stats are reported a quarter in arrears. So these statistics reflect the trailing 12 months ending 3-31-2025. In our senior housing triple net portfolio, same-store NOI increased 5.1% year-over-year and trailing 12-month EBITDA coverage increased to 1.19 times. Next, same-store NOI in our long-term post-acute portfolio grew 2.7% year-over-year and trailing 12-month EBITDA coverage was 1.9 times. Moving on to capital activity, we continue to capitalize our investment activity with equity, raising $2 billion of gross proceeds in the second quarter. In addition, we re-entered the bond market for the first time in three years with our first issuance as an A-rated credit, raising $1.25 billion in senior unsecured notes across two tranches for a blended coupon of 4.825%. This capital, along with retained cash flow, allowed us to fund $1 billion in net investment activity, repay our $1.25 billion June bond maturity, and end the quarter with $4.5 billion of cash and restricted cash on the balance sheet, while driving net debt adjusted EBITDA to 2.93 times, the lowest leverage level recorded in Welltower's history. As a result of our current capital position and the improvement in outlook for full-year operating results announced last night, we expect run rate net debt to adjusted EBITDA to end the year at approximately 3.5 times, while having added $7.2 billion to our planned 2025 acquisition activity since our initial balance sheet guidance was provided in February. Note that a substantial portion of our acquisitions under contract are expected to close in the fourth quarter, including the previously announced $3.2 billion AMICA transaction. Sticking with positive cash flow trends, we announced a 10.4% increase to our quarterly dividend last night. The decision reflects the Board's confidence in the durability of our cash flows and our continued growth trajectory. At the same time, we are continuing to improve our cash flow retention profile, giving us greater flexibility to reinvest in high-return value accretive opportunities. Lastly, as I turn to our updated 2025 guidance, I want to remind you that we have not included any investment activity in our outlook beyond the $9.2 billion that has been closed or publicly announced to date. Last night, we updated our full year 2025 outlook for net income attributable to common stockholders to $1.86 to $1.94 per diluted share, and normalized FFO of $5.06 to $5.14 per of the chair, or $5.10 at the midpoint. Our normalized FFO guidance represents a $0.13 increase in the midpoint from our prior normalized FFO range. This increase is composed of $0.03 increase from higher NOI in our senior housing operating portfolio, $0.07 increase from accreted capital allocation activity, $0.03 from increased FVAC's income taxes, offset slightly by higher DNA. Underlying this FFO guidance is an estimate of total portfolio year-over-year same-serving OI growth of 11.25% to 13.25%, driven by subsegment 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 growth of 18.5 to 21.5 percent this is driven by the following midpoints of their respective ranges revenue growth of 9.2 percent driven by increased expectations for both full year rev poor and occupancy growth now at 5.1 percent and 360 basis points respectively an expense growth of 5.25 percent and with that i'll call i will hand the call back over to sean Thank you, Tim.

Before we start the Q&A, I want to highlight two things that are top of my mind. One, talent management and incentive design, and two, a refined focus on reimagination of our technology, data, and innovation ecosystem. Over the past few months, through our January 2nd press release, annual shareholder letter, and our new website, I've written extensively about talent, culture, and incentive design. Now we are in the implementation and expansion phase of many of these ideas, both internally at Wealth Hour and externally with our operating partners. Importantly, we're engaging with leaders across our key operating partners to achieve the same goals that I outlined previously for internal stakeholders. Personally, I'm focused on integrating these work streams guided by the same basic design tenants. As I described in my most annual letter, we believe that the five pillars of well-designed incentive systems are the following. One, simple. Two, significant. Three, non-gameable, either by pair or payee. Four, armed as a team. And five, duration matched. I envision a future where these These five pillars shape the incentive structure for everyone, from executive leadership and regional management throughout Wealthower and our operating partners to critical caregivers and frontline servers in our communities. We're excited about a world where everyone is fully aligned and all in to create an ultimate win-win equation. While I continue to be told that vision is utopian and perhaps even foolish, I remain convinced that it is achievable. if we make the resident and employee experience our highest priority. This is why I believe the most important pillar is matching duration. We anticipate providing you more in this area as we begin to roll out our sixth generation of aligned partnership agreement and incentive programs in coming quarters. Moving to the next topic. As we continue to ramp up our investments in World's Hour business systems, we realize that we need to rethink, we need to think more boldly and more holistically about technology ecosystem. Software and hardware, both at site level and enterprise level at WorldTower, along with data architecture and innovation, all require the same level of focus, leadership, and talent that we have invested in past decades in building our data science platform. And the fastest way to move the dial is to narrow our focus. Over the past year, John, Tim, and Nikhil have been pushing me very hard to concentrate on the reimagination of a broader technology ecosystem, as admittedly, I have historically focused more on the data science side of the house. After having immersed myself in this area during the summer, I see enormous potential in the interconnection of many of the initiatives which are currently underway, as well as identifying new opportunities to explore next. You can expect a handful of new leadership performance in these coming months to drive maximum growth and maximum gain in this area, all following the principle of bringing the hottest source to the coldest sink that I spoke about a couple of quarters ago. To sum it up, while our recent performance has been somewhat satisfactory, we're never satisfied. But our confidence continues to grow as demand supply backdrop for senior housing business continues to improve, the implementation of what our business system bears fruit, and a capital deployment opportunity that remains robust. And as I have outlined, just outlined, we remain focused on rethinking the critical areas of our business, including talent, incentive management, and transformative potential of technology, information, data, and innovation. We remain intensely focused on pure execution in all facets of our business and have never been more excited as we are today about our future prospects. While our momentum is strong, we're still in early stages of a long journey of delivering compounding part-share cash flow growth for our existing owners, our North Star. Thank you for your support. Operator, please open the call for questions.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Please limit yourself to one question and re-queue for further questions. Your first question comes from the line of Jonathan Hughes with Raymond James. Please go ahead.

Good morning. Thank you for the prepared remarks and commentary. I wanted to ask about future growth potential. At the start of 2022, you outlined an opportunity to deploy $30 billion of capital over the next 10 years. You've done nearly that in just three years and now achieved a market cap over $100 billion. So following the success, what's next for Wildcower from a growth standpoint?

Thank you, Jonathan.

Success is a relative term. While we're suddenly proud of what we have achieved, I wouldn't call it a success. Ulta is a young organization. It is work in progress, and it is a startup mode. I am deeply worried about, frankly paranoid about, any perceived notion of success because that creates complacency. I think it's Rockefeller who said that if you go to sleep on a win, you will wake up with a loss. When an organization is young and is on the way up, it presents a generative characteristic of a dynamic organization. It's on the hunt, playing to win. It's lean, being forward-looking, unified in purpose, nimble, focused, responsive, open to risk, and most importantly, willing to look foolish. When an organization perceives itself to be successful, degenerative characteristics emerge. We made it mentality brings huddling in storm cellars, playing not to lose, a fear of appearing to be foolish. Culture becomes pervasive where people look in the rearview mirror, become risk averse, and bureaucracy sets in. And I think I talked a lot about this with you guys for a long period of time. Maybe with size and maturity, some changes are appropriate as you go from sprint to marathon. Nevertheless, the positive charity feel of a young organization is something an organization should never lose. You can define the gendered feeling as a shared vibe of enthusiasm and unity, doing whatever it takes, stretching, enriching, and making dream come true. For us, we're still in that sprint more, Jonathan. Still sprinting, still have an audacious dream of transforming this industry. Previous 30 billion or next 30 billion, previous 100 billion or next 100 billion, it's just a means to an end. It is easier for a team to do really hard things that matter than do easy things that do not matter, as I truly believe that audacious dreams motivate people. As I've said this before, win this game for the love of the game. We'll see what the market gives us, but I really appreciate the question. But success, you know, defines a destiny, a destination. We, for us, this is a journey. We'll see where we get to. But thanks for the question.

Your next question comes from the line of Nick Ulico with Scotiabank. Please go ahead.

Thanks. So just had a question, you know, in terms of the senior housing operating portfolio, you know, you now have I think more than half the NOI is actually in the non-same store. Can you just talk a little bit about the performance of the non-same store, you know, sort of in the last year versus some of the same store metrics and how we think about it going forward? because it clearly looks like there's some more occupancy growth potential in that portfolio, some more margin benefit, but in the last year, realizing that pool has changed a little bit in terms of some of the metrics you report, it feels like the occupancy growth and the margin expansion actually wasn't as strong in some of the non-same store versus same store assets. Thanks.

Yeah, I'll start with that, Nick. So when you look at the non-same store portfolio, it's really important to think about what we're buying And what Nikhil has highlighted on this call, so we continue to buy under-occupied, under-optimized assets. We also continue to have developments come online. Both those things come into that pool, and they come into that pool, the quarter required, or the quarter they come online. So that's part of what, you know, continues to keep the margin and occupancy profile below what the same-store portfolio looks like. And that makes sense, we think, through kind of what same-store is supposed to represent as being the more stabilized piece of it. That being said, on an aggregate basis, growth looks very similar to our same-store portfolio. There's different pieces of that. But overall, there's been pretty similar bottom-line growth in that portfolio.

I'll just add, Nick, when you say that it appears that it wasn't as strong, you are comparing with last quarter's number, and we don't restate those numbers. So you have a lot of new assets come in, including the elements, and you're sort of comparing apples to oranges.

Your next question comes from the line of John Kilichesky with Wells Fargo. Please go ahead.

Good morning. In your most recent annual letter and on your website, you spent a lot of time on this decade-long journey in harnessing technology and data, but mostly in the context of using your data science platform to inform capital allocation decisions and micro-market selection. collections. But based on your comments this morning, it sounds like your views are evolving with an opportunity to apply the operating technology to improve the customer experience. Could you elaborate on this and strategically what you're trying to accomplish?

Yeah. So I think, John, look, if you just kind of take a step back and think about different industries, think about sort of real economic industries, say industrial companies, say real estate companies say people like us right retail you know these companies have real customers who have real touch points in the physical world what we tend to see is they have their tam-rich and their tech work that's what you see if you look at technology companies uh who come up with at the frontier of you know changing the technology world the tech bridge and their tempo what we have

been trying to do is to have a company that we have, by definition, is extraordinarily camera-rich, and we're trying to be tech-rich.

And the tech, as I just pointed out, is sort of the opportunity set, which we have spent obviously a decade on the data science side. John has been focused last four years on the operational technology side, and we are sort of now putting even more focus on thinking, how do we expand that? and from, you know, sort of enterprise technology to site-level technology and that integration of everything in between as the technology ecosystem evolves. So, as I mentioned, there's going to be more to talk about this in the next six to nine months. More to be seen, but I appreciate the question. But there's a lot going on in our organization. And I'll tell you, after Tim has pushed me very, very hard over the last 18 months, I'm finally focused on it. and you're going to see some significant changes in this area.

Your next question comes from the line of Ronald Camden with Morgan Stanley. Please go ahead.

Hey, just a quick one. Last quarter we talked about sort of the gradient of the portfolio, 90 plus versus sort of 80 and below. I'd just love to get an update on how those are performing and your conviction on, you know, the potential for reacceleration here, which you got a little bit this quarter, but re-acceleration going forward as occupancy builds.

What really hasn't changed is we sort of think about below 80 or, say, you know, sort of below 75 is sort of report growth was roughly, call it 1%, 75 to 80, call it, you know, sort of same. But on the other hand, if you look at above 90 to say 90 to 95 is roughly, you know, 5, 7, above 95, 6, 7, so call it above 90, above 6, that's sort of the gradient, you know, sort of, you know, call it, you have below 80% occupancy, you don't have pricing power, you have 90 plus percent occupancy, you have significant pricing power, and it sort of scales in between, right? which makes sense. It's just basic demand supply. And that's where the excitement is, as, you know, it's just not us who is getting more and more towards, you know, 90 plus percent occupancies.

Also the overall industry is getting there.

I think you will see, you know, at some point, hopefully, and I think I'm on the record saying it should happen after summer leasing, next year, we'll see whether that happens, whether that happens. But sometimes in the next 18, 24 months, we should see pricing power probably gets better. But we shall see what the market gives us.

Your next question comes from the line of Omoteu Ukasanya with Deutsche Bank. Please go ahead.

Yes, good morning. Shank, in your opening, and again, first of all, congrats on another solid quarter. In your opening comments, you talked quite a bit about just aligning incentives. And, you know, you mentioned it quite a few times. And I guess I'm just curious, again, when we kind of take a look at your company in particular, I think since your team has been in place, you guys have increased insider ownership. I can't recall any stock sales in recent times. It's just kind of curious as you kind of think about the overall philosophy around, you know, incentives. You know, you already kind of think you're moving in the right direction. What's the additional kind of, you know, step you're trying to take in that regard? And what do you ultimately hope to achieve from that in regards to, you know, increasing additional, whether it's insider ownership or, again, more people across the company being, you know, tied into the stock?

Yep. It's a very important, it's a very, very important observation. Actually, our management team, we have never sold one stock in this company. neither I have nor my partner can and you know it's hard for me to comment on people's personal financial situation I understand sometimes you buy a house you do this you have a wedding or whatever these things come up in life events but we haven't you know I've never told explicitly to my partners they can but they haven't because you know at the end of the day you know I have trouble with companies that sort of tells you that there's the best thing, slice bread, and every opportunity they get, their own, liquidate their own ownership in the company they do. And just kind of, it just seems, at least it doesn't particularly work well with how I think about the world. As I've written in our foundational document many years ago, whether, look, we all, pretty much all my partners, my entire team comes from little or no strong financial backgrounds. They're all self-made people. So the issue is not the amount. The issue is how much of your personal network is on the line, right? That's what we have promised that, you know, our shareholders tend to benefit from diversification, but we don't because I don't believe in that that should be the case. And that's the way you take away sort of the agency problem. This is a very important problem important thing to think about as we are thinking about how we do, how do we design incentives. Think about what we're trying to do. We're trying to be all in. I just described how we align that. You think about sort of what we expect from our operating partners. They are not diversifying. I have a tremendous amount of respect for privately owned enterprises in this country. And many of those, they think about what my operating partners do. They own their companies. right we expect them to continue to own their company right through these tough times you think about i was yesterday with uh one of my uh strongest operating partner story point in toledo where we are now uh you know we're talking with dan and his team and talking about how difficult the last five years have been you know you know all the investments they have done in that company you know where that money came from their own pockets it didn't come from someone else That's how I expect them to believe. I was thinking about that comment. I was thinking about five years ago, I sat down with Oakmont and StoryPoint with Courtney, and we're thinking about what we want to do in the next five years. Where all this investment in Oakmont came from, it came from Courtney's pocket. So why would it be okay for me to expect her to be all in, but not for us to be all in? So that's sort of the whole point, is what we are trying to do, an incentive perspective from everybody from executives at WorldTower to the executives at our operating partner to all the way to the people who work in the community, they're defined by the same structure, they're defined by the same shared success, and I think that's possible. It's complicated, but it's possible if we prioritize resident experience and employee experience as a top priority. And if we can't do that, I think we'll take this industry to a level that has never been seen before. But it remains to be seen.

Your next question comes from the line of Juan Sanabria with the PMO Capital Markets. Please go ahead.

Hi, good morning. Thanks for the time.

Just hoping, Shank, you could or Nikhil talk a little bit about the competitive dynamics for investments. since a lot of what you're buying seems to be newer product under lease. Just curious on the runway for that type of product as the industry kind of approaches pre-COVID levels or 90% next year or shortly thereafter, and just the financing environment more broadly just for seniors housing. I think one really comes down to whether it's occupancy or it's other aspects of the business plan. And, you know, is there an opportunity to find transactions, find assets where we can improve the cash flow flow plan, right? I think there is no shortage of opportunity there given everything that John and the team are working on to optimize the cash flow flow plan. So whether it's occupancy optimization or rate optimization or other aspects of the business plan, then it's given how fragmented the industry is, given how varying the outcomes are under different you know operators and owners we don't think really there is any limits to finding opportunities and so you know as seen by our activity that continue to find this kind of opportunity you have to work harder you have to look in places because they haven't looked at it in the past but there's a shortage opportunity and I'll just add one you know obviously The question is a very important one.

Look, at the end of the day, investing capital and making money is not the same thing. We're focused on, obviously, finding opportunities where we can make a strong risk-adjusted return for our owners.

Making money is hard, right?

And I will tell you what is harder. Making money at scale is much harder. And we believe that that is making money at scale is not just a function of your capital allocation acumen, which is important, right? It's a necessary but not a sufficient condition. What's necessary on top of that, what is an asset worth in your own hand, right? So all these investments that for the last decade we have made from our data science platform to what our business system is all designed to do just that. You know, so far, it seems like we have no data opportunities. We'll see what market gives us.

Your next question comes from the line of Nick Joseph. with Citigroup. Please go ahead.

Thanks. You talked about the run rate of 3.5 times leverage and kind of the debt offering this year, re-entering the debt markets and obviously the equity.

So how do you think about the optimal capital stack going forward, particularly given the amount of acquisition and investment opportunity that you're seeing today? we believe a company that operates with this notion that you know you do handshake business and never walk away from a handshake needs to operate with a low leverage right that's the business model it's not the balance sheet strategy is different from you know on one side of the balance sheet which is the liability side of the balance sheet that you're talking about and it's different from the left hand side of the balance sheet this is our business model so you should expect us to continue to have very strong liquidity, very strong balance sheet all the time. And that's…and so that no counterparty ever question if we make a promise whether we come through, right? That's a sort of business model. Having said that, look, how we fund an investment or a series of investments, it's just a function of where we think the best risk-adjusted sort of capital is as a source. That could be debt, right? Obviously, we think, you know, as we think about, we've gotten more and more conviction on whether growth prospects of our company is the downside of that, that our internal view of our equity cost of capital continues to go higher, right? So, debt cost of capital is pretty obvious. You know, it's fixed for next, you know, 7 years, 10 years, 12 years, whatever tenor of debt that you are raising. So you saw that we got back to the debt market, and Tim and his capital markets team did a terrific execution. So it remains all open, right? It's debt, it's equity, it's asset sales, and most importantly, most importantly, it's massive return free cash flow, right? So that's sort of all four we're thinking about, and depending on what the combination of assets we see and how much capital we need, you will see us execute different tab, different points of the market at different points in time.

Your next question comes from the line of Pharrell Granath with Bank of America. Please go ahead.

Hi, good morning. This is Pharrell Granath. My question is around potential margin expansion. You've outlined now a lot of the focus that you have on expenses and individual line items. And I'm kind of curious, when you're looking further out, how far can margins go?

We've said numerous times that there's not an exact number we're going to give up. But at the same time, Sean has said clearly, and I said to Sean, I will not be here unless we expand margins pretty significantly. The opportunity is substantial. Again, realize that we're talking about a business that has been created by numerous different operators, and they're very small as a general rule. They haven't had the resources to invest in all the various areas that a company like ours can invest in. So as we step into it and partner with our operators, we find all kinds of opportunities. And I just pointed out that one item on the utilities, every line item of the GL has opportunities across the board, and we're just methodically going after them. So where exactly it ends up, I can't tell you. I can tell you in multifamily, margins expanded dramatically when that business was professionalized. You can look that up and look at other businesses for a comparison, say.

Well, I'll just add one thing. From your question, it appears, maybe you didn't mean it this way, that you think margin expansion is a function of expense management. I would say the bigger impact will come from the revenue side. Obviously, expenses matter, and we're intensely focused on every single line item. I think we have a team who are focused on or shared between John's teams, Nikhil's team and Tim's team, about 50 people are focused on this. Every single line item I think about how to optimize costs and really remove excess that you might see. And I can give you a million examples sitting right here. And I don't want to bore you with that, but just understand that margin expansion, whatever it might be, we're truly optimistic about where it can get to. will be a function of, I will not be surprised, significant more contribution comes from revenue than expenses, but you can come from both.

Your next question comes from the line of Mike Mueller with J.P. Morgan. Please go ahead.

Yeah, hi.

I guess generally speaking, does the pace of occupancy gains increase or decrease materially once a property crosses 90% on the way to what you see as full in the mid-90s? yeah so um it depends mike but i think i have said this before i think john has said this before it's harder to get it um get an asset to 95 percent than staying at 95 percent right so you just sort of think about it um the occupancy growth again depends on the area depends on how what units you have and not have and others but just remember you have if you have same amount In a rising demand environment, your inventory will be easier to lease, but it's not that obvious in that sense that if you have, say, a building where all ALs is leased, but, you know, your demand for ALs, but you have only IL units. So it's hard to generalize, but generally speaking, in a rising demand environment, less, you know, inventory will give you an easier pay-off, easier pay-off, lease-off. But on the other hand, you sort of have to think about what product do you have versus what the demand of that. So, it's kind of hard to generalize that statement in that way. Do you guys want to add anything to that?

Yeah, I think that's spot on. But, you know, I stay focused on the total revenue, you know, and so whether it's occupancy increases or increases in market rent.

Your next question comes from the line of Austin Werschmidt with KeyBank Capital Markets. Please go ahead.

Good morning.

For many years now, senior housing development has been very difficult to pencil, continues to be the case, which you guys have talked a lot about. I guess at some point that dynamic will likely change. I'm just curious what you think, what part are you doing strategically to develop the moat you talk a lot about should help well withstand any future pickup and construction activity?

Look, the fact of the matter is we want to be in areas where the highly affluent, more difficult to build, and takes a long time to build, right? That's the environment that we want to be. Your question of theoretical return of construction, as I've talked about this several times on calls, I don't want to go and repeat all the comments I made. You can go back and see it. I think there is a, you need to sort of think about this, that future construction will come if the economics is there, right? Just sort of think about that. And I think my team has described in several ways how to think about that from the standpoint of replacement costs and from the rent and everything else.

I'm just not going to go into that.

But, you know, but you're, the part of that statement, I just want to sort of reorient you. In the last decade, where you saw a supply situation, we talked about supply purely because demand was flat. So the conversation was purely about supply. I would like you to think about economic way, which is excess supply, and think about what the demand growth is versus what the supply growth can be, could be. And obviously, all of these happens if the economic situation doesn't exist. But anyway, reorient your thinking. just don't think in terms of what happened in last decade, when demand is flat, which it was last decade, you know, so the decade of the silent generation, if you will, you only had to think about supply. Next decade, when you think about supply, you've got to think about excess supply as demand is rapidly rising.

Your next question comes from the line of Georgie Denkov with Mizuho. Please go ahead.

Hey, this is Georgie on for Vikram.

Just on the occupancy cadence through the year, you increased the year over your guide by 10 basis points. Are you still banking in normal seasonality in the fourth quarter?

So we continue to see seasonality in the business. I think that's been one of the things that we've certainly talked to investors about is that they view that there's no seasonality left in business. There's still seasonality to volume of movements. and also see now into the move-outs, the absolute level has almost lifted. And so in the shoulders, you're seeing occupancy still gain or hold. And in the move-in seasons, you're seeing a greater amount of gains than you've seen historically. So as we've seen the last few years, we still continue to think there will be slowdown in move-ins from seasonal trends towards the end of the year, and that's reflected in the end.

Your next question comes from the line of Wes Goloday with Baird. Please go ahead.

Hey, good morning, everyone. Can you give us an update on the private fund business? It looks like you have about $280 million invested to date. Have you deployed the capital, and do you have any debt at the fund level?

Wes, we have talked about that we'll give you an update after the fund is closed, which I said that will happen by the end of the year, and then we'll give you an update on that. we can't talk about the fund and fund raising more.

Correct me. Yeah, I just generally speak with everything we're on track for the board capital raised capital.

Your next question comes from the line of Mike Carroll with RBC Capital Markets. Please go ahead.

Yeah, thanks. John, I want to circle back on your comments about the WS or WBS platform. I mean, how should we think that this platform will drive margin expansion? I mean, Are the benefits more unique to each individual community as WellTower needs to collect the data and figure out the best way to create value at that specific community? So is it difficult to kind of put it all in one bucket and say you can drive margin expansions this way just because it's so unique depending on what operator you're working with?

Yeah, there's a good question. There's really more commonality across the properties and the system. You're right on the data. The more data we get, the more effective we are, and the more we get into the processes, the more effective we can make them. So it does rapidly build on itself, but there's a lot of consistency across the board as we're looking at how we're executing. And so the challenges come in in the sense of we're working with a lot of people. As I said, over 8,000 people we've brought onto the platform, which is truly stunning.

Your next question comes from the line of Emily Meckler with Green Street. Please go ahead.

Good morning. Thanks for the time. Are you starting to see a slowdown in leasing in your wellness housing portfolio, given the softening of the housing market?

Emily, I wouldn't say we're seeing slowdown because the growth sort of still has continued 10 plus percent. But I will say that if you look at some of the sequential occupancy growth, it was dragged down by some wellness housing sequential. I'm purely talking about in that quarter. And that's because last year we had a bunch of where a lot of new openings. from the prior year, which hit the quarter, you know, sort of hit the same store, but this year we didn't. But frankly speaking, that business continues to amaze me. The age-restricted and age-targeted communities we own continue to, you know, NLI continues to grow at low double-digit 10, 12 percent years in, years out. Frankly, it just really has been pretty resilient, pretty consistent, but we haven't really seen a change in any form or fashion. But our reported metrics do have some slowdown just because of how the openings, some new openings of the communities came into last year. This year, if we look at sequential occupancy growth for the traditional city house business, it's actually been better than last year.

But overall, metric looks similar and slightly lower just because of the point you made.

But that was a function of new openings, not a sold-on business.

Your next question comes from the line of Jim Kammer with Evercore. Please go ahead.

Good morning. I was thinking about the persistent supply-demand imbalance in the seniors arena. Does that translate to a financially meaningful opportunity set for WellTower, sort of the redevelopment front? and your data says this is an A location from demographics and other attributes, but inventories are kind of C assets? Is that math work, and is that a meaningful market opportunity?

Yeah, no, that's a great question, and there's no doubt strategically we've seen an opportunity in our portfolio. I've talked about it previously. Our assets are roughly 17 years old, which is really the sweet spot. The infrastructure is in good shape, and we can improve the value propositions for the customer and get a wonderful win-win situation, wonderful return. What we're doing is providing like-new experiences at a time when there really are very limited, if any, new product that's online or coming online. So, yes, it is a tremendous opportunity for those teams to lean into.

I will just catch the last portion of your question, which is, you know, can you make a C product, put capital, and make an A product? The answer is almost in all cases no. You know, if the product market fit is not right, the bones of an asset is not good.

There's nothing you can change to, right?

So we're sort of focused on, you know, sort of the value-add opportunities. You don't have to go for, you know, sort of beyond sort of what improves the customer experience in the front end, but maybe it is possible. Maybe some people will do it at some places that, frankly speaking, I do not believe that you can turn a CES into a...

Yeah, thank you, Shank. I missed that comment because I agree 100%. This is about well-located quality assets and just improving the value proposition.

There are no further questions at this time. Therefore, this concludes today's call. Thank you all for joining. You may now disconnect.