Earnings Call Transcript - WELL Q1 2026

Operator, Operator

Thank you for standing by. At this time, I would like to welcome everyone to the Welltower First Quarter 2026 Earnings Conference Call and webcast. Operator instructions were provided to participants. I would now like to turn the conference over to Matt McQueen, Chief Legal Officer and General Counsel. The floor is yours.

Matthew McQueen, Chief Legal Officer & General Counsel

Thank you, and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that its projected results will be attained. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. And with that, I'll hand the call over to Shankh for his remarks.

Shankh Mitra, Chief Executive Officer

Thank you, Matt, and good morning, everyone. As usual, I'll review business trends and our capital allocation priorities and the team will follow the usual cadence. We started the year on a strong note with the business continuing to fire on all cylinders. While the heightened geopolitical tension and macroeconomic volatility dominated the headlines, our niche need-based and private-pay rental housing business did not miss a beat. Driven by a combination of strong organic growth and acquisition activity, our total revenue for the quarter increased 38% year-over-year, while adjusted EBITDA was up 36%. Most importantly, we delivered another quarter of strong bottom-line per share growth with FFO per share increasing 23% while we continue to deleverage our balance sheet and invest in people and systems. Our balance sheet provides us with substantial firepower and flexibility. These results exceed our already high expectation coming into the year, enabling us to raise the midpoint of our full-year FFO per share guidance by $0.11 to $6.28. The pronounced mix shift of our portfolio resulting from a transformative 2025 capital allocation activity has already begun to manifest itself. During the first quarter of this year, we reported 16.4% total portfolio same-store net operating income growth, by far the highest in our history. This is largely a function of combined strength from a senior housing operating portfolio, which now comprises 74% of our same-store NOI, up from 57% in the first quarter of last year. This is the first time in history the annualized in-place NOI from our SHOP portfolio exceeded $3 billion. During the first quarter, the U.S. outperformed from an occupancy perspective with nearly 400 basis points of year-over-year growth. On the other hand, Canada, with higher overall occupancy levels than the U.S. and U.K., posted growth closer to 300 basis points, but generated RevPOR growth of 6%, giving you some perspective on the outsized operating leverage as our overall portfolio leases up. Ultimately, all three regions made strong contributions, and we achieved nearly 10% organic revenue growth in the quarter. And the subdued expense growth driven by scaling and the Welltower Business System resulted in same-store NOI growth increasing 22%, marking the 14th consecutive quarter in which same-store NOI growth exceeded 20%. Drilling a bit further, the growth of RevPOR, the unit revenue, continued to exceed ExpPOR, or unit expenses, by a wide margin resulting in another quarter of significant operating margin expansion of 320 basis points. Perhaps the most remarkable stat of the quarter was the circa 20% NOI growth generated by the communities with 95%-plus occupancy. While I consider our recent senior housing results to be very encouraging, I'm convinced that the best years of this business are squarely in front of us. With the total senior housing portfolio occupancy at 87%, there is significant capacity in the system for us to drive multiple years of outsized occupancy gains, along with continued pricing opportunity. And with the operating leverage inherent in our high fixed-cost business, margin should continue to drift higher. But as we have talked about during our most recent calls, what we remain most excited about and our most meaningful opportunity to drive bottom-line growth is through the expanded role that technology, data and innovation will play in our business with the ultimate goal of improving the experience of our customers and site-level employees. The structural change driven by the Welltower Business System should continue to impact virtually every revenue and expense line item driving the margins even higher. This digital transformation, which we are striving for, coupled with in-place above-market compensation and benefits for our site-level employees, should result in lower turnover and lead to happier customers. As I mentioned last quarter, Munger Grant is a clear example of how we are putting these ideas into action. As I've written extensively in my annual letter, which came out a few weeks ago, we have built a system of scaled economic share amongst all participants in the ecosystem. While shareholders will certainly benefit as we extend the duration of our growth, we want our operating partners, site-level employees, residents and their families to benefit meaningfully as well. This is the only way to build and sustain a network effect in a complex adaptive system like ours. Turning to investment activity. Almost exactly a year after Liberation Day, the conflict in the Middle East has led to another period of significant capital markets volatility creating a dynamic similar to that of last year. Recently, a spike in interest rates and gapping out of spreads has resulted in retrading of deals and various parties walking away from their new-found love of senior housing. It is almost comical to see how predictable tourist capital's behavior can be. Many of our counterparties have seen this movie before and opted to bypass the theater and instead transact with us directly in privately negotiated deals. However, some of the first-time sellers have learned the hard way that the five to six months' timeline required to reach a signed definitive agreement in real estate is an eternity in today's world. We behave exactly how we always have: running a first-class business in a first-class way and never walking from a handshake. Over the last 60 days, we have been busier than ever, generating an incredible amount of activity, which Nikhil will describe to you shortly. But to provide some additional context, we completed $3.2 billion of investments during the quarter and have closed or are under contract to close an additional $7.3 billion of investments. Our investment pipeline remains robust, visible and actionable in all three of our regions. In addition, often overlooked is our disposition activity which totaled nearly $3 billion in the quarter as we continue to rotate capital into opportunities which we believe will both amplify and extend the revenue growth curve further into the future. Overall, we have completed $11 billion of dispositions since the beginning of 2025, which has been meaningfully dilutive to our 2026 earnings per share. However, calling our portfolio of lower-growth assets, we have meaningfully extended our growth curve in outer years. For example, the assets we acquired in the fourth quarter of last year are expected to deliver 10 times the level of growth in 2026 than the assets we have sold. Not selling this unprecedented volume of assets would have been easier and frankly, more fun as 2026 FFO per share would have been meaningfully higher, but we always have and always will choose hard over easy and long term over short term. We have a long and hard year of execution in front of us, but our team has never been more fired up as it is today. We shall see what the market gives us in this summer leasing season. With that, I'll pass it over to John.

John Burkart, Chief Operating Officer

Thank you, and good morning, everyone. As Shankh mentioned, we are pleased with our start to the year having delivered the portfolio same-store NOI growth of 16.4%, the highest level in our company's recorded history. Once again, our results were driven by our senior housing operating portfolio, which delivered the 14th consecutive quarter in which the same-store NOI growth exceeded 20%. During the first quarter, portfolio year-over-year same-store revenue increased 9.5%, driven by 370 basis points of occupancy gains and strong pricing power with RevPOR growth of 5%. Revenue growth was consistent across all three regions, led by the U.K. at 9.7%, followed by the U.S. at 9.5% and Canada at 9.2%. However, peeling back the onion, both the U.S. and U.K. reported occupancy growth of nearly 400 basis points and RevPOR growth just shy of 5%. On the other hand, as Shankh indicated, Canada reported occupancy growth of roughly 300 basis points, but RevPOR growth of nearly 6%. Ultimately, our goal is to provide a top-quality customer experience and to be fairly paid for it, and that's showing up through a combination of occupancy and rate growth. Moving to expenses. We remain encouraged by the trends we are observing across most line items, but particularly with respect to labor, which is almost SHOP expenses. This is best reflected by comp per occupied room, which increased 20 basis points year-over-year, near the lowest level of growth in recorded history. As a result, expense per occupied room, or ExpPOR, was up just 40 basis points. This is largely a function of scaled economics in the business, whereby a growing number of communities are now either fully staffed or approaching those levels. As occupancy continues to grow, the need to add additional staff has moderated, leading to a meaningfully higher flow-through or incremental margins. In fact, during the quarter, we achieved a flow-through margin of 64%, while our same-store NOI margin increased 320 basis points to 30.9%. As for the future, we believe that significant upside exists. The combination of our same-store communities at 95% occupancy posting NOI growth of roughly 20% and approximately 45% of our same-store SHOP assets operating below 90% occupancy with the opportunity for materially increased revenue and NOI via occupancy gains creates potential for years of compounding per-share growth ahead. While we take nothing for granted due to the operational intensity and persistent challenges which exist in the business, we are confident that through the efforts of our best-in-class operators and continued rollout of the Welltower Business System across the portfolio, we will continue to drive outside levels of growth well into the future. It's still early in the year with the peak leasing season ahead, and we will see what the market gives us. But our goal remains consistent, partnering with our operators to deliver an exceptional resident and employee experience. Our Welltower operations and asset management teams, including the Tech Quad, continue to make leaps, non-incremental steps on this front and remain committed to maintaining this momentum through a relentless focus on operational excellence. With that, I'll turn it over to Nikhil.

Nikhil Chaudhri, Head of Investments

Thanks, John, and good morning, everyone. Since our last call, the macroeconomic and geopolitical backdrop has once again introduced meaningful volatility into the capital markets. Escalating conflict in the Middle East, combined with renewed stress in private credit, has driven a more pronounced risk-off tone, evidenced by higher Treasury yields, elevated volatility across risk assets and growing signs of strain within private lending markets. Credit spreads have widened in recent weeks. Redemption activity in certain semi-liquid vehicles has increased and defaults have continued to trend higher. As others have said, we have seen this movie before. In periods like this, when capital becomes less reliable and execution risk rises, our position strengthens. Our reputation as the highest-quality counterparty backed by our incredible balance sheet becomes increasingly differentiated. Sellers place a premium on certainty of close, lenders become more selective. And when that happens, the opportunity set expands. That is exactly what we are seeing today. As a result, we have seen a meaningful increase in our investment activity. Our investment volume for the year now stands at $10.5 billion, an increase of $4.8 billion since our last call in February. During the first quarter, we closed 41 transactions totaling $3.2 billion. Of these, 37 were sourced off market, continuing to reflect the strength of our relationships and our origination platform. The majority of our acquisitions activity was highly granular, single-asset transactions where our teams operated as local sharpshooters supported by insights from our data science and machine learning platform, welltower.ai. These transactions added 37 communities and over 4,200 units to our seniors housing portfolio. On the disposition side, during the quarter, we completed the remaining $520 million of the previously announced $1.3 billion of dispositions in our Integra JV as well as an additional $1.3 billion of OM sales to Kayne Anderson. With $6.7 billion of sales now complete, we expect the remaining approximately $500 million to be completed during the second quarter. Turning to new activity. We have already closed on an additional $4.2 billion of transactions in the second quarter, comprised primarily of our previously announced acquisition of Amica Senior Lifestyles in premium markets across the GTA and Vancouver. The incremental $3.1 billion of activity is comprised primarily of newer-vintage seniors housing assets with roughly 95% sourced off market across a number of transactions. I'm also pleased to provide an update on our U.S. seniors housing equity fund. As I mentioned on our last call, we held our final LP close in the fourth quarter of 2025. Since then, consistent with the acceleration in activity on our balance sheet, the entire $2.5 billion of fund capital is now fully committed. While we were significantly oversubscribed, we made a deliberate decision to limit the size of the fund. Our focus was simple: raise the right amount of capital, not the maximum amount of capital. We also structured and are scheduled to deploy the fund in a way that avoids many of the common friction points for LPs. With 1.5 years still left in the investment period, capital is being put to work quickly on high-conviction opportunities, minimizing the typical J-curve of returns. In addition, we have avoided the use of subscription lines to manufacture IRRs, remaining focused instead on driving real equity value creation over time. I'll leave you with a few thoughts. What we're seeing in the market right now is not new, but it is meaningful. Periods of volatility separate long-term capital from short-term tourists. In these moments, speed, conviction in underwriting and consistent execution aren't just advantages, they're differentiators. That's where we have focused our time. Our platform is built to identify opportunities at a very granular level, move with speed and engage directly with counterparties. We are disciplined in how we deploy capital, valuing assets based on in-place performance while keeping the value-add from the Welltower Business System for our shareholders. We remain price disciplined with unlevered IRRs and discounts to replacement cost being our guiding principles and with terms like accretion notably absent from our investment committee conversations. Our focus on win-win outcomes and target pursuit of the truth rather than woven narratives continues to drive our ability to source opportunities off market and deploy capital thoughtfully, even in more uncertain environments. With that, I'll turn the call over to Tim to walk through our financial results.

Tim McHugh, Chief Financial Officer

Thank you, Nikhil. My comments today will focus on our first quarter 2026 results, performance of our triple-net investment segments, our capital activity, our balance sheet and liquidity update, and finally, an update to our full-year 2026 outlook. Welltower reported first quarter net income attributable to common stockholders of $1.02 per diluted share and normalized funds from operations of $1.47 per diluted share, representing 22.5% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 16.4% driven by 22.1% growth in our SHOP portfolio, which now makes up 74% of our same-store NOI. Now turning to the performance of our triple-net properties in the quarter. In our seniors housing triple-net portfolio, same-store NOI increased 3.9% year-over-year and trailing 12-month EBITDA coverage was 1.23x. Next, same-store NOI in our long-term post-acute portfolio grew 2.6% year-over-year and trailing 12-month EBITDAR coverage is 1.32x. Moving on to capital activity. In the first quarter, we raised $4.4 billion in gross proceeds through dispositions and equity issuance, allowing us to fund $3.3 billion of investment activity and end the quarter with a net debt to adjusted EBITDA ratio of 2.73x, more than half a turn reduction from just a year ago. Subsequent to quarter end, we used free cash flow to pay off a $700 million unsecured bond maturity in April, highlighting the strength of our balance sheet and the cash flow generating capacity of the portfolio. We ended the first quarter with $4.9 billion of cash on hand, which together with approximately $1.4 billion of incremental disposition activity, along with assumed debt and funding of transaction activity with OP units, positions us to fund roughly $7.3 billion of investment activity through the remainder of the year with a meaningful portion, again, expected to be sourced through capital recycling. Taken together, this net investment activity and continued cash flow growth from the in-place portfolio inform our expected year-end net debt to adjusted EBITDA of approximately 3x, modestly below our prior expectations. Before turning to our guidance, I want to come back to a point I highlighted last quarter around how our portfolio transformation and what we describe as Welltower 3.0 is reshaping our growth profile. What we're seeing play out in the first quarter is a clear validation of the mix shift we spoke to, with Q1 marking the highest level of total portfolio same-store NOI growth we've delivered in company history. Importantly, that growth is anchored by the strength of our in-place portfolio. Our initial guidance last quarter already reflected a high level of year-over-year visible earnings growth. And our updated outlook this quarter demonstrates the continued momentum we're seeing on the ground. As we continue to increase our concentration in senior housing operating, we believe the Welltower 3.0 portfolio is positioned to deliver a meaningfully higher rate of sustainable compounding than its predecessor. Moving on to guidance. Last night, we updated our full-year 2026 outlook for net income attributable to common stockholders of $3.24 to $3.38 per diluted share and normalized FFO of $6.21 to $6.35 per diluted share or $6.28 at the midpoint. Our normalized FFO guidance represents a $0.11 increase at the midpoint from our prior normalized FFO range. This increase is composed of a $0.03 increase from senior housing operating NOI, a $0.07 increase from investment and financing activity and a $0.01 increase from better-than-expected income tax and other with some offset from higher G&A expectations. Underlying this FFO guidance is an estimated total portfolio year-over-year same-store NOI growth of 12.25% to 16%, 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 16.5% to 21.5%. This is driven by the following midpoints of the respective ranges: Revenue growth of 9.2%, made up of RevPOR growth of 5% and year-over-year occupancy growth of 350 basis points and expense growth of 5.3%, equating to ExpPOR growth of just below 1.3%. And with that, I will hand the call back over to Shankh.

Shankh Mitra, Chief Executive Officer

Thank you, Tim. I would like to make three points before opening up the call. First, I want to take a moment to acknowledge the passing of David Simon, a true legendary figure, not just in the real estate space, but across corporate America. David was a visionary in every sense of the term, growing a small portfolio of regional malls into one of the most well-respected companies in the world. He was a legend, a true pioneer, recognizing the enduring value of highest-quality real estate where shoppers and retailers could come together in vibrant environments. And the Simon ecosystem thrived under his leadership. Just think of the long-term success of so many of America's great retailers, which would not have been possible without the setting that David created for them to grow and thrive. Of many of his qualities, one I personally appreciated the most is that he was unapologetically himself. He spoke his mind with clarity and conviction and remained relentlessly focused on creating long-term value for his investors. The stellar returns Simon delivered for its shareholders under David's leadership was no accident. He navigated the company through multiple recessions and structural changes in the industry via thoughtful countercyclical capital allocation, a focus on operational excellence and maintained utmost balance sheet discipline. He was unquestionably a stalwart and a true visionary, but also a friend, a mentor and a fellow Board member at Columbia. He was the one who encouraged me to take the leap from buy side to the corporate side, advice which I will forever be grateful for. He leaves behind a legacy that extends far beyond the real estate sector, setting a standard for what great leadership looks like. Our deepest condolences to the Simon family and those who are close to David. Second, roughly a year ago, we launched our private fund management business establishing a capital-light revenue stream and another avenue to drive per-share growth for existing investors. During the first quarter of this year, we identified another additional revenue stream through which to expand our capital-light business by unlocking and monetizing an existing balance-sheet asset: our data science platform. As many of you know, since 2016, through the efforts of a multidisciplinary team of PhD computer scientists, engineers, statisticians and mathematicians, we have pioneered the application of data science and machine learning in real estate investing. This was instrumental in driving over $80 billion of acquisition and disposition activity over the last 10 years. Given the modular and portable nature of the platform, we launched our first external partnership during the first quarter, licensing bespoke supervised and unsupervised models to a public storage company and a leading global private equity firm. These models enable the real-world application of AI by accelerating capital allocation decisions from five to nine months to mere weeks and significantly increasing velocity to market. Ultimately, our mission is to scale real estate investing, which historically was an unscalable business. More to come on this front in months and quarters ahead, but we have been incredibly busy since the announcement in March as many highly respected real estate, non-real estate and sovereign wealth funds have reached out to us to explore similar partnerships. Lastly, as I described in my annual letter, we have recently witnessed a surge of talent density that we have been attracting to the company, particularly with respect to Tech Quad. Following our ethos to hire A people, we have been successfully attracting the highest-caliber technology and data science professionals to execute our vision. Aiding our effort is what is rapidly spreading as a narrative around who is on the disruptive path of AI, which is releasing an extraordinary pool of talent into the market. This talent pool is increasingly focused on identifying businesses that cannot be replaced by AI, including sectors classified as halo or hard-acid low-obsolescence such as housing for a rapidly aging population. We are thrilled with the progress made by Tech Quad in reimagining our technology ecosystem to improve the resident and site-level employee experience. Our newest additions to our team will only accelerate these efforts. Nonetheless, our biggest opportunity to drive per-share growth is through unlocking greater value for our existing assets with the most immediate and impactful way being the implementation of the Welltower Business System, our end-to-end operating platform across our senior housing portfolio. In a maximum-growth, maximum-gain world, the fastest way to move the dial is to narrow the focus. Our relentless and maniacal focus on the digital transformation of the business and dramatically improving customer and site-level employee satisfaction will be the force multiplier on the attractive beta of our business. And with that, I'll open the call up for questions.

Operator, Operator

Operator instructions were provided to participants. Your first question comes from Ronald Kamdem with Morgan Stanley.

Ronald Kamdem, Analyst (Morgan Stanley)

Great. I just wanted to double-click on one of the comments you made on the 95% occupied portfolio and the communities growing circa 20%. Wondering if we could double-click and get some more color around whether RevPOR, ExpPOR, margins, mix—anything that could be interesting?

Shankh Mitra, Chief Executive Officer

Thanks, Ron. First, I clearly don't want you to run with the idea that that's what we are suggesting will universally happen. But that is definitely something that I found in our data to be surprising. A very significant part of our portfolio today is 95%-plus occupied, give or take, roughly 50% of the portfolio in that cohort. And that portfolio grew circa 20% net operating income, as I said. For a couple of reasons: obviously, you have pricing power increases as capacity comes down in the system. That cohort had roughly 6%-plus RevPOR growth. And on the expense side, major execution from our operators and the contribution from the Welltower Business System helped drive favorable expense trends. So it landed to be an extraordinary number, and we were very happy about it. We do think that that gives us confidence that we'll have double-digit NOI growth for a long time to come as the portfolio leases up; we'll see what the market gives us as we get through the next few years as the portfolio leases up.

Operator, Operator

Your next question comes from John Kilichowski with Wells Fargo.

William John Kilichowski, Analyst (Wells Fargo)

Shankh, you kind of hit on this at the end of your opening remarks, but could you talk more about the growth of the talent density and the data science platform given what you described as a halo sector? How much has this accelerated the growth outlook of the business in your mind? And then maybe also about how investors should be thinking about the medium-term potential for earnings contribution from this business?

Shankh Mitra, Chief Executive Officer

Yes. John, let me take the second part first, then I'll go to the first part. If you think about it, we built this data science and machine learning capability over the last 10-plus years to deploy capital on our balance sheet. Then we realized recently, from encouragement by some of our largest sovereign wealth partners in our fund business, that there could be a much bigger application of this, which you have seen in our first partnership announcement. We're in the building mode of this business. Whether something substantial comes out of it remains to be seen, but since the announcement in early March regarding the public storage partnership and the other private equity firm I mentioned, our phones have been ringing off the hook. We have been exploring a lot of opportunities with many parties—real estate companies, non-real estate companies such as banks, and major sovereign wealth funds. We'll see where it goes. Regarding the talent density, 90 days ago I had never really heard the term 'halo' used in this context. I've personally interviewed many people who have come to our organization, and I heard this more increasingly from the talent that was considering us. We've hired data scientists and software engineers with PhDs and backgrounds at top quant funds—people I never thought would work for a real estate company, let alone a senior living company. We've even recruited talent from places such as code-breaking agencies. This is a talent pool typically not seen in our industry, and it's changing the problems we can tackle. For example, industry participants often use crude signals like median house price by ZIP code. We are looking at far more granular signals across locations and uncovering hidden insights. That's the kind of talent we're attracting and why we're excited. We'll see what happens, but thank you for the question.

Operator, Operator

Your next question comes from Michael Goldsmith with UBS.

Michael Goldsmith, Analyst (UBS)

I'm here with Justin. On the topic of capital allocation, Ventas recently acquired a portfolio. Did you evaluate that opportunity? And maybe more broadly, you have one of the best costs of capital in this space. How do you think about accelerating accretive growth versus maintaining your discipline?

Shankh Mitra, Chief Executive Officer

We don't comment on other companies' deals. We did look at that portfolio, and we think it's a very high-quality portfolio and our colleagues at Ventas will do well with it. When it was brought to us a few months ago, it was in a structure that we did not find particularly palatable. As I've mentioned many times, we have concerns about encumbrances on assets, and the structure included encumbrances and operating arrangements that made it unattractive to us at that point. On accelerating capital allocation: as I wrote in my annual letter under the section on the cognitive dissonance of acquisition volume, we're not a deal shop. Welltower is different from our predecessor. We allocate capital in a particular product market niche where we can add significant value. We don't compete on cost of capital alone; we compete on data science, the Welltower Business System and our network of operators. If our goal were just to do more deals, we wouldn't have sold $12 billion of assets in the last 12 months. We see everything as we always have; roughly 90% to 95% of what we transact comes to us off market. If a seller comes to us, we can tell them within a day or two whether we want to transact and within a few days what price we'd transact at. We're focused on growing per-share value for existing investors, not doing deals for the sake of deals.

Operator, Operator

Your next question comes from Mike Mueller with JPMorgan.

Michael Mueller, Analyst (JPMorgan)

First, that was a nice David tribute. When I think about Simon over time, one thing that stands out is David's ability to walk away from deals. Can you talk about an example or two of steering clear from a big transaction that didn't sit well with you?

Shankh Mitra, Chief Executive Officer

Yes. Thank you. David called me on one of the most exciting days of my buy-side career and encouraged me to leave and come join him, which is how some of this began. He was an extraordinary leader. He walked away from deals many times, and I think that is an important skill. Believe it or not, one of the largest transactions we have done in this company is Barchester, and I walked away from that deal twice before it ultimately happened. There are many transactions we walk away from every day—often because of product-market fit, structural issues, or simply price. We try to do it respectfully, explaining why we walked away so we can maintain relationships. By design, we probably walk away from about 90% of what we see. Sometimes, when the timing, price or structure is right, a deal comes back to us and closes. Thank you for the question.

Nikhil Chaudhri, Head of Investments

Yes, roughly 10%.

Operator, Operator

Your next question comes from Michael Carroll with RBC Capital Markets.

Michael Carroll, Analyst (RBC Capital Markets)

Shankh, I know that the Welltower Business System model continues to evolve. How beneficial are these new partnerships that you're creating with public storage and others to take the data platform to the next level? I assume Welltower is getting access to new data that you didn't have before. How beneficial could that be as you refine those systems?

Shankh Mitra, Chief Executive Officer

Mike, think about our SHOP technology in two different but interconnected segments. One is our data science platform, focused on capital allocation and finding granular opportunity and dramatically reducing the latency of decisions in this business from months to days. The other is the operational side, the Welltower Business System, which Tech Quad is building. The operational system is about reimagining how communities are run and is not what we are collaborating on with public storage. Public storage doesn't need our help on operations. Our collaboration with public storage and other partners is on the data science side, where we've been building for over 10 years. That's where our first external partnerships lie. We're applying those models across product types and geographies. People are coming to us with location-type problems beyond just real estate—examples include banks wanting help predicting the most profitable locations for branches. Those are the kinds of problems we're exploring.

Operator, Operator

Your next question comes from Jim Kammert with Evercore ISI.

James Kammert, Analyst (Evercore ISI)

Shankh and team, is there a way to leverage the data science into other geographies beyond your core U.K., U.S. and Canada? Or are those markets structurally different—less private pay or other cultural issues—that make external growth unlikely?

Shankh Mitra, Chief Executive Officer

The short answer is yes; it can be. Just for example, we're having conversations with a significant investor in Japan and built a model in roughly three weeks to show them how to apply our approach there. We don't have as much data in some markets, and we haven't bought gobs of data everywhere, but the platform is absolutely scalable across geographies and product types and beyond real estate.

Operator, Operator

Your next question comes from Richard Anderson with Cantor Fitzgerald.

Richard Anderson, Analyst (Cantor Fitzgerald)

Shankh, you talked about doing the hard things, not the easy things, and making decisions with that mindset. As you talk about data analytics and these tangential opportunities that spin out of your senior housing platform, do you have aspirations where senior housing becomes a base from which you grow other businesses—data analytics, perhaps other lines—becoming a diversified vehicle over time?

Shankh Mitra, Chief Executive Officer

No. We're not trying to convert from senior living to other asset classes on our balance sheet. In fact, we're doing the opposite: selling other asset types and focusing our balance-sheet capital in a single asset class where we have competitive advantage. That said, capabilities we build—such as the data business—could become more than an internal platform. We are focused on concentration, not diversification. We believe in concentration and in building capabilities. For example, a lot of the advantages we have come from challenging industry heuristics and finding the truth through data. We are optimizing for duration of growth and per-share value over a long period. So senior living remains the primary focus for our balance-sheet capital deployment, while the asset-light businesses like fund management and data science can complement and add to shareholder value.

Operator, Operator

Your next question comes from Vikram Malhotra with Mizuho.

Vikram Malhotra, Analyst (Mizuho)

Shankh, I enjoyed your hummingbird analogy. Two questions: One, going forward, is there something the Welltower Business System or the team can do to monitor and reduce CapEx levels in senior housing, which often becomes a bite on returns? And two, when you think about supply and demand, we still have not seen supply start—can your relationships or markets limit supply perhaps longer than people perceive?

Shankh Mitra, Chief Executive Officer

On the hummingbird analogy: the point is reimagining the entire value chain rather than incremental improvements. If you start from the customer and remove friction for both customers and site-level employees, you can get very far. On CapEx: CapEx in this business has often been piecemeal—one year a roof, another year gutters, then skylights. That's not an efficient full-cycle approach. If you think about CapEx on an available-room basis versus just occupied rooms, many first-impression items should be addressed across all rooms. As the system fills up, scaling improves CapEx efficiency. Two years ago, much CapEx execution was outsourced; today we have a 200-person team working with our operators to manage lifecycle costs and execution. You're starting to see that scaling effort, and I expect more going forward. On supply: supply response is often Pavlovian. Participants equate supply with oversupply because historically new supply overwhelmed flat demand. I think supply will chase demand for a long time due to demographic trends and constraints, including the availability of quality operators. After COVID, banks are selective about lending without strong operators. Over the last three years, we forged 25 to 30 long-term partnerships with operators, many near-exclusive in our markets, which we believe provides a governor on quality supply. We'll see how it plays out, but those are the factors in our view.

Operator, Operator

Your next question comes from Farrell Granath with Bank of America.

Farrell Granath, Analyst (Bank of America)

I wanted to touch on a comment you made in your annual letter where you highlighted several operational heroes. What was some of the best operational advice that you took away from those organizations? How are you applying and executing on that advice across the portfolio?

Shankh Mitra, Chief Executive Officer

That's an interesting question. The heroes we mentioned span operations, capital allocation and culture. One of the best operational pieces of advice I received—largely influenced by Peter Kauffman, a longtime mentor—is that operations can be meaningfully improved by systems, process and technology, but at its core, operations is about people. Systems are enablers, but hiring, training and treating people well is central. Also, understand who has credibility and expertise—you need a filtering mechanism to find the right advisors. If you're ever in L.A., I can arrange a visit to see a well-run factory that demonstrates the focus on people. That emphasis on people is what we're applying across our portfolio.

Operator, Operator

Your next question comes from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt, Analyst (KeyBanc Capital Markets)

Going back to the 95%-plus occupied portfolio: within the roughly 6% RevPOR growth for those assets, you indicated benefits of capacity coming down and pricing power. Are street-rate increases exceeding increases for in-place customers within this subset of assets? And are you also seeing greater benefit from high-return ancillary income opportunities?

Shankh Mitra, Chief Executive Officer

Thank you. You were a bit far from the mic, but I think your question was whether pricing increases are coming more from street rates than from in-place customer increases, and whether ancillary income is contributing. You picked up on something important. Just because you can increase in-place customer rates substantially doesn't mean you should. There's a trade-off. A lot of the RevPOR improvement comes from street rates—the price new customers pay—which can move materially as markets tighten. There's an acute difference between in-place customers and new customers. Ancillary opportunities—community fees and other services—also contribute to RevPOR. So it's a mix of in-place rate increases where appropriate, street-rate increases, and ancillary income that drive the RevPOR improvement.

Operator, Operator

Your next question comes from Juan Sanabria with BMO Capital Markets.

Juan Sanabria, Analyst (BMO Capital Markets)

I'm curious about market share and the opportunity to consolidate a fragmented industry, recognizing you have a targeted approach. How much is left to consolidate? There's been some political pushback in Canada and reviews in the U.K. How do you think about the addressable market and opportunities remaining?

Shankh Mitra, Chief Executive Officer

Juan, take a step back: roughly 7% to 10% of people who could use our product actually use it. So 90% of the people who could use the product don't. Within the existing product, we likely represent about 7% of the industry. So from a customer standpoint, we're a small portion even of the current users. Within senior living, though, we're very focused on the highest price point and highest-quality assets—our product-market niche. That niche is smaller, and our total addressable market within that niche is likely a multiple of our current size but not enormous—maybe 2x to 3x, not 15x. We're very selective. Our goal is not asset aggregation for the sake of scale; it's to pick where we can add significant value. We would be comfortable if we never bought another asset. The aim is to grow per-share value, not simply consolidate for scale.

Operator, Operator

Your next question comes from Nick Yulico with Scotiabank.

Nicholas Yulico, Analyst (Scotiabank)

On the investment side: this quarter, loan funding was a little over 50% of the investments. Could you remind us what the approach is there and what type of yield you're getting on that loan funding? Also, could you break out of the $7.2 billion investments in April so far what percentage is loan funding?

Shankh Mitra, Chief Executive Officer

Let me start and then Nikhil can add. Nick, remember that when certain transactions closed, we took back more than $1 billion in participating preferreds, which shows up in the loan book. Those are participating structures with an equity-like derivative attached. Some of what you're seeing in loans is that participating preferred or similar structures. The rest are bridges or refinancings for certain assets where loans were paid off. As those dispositions settle, the loan book will change. Overall, that's the construct behind the elevated loan funding in the quarter.

Nikhil Chaudhri, Head of Investments

To add, of the $4.2 billion that closed in the second quarter, the vast majority was the Amica acquisition—north of $3 billion—and the rest were predominantly asset acquisitions. There may be one or two small loans, but the second-quarter closings were primarily asset acquisitions rather than loan-funded activity.

Operator, Operator

Your next question comes from Seth Bergey with Citigroup.

Seth Bergey, Analyst (Citigroup)

Can you touch on the transaction market more broadly? First, the impact of competition. Second, how prevalent is deal retrading or walking away because of capital markets volatility? And Shankh, what is Welltower's due diligence and time-to-close relative to average buyers?

Nikhil Chaudhri, Head of Investments

On competition, as I said earlier, about 90% to 95% of our transaction activity is off market, which by definition reduces competition. That said, over the last couple of years more capital has come into senior living, so if we say no to an off-market opportunity, it's now more likely that someone else might buy it. On speed: given how much insight we get from our data platform, it takes us a couple of days to form a narrow view on an asset's price. Once there's a meeting of the minds, we parallel path diligence—site visits, finalizing business plans with operators, third parties, and legal negotiations. Typically, we can move from initial view to close in roughly 30 days. By contrast, a full market process often takes about six months from start to finish, which introduces a lot of execution risk given macro changes over that timeframe. In recent months we've seen transactions we liked get away because of pricing or structure changes, and then sometimes those same opportunities come back to us later.

Shankh Mitra, Chief Executive Officer

I'll add two points. First, we are one of the few SHOP investors that visits every asset we buy. For each asset, we walk it with an average of 12 Welltower personnel, including investment, asset management and structural engineers. That hands-on diligence is important. Second, our reputation is the currency of our business. If we tell someone we'll transact, we transact. We'd rather give bad news upfront than string people along through a six-month process and then change our view. The reputation approach and long-term orientation serve us well.

Operator, Operator

Your next question comes from Omotayo Okusanya with Deutsche Bank.

Omotayo Okusanya, Analyst (Deutsche Bank)

You need specific types of operators and SHOP operators to realize your strategy. Are you still seeing opportunities to bring more operators into the fold, or does the strategy become doubling down on the operators you have? If doubling down, what additional incentives can you provide to further align with your current operators—beyond examples like Munger grants?

Shankh Mitra, Chief Executive Officer

This is an important question. We view our business as a complex adaptive system. Over time, we've built deep collaborative relationships with a handful of operating partners. In many cases it's hard to tell who works for Welltower and who works for the operator because we operate so closely. That trust and collaboration takes years to build. Are there additional operators we'd like to work with? Yes, there are a few we respect and would pursue when alignment is right. But overall, we're in a mode of reducing the number of partners we work with and doubling down on those with whom we have deep alignment. We are not trying to be everything to everyone. Cultural fit is paramount: partners who prioritize operational excellence, treat their people and residents well and take reputation seriously. We are doubling down with those partners and continue to explore selective additions where the chemistry and alignment are exceptional.

Operator, Operator

Your next question comes from Michael Stroyeck with Green Street.

Michael Stroyeck, Analyst (Green Street)

On applying the data science platform to new geographies: has the company underwritten any transactions outside the U.S., U.K. or Canada? Are there countries Welltower could enter down the line on a balance-sheet basis?

Shankh Mitra, Chief Executive Officer

Michael, very good clarifying question. We have no desire to expand our balance-sheet investments beyond the three countries we operate in—the U.S., U.K. and Canada. The comment about scaling across geographies applied to the data science business on a capital-light basis. That capability is scalable across geographies and asset classes for the data and analytics business, but not for balance-sheet expansion.

Tim McHugh, Chief Financial Officer

Yes. And Michael, to directly answer your question, no, we have not underwritten anything or signed an NDA to get information beyond the three markets for balance-sheet deployment.

Operator, Operator

That concludes the Q&A session of the conference call. Thank you for your participation. You may now disconnect, and have a wonderful rest of your day.