Welltower Stock

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Welltower Second Quarter 2026 Earnings Call. [Operator Instructions].

I would now like to turn the conference over to Matt McQueen, Chief Legal Officer and General Counsel. Matt, 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 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 markers.

Thank you, Matt, and good morning, everyone. I'll review business trends and our capital allocation priorities and the team will follow the usual cadence. I'm pleased to report a record quarter for our company as the end market demand for our needs-based senior housing business remains resilient despite continued macroeconomic and geopolitical uncertainty. The uncorrelated nature of demand growth, combined with the mix shift of our portfolio resulted in 25% year-over-year increase in partial FFO growth one of the highest levels achieved in our history.

As Tim will describe shortly, our strong start to 2026 and increased confidence in the back half of the year enabled us to increase the midpoint of our full year FFO guidance by $0.12 to $6.40 per share. Notably, our second quarter bottom line growth would have been even stronger absent nearly $1 billion of dispositions during the quarter as well as more than $11 billion over past year. Our maniacal focus remains on compounding our share growth well into the future for existing owners and incurring near-term dilution from $3.6 billion of disposition completed year-to-date is a trade-off we will gladly make.

Remember, every decision we make is evaluated obsessively through an opportunity cost lens to extend the duration of our growth curve. And the trade-offs we made last year vis-a-vis the sale of our outpatient medical portfolio and concurrent redeployment of proceeds within senior housing are clearly being reflected across our P&L. This includes revenue and adjusted EBITDA growth this quarter, which increased 39% and 36%, respectively. At the same time, we maintained an under-levered balance sheet and continue to invest heavily in operations and technology side of the house.

Turning to operating results. We're pleased with our second quarter performance, particularly when weighed against an economic backdrop fraught with uncertainty. Organic revenue growth of 9.2% was driven by another quarter of strong occupancy gains and healthy pricing power. Same-store occupancy increased 330 basis points year-over-year, which follows a 420 basis point increase in the second quarter of last year and our sequential spot occupancy growth in the quarter was 100 basis points, reflecting a strong start of the summer leasing season versus 80 basis points in Q2 of last year. We also continue to be pleased with the pricing power that our operating partners are achieving with RevPAR or unit revenue increasing 5.2% during the quarter relative to 4.9% achieved in Q2 of last year.

We believe this reflects two powerful dynamics. First, capacity in the system continues to shrink with strong percent of our portfolio rapidly crossing 90% and 95% occupancy thresholds, creating additional pricing power. This is not solely a supply-demand story, though. We serve the wealthiest of age cohorts in history with a significant concentration of wealth held by baby boomer generation. This cohort increasingly prioritizes exceptional experiences and high-quality amenities and services, particularly later in life. This is also a highly discerning customer base that expects the best and willing to pay for it.

Our operators and their on-site teams work relentlessly every day to deliver that exceptional and differentiated experience. Ultimately, we believe the combination of supply constraint and a highly affluent need-based customer will continue to support healthy rate growth for many quarters and years to come. It is also worth highlighting that RevPAR growth continues to meaningfully outpace the growth of export or unit expenses, which resulted in another strong quarter of operating margin expansion of 300 basis points to over 32%, surpassing pre-COVID levels, and we believe that meaningful margin upside remains for the portfolio, driven by operating leverage inherent in our high fixed cost business, coupled with structural changes being fluctuated by Welltower Business System.

Turning to capital allocation. Transaction activity across senior housing space has picked up in recent quarters, but our ability to execute on highly attractive investments in U.S. U.K. and Canada has not diminished. In fact, the pace of activity has picked up meaningfully as a result of geopolitical uncertainty, coupled with a spike in interest rates. Even after a record level of investment activity in 2025, we have already completed or under contract to close approximately $15.5 billion investments this year. The vast majority of these opportunities are off-market in nature with sellers coming to us first, knowing our reputation as a fair counterparty and on our ability to provide certainty at a lightning speed and close quickly as depicted on Slide 15 of our business update presentation. This is particularly important given the recent rise in interest rate and growing uncertainty with respect to the direction of the economy. Our investment teams remain busy as ever, and I suspect that will be the same in case of in -- will be the case in fall and into the year-end.

Not only does our investment pipeline remains robust, visible and actionable, but our conviction in deploying capital is enhanced by our ability to meaningfully increase cash flow post acquisition through transitioning assets to one of our best-in-class operators and implementation of WBS. Despite this confidence, make no mistake that we remain exceptionally disciplined in deploying our shareholders' precious capital, we will not compromise our standards for asset quality, management contract structure or a host of other criteria, which are embedded in our investment process in pursuit of near-term accretion or overall size.

Our goal is simply and only partial growth. And while we almost invariably remain the first call from sellers, we have passed on tens of billions of dollars of transactions this year alone, which did not meet our credit stringent criteria for quality, price, acuity, future growth and contract structure. At the risk of sounding like a broken record, this is not a spread investing business, at least not for a product assist operating powerhouse like us. I can't speak for the shadow banks in our space who only understand the spread investing language and are perhaps particularly impressionable by Silver Tank investment bankers.

Lastly, we're delighted to have announced an increase in our quarterly dividend by 15% to $0.85 per share. This marks the third consecutive year in which the Board has elected to raise our dividend and marks a step function higher from the previous increases. This increased size of the dividend reflects Board's continued confidence in the growth trajectory of the business and health of our balance sheet. At the same time, our free cash flow generation continued to grow rapidly, providing us with greater flexibility to allocate capital in ways to maximize shareholder value and extend the duration of our par share growth.

With that, I will pass it over to John.

Thank you, and good morning. The second quarter not only marks another period of substantial growth for the business, but also continued progress on Welltower business system initiatives, which I'll get into shortly. As Shankh mentioned, we reported another quarter of stellar results with the company firing on all cylinders. Total portfolio same-store NOI increased 15.5% year-over-year, marking the second highest level in our company's recorded history. As we discussed last quarter, the portfolio is growing at a meaningfully faster pace, driven primarily by the continued mix shift towards senior housing operating portfolio which now contributes approximately 70% of total NOI.

Importantly, seniors housing remains largely insulated from the various cyclical and secular pressures affecting many sectors across corporate America. The business continues to perform at a high level, resulting in our 15th consecutive quarter in which NOI growth exceeded 20%. Top line growth remains strong by another quarter of 330 basis points of occupancy growth and 5.2% RevPAR growth. We're pleased to report that expense pressures remain subdued with year-over-year growth in export or unit expense of just 0.7%.

This is largely a function of scaling benefits received from the rapid increase in occupancy across the portfolio. And with the properties fully staffed and with continued normalization of wages, comp for or compensation per occupied room came in at just at 0.8%, one of the lowest levels in our recorded history. As a result, we achieved flow-through margins of 65%, a continued improvement from prior years. The combination of healthy RevPAR growth and constrained export growth drove another 300 basis points of year-over-year margin expansion during the quarter. And as Sean mentioned, we believe that significant margin upside remains given the inherent operating leverage in our business, combined with the competitive advantages we are building through the Welltower business system.

One of the most important ways in which we're expanding our moat is by attracting exceptional talent from a broad range of industries highlighted on Slide 13 of our business update presentation. The tech squad represents an expansion of the tech quad we introduced last year, task with accelerating the reimagination of our technology ecosystem including all initiatives related to data science, information, technology and innovation. Their objectives feed into our broader company-wide mission to dramatically improve the customer and employee experience and provide a fantastic value proposition for our residents and their families.

In this light, our goal has been to attract the highest caliber professionals with tech or tech adjacent backgrounds to execute on this vision. We will continue to allocate significant resources and talent as we continue to deploy WBS across our portfolio. We've already seen encouraging early results across the properties where WBS has been deployed including operators refining their site labor model enabled by WBS automating previously paper-based back-office workflows, allowing community-level employees to reinvest their time savings into improving the resident experience.

Overall, WBS is beginning to result in meaningful improvements in cash flow, and we believe that expanding the platform across the portfolio will further extend the duration of our growth. To sum it up, it was another strong quarter for the company. But as you know, we take nothing for granted and remain relentlessly focused on every operational detail, not simply to produce strong results this quarter or this year but to build an organization capable of sustaining exceptional performance for years to come. That requires a culture of continuous improvement, a willingness to up in the status quo and an unwavering commitment to execution and operational excellence.

Finally, I'd like to thank the Welltower team, our exceptional operating partners and the dedicated caring community employees for their tireless efforts and for embracing this journey alongside us. Their dedication is what makes these results possible. With that, I'll pass it to Nikhil.

Thanks, John, and good morning, everyone. Since our last call, the macroeconomic and geopolitical environment has remained highly fluid. The Middle East war has seemingly been both on and off and markets have repeatedly moved between expectations of escalation and deescalation. Globally, central banks, such as the ECB and BOJ have recently tightened their policy rates.

While in the U.S., the 30-year treasury has reached levels not seen since before the global financial crisis. And the Federal Reserve has adopted an increasingly hawkish posture as inflationary pressures have persisted. In an environment like this, the margin for error narrows. Asset quality and basis become the primary sources of downside protection, and the ability to distinguish between genuine value and a compelling narrative becomes increasingly important. Our competitive advantages continue to show through.

For counterparties we remain the preferred and most reliable buyer, one with the credibility and track record to provide certainty, regardless of what is happening in the capital markets. Our advantage lies in the ability to identify value at a higher -- at a highly granular level, underwrite conviction and move with unparalleled speed when the facts support doing so. Since our last call, our investment activity has increased by another $5 billion and now totals $15.5 billion for the year. During the second quarter, we completed more than 30 transactions totaling $6.2 billion, with a median transaction size of $46 million and approximately 96% of our second quarter activity was sourced off market.

Through these transactions, we acquired 138 communities across the three countries where we do business. Through the end of the second quarter, we had completed nearly $9.5 billion of investments. The remaining $6 billion of announced activity consists primarily of newer into senior housing assets across 26 transactions in the United States, Canada and the United Kingdom. These assets have an average age of 6 years and in-place occupancy of roughly 75%, providing us with attractive physical plants and meaningful embedded opportunities to improve operating performance. These assets were acquired at a circa 20% discount to revision cost.

Importantly, approximately 20% of these transactions were sourced directly by our key growth operating partners through relationships in their local markets. Many of these partners have elected to receive their incentive compensation in Welltower stock. As a result, their alignment with our owners is not theoretical. They participate directly in the value they help create. That alignment is producing tangible results. We operate as one team, developing relationships, identifying opportunities and improving the business together, these network effects strengthen our platform and make the entire ecosystem more valuable.

The [ Fly view ] is humming. Our confidence in these investments is grounded in what we are already seeing across our portfolio. As the Welltower business system continues to mature, our ability to increase cash flow following an acquisition has become both more significant and more repeatable. That distinction matters. Spread investing and cost of capital arbitrage are not value creation, nor are the durable investment strategies. Our focus is different. We seek to acquire assets at a fair price based on reasonable view of their prospective cash flows. While retaining for our owners, the upside we believe our platform can create beyond that. I would also like to spend a moment on how we define success.

In parts of the market today, simply completing a transaction appears to be treated as an accomplishment. A deal is announced, the champagne is popped Victory is declared and attention quickly turns to the next opportunity. We see it differently. Closing an acquisition is not the culmination of the work. It is the moment the work begins. There is something inherently worthy of celebration about winning an auction or signing a purchase agreement. After all, any fool can write a check. The more difficult task is determining whether the prospective returns adequately compensate our owners for the risks being assumed and having the discipline to walk away when they do not.

At times, that means watching others claim victory in processes in which we chose not to participate. We are comfortable with that. To us, success is not simply buying something. Success is establishing a thoughtful business plan, executing against it, achieving the cash flows we underwrote and continuing to push for outcomes that exceed our original expectations. It means never becoming satisfied with current performance. It means improving the experience of residents, creating a better environment for employees and generating durable value for our owners. The acquisition itself earns no credit, the results that follow are what matters.

In an uncertain environment, the temptation to confuse activity with accomplishment becomes even greater. Our focus remains unchanged. pursue the truth rather than the narrative, maintain a margin for error and deploy capital only when the prospective returns justify the risks through the arc of time. Our objective is not to win the announcement, it is to win the outcome.

With that, I'll turn the call over to Tim.

Thank you, Nikhil. My comments today will focus on our second quarter 2026 results. The performance of our triple net investment segments, our capital activity a balance sheet and liquidity update, and finally, an update to our full year 2026 outlook. Welltower reported second quarter net income attributable to common stockholders of $0.61 per diluted share and normalized funds from operations of $1.60 per diluted share, representing approximately 25% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 15.5% and driven by 20.5% growth in our SHOP portfolio.

Now turning to the performance of our triple net properties in the quarter. In our senior housing triple-net portfolio, Same-store NOI increased 5.2% year-over-year and trailing 12-month EBITDA coverage was 1.23x. Next, same-store NOI in our long-term post-acute portfolio grew 2.9% year-over-year. and trailing 12-month EBITDAR coverage was 1.3x. Moving on to capital activity. During the second quarter, we raised $3.9 billion through share issuance, OP unit funding and capital recycling. Which, when combined with internally generated cash flow, allowed us to repay nearly $1 billion of senior unsecured notes and fund $6.3 billion of gross investment activity while ending the quarter with net debt to adjusted EBITDA of 2.99x, in line with a year ago.

During the quarter, S&P revised our outlook on our A- credit rating to positive. Following Moody's decision earlier this year to revise the outlook on our A3 rating to positive. Together, these actions further validate what we believe has become one of Welltower's growing strategic advantages, differentiated access to capital, supported by an exceptional all-weather balance sheet. We ended the second quarter with $2.1 billion of cash on hand, which together with recent capital activity, and $1.1 billion of incremental dispositions position us to fund approximately $6 billion of incremental investment activity, the majority of which we expect to close later in the year.

Subsequent to quarter end, we successfully returned the Canadian unsecured debt market for the first time since 2019, issuing $1.5 billion of senior unsecured notes across 2 tranches at a one coupon of 3.95%, extending the duration of our liability profile and attractive pricing. Taken together, this net investment activity and continued cash flow growth from in-place portfolio are expected to result in year-end net debt to adjusted EBITDA of approximately 3x, in line with our prior expectations.

Before turning to our guidance, I want to come back to a point I highlighted last quarter around how the vertical integration of our model and the portfolio transformation underpinning Welltower 3.0 is creating a powerful compounding network effect that is only beginning to unfold. While our updated outlook reflects another quarter of strong execution, we continue to believe the more important story is the structural evolution of the business.

As we've increased our concentration in senior housing operating assets, we have fundamentally changed the earnings profile of the enterprise. One example of this is the operating leverage now emerging within the portfolio? For the second consecutive quarter, our SHOP portfolio generated flow-through margins in the mid-60% range. As occupancy continues to trend higher, Union economics should improve further as a higher proportion of incremental revenue is translated to bottom line net operating income. This fundamental strength is reflected in our guidance.

We began the year with an outlook that already reflected a substantial amount of visible year-over-year earnings growth, driven by the continued evolution of our portfolio towards higher-growth senior housing operating assets. Two quarters later, we're raising that outlook for the second consecutive quarter, reinforcing both the strength of our underlying portfolio and the continued momentum of the business. Moving on to guidance. Last night, we updated our full year 2026 outlook for net income attributable to common stockholders to $3.11 to $3.19 per diluted share. And normalized FFO to $6.36 to $6.44 per diluted share or $6.40 in the midpoint.

Our normalized FFO guidance represents a $0.12 increase at the midpoint from our prior normalized FFO range. This increase is composed of a $0.03 increase from our senior housing operating NOI an $0.08 increase from investment and financing activity and a $0.01 increase from better-than-expected income tax and other. Our updated outlook assumes total portfolio year-over-year same-store NOI growth of 13.75% to 16%, driven by subsegment growth of outpatient medical, 2% to 3% and long-term post-acute 2% to 3%; senior housing triple net, 3.5% to 4.5%.

And finally, senior housing operating 18.5% to 21.5%. And which is driven by the following midpoints of their respective ranges. Revenue growth of 9.3% comprised of RevPOR growth of 5.1% and year-over-year occupancy growth of 350 basis points. An expense growth of 5%, equating to export growth of approximately 1%.

And with that, I'll hand the call back over to Shankh.

Thanks, Tim. I want to make two general observations before opening the call up for questions. First, exactly 2 years ago on our July 2024 earnings call, we laid out our macro view of the world. suggesting that the powerful secular tailwinds experienced over the last 40 years, which resulted in subdued levels of inflation and a historic bond roll market could diminish or yet turn into headwinds. This includes shifting from a period of globalization to deglobalization from an abundant ever force driven by baby boomers in their prime working years to a scarcity of labor due to a rapidly aging population.

We reflected on increased deficit spending across the world and growing international conflicts after a period of relative peace and cooperation. And we specifically called out structural changes in Japan, the global anchor of low interest rates, which has been experiencing the highest level of inflation in decades. While the 10-year treasury has increased over 100 basis points in past 2 years, we believe we're still in the early innings of the structural forces playing out. How has this been reflected at our company through both transformation of capital and resource allocation.

First, we executed a massive portfolio rotation from bond proxies such as output on Medical into higher-growth senior living communities where we believe we can meaningfully outperform inflation and where we can effectuate positive divergences in outcomes through our competitive advantages. And second, through a substantial resource reallocation to increase talent density in operations and technology.

Over the past few years, we have recruited incredibly high-caliber technology and operating talent from some of the most sophisticated and innovative farms in corporate America. The acceleration of this trend during past 6 months can be seen on Page 13 of our business update presentation. This is a testament to our transformation from Welltower 2.0, a capital allocator with strong asset management expertise to Welltower 3.0 a customer-obsessed operations and technology-first company with a complementary disciplined capital allocation function. As a result, we do not receive returns. Like spread investing shadow banks, whose currencies either interest rate compression or leverage.

Instead, we create returns through driving cash flow the old-fashioned way in our pursuit of dogged incremental and continuous progress over a long arc of time. Finally, I want to provide an update on an important topic that I had anticipated eventually discussing after we established the RIDEA 6 construct 9 months ago, although I certainly didn't expect it to become relevant this soon. As you might recall, many of our growth operating partners have elected to take their multiyear promoted interest in Welltower stock. The ultimate value of the wealth to create will not only be a function of their own achieve results but also perhaps turbocharged by their peers in other parts of the country or different countries.

As I've sat down with many of these operating partners during the summer, I have heard unprompted more about the cooperation they're receiving from other Welltower operating partners than ever before. Imagine historically, for example, Cogir and Welltower would be working on culinary initiative. Our StoryPoint and Welter be working together on a digital marketing priority. Now you have other operators such as QSL, Amica, KRUK, are jumping in at the same time as a team and amplifying the outcome regardless of who started the project. Organizations spent an inordinate amount of time and resources to deconstruct intricate complexities.

However, together as partners, we are maniacally focused on capturing unrecognized simplicities that are hiding in plain sight. Quickly resolving pain points for both customers and employees to consistently deliver a better experience. What started as a shared incentive is now turning into a shared dream and shared sacrifice. I have never seen and felt this level of deserve trust amongst the ecosystem with true unity of purpose and [indiscernible].

I want to thank my operating partners who are pushing us and pushing each other every day to get better. As the old edit says, if you want to go fast, go alone, if you want to go far, go together. Life is more fruitful and fulfilling if we focus on growing the size of the pie versus the share of the pie. This unprecedented level of cooperation is a reflective of a win-win additive sum mentality as opposed to a narrow zero-sum mentality, which is prevalent in our industry. I am confident that we are gathering tremendous momentum at the beginning of a leaping imagine effect that will shape our shared future together and transform this industry.

With that, I'll open the call up for questions.

[Operator Instructions]. And your first question comes from Ronald Kamden with Morgan Stanley.

You mentioned the term shadow banks twice in your opening comments. I'm just wondering if you could elaborate on fundamental differences between how you view your business and those players? And if I could ask the second part or just a quick update on the 95% plus of your portfolio that you gave last quarter. Wondering how they're doing this quarter?

Thank you. So if you think about what a bank does, it takes deposit, it has a cost of funds and it lends money on a spread on that cost of fund. If you look at health care REIT industry, which is why this industry started, they're all in triple nets, and that's all they did. And despite this industry has gone from a credit investing to an equity investing, that mentality of spread investing has not changed. It sees the industry as a zero-sum financing game rather than an additive some where we can create value together.

That's not what we do. If you think about the transformation of this company, what we have been trying to do from a spread investing vehicle, which was before us, to a true capital allocation powerhouse to finally change into an operating and technology-first company whose entire focus is to enhance resident and customer experience to create value with the complementary capital allocation side. That's not -- we're not saying that's not what we do. We're seeing our first every day we wake up to think about how to create value. by enhancing what we own, which is to increase customer and resident experience.

That's the key difference, right? Hence, the question of what Nikhil sort of talked about. We define our success differently. And that's the difference, right? Second, and that's just [indiscernible] through our culture, [indiscernible] to our entire ecosystem. So that sort of is a different mentality on how we think about the business. and how we allocate both capital and resources, right? Very, very important part.

The second question, the 95% plus of the portfolio had obviously higher RevPAR growth, 6-plus percent, and also a higher NOI growth of 20-plus percent. I hope that answers your question.

Your next question comes from the line of John Killacowski with Wells Fargo.

Nikhil, you made some very helpful comments in the opening remarks in regards the composition of sellers. And I was hoping you could dig in there a little bit and talk about what constitutes the rest of that pie of sellers. And also what's driving this acceleration in transaction activity as you put it any fool can write a check and Welltower has always prided itself on offering a fair price for assets. So what do you think is the driving factor or factors that are, one, bringing sellers to market the best senior housing operating market and two to Welltower when there may be a higher bidder.

I think, John, I think, first and foremost, if you look at how many transactions we did and how I quantified that practically 96% of those transactions are off market. It's -- the model has been changed, right? I mean, sitting here, backed by all the tools that our data science team has provided to us we have a very granular view of all the assets that are out there, who owns them and what the expected performance of the assets is. And so then we turn the model around and go pursue those assets rather than wait for those assets to come to our desk.

So in some cases, these are family businesses where the one generation that created the business is not looking to hand it off to the next generation as they have other priorities. And so we go unlock those opportunities. And at times, those conversations take years to eventually come together. And then there's local owners who own a handful of assets where we get together with our operating partners and say, who has the best relationship, who has the ability to go unlock these opportunities. And it's just old school classic business development to go pursue specific asset specific portfolios that we've been tracking and have a strong view of what the performance can be. So that's how we pursue these opportunities.

I just cannot overemphasize what Nikhil says the first one, which is there is a tremendous amount of generational transfer is happening. Happening across our society with many, many businesses are changing hands, and you will see a lot of write-ups on this over the years. But we are seeing that in our industry, it has been particularly tough last 5 years, 6 years in this industry.

And finally, cash flow has sort of come back to pre-COVID levels. And a lot of the owners are ready to move on into their retirement or in other pursuit and enjoy their life. And that's sort of what we are seeing driving across all 3 countries.

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

Maybe, I guess, Shankh, sort of thinking about durability and longer-term cash flow from the perspective of your operators. I'm wondering if you can give a bit more color. You've sort of alluded to maybe consolidating a bit going forward and sort of the operators that got you here today versus the operator that will get you to where you want to be in 5 years, particularly as you referenced that 95-plus percent is still growing 20%.

And so the operators that can get you that high occupied pool to compound in that range or maybe a plus/minus. I'm just wondering if you can give us a sense of where are we in that evolution of operators? And what maybe we see that allows you to keep that durability on?

Thank you, Vikram. First, I want to be very clear that Ron asked the question I answered the question. The goal is not same-store NOI growth of any number. That is not our goal. Our goal is partial earnings growth and cash flow growth. Very, very important you understand that. And that's not a function of a myopic view of occupancy growth, rate growth, expense growth, NOI growth, it is a pure function of what we are focused on is what is the ultimate per share cash flow growth and partial earnings growth, that's what shareholders eat.

Everything else is irrelevant just to input to the ultimate that system or anything else. And I've talked about this very specifically in our annual letter that how mix shift impacts and also very importantly, how as free cash flow generation goes up in the system, how that impacts and all of those things. So there's a multiple input to that. Now going back to your question, very specifically, performance and a pursuit of excellence that you are alluding to in that question is extraordinarily important.

But what is more important is the culture at this operator level, whether they're aligned with us, they see the world the way we see it. Nobody is saying, we're right or some of our growth operators are correct in every pursuit of everything. But do they have the mentality, the culture to have a long-term view of taking care of the resident, taking care of the customer, having an obsessive view and manacle focus on increasing the standards every day and see the world in a win-win way it's like the way we see it. Not saying that if you don't subscribe to that view, Vikram, you or anybody else is correct or incorrect, but that's just our view. That's how we live and run this business 24/7. This is a very, very hard business.

And because this is a very hard business, you got to be somewhat stoic about how you see the good days and the bad days. And there's been plenty of about, particularly the bad ones in last 10 years, 11 years that I've been doing this. So we are looking for a particular group of people who share that view of the world was that long-term focused and have a similar culture of shared sacrifice shared dreams and we'll see where we get to. But there is no caution that we're increasingly concentrating our portfolio with people who have that mentality of an additive cell.

Your next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Congrats on an excellent quarter. So in the business plan presentation, I think you make a very strong point around lack of supply and kind of all the different factors that probably lead to lack of supply for a while. But I'm wondering then to kind of be in higher construction costs, and it's really hard to kind of get really good returns at this point. But I also did you have a fair amount of development going on and almost $1 billion of commitments on that side at pretty attractive yields of over 10%.

So I'm just trying to understand how you're finding these opportunities at really good returns when it just kind of us generally the industry should be struggling with development at attractive yields.

Understand. Majority of these that you see is the increase has come with the first 3 buckets. Some are organic expansion opportunities in our own portfolio, but majority of them has come with either Amica or Barchester acquisitions. If you think about it, what we discussed during Amica, that team has worked relentlessly 8, 10 years to assemble these lands in places that there is no land, right? One house at a time house at a time and 10 years working with that to create a land assemblage and in sliding through that, some of the most difficult parts in North America, and what you saw is that sort of the addition is assuming those, right?

I have said this many, many times that I have no problem. I have started to help then during COVID. If it is an exceptional product, an exceptional location, we will do it, right? And for example, I've talked about Brookline development, right? This is -- it's a truly replaceable community. You cannot build it, you cannot buy it. We did it during COVID at the height of COVID. I've said it many times, do I want to do Cupertino? We will do Cupertino, right? Palm Beach? We'll do Palm Beach, places like that.

At the same time, Tayo, you can see this quarter, I believe we mentioned this in our earnings release, are one of those documents that we have taken impairments and given our several lands that we have been working on 10 years, including, I believe, a big one in Wesley after working years on it, right? So it's just a question of economics. If the economics works out, we'll be -- we'll engage in an economic activity. We have no bias against it or for it. The point we are trying to make in the segment that we operate, which is luxury senior housing, cost has become so prohibitive that it's very difficult to make returns work.

And we think about returns, it's very simply untrended versus untrended returns relative to untrended construction cost. And as you know that you have to have that view in a world where construction cost is rising rapidly, can you just think about what will be the yield 7 years from now if you keep trending your rent. You have to have that view, and that's how development should be done. And very few things work out in that world.

Our next question comes from the line of Nick Yulico with Scotiabank.

I wanted to ask about the non-same-store pool within the senior housing operating segment. So about 30% of that segment NOI is non-same-store. It looks like it has lower occupancy, lower margins. So if you could just talk about how the assets have been performing and how we should think about growth there over the next year versus the same-store pool since it looks like there is more occupancy upside and more margin upside in those non-same-store assets?

Let me start and Tim you jump in. If you think about the volume of acquisition in the last 12, 15 months, that should be the case, right? It takes some time to season, they will come in same-store after 5 quarters as it always has. But the acquisition volume in the last few quarters would suggest that would be the case. You make a very good observation that the occupancy is lower, which means there is obviously more occupancy upside and there's a significantly for margin upside.

For example, if you think about what Nikhil said, this quarter with the second quarter activity, not second quarter close, but the activity, the there's close to $6 billion of senior living assets we bought at 75% occupancy. As you know, Nick, at 75% occupancy these communities are not making much money. It's really you start to make money after 80 and your margin really goes up after high 80s, low 90s, right? So there is tremendous amount of opportunity.

Clearly, they're moving really, really well from an NOI standpoint as they're going through our platform, new operators, WBS initiatives and everything. So that sort of -- I would not say sort of low-hanging fruit, occupancy is never a low-hanging fruit, but there's occupancy upside. Having said that, you will expect they will transition into same-store they will get to a higher level of occupancy and then pricing power will kick in.

So this is sort of think of this as a more of a manufacturing process, if you will, you have same store where the handover from occupancy to rate has happened or is sort of happening right now, non-same-store is more still an occupancy story, not a rate story, that's why sort of cash flow is moving, and it will happen as we go forward.

Yes. And I would just add to that, Nick, that so think about our overall -- our same-store portfolio approaching 89.5% occupancy that non-same-store portfolio is about 550 basis points lower than that on occupancy. To Shankh's point, this has kind of been the consistent strategy. We gave some color around our current pipeline is 75% occupied. So what we expect to close in the back half. So consistency on that kind of manufacturing line analogy of continuing to bring in assets and as we build out WBS and implement.

Nikhil is keeping us very busy with the additional assets. And I think about it in terms of kind of like TAM that we continue to see really good results in what we're bringing on board as far as the more mature portfolio, and we continue to bring a larger opportunity set.

Your next question comes from the line of James Kammert with Evercore.

Obviously, Realtor has an extensive and fertile plate of shop opportunities. But I was just curious, what is your thinking at present regarding the, I guess, the TAM to use Tims word recently there and/or the financial opportunity, if you will, for Welltower and [ Active Adult ].

Jim, Active Adult is a space we like. Our wellness housing portfolio has compounded very strongly, high single digit, low double digit for a very long period of time. Imagine just think about this that going back to 2018, when it's the first time we did it, our first transaction into the space to today, you had COVID, you have massive spike in inflation, interest rate through all of these, it has compounded that meaningfully which is obviously what we like. And we think there is a tremendous sort of position in our portfolio, but it's a very small sort of an industry. We're the largest owner in the industry.

We continue to be active but it's not a scaled opportunity. We like a specific price point in that particular asset class. And we continue to grow and we'll continue to do that. But we like that cash flow compounder that, that industry is or that those assets are, but it is highly unlikely a skilled opportunity. I don't know what else you want me to add to that.

Your next question comes from the line of Farrel Granath with Bank of America.

Good morning. I wanted to touch on your comments about diversified social source capital. Recently, we've seen some unique JV structures that have been announced with other peer companies, especially partners with private it in order to source capital. And I'm curious about your appetite for doing that on the go forward, especially as you consider this investment opportunity?

I'm pretty rusty in this area. We have explored doing that with the sort of the one of the largest or probably the first one who came up with that idea a few years ago. So maybe the structures have changed, evolved. So I'm not the right person to comment on it. But if I remember that, and I personally engaged a lot in that conversation and the structure. My understanding is every way you look at it, it's a debt structure, it's not an equity structure. So I wouldn't describe what you called in JV equity structure, that is that. A piece of capital cannot be debt and equity at the same time.

And that's my understanding of it. As you can see where our balance sheet has gone, we can raise bonds today. for sub 4%. So obviously, we would not engage in that we'd not engage in some sort of that kind of structure. We understand -- some people raise debt, where they probably don't have better access to capital. It makes sense, right? But I don't know how the structures have evolved. I'm not the right person, but to comment on it, when I did engage, my understanding is unequivocally, it's the structure and the JV structure and sort of the -- that I understood it to be that the asset values of those are sort of a marker that doesn't drive obviously, the return of the debt.

And it is sort of an interesting piece of debt that is both secured and unsecured within first, your first round of defense is the assets and then second around other defense is the sponsor. So that's sort of my understanding what was what has become, I have no idea. I don't comment on things I don't understand.

Your next question comes from the line of Michael Goldsmith with UBS.

In your June 1 press release, you noted that unlevered returns on acquisitions that are comparable or a higher than returns achieved on acquisitions made in prior years by leveraging WBS. Can you help us reconcile that statement with the acquisition yields in the quarter of 6%?

Yes. I mean the yields are going in numbers, and that is, at that time, just a seller's cash flow, right? So now what has changed is with WBS, we have more and more confidence on what the end state is. And so that's part of the underwriting, right? So you've got a going and then what is the stabilized trended cash flow and going from the starting point to the ending point is what creates a total ARR. So the point is that the terminal yields are much better than what they used to be, given how we're improving cash flow.

Michael, if those yields were 0 or negative, which we buy, we continue to buy 4, 5 years later, I would be equally pleased. All we care about what the end state looks like, not the beginning state looks like. As I said, you buy 75% occupied assets, your yields would be substantially lower than 6%. And we are completely fine with that. we're total return investors, and we're not yield-driven spare investors, to my earlier point.

Your next question comes from the line of Michael Stroyeck with Green Street.

Thanks, and good morning. Can you just talk a bit about pricing power in the U.K. relative to the U.S. RevPAR growth has decelerated a bit over the past couple of quarters. at least in the same-store pool, just what's driving that recent deceleration? And how do you view the long-term rent growth potential of that market versus the U.S.

Yes. Michael, if you look at it, it's a lot of change of a poll, I understand that we have bought a lot of assets in U.K. in the last 2 years. So quarter-to-quarter changes are driven by a lot of pool change, this that and others. But generally speaking, if you just think about the not an optics view, which is what that is in the sub, but economic view, the occupancy in U.K. is 300-plus basis points lower than that of U.S. On the other hand, you can see occupants in Canada which is, call it, give or take circa 300 basis points higher than the U.S., you are seeing pricing power change like exactly what you should see, which is where higher occupancy drives higher RevPAR growth and where occupancy is lower, the focus is on bringing occupancy up, but you get a lower RevPAR growth.

And that sort of is the fine-tuning of the model. I would not worry too much about quarter-to-quarter. As you know, that we have a historic and a very long-term unchanged consistent policy of being in assets after 5 quarters in the same store, and a lot of assets are coming in. So that sort of don't worry about sort of the optical nature of this basis point basis point from this quarter to that quarter. But generally, your observation is correct, and that's because the occupancy is lower.

Your next question comes from the line of Juan Sanabria with BMO.

Shankh, at the beginning of the call, you made comments around the aging workforce and kind of alluded to Japan. Just curious on how you expect or to trend particularly as we're seeing a decrease in the integration available labor with the setting of TPS here in the U.S.?

Yes. So for that specific issue, we have discussed with all of our operating partners, a majority of the operating partners. The impact has been pretty minimal. My comment is more of a societal change of sort of lack of labor force as our diminishing liver force and sort of family [indiscernible] and all of those things that we have talked about for a long period of time, there's a reason one that we specifically focused on the highest end of the senior living. And things are good now. It's a cyclical turnaround. Everything is, everybody is dancing. I see it, no problems.

We are very, very focused on price point and a product combination sort of I've always said this is an optimization game of product price point and service level. And that at the highest price point level at the higher acuity level, where we think we understand the business, and we believe that there -- the pricing would be pricing power would negate the increase -- long-term increase of labor cost, right? That's what we believe. You are not seeing that cyclically, I would say, right now, Labor is going the other way, right? Labor cost is rolling over. We're seeing that right now.

But from a long-term standpoint, availability of labor is something that I worry about just purely from a numbers standpoint, and that's why we want -- increasingly, we have focused and narrowed our focus on a specific product price point range where customers are willing to pay and they understand, they don't want that provide us to cut services, and they're willing to pay for that services and where the pricing could negate the increase of inflation labor, and that's why we do what we do.

Your next question comes from the line of Seth Bergey with Citi.

Shankh, you gave some comments about kind of the collaboration with the operators and the focus on capturing unrecognized simplicities. Just curious, what does the operator performance gap look like between your strongest and weakest operators running on [indiscernible] business systems? And how much does that gap narrow when a new operator comes on to the platform?

So if you're talking about sort of West operations sort of result spread best-performing operator to weakest performing operator, I will tell you, this is the conversation. There's no beta in this business. You've got NOI growth approaching 0 negative, very low single digit to NOI growth of 30%, 40%, and everything in between, right? So the spread is as big as it gets, and that's sort of my historic point, I have written about this topic for a very long period of time. that the returns of this business will be in the tails, right? And you see that you guys don't see it because we have a very large portfolio.

We manage the volatility and some days better than others. But that's what you don't see. Now focus on Welltower Business System has been primarily not necessarily to just reduce that volatile. There are certain things that are uncontrollable life that you just have to leave with, right? There's a fundamental misunderstanding of what Welltower business system is or what we're trying to achieve. Efficiency is a very small part of it. We're really focused on the efficacy.

And obviously, you don't want to pay late utility deals. That's -- and you want to -- obviously, for a company and when you go from manually processing utility bills to systems, you won't. That's efficiency. What we are really, really focused on capturing every interaction between residents, their caregivers, their families, and in a timely basis, that's the key. In human intensive systems, what happens is cumbersome technology and workflow to more than waste time. They reduce quality completeness and timeliness of that information as details are omitted, delayed or inconsistently recorded.

What happens is because of that, as a consequence, it's not just lower productivity, but less accurate understanding of the business. That's what we are trying to do throughout our business system, helping our operators, this Welltower Business System is built with the operators for the operators. And that's what we are doing. We have a long ways to go, but that's the key is we're trying to bring in a level of efficacy in this business that you don't see in more of a commerce managed by a lot of papers and all of those things. I hope that sort of helps you understand that the goal is not necessarily just the performance, that's an output the import is what we are focused on, which is to enhance customer and employee experience.

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

Shankh, can you give us an update on the fund business that Welltower is currently pursuing mean how much of Seniors Housing Fund I has been deployed at this point? And where does the seniors Housing debt Fund 1 stands right now?

Mike, I gave a pretty extensive update last quarter but the fund -- the senior housing equity fund was fully deployed or fully committed, I should say, as of last quarter. And on the debt fund, we raised a pretty small discrete debt fund, very targeted about $750 million, and that is also practically fully deployed.

Your next question comes from the line of Richard Anderson with Cantor Fitzgerald.

So I wanted to talk a little maybe more finer point on the future tale of the opportunity set from a demand point of view. And specifically, when you think of like the silent generation, about 18 million people, baby boomer, about 67 million sort of -- I mean, still alive today. What percentage of those 2 groups do you think can afford your product. And second, what do you think the time line is for this -- these two generations to be supportive of your ability to continue to produce outsized organic growth. My point being, there's a finiteness to this and not to be tongue-in-cheek, but these are older folks. How long can this go on? And when does the music at least start to the volume of the music start to come down?

Yes. So very, very good question. I would like to point out a couple of new slides that you can find on our business update. One is Slide 10. And it talks about sort of the concentration of wealth in the baby boomers as they become part of the customers. The silent generation was not didn't have wealth. There just not been in growth of silent generation, which you saw the impact on the demand last cycle. If you look at the baby bema generation, you can see sort of not only the growth of that generation as they come for age to become our customer.

But we can see it is the wealthiest generation of all time, right, roughly controlling about $100 trillion of assets, and that is also equivalently true for Canada and U.K. And that generation wants to spend money on themselves, but they're extraordinarily a discerning customer that they will only spend money where they perceive value. And so the point that you are making, I think the trends are going to be exact reverse. And you're seeing that across all luxury segment of the economy. So I'm actually very optimistic about it. Now from an affordability standpoint, we have a new slide or maybe an update of a slide that I just noticed -- let me pull it up, which is Page 27, and it shows you how affordability actually has meaningfully improved.

So look at the right side of the page, Slide 27, in our deck, and you will see that what happened, the rise of the network has meaningfully outpaced rent growth in the sector. So I'm actually very optimistic on this particular topic, which I'm not a very optimistic person to begin with, but on this particular topic, at least for next 20 years.

Your next question comes from the line of Mike Mueller with JPMorgan.

For the portfolio that you own today, how long should we think about a time frame to fully implement WPS?

So you are saying just the portfolio on today because the portfolio is expanding, right? So you sort of think about the -- we own today, what, 2,500 assets, give or take, so if you think about last year, we did 240, 250 assets. I think Tim said 600 to 700 this year, that's the right cadence. So call it another 3 years after that.

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

Just, Sean, going back to your comments about labor and just tying in kind of the focus on resident employee experience through WBS and some of the operational efficiencies you're achieving or at least have line of sight to. Are you getting to a point where the FTE needs or even labor hour needs are less at certain occupancy bands or maybe even on a stabilized occupancy basis?

I will frame that in a different way that John did. If you just think about there are several positions in a community that you have to have, whether that's -- you have one resident or 100 residents, right? So there is a tremendous amount of fixed costs associated with the business. And as occupancy sort of expands, you see more incremental sort of flow through to the bottom line because it's a fixed cost nature of the business and that way you're seeing.

WBS, as I've gone through, I don't want to repeat what I said earlier, we're very focused on decreasing the friction points between residents customers, their families and the employees of the community so that they can do the job that they have signed up to do, which is to care for the customers, right? That's the goal whether we can -- some administrative function can be more sort of automatized or systematized that probably that's the right word. We shall see. That's our hope.

And as I've said in the last earnings call that we should not expect as analysts and investors and including us with our entire life work and net worth is in this company. to come back to investors. I wrote about this topic several times that we see this as a scaled economic share, but shared with who investors operators, but also the customers, right? So we think about what we -- if we are successful in systematizing part of the workflow you would expect that will contribute that back some of that back into the communities for improving resident experience. And part of that, obviously, will enhance margin, and that's how we're thinking about the business.

It's sort of the go-and-read the trade-off section of my annual [indiscernible] there's a long conversations about the stock, but very, very good question. Thank you.

Your next question comes from the line of Rich Hightower with Barclays.

I had a question on the under contract pipeline and sort of you've had a stable 75% kind of going in occupancy figure for that for a while. Is there something structural about those assets where occupancy is just materially lower than what we see maybe elsewhere around the industry, especially given that it's presumably the highest quality stuff available. Is there something that we should understand about that dynamic?

No, Rich, it's just the average, right? So the average is made above a bunch of assets that are, call it, 90% occupied and a bunch of assets that are newly delivered that are 10%, 20%, 30% occupied. So the average age of 6, the median age is 4, right? So half of these assets are below the age of 4. And so obviously, there's newer assets leased up.

A couple of other points, Rich, that number was not stuck at 75% some quarter. Nikhil said, it's 80%, low 80%. I think I heard the 75% after [indiscernible] that caught my attention. But what you're alluding to, which is if there are some structural issues with these occupancies, if that was the case, overall portfolio occupancy wouldn't be where it is because all these assets were bought at a much lower level. More importantly, par share cash flow growth wouldn't be mid-20%, right? That sort of you can think through from overall operating metric level. you can also think through from a partial impact of cash flow level, and we'll come to the conclusion from a basic understanding of numbers, the impacts have been exact reverse.

Your next question comes from the line of Wes Golladay with Baird.

Going back to the comment about the wealthiest cohort for a more discerning customer experience. Are you seeing that same dynamic in the U.K. and Canada?

100%. The same -- it's an extraordinarily -- if you think about what happened in these 3 countries post Worldwide 2, the wealth creation, and whether it's stock market, it's housing markets, no matter how you look at it, this is the generation that controls the majority of the world. If you just look at how small baby boom generation is as a percent of the overall U.S. population, for example, it controls more than half of the overall consumer wealth of -- in the United States, and there's very similar in U.K. and very similar in Canada. And they are very similarly discerning. These people are anything but idiots. They are very discerning customers. They understand what they want, they are willing to pay for it only if they perceive value.

So this is much more than was just a question of demand supply. It's also a question of, are we providing the best of experience and services to this customer. If not, no matter what the demand supply is will be a giant failure.

Our next question comes from the line of Dave Rogers with Raymond James.

You guys have framed the path to the mid-30s margins kind of on a free COVID flow-through getting occupancy back to historical levels, but you seem to be clearly ahead of that path right now. So a couple of questions on that. One is, is there additional details you can give us around flow through at different points in the portfolio that would kind of shine a little bit more light on kind of where all that's coming from the components that are performing much better than you had anticipated that are getting you higher? And do you have a new kind of, I don't know, say, target, but a new thought in mind of where you can get margins to given where you are today?

Let me try and Tim jump in as in variable part of the question. Tim said, flow-through margins as mid 60s, if you look at 95%, you should be in sort of 70-plus. That's sort of the market we're willing to give you. We have never put a marker on overall portfolio margin neither we will. It is a journey for us, not a destination. I have said on the call today that we believe that there is a significant margin upside remains. Why is it outperforming our expectation, nothing ever outperform my expectation.

I just have too high of an expectations of everything in life. Why is this happening? It's just -- this is what we do. This is what the whole idea of WBS was that we have been on this journey for a very long period of time, as you can imagine, at least at this point. And John, when did you start 5-plus years at this point? That was the change of this company. When we changed our view from what we wanted to be when we grew up, which was to be a centralized capital allocation and decentralized execution, that was our view going back 10 years ago, call it, to a centralized capital allocation, decentralized execution, but a whole network of platform technologies that was initiative that we started 5 years ago and completely change this company.

Good, bad, ugly does not matter in that direction, right? That's what we do. That's what we are seeing. But nothing is ever done well or fast enough as far as I'm concerned. So it has not exceeded my expectation. I'm very encouraged by all the things we have seen on the 250 communities that are on WBs. But we're working with our operating partners, as we have talked about. Just in the last 90 days, our operating partners have come up with ideas that, frankly speaking, I absolutely have not thought about, and I don't think they have thought about.

This is what happens when collaborations come together and we're trying to solve problems. So there's a lot -- long ways to go. We'll see where we end up.

And ladies and gentlemen, that does conclude our question-and-answer session, and that does conclude today's conference call. Thank you all for your participation, and you may now disconnect.

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] I would now like to turn the conference over to Matt McQueen, Chief Legal Officer and General Counsel. The floor is yours.

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.

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% 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, 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 U.S. and U.K., posted growth closer to 300 basis points, but generated RevPOR growth of 6%, giving you some perspective of the art of the possible as our overall portfolio leases up. Ultimately, all 3 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, same-store NOI growth increased 22%, marking 14th consecutive quarter in which SHOP 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 somewhat satisfactory, 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 shared amongst all participant 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 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 behavior can be.

Many of our counterparties have seen this movie before and opted to bypass the theater and instead transacting with us directly in privately negotiated deals. However, some of the first-time sellers have learned the hard way that 5 to 6 months time line 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 under contract to close an additional $7.3 billion of investments. Our investment pipeline remains robust, visible and actionable in all 3 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 meaningfully dilutive -- which has been meaningfully dilutive to our 2026 earnings per share. However, culling our portfolio of lower growth assets, we have meaningfully extended our growth curve in outer years. For example, the assets we acquired in fourth quarter of last year are expected to deliver 10x 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.

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 seniors housing operating portfolio, which delivered a 14th consecutive quarter in which the same-store NOI growth exceeded 20%.

During the first quarter, SHO 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 3 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 60% of SHO expenses. This is best reflected by CompPOR or compensation 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 gain creating 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 outsized 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 -- operating with our operators to deliver an exceptional resident employee experience. Our Welltower operations and asset management teams, including the Tech Quad, continue to make leaps, nonincremental 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.

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 semiliquid vehicles has increased and defaults have continued to trend higher. As John 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 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 in 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 and high conviction opportunity, 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 and 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 WBS for our shareholders. We remain price disciplined with unlevered IRRs and discounts to replacement costs being our guiding principles and with terms like accretion, notably absent from our investment committee conversations. Our focus on win-win outcomes and dogged 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.

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 $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 EBITDAR 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 0.5-turn reduction from just a year ago. Subsequent to quarter end, we used free cash flow to pay off $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, our expected result in 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 an $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.

Thank you, Tim. I would like to make 3 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 real estate space, but all of 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, an advice, which I will never -- which I'll 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 Simon family and those who are close to David.

Second, roughly a year ago, we launched our private funds 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 through which to expand our capital-light business by unlocking from an existing balance sheet asset, the monetization of our data science platform.

As many of you know, since 2016, through the efforts of 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 Public Storage and a leading global private equity firm.

These models enabling the real-world application of AI by accelerating capital allocation decisions from 5 to 9 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 have -- we have been attracting to the company, particularly with respect to Tech Quad. Following our ethos that [ A 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 called or rapidly spreading narrative around who is the next 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 asset, low obsolescence such as housing for 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 addition 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 of being the implementation of 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 Instructions]. Your first question comes from Ronald Kamdem with Morgan Stanley.

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

Thanks, Ron. First, I clearly don't want you to run with that idea that that's what we are suggesting will forever happen. But that is definitely something that I found in our data to be most surprising. A very significant part of our portfolio today is 95%-plus occupied, give or take, 50%. And that portfolio grew circa 20% net operating income, as I said.

And for -- clearly, for a couple of reasons, obviously, you got pricing power increases as capacity comes down in the system. That happened -- that part of the portfolio had give or take 6%-plus RevPOR growth. And with the expenses, major execution on the expense side that John mentioned through our operators and the contribution from Welltower Business System, it just landed to be an extraordinary number.

So we were very happy about it. We do think that, that sort of gives us confidence that will have double-digit NOI growth for a long time to come in our portfolio as the portfolio leases up. We'll see what market gives us as we sort of get through the next few years as the portfolio leases up.

Your next question comes from John Kilichowski with 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? And how much this has accelerated the growth outlook of the business in your mind? And then if you could also maybe just talk to how investors should be thinking about the medium-term potential for earnings contribution from this business?

Yes. John, let me take the first -- second part first, and then I'll go to the first part.

If you just think about it, we built this data science capability, machine learning capability over the last 10-plus years to deploy capital on our balance sheet, on our books. And then we realized recently from -- at the really encouragement from some of our largest sovereign wealth partners in our fund business, that there could be a much bigger sort of application of this, which you have seen our first partnership announcement.

We're in the building mode of this business. Whether something substantial come out or not, we will see in the future, but I can tell you that since the announcement was made in early March on Public Storage as well as the other PE firm I mentioned, our phones have been ringing off the hook. We have been exploring a lot of the opportunity with a lot of people, real estate -- great real estate companies, many non-real estate companies such as banks and others, major sovereign wealth funds, which I mentioned to you are the first ones who actually told us there could be a significant opportunity of that nature.

We'll see where it goes. Whether sort of remains a true major force behind our capital allocation and everything else sort of becomes a fun project or we just sort of take this as a whole new business, we'll see what happens, right? Going back to the first part of your question, I have never heard of this concept of HALO even, say, 90 days ago. I heard that, as you know, probably that I personally interview most of the people who come to our organization.

And I heard it increasingly from the talent that was coming through. And many of the businesses which are sort of impacted or people are worried that potentially impacted or frankly, a different level of talent pool I've never seen. And just in last -- since the last call, we have hired either data scientists or software engineers with the backgrounds that we look for, whether it's computer science or math, PhDs, hired from the top quant funds, we never thought that will come and work for a real estate company, let alone a senior living company, or we started to see talent from people who are code breakers in 3 other agencies.

We never -- 90 days ago, if you asked me, I would not have told you that we would attract talent from that kind of places. So it's -- talent density is increasing. We are trying to explore problems that we never thought that we will -- obviously, we think about there's a granularity of those problems, right? One granularity is obvious is we talk about housing prices, for example, in real estate. Housing prices of what? Most industry uses housing prices as a median house price in the ZIP code, right?

We today use every housing prices in an entire area, okay? That's an interesting idea. How about you think about what you have hidden? Is there other hidden signals such as, I'm going to make this up, the price of which futures, the impact of that in housing assets in Great Plains? I totallly made that up as we're going through. But those that the hidden insight we want to discover and understand we -- and that kind of people are in the industry and kind of overall in the world, but not in our kinds of industry. And that's what we are trying to attract and see where we can take the business, right? We'll see what happens. But thank you for the question.

Your next question comes from Michael Goldsmith with UBS.

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

We don't -- Michael, we don't comment on other deals that our colleagues in the industry do. We did look at the Revel portfolio, and we think that is a very high-quality portfolio that our colleagues at Ventas will do very well with. But I don't really want to get into it. When it was brought to us a few months ago, it was in a structure that was not something we find particularly, at that point, palatable.

I've mentioned many, many times that we have problems with encumbrance on assets and when it was brought to us, there was an encumbrance of assets of existing operators and asset management and all of those kind of things, which I don't want to get to, but I think they're high-quality real estate and our colleagues at Ventas will do very well.

On your other part of your question is accelerating capital allocation. I want you to understand, this is what I wrote in my annual letter, which under a section called cognitive dissonance of acquisition volume. And I want you to understand that what we are trying not to do, we're not -- it's not a deal shop. That's why Welltower is different from our predecessor company. We want to allocate capital in a particular product market niche where we think we can add significant value. This is not a cost of capital business for us. We don't compete on cost of capital. We compete on ability on the data science side, on WBS side and a network of extraordinary operators who can drive higher value for customers and employees and for us and themselves.

That's the model. So not everything -- if the goal was to do more, we would not be selling $12 billion of assets in the last 12 months, right? So -- and we are getting -- we're seeing everything like we always have, as Nikhil said, 90%, 95% of everything sort of we do comes to us off-market. And frankly speaking, that makes sense, right? Because we'll tell you as a seller within a day or 2 whether we want to transact and probably within 3 to 5 days, give or take, what will transact at what price we'll transact at.

So fundamentally, as a seller, you have nothing to lose for -- by coming to us. And so that's how the business rolls, and we'll see what market gives us. If we never buy another asset or we go back to the period pre-COVID where we sold -- we're net sellers and we sold $16 billion of assets, we will be just fine. Our goal is to grow per share value for existing investors, not do deals.

Your next question comes from Mike Mueller with JPMorgan.

First, that was a nice David tribute. When I think of Simon over time, one thing that stands out is David's ability to walk away from deals whether it was Rouse or the first shot at Mills. Can you talk about an example or 2 of steering clear from a big transaction that didn't sit well with you?

Yes. Thank you very much. I always think of -- I was e-mailing back and forth with him a couple of months ago. David was the one on the best day and most exciting day of my buy-side career called me and said, "Your career has peaked today, leave the industry and come join me on the dock side." And that's how this whole thing started rolling. I think many of you -- I think we have had the conversations over a period of time.

He was an extraordinary leader. Extraordinary leader. And it was something I admired. I knew him for a long time. We were in the Columbia Business School Board. It was just in -- I was in awe with his leadership skills, not just his financial success of total returns and all of those things.

But one of the things, as you mentioned, look, we -- David's ability to walk away from deals and many times he did it. Believe it or not, many times when you walk away from transaction and you do it in the right way so that you're not burning bridges, you tell people why you walked away, you can still maintain the relationship. One of the largest transaction we have done in this company -- is the largest transaction we have done in this company is Barchester, believe it or not, I walked away from that deal twice pre-COVID, right?

So we -- there are many -- I don't want to get into granular transaction. Every day of the week our team walks away from transactions, tell the counterparties why we walked away, whether we walk away because we don't like the product market fit, we walk away because we don't like the encumbrances that I just mentioned or I've written extensively about. We're respectful to the marketplace and to the industry. And we're direct, right? Nobody will tell you that we have ever said something we didn't do it. We are very direct to people. And then it's just that we do a very small fraction of what we see. Nikhil, what do you think?

Yes, 10%.

10% or so. So by definition, we walk away from 90% of what we see. But sometimes something like Barchester, we walk away. And eventually, it happens when the time is right from a pricing standpoint or from an industry structure standpoint. But very, very good question, Michael. Thank you.

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

Shankh, I know that the WBS model continues to evolve. I mean, how beneficial are these new partnerships that you're creating with PSA and others to take WBS to the next level. I mean, I'm assuming that Welltower is getting access to more new data that they didn't have access to before. I guess, how beneficial could that be as you kind of refine those systems?

Mike, think about in our SHOP technology in 2 different -- completely different segment, which obviously they interconnect at some levels, which is one is our data science platform, which is focused on allocation of capital and finding granular opportunity and changing the velocity that exists in this business from months to days right? And that's one idea.

The other idea is operational side of the business, which we call Welltower Business System, which we're building out, and I mentioned about Tech Quad and how Jeff and Tucker and Swagat and Logan and all these, Ron, they are also taking that to a new level. Welltower Business System, which is the operational side of the business, is not something that we are collaborating with Public Storage.

Public Storage or people like that don't need our help to think about operationally how they should run the business. That industry is years ahead. We're actually hiring from that industry who can help us to do it, right? On the other hand, our collaboration is on the data science side, which we have been at this for 10-plus years. And that's why we have changed the real estate investing business, where this latency of the system is 5 to 9 months and we have taken that today, right? So I don't want you to confuse the two and understand how -- where the collaborations are coming.

We have given you many examples on our business update, the kind of problems that we are going after that people are coming to us. For example, obviously, real estate examples are easy, and you can see it on examples, whether that's multifamily, other types of asset classes. So storage, obviously, you mentioned, all other types of asset classes. But people are coming to us with problems that are location-type problems, but not necessarily specifically real estate problems.

For example, a big bank has come to us and asked us whether we can help them on predicting whether most profitable next branch -- bank branches should be? These are the types of problems that we are exploring, and we'll see where we get to. But thank you for your question.

Your next question comes from Jim Kammert with 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 just structurally don't have private pay or other cultural issues that leave you unlikely to pursue in terms of external growth?

The short answer is yes, it can be, in fact, on -- just for fun we're having this conversation with an investor, a significant investor in Japan, and we built a model over 3 weeks that our guys did to show them like how to apply that in Japan, right? I know obviously, we don't have as much of a data and we haven't bought like gobs and gobs of data, but it is absolutely scalable across geographies and product types and beyond real estate product types that I just mentioned.

Your next question comes from Richard Anderson with Cantor Fitzgerald.

So Shankh, you talked about doing the hard things, not the easy things and making decisions along with that mindset. And I'm thinking as you're talking about data analytics and all these sort of tangential opportunities that sort of spawn out of senior housing platform. And then I think about Amazon, which once upon a time sold books and now they're what they are today or Berkshire Hathaway, which was an insurance company and is what it is today. Do you have aspirations along those lines where senior housing -- because we can talk until we're blue in the face about how great it is, and you guys are doing a fantastic job.

But longer term, this is not going to always be a 20% growing type of industry. Are you thinking about senior housing as sort of a bed from which you grow other businesses outside of data centers or data analytics if you get my point, right, you could be kind of like a diversified vehicle. Is that kind of in your mind today?

No. Let me answer that question. We are not trying to go from senior living to other asset classes in real estate. In fact, we're doing exact opposite, right? We are selling out of all other asset -- other types of asset classes and focusing our balance sheet capital, our balance sheet capital, if you will, our book into 1 asset classes, which we think we have competitive advantage. However, if you think about we have built capabilities, right, such as this data business that we talked about could potentially become more than a platform that we use for an internal application, we'll see where we get to.

We're not trying to become a diversified company. I do not believe diversification -- I do not believe in diversification. In fact, I believe diversification is the worst word that has been taught to investors, right? So if you think about -- you gave a Berkshire Hathaway example, if you think about -- look at Berkshire, you will see they've made the almost entirety of the return in 5 things -- 5 names, right?

So you think about it as -- we believe in concentration. We genuinely believe that capabilities, you cannot be good in 5 different things. But your question is a much more nuanced one, which is we -- right or wrong, our whole idea 10-plus years ago was very much that we want to understand the truth. We noticed that the real estate business people talk in heuristics, rule of thumb, and we wanted to know the truth, and that's what we found. I give an example, right?

People use housing prices. Housing prices are what? Housing prices and average housing prices, mean housing prices, median housing prices, we're talking about a block group, we're talking about ZIP code. What are we talking about, right? So these are the things now I can complicate this problem many times over, right? You can think about it depending on product, how long people are willing to drive? You'll notice in real estate, people talked about distance as your competition not drive time.

But again, without getting into too much of this conversation, we do believe that our job, that what we are trying to do is to optimize over the -- optimize the duration of the growth over a very long period of time. That's what we're trying to do. So today, a lot of that is obviously coming to the mix shift and everything, but we do believe that there are 2 other things that can potentially add pretty significantly. One is our asset-light businesses, which is fund management business, the data science business. And as you know that we are obviously the fees we are getting, obviously, that is a reflection of our data science business. So it's interconnected nature of it.

And the other thing, Rich, is just something I want you to think about is what is the potential -- untapped potential of our balance sheet, right? So we are thinking about sort of years ahead of what this platform could look like. We're thinking how do we deliver a significant per share growth opportunity for existing shareholders when things will not be as good in senior living, as you might say. But I do think that senior living as a business will remain our primary focus of the way to deploy our own balance sheet capital.

Your next question comes from Vikram Malhotra with Mizuho.

Shankh, I guess one other thing in your letter I really enjoyed is reading about the hummingbird and how they fly very differently and achieve lift at a discount. So in that vein of sort of a different approach, just I guess 2 questions. One, going forward, is there something WBS or the team can do to sort of monitor reduce CapEx levels in senior housing, something that usually bites people where there's too much CapEx load?

And then secondly, when you think about supply/demand, on the supply side, we still have not seen it start. Is there something different about your relationships or your markets which can limit supply perhaps longer than people perceive?

So second question was supply and the first question was CapEx and hummingbird. So the idea of hummingbird, I don't want to repeat it, I wrote extensively about it, you can read it and sounds like you have read it. The idea is continuous improvement of candles will not give you a light bulb or as Henry Ford will tell you that you can improve horse carriages as long as you want, but you're not going to get a Model T, right? So you got to think about the business in a completely different way, which is reimagining what the entire value chain looks like.

And if you sort of take a first principal approach to say, what are my goal is and you start from the customer, right? And solve, okay, how do I remove friction of customers and the people who the customers see as product, which is the site level employees, you can get very far. How far we will get to, we'll see in the future. And now let's talk a bit, take the question of CapEx that you talked about, right?

John gotten into this in details. The CapEx in this business because of the sort of short-term private equity type mentality, which I'm not actually denigrating private equity. If I got paid on short-term IRR, I would have done the same probably. But if you just think about it like people take a very piecemeal approach, right? One year you do roof because you have to, then next year you go back and do the gutters, the next year you go back and fix your skylights and that's not how full cycle CapEx should work.

On our particular -- if you look at our cash flow, you were obviously -- Vikram, you're seeing that CapEx is improving and it's improving for 2 reasons. One, CapEx is a concept that is not an idea that you should think about in terms of available or occupied room, you should think about all available room. Because if you think about you are doing, say, first impression, it is not going to be whether you have 40 people in the community or 400 people in the community, right?

It will be on all the rooms. As the system is filling up, obviously, you are getting the scaling effort or as the NOI is going up, you're getting the scaling efforts. Second, CapEx today, 2 years ago, we didn't -- we obviously did all CapEx that was outsourced to operate us. Today, we have 200 people team, which works for us. And that team is working with our operators to figure out how to do CapEx the best, how to do life -- think about lifecycle cost and executing where the best sort of execution we can get. And that's just started to see that scaling effort over the last, say, 6 months. And I think you're going to see a lot more going forward.

And what was the second question? Did I answer both of the questions?

Supply, yes.

Yes. Supply -- so look, the fact of the matter is, the supply currently is a very low starts you are seeing. I would expect that -- I personally think about supply it's almost a Pavlovian response to participants in the market when we see the supply. It's sort of almost a third rail and people think supply equals to oversupply. Why? That makes sense. Last decade, every unit of supply was oversupply because demand was flat.

I think about supply and the impact of supply in terms of oversupply. You can see the demand growth and you can sort of think, okay, how long it takes to bring supply in the market. We have a slide on our presentation and that sort of walks you through. And you can see sort of what's the oversupply sort of can be. I personally think that supply will chase demand for a long period of time, just because what the demand growth looks like and the constraint of supply that is in. In our markets, in senior living one of the biggest constraint of supply on top of everything else that you can think about is availability of quality operators, right? That's a big constraint in the market. No bank will lend to you if you have Joe Schmo operators, especially after what they have gone through last cycle.

And as you know, and this is something that you brought up Vikram, that I don't think we have -- a lot of people have asked us over the last 3 years. At the bottom of COVID, when we were the only people, only people who were actually allocating capital and leaning into senior living, we forged 25 to 30 long-term partnership with our operators, different developers, who were mostly exclusive or near exclusive in nature in our markets, which we believe will provide a governor on quality supply. And we'll see how this plays out. But thank you for your question.

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

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

That's an interesting question. Farrell, some of the heroes we mentioned was not just operational, also capital allocation and culture and many other things. However, I will tell you, I personally believe and probably because of the influence of Charlie, one of the most well-run operational company in this country is a company called Glenair. It's a private company, who's CEO -- long-term CEO, Peter Kaufman, has been a great friend and mentor of mine over a long period of time, and he's a true hardcore operator in the aerospace defense sector.

So first, Peter would tell you, first thing is before you get advice from people, you need to understand the credibility of their advice. Lots of people have lots of advice in things that they have no expertise in. I routinely see people who have never ran lemonade stand and have opinions on how multibillion-dollar company should be run. So that's sort of first, you have to have a filtering mechanism to understand who has expertise. But beyond that, and the best operational advice that I actually got that operations can be meaningfully improved from systems and process and technology, but operations is not about any of those things.

They can be enabler. Operations is all about people. So if you have -- if you're in L.A. and you have an hour, let me know, I'll help you go visit Peter and you will see what a well-run factory could look like and with all the focus of people. But anyway, thank you for the question.

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

Just going back to an earlier question about the portfolio of assets that are 95%-plus occupied. I guess as we continue to understand as you put the art of the possible, within the 6% RevPOR growth for those assets, you indicated the benefits of capacity coming down and just pricing power. Are street trade increases exceeding increases on in-place customers within this subset of assets? And are you also seeing a greater benefit from high ROI ancillary income opportunities?

Austin, thank you so much. You were a little further from the mic, but if I understand your question was on the 95%-plus are we seeing even within the pricing, are we seeing greater opportunities of street trade versus. Yes, so you hit on something extraordinarily important.

I have a particular belief that just because you can doesn't mean you should. And this is something I'm boring you with repetition and details. Clearly, it sounds like you read my annual letter. There's a whole section on trade-offs that I would like you to go back to and I will say in many places, in-place customer rate increases could be meaningfully higher than what we are comfortable with, and I'm fine with that. I'm fine with that.

So how do you -- if you are, if you say, okay, I'm not going to give customers 15%, 20% rent increases, how would the RevPOR change? It will change because of the point you just made, right, which is not an existing customer increase, but it comes from the street trade. This is a fundamental negative mark-to-market in this business because of the person who leaves versus the person who comes in, there's an acuity difference between the two.

However, when you have in this kind of assets and its overall trading market when everybody else is full, the street trade goes up and that's the impact you see in the overall RevPOR, right, which is a function of 3 different pricing, not just existing customer rent increase, increasing street trade. You picked up on something very important, and I think that will be a lot of driver as you sort of go forward in many, many of the markets. And ancillary opportunities such as a lot of the other -- such as community fees and others also play an impact on that as well.

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

I'm just curious if you could talk a little bit about market share and the opportunity that's still left to consolidate a fragmented industry, recognizing that you guys have a very targeted approach, hoping you could help us understand how much is left to consolidate, if you will. There's been a little bit of political pushback in Canada, and there's overviews or reviews going on in the U.K. So in that context, just hoping you could help us understand how you think about the addressable market and the opportunities remaining.

Yes. Juan, so if you just take a step back and think about from a customer standpoint, roughly, give or take, call it, 7% to 8% or call it, 10%. Let's just do easy math, 10% of the people who can use our product, use our product. So 90% of the people fundamentally don't use the product who can use our product, right? So it's just a small portion of the -- your customers use the product. Within that small portion, we're probably 7% of the industry.

So we're a very small portion of even the existing product. And -- so our -- so from that standpoint, if you just think about it, a 7% of 10%, you can imagine, like we're insignificant from a customer standpoint, right? They just that -- those are the numbers. Now having said that, if we're 7%, say, of the entire base of products, does that mean that our opportunity -- and as you mentioned that obviously, it's an extraordinarily fragmented industry. Does that mean that our -- and I think the average operator or owner operator has like 10 communities or 1,000 units or something like that.

It's a very, very small. Does that mean that we're 7% of the industry, our TAM is 15x? The answer is no, right? Our TAM is probably -- we're very focused on -- even within senior living, we're very focused on the highest price point or the highest quality assets in the market, so very much of the -- very focused on the highest, highest end of this business. That product market niche is what we have made our bet on. And that probably is -- the TAM is probably 2 to 3x, not 15x.

So that's how we kind of think about it. We see what the opportunities are. As I've mentioned in previous questions and in my annual letter, we would be comfortable if we never bought another asset. So the goal is not asset aggregation, goal is to pick where you think you can add significant value, and I think our team is doing a pretty good job of. And we'll take the -- we'll go forward with that and see what market gives us.

Your next question comes from Nick Yulico with Scotiabank.

I wanted to ask on the investment side. This quarter, the loan funding was a little over 50% of the investments. So could you just remind us sort of what the approach is there and where you're able to get what type of yield on that loan funding? And then also, if you could also break out of the $7.2 billion investments in April so far, what percentage of that is loan funding?

Let me start, Nikhil, you go. First is, you were seeing that, Nick, just to remind you that remember, that when we did the Kayne transaction, we took back $1 billion-plus in participating pref, and that's what showed up in the loan book, right? So it's not really a loan, it's a participating loan. It's with an equity derivative attached to it, but that's what you're seeing. Rest of it, you can see -- think about it as a refill of the HC1 loan and other loans that got paid off.

Some of it is just a bridge-to-HUD of some of the assets, the skilled nursing assets we sold. They will be gone as HUD takes a long time, as you know. When that happens, they will be gone. But overall, that's the construct is that Kayne piece showed up.

From your second part of your question, which is the $7.2 billion. I do not recall, Nikhil, you might recall.

The next specific question was what's closed in the second quarter. So of the $4.2 billion that's closed, as I said in my prepared remarks, Amica, which is north of $3 billion, is the vast majority of that. There might be 1 or 2 small loans, but it's been predominantly asset acquisitions.

So that's -- I think you asked about the pipeline as well. That is primarily also the same thing. It's all just in 1 quarter, that Kayne piece landed, and that's what it looks like it's elevated. As you look back in the whole year, you'll not see it.

Yes, as we said, there's remaining $500 million of sales left as part of the Kayne transaction. So as that happens, of course, that will come with some additional participating pref funding.

Your next question comes from Seth Bergey with Citigroup.

It's Nick Joseph here with Seth. I was hoping you could just touch on the transaction market more broadly. First, I guess, the impact of competition and then how prevalent is retrading deals and walking away because of the capital markets? And then Shankh, I think you mentioned kind of time to close. And I was just curious, kind of Welltower's due diligence and time to close versus kind of the average for other buyers in the market?

Yes. I think let's start with the competition piece. As I said in the prepared remarks, regardless of whatever period we look at transactions that have closed, the pipeline and I say this every single quarter as an update, that give or take, our transaction activities between 90% to 95% off market. And so by definition, in that regard, there is no competition. But what we've seen is over the last couple of years as more capital has come into senior living, previously, when we would say no to one of those off-market opportunities, it wouldn't get done. Now what you're seeing is, given that there's a more robust marketplace, if we say, no, more likely than not, somebody else will end up buying those assets. So that's certainly happening.

Then your second question was about our speed. Well, I think as Shankh said earlier, it takes us a couple of days to, within a very narrow range, have a view on what an asset should be priced. Thereafter, and assuming there is a meeting of the minds, then it's the traditional diligence process, which involves site visits, finalizing business plans with operators, third parties, negotiating legal documents and we parallel path all of that, just given upfront how much information we have from our data platform on what to expect from an asset.

And so we can parallel path all of that, and it takes us roughly 30 days from when we first see something to close something. In comparison to the broader market process, Shankh wrote extensively in his last annual letter last year, a typical process takes 6 months from starting to think about, hey, we're going to sell something to get BOVs from a bunch of different advisor to then picking an adviser to then populating all the information and creating a really pretty offering memorandum to then negotiating NDAs, to then having a first round process, to then having a second round to the process, finally picking a winner and then most transactions occur in a way that you first negotiate a contract, then you have a 30- to 60-day diligence period where you find financing for the asset and eventually close on it.

So 6 months is a long time, if you think about what macro looked like 6 months ago versus it does today, a lot changes. So -- and given that the price -- the buyer is not going hard until 30 days before closing, so 5 months into 6 months, there's a lot of uncertainty. And we have, in the last 2 months, seen a lot of transactions that we liked, but weren't comfortable with the pricing get away from us to then come back to us. So that's certainly happening, and it happens all the time.

I'll just add 2 more things, right? So we are -- one of the very few SHOP who actually go and visit every single asset that we buy. That is not -- predominantly, that is not a percentage of we visit every single asset that comes on our balance sheet and walk on average, 12 people from Welltower go walk assets, not just our investment team, our asset management team, structural engineers. So we go and do this every single asset, which is very important for you to understand.

And it just -- the second question is, from our standpoint, is the reputation is our currency of business. If we tell people we're going to do something, we do it. I might as well give people bad news upfront than try to drag them through the process and then 5 months later, said these are the 5 different things. I didn't like the color of your nails, so it will be retraded, right? And that's sort of what happens in this business every day. That's very standard people accept in real estate business to do, we just don't do that, right?

We are always comfortable in the trade-off of short-term money versus long-term reputation that works out for us over a period of time. And hopefully, overall, our execution over the years will tell you that if you take a long-term approach, if you take a reputation approach, if you take an approach of running a first-class business in first-class way, it generally works out for you.

Your next question comes from Omotayo Okusanya with Deutsche Bank.

Shankh, I wanted to talk a little bit about just, again, the overall business model and again, the growth mode you're in, you definitely need a specific type of operator in SHOP to kind of realize your strategy. So I'm just curious, at this point, are you still seeing opportunities to bring more operators into the fold or does the strategy really become doubling down on the operators you have? And if that's the case, what becomes kind of the next level of incentive you can provide for your current operators to even have further better alignment? Is it stuff like the Munger Grants? Or kind of what else is kind of out there that can really kind of align the two to continue to kind of deliver the results you've been delivering?

Yes. Thank you very much. It's a very, very important question that we reflect on and debate and talk about. Look, we sort of think about this business as a complex adaptive system. And as we think about this business as a complex adaptive system, we have -- after years and years of thinking through this every line item we have sort of come to a point where we have a very good idea. If you just -- if you were sitting, Tayo, in one of our sort of conference room, with our -- one of our operating partners and people, I guarantee you will not be able to say who works for Welltower, who works for this operator, they are all working very collaboratively and not trying to say this is your side, this is my side, and that's just not.

That type of collaboration trust takes a long time to build, which we have built with a handful of our operating partners, and we're doubling down with them every day. Having said that, are there a couple of people that we have long respected over time that we want to do business with? The answer is yes. At the same time, you will see -- if your question is, are we in an expansion mode from a number of operators we do business with or we're in a sort of flat or we're shrinking? The answer is, unequivocally, our view is that we're shrinking, right?

The number of people that we business with. That is in -- because we are doubling down with our existing partners, we have built these collaborations and we are not trying to be everything to every people, every product, every operator. We have found the like-minded, a lot of like-minded operating partners, who are truly our partners. That's not sort of they take partnership very seriously. They are extraordinarily focused on excellence like we have.

They want to treat their people right. They want to treat the residents right. They want -- they take reputation as the currency of business. And those are the type of cultural alignment, not just technological systems, money and everything, financials and everything has to work out. But the cultural element is the most important, and we are doubling down with them. And sometimes, we do find somebody like Amica that we tremendously respected over the time. And then when the stars align, and we go together and meeting of the mind happen.

The same applies for Barchester. But generally speaking, our goal is to do more with our existing partners where the alignment has already happened. But it's an extraordinary question that we reflect on every day.

Your next question comes from Michael Stroyeck with Green Street.

I just wanted to go back to an earlier question on applying the data science platform to new geographies. Has the company underwritten any transactions in geographies outside of the U.S., U.K., or Canada? Or are there any additional countries that Welltower could be interested in entering down the line on balance sheet?

Yes, Michael, very, very good question. I'm glad that you asked the clarifying question. We have no desire to go to any other countries other than the 3 countries we are in from a capital perspective and balance sheet perspective. That comment was entirely on the capital-light on the data science side. And obviously, we think that is eminently scalable across geographies, across asset classes. But from our standpoint, on a purely capital-light basis, we're trying to -- everything we are doing should tell you we genuinely believe that in today's world, which is a maximum gain, maximum growth world, the fastest way to get to what we're trying to do is to narrow the focus, not extend the focus.

Yes. And Michael, to directly answer your question, no, we have not underwritten anything. I don't think we've even signed an NDA to get information beyond the 3 markets.

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.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph here with Seth Bergey, and we're very pleased to have with us Welltower Inc. CEO, Shankh Mitra. This session is for Citi clients only and disclosures have been made available at the access desk.

To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit any questions. Shankh, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investors should buy your stock today, and then we'll get into Q&A.

Okay. So to my left is Tim McHugh, our CFO and Co-President; to my right is Nikhil Chaudhri, our CIO and Co-President; and to Nikhil's right is sitting John Burkart, our COO and Vice Chair of Welltower. It's a company that plays at the cross-section of housing, aging and wealth. So we are -- we do senior housing. We're mistakenly known as a health care REIT. We don't do much health care. We don't know much about health care. But we're in the business of providing housing to seniors, and that's what we do.

So that's sort of our business. We're in 3 countries, U.S., U.K., Canada. I've never asked anyone to buy our stock. So I'm not going to come up with an answer here. That's not my job will run the company.

Got it. Yes. No, I feel like you'll never tell someone to buy your stock, but maybe to rephrase it a different way. What's misunderstood right now? If someone doesn't own your stock, what maybe are they missing about the story?

That's a different question. So it is a pretty well-known sort of well understood bias of the market that people sort of fade growth in all industries. And depending on what industries you look at, what you grew up looking at, different industries have different sort of time horizon. So if you cover tech, you used to look at things 5 years, 7 years, 10 years out, right?

By being the virtue of being a REIT, majority of people who grew up in this industry have learned only to look at things 12 months out, 18 months out. And that sort of created an interesting situation where people don't know how to value compounders, right? So that's my perception because not a lot of companies have been compounders in REITs, at least not for the last 10 years. So if you really want to understand our company, understand what the company, I would suggest you look at understand what the earnings power of the company is years out, not just 12 months out. That will be an observation for me.

So ahead of the conference, I guess, 2 days ago now, you announced -- Welltower announced a strategic data science partnership with self-storage company, PSA. I guess what is the benefit to Welltower of this partnership? Where do you see it going? And kind of what is the opportunity for you?

Yes. I think the announcement was Public Storage and then one private equity group as well, public storage on the storage side, the private equity group on the medical office side. And I think from our perspective, a, it's economics. We're getting paid licensing fee from both parties. But b, more importantly, we're focused on the potential of tapping untapped value from an asset on our balance sheet. If you all think about the data science journey we've been on, which now goes back 11 years, we have spent hundreds of millions of dollars to build out a data science platform that has allowed us to quite effectively allocate capital. And our -- as part of the fundraising process we were on last year for our private funds management business, some of the largest sovereign wealth funds in the world dug into how we allocate capital, how our models work and they like what they saw.

They challenged us to ask us, can we apply that to other geographies? Can we apply that to other asset classes? And they like what they saw. And one of them is a prolific investor in the broader AI space, whether it comes to AI infrastructure, software models, all kinds of things. And they suggested at a multibillion-dollar valuation, investing $1 billion into this platform to try and commercialize it. We just fundamentally never want to take money from anyone unless if we're confident we can earn an attractive return on that. So we said, let us go figure this out. Let us go figure this out if there is true commercial interest for this. And if there is, then we'll figure out how to capitalize this. So we started having a few conversations, and you all are seeing the first couple of folks that have got over the finish line, and we're in active conversations with many others. And so -- but let's see where this goes. But it's an asset on our balance sheet that has created substantial value for our shareholders, and there is a potential that there is significant incremental value to be captured from that. So that's the journey we're on.

And so does it change anything internally at Welltower? Or is it just leveraging what you're already doing and essentially being able to monetize it?

Yes, it's predominantly leveraging what we've already built and utilizing it for other asset classes.

I think one of the broad themes here at the conference this year has been AI. And I want to kind of talk about maybe the potential impact to the broader senior housing sector, but more specifically to Welltower, I mean, this is obviously an example of work you've been doing in data science and now AI, but where are you seeing the other opportunities to either be more efficient or across the investment capabilities? How are you deploying AI internally? And what could we expect to see as kind of the benefits from it?

So I think most people these days think LLMs are AI, I don't, right? I think AI is a much bigger, broader discipline than LLMs. And I think if you look at my comments on the press release, you will see that, try to reflect that. Look, the fact is that we thought that commercial real estate is world's largest asset class, and it still works from a corner and a gut feel and that we could disrupt that. And that's the journey we have been on. We didn't call it AI. We call it machine learning, right? In a way it's machine learning, it's statistical learning, supervise and supervised learning. on structured data, right?

And then obviously, the transformer model came and that paper came in 2018. We changed the world, right? And so what happened is from there, we own from structured data to unstructured data, right? So that's sort of -- that's the journey we have been on. And I think you don't have to go and look at it very far to see that actually it works. You can see how effectively we allocate capital with what velocity we allocate capital. If you go and read my last annual letter, I wrote a lot about this topic. Commercial real estate transaction takes 5 to 9 months, right? We can give you a price that we live with in 2, 3 days, right? And we give you people a handshake, we never walk away from it.

So that sort of change of velocity in an industry can in absolute change the game. So that's what we have been doing. But there is more to the aspect of I think less about cost and more of our revenue. I sort of have a mindset of not cost mindset, a revenue mindset. Having said that, you can see what that does, that kind of user models do to our own people. I mean our investment team has not changed in size in the last 4 years. It's a substantial team. We're not sort of algorithmic traders. So our last mile is always people. But that team has not changed, yet our -- the volume of transaction that we process -- that team process has gone up 4x, 5x in the last 5 years, right?

So that's sort of one aspect of how we think about these things in our farm. But Tim and Nikhil and John are sort of thinking about this across the board, different aspect, how you source leads, where people show up, all of those kind of things that every organization is thinking about that we're not as special. I would tell you that senior housing as an industry is particularly interesting, where last few weeks of all these conversations where people are sort of focused on whether it's SaaS, it's others, types of businesses where potential of disruption. And you'll notice that in majority of those businesses, whether it's brokers, insurance brokers, others, you will notice that in majority of those cases, people are revenue in these businesses, wealth managers and others, right? It is interesting to me that I don't know it's going to happen, not happen, it's true, not true and the market is going to move on from there.

But it is interesting, senior housing is a business, not the business, but a business where people go to cost. And so there is an aspect of it you think about whether it's AI or broader technological change or automation, you would think, okay, you have on average, 57, 60 FTE in a community, probably 30, 35 of them are caregivers. But there is a substantial number of people who are not, right? You have on-site HR, on-site payroll, on-site this and that and others. Whether it's not less of a question of AI, more of a question of probably broader automation and technological use, what would that look like 10 years from now? It's an interesting sort of thought process to think about.

And as you think about either developing these tools, are you buying them off the shelf? Are you partnering? And what's the investment level from Welltower?

Yes. So our entire platform we have built ourselves over the last 10, 11 years. Entirely, we built ourselves in-house.

As you think of some of the advancements of AI, we've seen some reports on anti-aging or delay aging and maybe people living longer and all those kind of considerations. How do you think that could impact senior housing? I know it's still a little far out, but you are seeing some stuff going through the FDA that could maybe delay when people would actually need senior housing. Do you think that's something to keep an eye on? Or do you think kind of the value that Welltower senior housing is delivering would remain static even if people live for longer?

You want to take that, I'd like to -- I think in general, the problems that we face in our business, right, short length of stay. If folks are healthier, that is a positive, that helps with length of stay. If life expectancy is longer, that is a benefit. If you still -- I was looking this up on ChatGPT earlier today, I don't know if this is actually correct or not, but the average lifespan of males in the United States is still 79 years, right? Our average customer is 84 years old. So if longevity is good for our business, there might be some short-term disruption potentially in a particular year, less folks age this or that. But as a more broad-based concept, folks living longer is good for society, and we happen to be in a business where it's positive for us.

Yes. I would just add that really what the type of care that goes on in our buildings is for frailty, right? And so you think about where a lot of these breakthroughs and what's happened in -- it's not just what's going on with AI. There's been longevity breakthroughs for a couple of decades now. And the people -- the residents of our buildings are generally healthy people. They reached a point in their life where they're frail. And they have actually, I say, survived, but they have not had something else impact them that's allowed them to be 85, 86 years old.

So I think the idea that the last 18 to 24 months of your life, you're going to have -- need some assistance with daily living and a focus on wellness care, that likely doesn't change. And if anything, [indiscernible] to end up with a healthier resident, which is a lot of benefits to both the residents and the business.

Going back to the partnership that you announced, kind of what is the opportunity set here? You announced it with PSA and then another private equity that's looking at medical office building. Do you see kind of this licensing structure applicable to kind of the entire kind of commercial real estate asset class? Or just where do you kind of see the trajectory of monetizing that going?

Can it be? The answer is yes. Nikhil already said that some of our sovereign partners asked us to prove the models in other asset class. We mentioned some of those on that page that if you look at our business update, Will it be remains to be seen, right? So we'll see -- we have proved that we have better capability on predicting multifamily rents than a lot of other multifamily companies or data providers and others. But will somebody pay us to do that? I don't know. If they do, we'll do it. If not, no problem, right? So that's sort of a -- you've got to understand is sort of life is -- as an investor, we are investors. We always think about we know what we know and particularly we're focused on what we don't know and don't try to solve for that. But can these be -- we build our platform? Can we build a business around it? I don't know the answer to that question. We'll see. But definitely, the potential is that the capabilities have been already proven. It does work.

And then just keeping with the technology theme. You hired Jeff and announced the formation of kind of the tech quad. You described yourselves as I believe it was mediocre minus as you think about the use of digitization in the platform. Can you kind of talk about kind of the key priorities and how the digitization process will impact both the resident and employee experience? And how have your expectations kind of changed since you initially thought of the tech quad and the hiring of Jeff and maybe where you are now a few months down the road?

Let me start and explain what I said about mediocre minus, then Tim can answer the rest, which is I think about technology in 2 different aspects. One is what we have been talking about, which is data science and this is an umbrella term we use for ML, machine learning, deep learning and AI in our place, statistical learning at its foundation. That is a mature platform that works extraordinarily well. I cannot give a letter grade to it because there's no comparable set anywhere in the world.

So what I have described as mediocre minus is our operating technology platform, which we call Welltower Business System. Just because we do better than the people or other participants in this industry where these types of capabilities are nonexistent, that does not tell you that we're good. I personally think that we are in the infancy of what the capabilities should be and hopefully, they will be, but that's mediocre minus.

So with that, Tim will answer the rest of the question.

I like how you asked kind of the impact of digitalization on the resident and employee experience because I think that's the right way to frame it. The -- where you're going to see the biggest impact of it and where you'll see the impact of investment in technology at the property level is going to be in freeing up time on the employee side, caretaker side. This is a business with very high turnover on the front line. It's a very challenging job. And every minute that someone spends in the system means they're not spending it with the resident. And I'd also say, if you have difficult systems to use and you have a lack of digitalization, you should expect to get less and less data from a property because people are going to prioritize the right thing, which is spending time with the resident versus making sure you've got the correct data flowing up.

And then from there, it's where we started or we were a few minutes ago in this conversation around AI and the applicability of the business. There's 2 layers that sit above a property kind of between that data and you all, and that's both the management companies and then also the Welltower team. And the more that we're able to get that first, that kind of analog to digital done seamlessly at that property level, you create a better experience, create a better business. And you also create the ability to apply AI to that data in a way that you start to get some significant efficiencies to how the business runs. So it's all connected, but it does start with that kind of employee and resident experience.

And then as AI tools become more accessible, if AI allows people to kind of develop software without having to outsource the software engineers, do you think that, that narrows the competitive gap between sophisticated operators and smaller operators? Or does kind of the data scale that you have actually widen the moat against the competitive set?

I'll start, and you can jump in, Shankh. I think the -- a lot of what you're seeing is, I guess, in the development of AI is likely impacting software first. It's making data more valuable, right? A lot of that is taking what is software, particularly kind of vertical software that's applied to an industry and that's integrated into workflows and it's creating automation around that, that's somewhat removing the need of it. But the actual data that belongs to the company is considerably a stronger asset. I think on your question around kind of whether or not the vibe coding of software will allow for -- to take away some of the competitive advantage a large operator or sophisticated operator has relative to less sophisticated.

I don't think that right now, what you've seen is that software is a differentiator. There's a discipline around it in a way in which processes are run at the better operators. And we see -- we interact with them. We think we have the best operators in the business that we work with, and we think technology enhances what they do. It's not the technology is the moat for them. It's going to create a better advantage. But software being able to write your own software, there's going to be no substitute for process and mindset and motivation when it comes to running a business. And so I don't see that playing a big role in senior housing.

I have nothing to add to that.

And then how long does it take to kind of typically deploy the Welltower business system on to new communities as you acquire them?

So it's -- on the new communities you acquire them, it's actually -- it's pretty seamless. That's one of the areas where we're already seeing the efficiencies of it. It's more so the conversion of operators of existing properties and the change management that goes with that. So on the new communities is actually where we're seeing a lot of the promise of how this is going to create more seamless data flow in the future.

And then you've messaged kind of you expect to drive multiple years of margin expansion, both driven by strong fundamentals, the operating leverage within the business and then some of the operational improvements driven by the Welltower business systems. Is there a way to think about kind of looking back how much of that you would kind of attribute to those different buckets? How much is just the operating leverage and the incremental margin flow-through as occupancy -- as you make occupancy gains? And how much of it do you think is attributable to kind of the Welltower business systems and kind of the Welltower platform?

Welltower platform or Welltower Business System, completely different answer. So if you look at -- we own the best assets in this industry by a very long shot. And if you have operating leverage in the business and your occupancy goes up, your margin should expand. There's no question about it. So far, what you have seen the significant excess alpha operating alpha that has come through our system is a function of 2 things, right, 3 things.

First, our asset selection, which is the capital allocation and all the things on data science and everything we talked about; b, the operator selection and see, brute force asset management, right? So that's what you have seen the impact of is the Welltower platform impact, right, all 3 of them. But Welltower Business System is nascent enough that I wouldn't say that you have seen a lot of impact of that, you will. Does it make sense? We've got only 250 properties that has been on that system for the last 6, 9 months. So you haven't had a chance to see what that could look like.

And then just kind of what's the current penetration rate across the portfolio? And then as you think about kind of the adoption curve and some of the operational improvements that you're able to make with the Welltower Business System, maybe just using a sports analogy, kind of what inning are we in with where we're at and some of the operational improvements?

Yes. So you're saying the penetration, you're asking how many assets are on the system. It's roughly 250, as we've said. So it's a small amount, and my friend over here keeps buying more. So it hurts that penetration percentage.

As it relates to -- what's your next question?

Just what inning we're in, in terms of how much upside there is in the Welltower business?

Yes. I think Shankh just said that. I mean when we talk about brute force, what we're really saying is that's just hard labor. That's us with great tenacity addressing things from an asset management perspective. What Welltower Business System does is it's digitizing the business. It's providing robust data, enabling us to actually get insightful reports and drive value. So we're at the very beginning of that game.

While we shift to capital allocation. Obviously, you've been very active over -- really over the past few years, both in terms of buying and selling and different structures in terms of the fund and everything else. Are you starting to see more competition? I mean it feels like senior housing is at the top of a lot of institutional investors kind of surveys. I think everyone sees the supply and demand dynamics there. Does it feel like competition is increasing right now?

I think how I would describe it is, I think Shankh's annual letter from last year does a really good job of explaining how we have been able to quite substantially eliminate the latency in our process, right? How quickly we can have something hit our desk and in a couple of days, in a very narrow range, have a view on pricing on the asset, right? Those are our capital allocation tools we talked about earlier today. So -- and we're market participants in terms of what pricing makes sense, right? We're not trying to steal assets.

So it makes sense if you're a seller, it's a free option to give Welltower a quick call and say, "Hey, do you want to buy my assets?" And at worst, you lose 2 days compared to a process that runs 6 to 9 months. And so everyone still does that with us. And every quarter, I quantify what percentage of our transaction activity has been done on an off-market basis, and it's pretty much all of it. And so that part is still happening. The difference between 2 years ago versus today is 2 years ago, when we would say no to a transaction and our hit rate is probably about 10% on the stuff you look at. When you would say no to a transaction, it wouldn't get done. Today, those are getting done.

So we are still getting to do transactions and acquire assets that we like. Values are a little bit higher today, but the competition part is irrelevant because that's when we say no to an asset that somebody else gets to buy.

What hasn't changed is all the assets that trade away from us, not all, I shouldn't make a general statement. Majority, a vast majority of the asset that trades away from us, it trades away from us because we made a decision not to buy them, usually because of quality and product market misfit that we think about what drives it. But I have seen other problems show up, which is I talked about on the call, such as we have seen that some participants have started buying assets with encumbrance of operations and all of those things, which we think an absolute third line for us, we would not do that. So -- but you should assume that if an asset ABC traded owner XYZ bought it, you should assume that there's a 90% probability we looked at it and said no for reason.

We've seen private equity come in and out of the space in the past, some that clearly were not successful in it. Part of that was probably a mismatch of supply and demand. But for these assets that you're passing on, is it just the CapEx or the growth rate isn't up to what Welltower needs? Or do you think that there's going to be a concern if we're looking back in 5 years off of some of these deals that you don't get?

Look, I mean, we're not scared of CapEx. We have great CapEx capabilities. And if asset requires CapEx that is a worthwhile asset, we would gladly do that. For us, if we say no to an asset is we think about the incredible growth prospects that the assets we already own have. And when we add something to the mix, we say, is this going to enhance or subtract from the growth prospects of our company. And that's where our data science platform comes in, right? We're looking at not assets at a market level, which is like a metro level that everybody else looks at. We look at assets based on what corner they're at. We have the insights into being able to look at that granular level, and we've showcased some of that with a lot of you in the room.

So it's just a different view of the terrain, right, where someone might say, pick a market that this is a Miami asset, we'll say that this is a Hollywood asset versus this neighborhood versus that neighborhood asset, and it's a different lens. So it could be the product market fit. It could be what's within the walls of the asset in terms of when you open a door, how big is the unit behind it. It could be operational aspects, how big is the floor plate? Is it efficient from a staffing perspective? Or it could be the management contract that it's encumbered by. There's multiple reasons or it could be price, all of those.

Are you seeing divergence in underwritten expected returns across the different geographies? So outside U.S. versus U.K. versus Canada?

Yes. I mean each of those markets has a different risk profile. Each of them have a different capital markets outlook. Canadian yield curve is 1 point lower than the U.S. yield curve. So on a risk-adjusted basis, there should be a divergence and expected returns on top of risk-free returns in each of those markets. So there is certainly a difference in all 3.

What's the most attractive right now for you?

It's opportunity dependent. We've we're disciplined on how we look at transactions, which is unlevered IRRs relative to base rates in the market. And we think, generally speaking, we're able to get the same risk premium in the 3 places we do business.

I will tell you that flows change depending on time. But if I just look at very short-term current flow has been very primarily focused on U.S. But that could change next month, right? So it's just sort of -- it's hard to say. We like senior living in all 3 markets we do business in, and we're very -- it needs to be the right asset. Product market fit is important for us.

Most common question that we receive on senior housing broadly is when is supply going to return, right? You're seeing this outsized growth. You see the demand side. Obviously, we had a lot of supply ahead of it pre-COVID. But what is holding it back today? And when do you expect supply to start to pick back up?

Well, I think construction development, whatever you want to call it, is a commercial activity. People should only do it to make money. And when assets trade below replacement cost and as a developer, you should be targeting at least a 2x on your equity. And so it's a $100 deal, you're putting up $40 of equity. You need to be able to sell the asset for $140, right? That's the first and foremost thing. So economics don't pencil, and that's why people are not doing it. Will they pencil at some point in the future? Of course, right? I mean capital follows growth and at some point, that will change.

Then the question becomes, are we talking about supply? Or are we talking about excess supply? And what hurt the industry in the last cycle was that there was excess supply. But for there to be excess supply 3, 4 years out, which is how long it will take if people decide today that it's a good idea to start building senior housing, which it isn't. But even if that were the case, the demand profile that we're talking about 4 years from now, 5 years from now is 120,000, 130,000 units that is needed for excess supply. Prior peak supply was 44,000, 45,000 units in a year. And so we're talking about replacement costs being at least 2x, if not more. And so the quantum of capital that is needed for excess supply many years out, that doesn't exist in this industry. So we're not sitting here today concerned about excess supply and even supply just doesn't make pencil today.

How far off are we from either rent growth or construction costs coming down that it would pencil. I know it's market specific, but if you can just frame it broadly.

One thing I want to make it very clear that I've heard second participants believe that construction cost is coming down. I do not believe that's the case. There is no evidence of construction cost in senior living is coming down. In fact, the evidence is exact opposite. Construction cost escalation is between 4% and 5%.

And to answer your question directly, assuming construction cost doesn't change and stays flat, today's dollars, do you need deal economics to be 30%, 40% better for development to pencil. That's the gap.

So ways away?

Yes.

And maybe just thinking about some of the changes you've announced with the management compensation and the RIDEA 6.0, how is your thinking kind of evolved as you think about trying to align incentives with both operators for shareholders and management with shareholders?

We think it's an incredibly powerful thing if everyone has the same exact goal. And even with the RIDEA 6.0 contracts that we just announced recently, where the biggest changes operators -- some of our operators have not chosen to get compensated for their incentives in Welltower stock. What you've instantly seen as soon as that happened, that those operators went from -- they're in different geographic areas, but all of a sudden, the mindset shifted from, I've got my secrets that I'm not going to share with others to now being, hey, I'm really good at this. I want to make sure you learn from me and you're also really good at this because otherwise, given that we're all getting paid in the same currency, your underperformance can tank my performance, right?

So that fundamentally changes the mindset. And that's the level of alignment we all want because we view our outcomes as what the entire portfolio produces. Now that's how the operators are thinking about it, and that's aligned with all of you shareholders.

And the buy-in from the operators, I know...

What was that?

The buy in from the operators or they -- have they been pretty receptive to it?

No one forced the operators to sign these contracts, right? The operators came to us and said, we see the reflexivity. We see that our actions result in positive outcomes for you and your shareholders, and we want to be aligned and we want to be compensated in the same -- we want to benefit on an exponential basis from on our efforts. That's what they're looking for.

It's an invite only club. The question is not whether we have -- whether there was a resistance to be in the club. A few people have been invited. Everybody who was invited have been delighted to be part of the club.

Really quickly, rapid fire. Same-store NOI growth for senior housing broadly sector-wide next year in 2027.

No idea.

Higher, lower, the same than this year.

No idea.

More fewer of the same number of -- you won't like this, but health care REITs a year from now.

No.

All right. Thank you.

Hello, and welcome to the Welltower Fourth Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Matt McQueen, Chief Legal Officer. You may begin.

Thank you, and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltower believes any forward-looking statements are based on reasonable assumptions, the company can give no assurances that 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.

Thank you, Matt, and good morning, everyone. This morning, I'll provide some high-level thoughts on the business, our recent capital allocation priorities and a recap of what proved to be a truly transformational year for our company.

2025 not only marked the 10-year anniversary of the refounding of our company by the current management, but also proved to be the most pivotal year in the company's history. We are pleased to have delivered 36% revenue growth, 32% EBITDA growth and 22% FFO per share growth while deleveraging our balance sheet and investing significantly into our future systems and talent. We launched our private funds management business, overhauled our internal and external incentive structure, made substantial progress on Welltower Business System initiatives and created our Tech Quad to take our technology journey to the next level.

However, these exceptional achievements made across the business are frankly in the rearview mirror, where our focus is firmly and intensely on what comes next. What truly excites us is the deliberate actions we took in 2025, which we believe will meaningfully amplify the trajectory and duration of our long-term per share growth. These actions were part of a decade-long effort to transform our firm from a real estate deal shop when we arrived at the company to an operations and technology first business, with the maniacal obsession of delighting residents and prioritizing site-level employee experience.

There are very few businesses in which the earning the trust of customer is more important than senior living. Each day, our team shows up with one question in mind, how do we support our best-in-class operators to Welltower Business System to provide a killer value proposition to residents, their families, and site-level employees whom the resident rely on every day. As an operating company in a [ real estate wrapper ], it is of utmost importance that we get this right. Only then do we have a shot at achieving our North Star, the long-term compounding of per share growth for our existing investors.

Before providing some additional commentary on the events which led to this juncture, I'll quickly review our fourth quarter results. In terms of our senior housing operating portfolio, we ended the strongest year in our company's history with a high note, reporting 13th consecutive quarter in which same-store operating -- net operating income growth exceeded 20%. Our organic revenue growth continues to hover around 10%, driven by 400 basis points of year-over-year occupancy gains and healthy rate growth. And as Tim will outline for you shortly, we expect another year of strong occupancy upside in 2026, along with strong pricing power.

Additionally, I would be remiss not to mention the continued outside expansion in operating margins, which increased by another 200 basis points -- 270 basis points in the fourth quarter. As John will describe to you shortly, we'll continue to see multiple opportunities to drive margins meaningfully higher in the coming years, including continued implementation of Welltower Business System, our proprietary operator tailored end-to-end operating platform.

Looking to 2026 and beyond, against a macro and geopolitical backdrop fraught with uncertainty, the end market demand for our product is highly visible and only expected to improve as the 80-plus population continues its pace of rapid growth. And with new construction remaining at trough levels and long-term interest rates and construction costs remain stubbornly high, we continue to feel good about the supply side. While demand/supply picture continues to improve each passing day, we're laser focused on execution at the granular level, alongside our operating partners with whom we stand shoulder to shoulder no matter what.

Despite the true joy and satisfaction of helping residents to live well, the underlying business of senior living is a hard one. Needs are very different and [ wants ] from residents to residents. And our predecessor company, HCN, entered into equity ownership post GFC from a historic lease or credit model without appreciating it was a completely different game. For the last decade, the current management team completely overhauled this organization, turned over 2/3 of our asset base and operators, 90% of the people and transformed their contracts and so on and so forth. The transition has been and continue to be incredibly difficult. We built out a vertically integrated hardware plus software model to navigate this treacherous water.

The hardware is our best-in-class real estate that we curated over past decade. The software is comprised of WBS, along with the execution of our best-in-class operating partner ecosystem. We see the light at the end of the tunnel, but we still have a long ways to go even after almost 2 decades of accumulated battle scars and paying down taxes. This is not a complaint. The management team of this company, including yours truly, deliberately sought out this industry because it is a hard problem to solve, and our competition is forced to follow us in these difficult terrains.

This vertically integrated software plus hardware model aims to reduce latency across the stack of decision-making and putting network effect into operational execution. This directly feeds into our capital allocation flywheel, driving execution into high gear in 2025, which we are likely to observe again in 2026. We ultimately completed nearly $11 billion of net investment activity for the year, consisting primarily of high-growth senior housing properties across all our regions, which are funded in large part through the sale of our outpatient medical business for $7.2 billion. We thus far sold the first 4 tranches of the portfolio for $5.8 billion, significantly ahead of our prior expectations, with the remainder set to close in the first half of the year.

And it's worth repeating that we are able to execute this massive capital rotation and a shift in our long-term growth profile without incurring any near-term earnings dilution. Historically, in the corporate world, these types of mix shifts to higher growth businesses from lower growth ones almost invariably comes with some degree of dilution as lower growth businesses generally trades at a lower multiple, a stark contrast to what we pulled off.

Importantly, we continue to be extremely discerning in our evaluation of prospective acquisition, having passed on billions of dollars of opportunities [ we ] simply did not meet our criteria in terms of location, quality, operator contract or pricing. We recently saw some high-quality assets where we wouldn't sign even an NDA because they are encumbered by long-term management contracts, where in exchange for writing the entire equity check, you get the honor of sitting in second position on cash flow and had delivered a [ hope note ] that someone else will get it right. We do not buy assets with liens on them, which exactly what long-term management contracts are.

Nonetheless, we have started off 2026 with a bang with $5.7 billion of acquisitions and with [ $2.5 billion ] of new deals completed or under contract in just first 6 weeks of the year and a robust pipeline that can be described as granular, visible and highly actionable. Needless to say, 2026 is quickly shaping out to be another banner year for us in terms of acquisition activity.

Importantly, capital allocation does not solely involve acquisitions, but also include disposition activity to methodically shape the portfolio of future growth. It is not about here and now, but the duration of growth that will be the key determinant of our long-term success. And through these efforts, we have been able to intensify our focus on rental housing for rapidly aging population. So in addition to the sale of our outpatient medical portfolio, which I mentioned earlier, we sold another $1.3 billion of portfolio of skilled nursing assets, which marks one of the most successful full circle transactions executed by our management team. We brought this portfolio as a part of UCP transaction in 2018, which is the only public to public M&A transaction executed by this management team.

As you are -- as most of you are aware, the period from 2020 to 2022 was exceptionally challenging for that sector, driven by the impacts of COVID pandemic and resulting labor shortage. However, due to the structure we created in 2018, including a [ parent ] guarantee, we did not lose a dollar of cash flow despite substantial cash flow deterioration incurred at the property level. At that time, many folks had encouraged us to simply rip the Band-Aid off and dispose of this portfolio given the headache it was creating for us in the public market. Instead, we rolled up our sleeves to determine the best path forward for the portfolio and for our owners with a firm belief that volatility is not risk.

Ultimately, we embarked on an arduous process of recapitalizing this portfolio with Integra, which then brought its network of regional and local sharpshooters to turn the portfolio around. And over subsequent 3.5 years, the portfolio witnessed a massive [ $500 million ] rebound in cash flow, which we believe is close to stabilization. The return achieved by the sale is a function of basis, structuring and sheer grit and tenacity displayed by our team to achieve the best possible outcome for our owners.

I would note that the unlevered IRR of 25% and a 3.1x unlevered money multiple achieved on this portfolio over 7 years compares highly favorably to a proxy of public [ NFPS ] with equities levered was delivered an approximately 10% to 11% return over the same time. Collectively, these [ board ] capital allocation moves, both acquisitions and dispositions, have enabled us to remove organizational complexity and narrow our focus on senior housing with the goal of elevating the customer and employee experience through better operations at technology. At the same time, we fundamentally enhance the terminal growth rate of our enterprise.

Lastly, I'm pleased to announce the closing of Senior Housing Equity Fund I and the launch of Senior Housing Debt Fund I, our foray into capitalized businesses. Nikhil will provide you more details, but this business vertical represents a natural extension of our balance sheet strategy, allowing us to jump-start a significant capital allocation business. We're incredibly grateful to ADIA and our other LPs who have entrusted us with their capital in this new endeavor.

And with that, I'll turn it over to John.

Thank you, and good morning, everyone. As Shankh described, 2025 marked a truly transformational year for Welltower. Not only did we deliver another period of exceptional results, but we also witnessed the benefits of our Welltower Business System initiatives starting to bear fruit. As we discussed in the past, the backdrop for growth remains attractive, but our goal is to drive meaningful health for our owners through the full-scale modernization of the senior housing portfolio via WBS. More on that shortly.

In terms of our fourth quarter results, we delivered total portfolio same-store NOI growth of 15%, driven once again by another quarter of strong senior housing operating portfolio growth of 20.4%. Remarkably, this marks the 13th consecutive quarter in which SHO portfolio same-store NOI growth has exceeded 20%. Demand for our needs-based and private pay senior housing product continues to strengthen, as reflected by continued occupancy gains during the seasonally slower period of the year.

From a year-over-year perspective, the portfolio delivered another quarter of 400 basis points of occupancy growth, amongst the highest levels achieved in our history. And combined with healthy levels of rate growth, we achieved same-store revenue growth of 9.6%. Notably, top line growth was consistent across all 3 geographies and senior housing acuity levels.

With respect to expenses, we continue to see favorable trends across key line items. ExpPOR or unit expense growth increased 0.8%, one of the lowest levels achieved in our recorded history. As the spread between RevPOR and ExpPOR growth remains at historically wide levels, we were able to post another quarter of strong margin expansion of 270 basis points. As Shankh mentioned, given the high fixed cost nature of the senior housing business, we expect operational leverage inherent in our business to continue to play an important role in driving margins meaningfully higher in future years.

Additionally, our regional densification efforts continue to create significant top and bottom line synergies while we also recognize meaningful efficiencies from our WBS-driven initiatives. Going forward, we remain highly confident in our ability to continue to deliver outsized NOI growth. While we take nothing for granted and remain intensely focused on driving excellence in all aspects of operations, organic revenue growth should remain strong with significant occupancy runway ahead, coupled with a healthy rate growth.

Similarly, there was ample room for margin expansion from current levels for the reasons I noted a moment ago. I think -- as I think about the next few years and beyond, our focus is simple: People, optimizing the human interaction provided a delightful experience. Processes, remove bottlenecks and streamline flow. Data, provide our operating partners with robust objective data to drive positive outcomes. And technology, leverage technology to improve the customer and employee experience, automating processes and providing personalized experiences.

Reinventing a business like senior housing is by no means an easy one, and we have not been shy about adding necessary resources, including extraordinarily high caliber talent to effectuate this change. As Shankh described, WBS, along with our operating partnership relationships, serve as the backbone of the software side of our vertically integrated hardware and software model. We are methodically removing time-consuming administrative burdens that employees contend with on a daily basis, freeing them to focus on what they signed up for, taking care of residents.

In terms of recent talent we have brought into Welltower, we have already witnessed a strong impact from Jeff Stott, our new Chief Technology Officer from Extra Space Storage. Along with his first prominent hire, Bron McCall, himself a former CTO of Extra Space. Together, they are leading the digital transformation of the business and integration of our enterprise systems, areas where they bring deep expertise and a strong track record from their prior roles.

The early contributions from other members of our Tech Quad cannot be overstated either. Additionally, the decision to transition some of our strongest internal talent into operational roles, including Russ Simon, our EVP of Operations, is already being validated by meaningful value they are creating.

In our continued pursuit of higher standards across every aspect of the organization, particularly in operations, we fully remain fully committed to investing the time, talent and resources necessary to deliver a truly superior experience for senior housing residents and the employees who serve them. The future of our company has never been brighter, driven by the dedication of our internal Welltower team and the unwavering commitment to our operating partners who share our vision for transforming the industry. More to come in 2026.

And with that, I'll turn the call over to Nikhil.

Thanks, John, and good morning, everyone. As I reflect on 2025, it was a marquee year for the company, one that fundamentally changed the long-term growth profile of our business. We deployed $11 billion of net investment capital. And together with strong organic NOI growth, increased our SHOP concentration by roughly 12 percentage points to circa 70%.

On the investment side, we closed [ 19 ] different transactions, acquiring over 1,000 properties, more than 175 of which are either under construction or recently delivered. While these assets are not meaningful contributors to near-term results, they are expected to significantly bolster our already industry-leading growth for many years to come and were underwritten to achieve attractive risk-adjusted returns.

To put the quality of our recent acquisitions in context, the average age of our SHOP portfolio today is 16 years compared to 19 years at the end of 2021. On the disposition side, we continue to create shareholder value by monetizing mature or slower growing assets and redeploying capital into higher growth, higher total return opportunities. As a result, the assets we acquired are budgeted to generate approximately 10x more growth in 2026 than the assets we sold.

Our previously announced $7.2 billion Outpatient Medical sale to [ Kayne Anderson ], which generated a $1.9 billion gain on sale, remains on track and ahead of schedule. To date, we have closed approximately $5.8 billion, with the remaining assets expected to close during the first half of the year as [ tenant is tooled ] and [ ground lessor of consents ] are finalized.

I also want to highlight our progress on the Integra portfolio or what some of you may remember as the former ProMedica, UCP or [ HCR ManorCare ] portfolio. We have entered into $1.3 billion of asset sales across 12 different transactions, representing approximately half of the portfolio. With these sales, as Shankh mentioned, we have achieved an unlevered IRR of approximately 25% or a 3.1x unlevered multiple on invested capital, returns that are exceptionally difficult to generate at this scale.

Candidly, this transaction has not always been a popular one with many of you. The initial announcement in 2018 was met with skepticism. And during our restructuring period in 2022, many investors would have preferred that we exit the assets at bottom-of-cycle values. Our team took a different view. We went back to first principles and asked whether the underlying thesis had changed. Owning assets at an attractive basis in a supply-constrained sector with durable need-based demand, it hadn't. Rather than reacting to sentiment, we focused on execution, stabilizing operations, partnering with strong regional operators, maintaining a conservative rent load and aligning incentives across the platform.

Following these sales, the remaining Integra assets continue to perform well, with in-place EBITDAR coverage greater than 2x. Staying the course wasn't the easiest decision in the moment, but it was a disciplined one, and it reflects how we approach capital allocation over full cycles, not short-term pressure.

Turning to 2026. We are off to a great start. While the back half of the fourth quarter can often be a quieter period for deal activity, our momentum carried through the holidays and into the new year. We have already closed on or are under contract or close on $5.7 billion of total acquisitions, including the previously announced $3.2 billion Amica Senior Lifestyle transaction and new activity of $2.5 billion over the last few weeks. This new activity spans more than 30 different transactions and is comprised primarily of newer vintage assets with blended occupancy in the low 80% range. Most of the transactions of our [ store stock ] market, which continues to reflect the strength of our relationships and origination platform.

I am pleased to provide an update on our private funds management business, which we launched roughly 1 year ago. As we have mentioned several times, our approach to capital-light strategies is simple. We are moneymakers, not asset gatherers, and we seek opportunities that are compelling, durable and complementary to our balance sheet. We are thrilled about adding another business vertical which we believe will benefit our existing owners over the long term.

We recently held the final close of our U.S. Seniors Housing Fund I with approximately $2.5 billion of equity commitments, marking one of the largest recent first time real estate fund launches. The fund was significantly oversubscribed, which we believe is a reflection of our data science capabilities and capital allocation track record. The fund includes approximately $2.1 billion of third-party capital with blended management fees of 1.35% and 8 third-party limited partners, representing some of the most thoughtful and significant global capital providers. We are already approximately 50% deployed, and similar to our balance sheet strategy, investing in opportunities where we have high conviction. Building on the success of our equity fund, during the fourth quarter, we also launched and held the first close of the Welltower U.S. Senior Housing [ trade funding ].

I'll close with this. Our mandate is simple. From the moment we wake up, to the moment we go to sleep to create value for our shareholders, our entire organization is focused on unlocking additional value, whether that comes from the assets we already own, through operations and disciplined portfolio management or through thoughtful capital allocation, acquiring, lending, selling or building assets and by growing our capital-light business. Our thesis is straightforward. When we stay focused on simple goals, apply discipline and keep emotion out of decision-making, good outcomes tend to follow.

With that, I'll turn the call over to Tim to walk through our financial results and 2026 earnings guidance.

Thank you, Nikhil. My comments today will focus on our fourth quarter 2025 results, the performance of our triple-net investment segments, our capital activity, a balance sheet and liquidity update and finally, the introduction of our full year 2026 outlook.

Welltower reported fourth quarter net income attributable to common stockholders of $0.14 per diluted share and normalized funds from operations of $1.45 per diluted share, representing 28.3% year-over-year growth. We also reported year-over-year total portfolio of same-store NOI growth of 15%, driven by 20.4% growth in our SHOP portfolio, which now makes up circa 70% of our in-place NOI.

Now turning to the performance of our triple net properties in the quarter. In our senior housing triple-net portfolio, same-store NOI increased 2.6% year-over-year and trailing 12-month EBITDAR coverage of 1.19x. Next, same-store NOI in our long-term post-acute portfolio grew 2.6% year-over-year, and trailing 12-month EBITDAR coverage is 1.53x.

Moving on to capital activity. We financed our investment activity in the quarter with dispositions in equity with $9.5 billion of combined gross proceeds. This allowed us to fund a $13.8 billion of investment activity and end the quarter with net debt to adjusted EBITDA ratio of 3.03x, representing a roughly 0.5 turn reduction from the end of 2024.

We ended the year with $5.2 billion of cash on hand, which together with approximately $3.5 billion of disposition activity we expect to complete during the year, provides funding for roughly $5.7 billion of investment activity. This includes the $2.5 billion of net investment activity closed in Q1 or under contract to close as we announced last night and the $3.2 billion Amica transaction that was put under contract last year. Taken together, this net investment activity and continued cash flow growth from the in-place portfolio should leave us exiting 2026 at a net debt to EBITDA level consistent with where we finished this year.

Before turning to our guidance, I want to highlight how our recent portfolio activity is changing the growth profile of our enterprise. Even with the same initial growth outlook for our senior housing operating portfolio as we started last year, 18% at the midpoint, our total portfolio of same-store NOI growth is more than 200 basis points higher. This faster growth reflects the continued mix shift towards higher-growth senior housing communities, and the flow-through impact has had an organic cash flow growth. In turn, this is driving a higher FFO growth assumption versus last year. As we further intensify our focus on senior housing, we believe Welltower 3.0 is positioned to compound cash flows at a meaningfully higher rate than the portfolio's prior growth profile.

As I turn to our initial 2026 guidance, which was introduced last night, I want to remind you that despite the robust pipeline that both Nikhil and Shankh described, we have not included any investment activity in our outlook beyond the $5.7 billion that has been closed or publicly announced to date. Last night, we introduced a full year 2026 outlook for net income attributable to common stockholders of $3.11 to $3.27 per diluted share and normalized FFO of $6.09 to $6.25 per diluted share or $6.17 at the midpoint. Our normalized FFO guidance represents an $0.88 per share increase at the midpoint from our 2025 full year results. This increase is composed of a $0.58 increase from higher year-over-year senior housing operating NOI, a $0.30 increase from investment in financing activity and $0.02 from higher triple net income. This $0.90 of growth [ has net ] $0.02 of G&A offsets.

For context, the net G&A assumption, we expect general and administrative expenses to be approximately $265 million at the midpoint. The stock-based compensation expense of approximately $60 million or $0.08 per share drag to normalized FFO. Underlying this FFO guidance is an estimated total portfolio year-over-year same-store NOI growth of 11.25% to 15.75%, 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 15% to 21%. This is driven by the following midpoint of their respective ranges. Revenue growth of 9%, made up of RevPOR growth of 4.8% and year-over-year occupancy growth of 350 basis points and expense growth of 5.5%, equating to ExpPOR growth of just below 1.5%.

And with that, I will hand the call back over to Shankh.

Thank you, Tim. Before we open the call up for questions, I would like to discuss two topics that many of you have recently asked about: one, talent density and incentive design; and two, increased competition for acquisitions.

I'll address the first topic in two parts, Wall Street and Main Street. After announcing the 10-year Executive Continuity and Alignment Program last quarter, I sat down with the majority of our large shareholders. While we received significant support for the plan's philosophical underpinnings, we have also heard a desire for expanding the group of participants and increase the performance-based portion of the total plan. I'm delighted to inform you that working with our Board of Directors, we swiftly applied this feedback. We broadened the plan to include 7 additional leaders, with 70% of the payout now performance-based, up from 50% that was announced in Q3. This group also give up a substantial portion of the promoted interest in a first fund vehicle and all of their interest going forward, with those economics redirected towards attracting and retaining talent to the next level of leaders within the organization. We expect little to no turnover at any [ NEON ] and EVP levels over the next decade and have designed long-term highly aligned incentive plans to retain the strongest talent at all levels of our organization. Make no mistake, this is a team game.

In terms of Main Street, the Welltower Grant, which was announced in Charlie's memory, has been a huge hit with our operating partners and at our communities. We're expanding this program beyond the originally announced 10 communities and are exploring mechanics to expand it internationally. Engaging with these frontline employees about Charlie and his philosophy of compounding has been, in many cases, prompted them to think about first time about investing and long-term wealth creation beyond just wages alone and has been personally extremely gratifying for me. We believe we're on to something here.

Regarding the announcement of several health care REITs and private funds jumping on to [ Shop ], I would offer the following observations, which is strictly my personal opinion. These are capable organizations, and many will find their niche to do well. Others will appreciate that writing credit checks is very different from owning equity in a complex and operationally intensive business that cannot be addressed simply by hiring a few asset managers to manage the managers, as HCN did. These are full cycle lessons, and will be learned as such.

I repeated this point for a decade and perhaps will continue to do so for another one, like a broken record. Exposure alone does not define success in these challenging terrains. As I've mentioned in my earlier remarks, we deliberately sought out this industry because it is a hard business. Even in highly competitive industries with largely indistinguishable end products, elite long-term compounders still emerge: Costco, McDonald's, [ Gener ], [ Kit ], [ Cintas ] exist for a reason.

If we take a step back and look into relatively nascent senior housing industry with evolving standards to meet expectations of baby boomers, you will notice that there is virtually no scale capital focused solely on this business. To the contrary, the [ in-store ] capital, including some of the world's largest pools of sovereign type funds, actually want to be part of the Welltower flywheel. But this is not a discussion of capital. As Charlie said, any fool can write a check.

In 2025, we targeted and evaluated several thousands acquisitions using our data science platform, and from those, curated a portfolio of roughly 1,000 communities that we engaged and transacted with sellers mostly off-market. We onboarded this massive hall into Welltower operating partner network with the help of WBS, which is a complex adaptive system with little disruption to customer service. The sheer complexity of scaling an unscalable business is where our value add lies. Yes, we can point you towards many examples such as the Integra JV that prove our capital allocation capabilities to be somewhat satisfactory.

But it is not in addition to the operating and technology prowess of our network and that of our operating partner, but because of it. And that mode is expanding, not shrinking, as the network effect of our data and insights on a platform grows exponentially. We welcome our competition to chase us into these challenging trends that keep us on the edge and paranoid every day to show up to win.

Having said that, we are not a competition centric organization. We're a customer-centric organization. In rare cases where we engage in a market-based process, our competition for acquisition remain financial organization who are fixated on cap rates, financing and spread investing, while our obsession lies with the customer journey and employee experience. Our primary business remains off-market, privately negotiated transactions with owners. We're trying to solve the dispo problem or embarking on a different opportunity. We have no crystal ball to determine which model will ultimately prove to be more successful. While the change of our business model over past decade ensures that we'll not need to buy another asset to drive strong partial growth well into the future and expanding operational and technology more is uncovering more and more acquisitions opportunity for us. 2026 will be no different.

With that, I'll open the call up for questions.

[Operator Instructions] Your first question comes from Vikram Malhotra with Mizuho.

Congrats on the strong quarter. Shankh, I guess I just want to build on what you just said, compounding and duration. I know the -- you said you have a lot of acquisitions ultimately that reloads the same-store pool. We've seen this in other sectors. But I'm hoping you can give us a bit more quantitative or framework to think about this compounding aspect. The portfolio is at 90% on same-store. How should we think about like a stabilized portfolio in terms of RevPOR margin and then overlaying the WBS systems? Maybe anecdotes or some numbers would be helpful.

Yes. Vikram, Look, I'm not going to sit here and try to speculate what future might hold. But I will just say that I focus on a couple of things that I mentioned, which is, first is sort of the idea, we're not after same store, right? If you just think about what is our North Star is what we have said that we are focused on is partial earnings and cash flow growth. And that comes from very different places, right?

So let's just think about it as mix shift is a very important part. We said that we believe that we'll be able to drive double-digit NOI growth for a long period of time. So I'm just -- it's very hard for me to say your focus is 2 years from now, 5 years from now, 7 years from now. So instead of that, let's just focus on the fact that a lot of things matter is just, obviously, as our assets leased up and gets over 90%, we're seeing significant pricing power higher than assets with, say, less than 80% occupancy, right? That's just basic supply-demand.

But also, I would like you to think about a couple of other things from a standpoint of earnings and cash flow growth. One is a very important factor, mix shift. I just think about it simple times, right? Two quarters ago, our SHOP was 59% of our overall portfolio, right? Obviously, probably 4 years ago, that was 35%, something like that. Now you think about it, okay, 60% grows 20%, 80% grows 15% or 100% grows 12%. You have the same exact impact on partial earnings, just as a point of reference, right?

Then sort of think about, okay, what's going on with free cash flow generation? What can you do with that free cash flow, whether it's acquisitions, whether it's return on capital. Because the marginal cost of your free cash flow is 0. So all of these, as sort of you think about it, you have -- you can get to and obviously with an unlevered balance sheet, which will -- some day we'll use it for growth as well. And you put all of these with the framework of what we think could be a long sort of journey ahead of us of margin expansion.

And we think the growth algorithm, you don't have to be a genius to figure out that it could be a very significant and very strong one. How exactly, what numbers, what year, it's just hard to speculate right here, sitting here. But I will say that the future looks very bright to us. Whether we're right or wrong, only future will say. But you can see the 12 of our colleagues have bet their entire lives for next decade on this because we think the future is very strong. We'll see what market gives us.

Your next question comes from John Kilichowski with Wells Fargo.

My question is on the Tech Quad. You've already made such progress with Welltower Business System and with your data science platform. I'm just curious, what challenges are there left in the senior housing space to tackle? You're still hiring significantly. And then maybe an extension of that would be, are you building something that would eventually be monetizable?

So let me answer that question. I think I addressed this before. There are 2 ways I think about our technology platform. One is our data science platform, which is mature, but there's a lot of work to do. And as you can see, what Nikhil mentioned, the economics that we received on our fund business that suggests to you, which is significantly higher, many would claim 2x higher than many others have received in the fund management business is a pure function of our capability of the data science platform, right?

So one, you can see sort of the monetization of that platform is actually coming through. Now if your question is on the operational side, operational technology side, I wouldn't even call us mediocre. I would call us mediocre minus. So we have a long ways to go in that journey. Just because we are better than in a business where we sought out because we thought there's a lot of opportunity and we're doing fine does not make us really great. So we have a long ways to go, and you can see that we are continuing to hire terrific leaders across different industries, from different expertise, and we continue to double down on that. And I think it is a long sort of a journey in front of us.

Now if your question is will we monetize these platforms in terms of other capitals to use, right, and think about sort of LRO of what [ Akston ] and EQR did many years ago or third-party management in self-storage, things of that nature, if that question is with that angle that I would say that, that will never happen. Our operating capabilities of our core investment cycle will always remain within the bounds of this company.

Now we're bringing our capital and others into this platform, we're open to helping our partners who are on the platform thinking about investment in real estate in many different ways, but we will never see us sell our operating software to someone else so that they can compete with us. We'll never do that.

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

This is Farrell. I just wanted to touch on the Integra disposition. Now given the sale of the [ SNF ] portfolio and really the highlight of the source of funds and the value harvesting, does this now frame your [ SNF ] portfolio in total as a source of funds for future -- or future acquisitions?

Yes. Farrell, I think the way to think about our skilled nursing portfolio, as we've described it in the past, is a structured credit investment, right? Structured credit investments by default are relatively short dated in nature. The definition of that is in the eyes of the beholder. But our skilled nursing strategy is to acquire assets that are -- that have an operational turnaround story behind them, bring in really sharp regional operators and then turn the performance around harvest value. And our fundamental view is these high-quality operators, they should be the end owners of skilled nursing businesses, skilled-nursing assets because there is attractive [ hot ] financing available. And once you've executed the business plan, that is the right to table capitalization of the assets.

So we will continue to acquire, stabilize, exit. And then what we do with the proceeds and how we redeploy it is purely opportunity dependent. We don't have allocations in our mind of what -- how big or small each bucket needs to be. If we have good opportunities, we'll invest capital. If we don't, we don't. And it will depend on what is the best use of capital depending on the time period we're in.

Your next question comes from Omotayo Okusanya with Deutsche Bank.

Yes. And again, congrats on a really incredible outlook. A couple of questions, if I may just ask 1 or 2. The first one, the SHOP portfolio. Could you just help us understand at this point how large the non-same-store pool is some general characteristics of that pool? Like occupancy or wherever that is. And just -- we're trying to understand a little bit about how that's growing relative to the stabilized portfolio.

Yes, I'll start with that. So if you think about our -- our same-store portfolio right now makes up over half of our total portfolio, and a lot of that is just because of how acquisitive we were last year. So it takes 5 quarters for something we acquire to come into same-store. I would describe the growth we're seeing in that portfolio is consistent with what we have in our same-store portfolio.

The characteristics of that portfolio, it is less occupied. If you think about kind of that strategic on our side, we continue to buy assets that we believe there are -- there's significant upside on the balance sheet. And then just given the nature of our acquisitions last year, a lot of it U.K.-focused in the back half of the year, I'd characterize too, that it's heavier in the non-same store is heavier in the U.K. than relative to the same-store portfolio.

Your next question comes from Ronald Kamdem with Morgan Stanley.

Just wanted to double click on some of the occupancy performance, both last year and sort of the guidance into going into '26. Just -- I'd love some updated thoughts in terms of how you guys drive sort of move-ins versus move-outs? And how much is WBS contributing to the outperformance versus the industry?

I will take the last part of that question. And John, perhaps you can address, while [ Tran ] is trying to get on the first part. You know what sort of our peers or [ NIC ] data or others or reported, I believe, for [ NIC99 ] occupancy growth last year was something 250 or something like that. And we did 400, sort of that gives you the answer to the first or last question. John, what sort of -- how do you answer the first one?

You're asking what's driving the occupancy. I mean, it is a combination of items, and it starts all the way from focusing on the marketing, all the way through the customer experience, the speed to lead, how we're answering the calls, et cetera, et cetera. And it's an execution business. And that's what's changing rapidly as we isolate and focus on each component there and optimize at each site, which has enabled us to outperform market share.

Your next question comes from Michael Goldsmith with UBS.

You had a robust year of acquisitions in 2025. 2026 is starting off very strong. How long can you continue to acquire unstabilized SHOP in the 75% to 85% occupied range? At what point is there none of that left or that benefits from industry trends? And does that impose a problem now, given that you now have a fund vehicle buying more stabilized assets?

Yes. I'm not doing a good job of explaining my point. So I'm going to try to do it again. How long is a pure function of market opportunities. So I can't sit here and tell you how long the acquisitions opportunities will be there. The goal is to create value on a per share basis for existing investors and not do transactions, right? That's sort of the first and foremost point I want you to walk away from.

And so we will see -- our goal is to create value, right? So if we can value -- create value by buying, we'll do it. If not, we'll not do it. If we can create value by selling, just like you saw right? I said this several times, making money is hard, making money at scale is much harder. And we continue to do it. So the goal is to create value for existing shareholders on a per share basis. I sort of see a Pavlovian response to acquisition activity or investment amount. I understand historically sort of that why that made sense because it was fundamentally a triple net model, and where only way companies drove earnings is buying properties because effectively, all their earnings were straight line, and there was no growth.

And I understand that for many companies in the sector or triple net sectors and others, I just wanted to emphasize this and understand that, that does not matter to us anymore. The mix shift of this company is at a place and continue at places that we'll never have to buy another asset. We'll see what market gives us. Having said that, after answering your question philosophically, and tactically, we have never been busier.

As you can sort of -- I think you heard from Nikhil. In first 6 weeks of the year, we have done 37 different transactions. That's about a transaction a day, right? So it feels like the opportunity set is very robust in front of us as long as we can make money through sort of our operational and technological prowess and are able to allocate capital, we'll do it. If not, we'll do what you just saw we did on the Integra portfolio.

Michael, I'll just add 1 thing really quickly. You started by talking about occupancy. That's not the only lever of driving growth out of assets, right? It's a complex operating business where you're spending $70 up $100 you're collecting on expenses. And so even in highly occupied buildings that we're buying, we're creating significant value through WBS. So that's just 1 way of looking at it, but there's just so much different ways to create value in the business.

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

I was hoping you guys could contextualize the SHOP occupancy growth and RevPOR growth guidance versus last year. I mean, you're at a higher occupancy today, but you're initially assuming higher growth in occupancy than you did at the outset of last year. And I know last year, you had a leap year comparison, but just how should we think of the balance between RevPOR growth and occupancy growth in the setup going into 2026 versus where you were a year ago?

Let me try to start, and then Tim will jump in. So obviously, it is our guess. So you have to understand that what we are telling you at this point, and we'll see what -- how the year plays out. From RevPOR point is the one I'll take up and say, you picked up on one, you have to think about on a up-adjusted basis.

The other thing you have to think about is the massive pool change that happened in fourth quarter. I think I talked about this 6 months ago, that 90-plus assets are going to get into fourth quarter, which is holiday. Those assets are still in an occupancy journey. And until the occupancy journey is occupancy is stabilized, we're not going to get on to a substantial rate journey. Just that change, [indiscernible] alone was a 30 basis point drag on fourth quarter RevPOR. That obviously is going through 2026 guidance numbers.

But as I said, Austin, I highly encourage you to think about -- these are for a large company, large portfolio same-store RevPOR or ExpPOR NOI, these are all sort of markers towards the ultimate goal. And that ultimate goal is per share growth, right? So forget about how these things all combine into an OpEx. Just think about how much underlying cash flow growth we are driving. That our initial FFO guidance, we started at, what, 16%, 17%. I don't know, Tim, do you want to add anything to that? Good. Okay.

Your next question comes from Nick Yulico with Scotiabank.

I guess maybe just a sort of related question on the guidance for how to think about like that spread between RevPOR and ExpPOR growth. I know you guys have the chart in the presentation, that's been a wide spread. Is it -- are you guys assuming that spread is actually shrinking a bit this year? Because the reason I'm asking is I think you're saying ExpPOR growth is going to be somewhere below 1.5%, and I think it was below 1% last year. So just trying to understand that dynamic and if there's also sort of an element of conservatism built in there.

Yes. Thanks, Nick. I think the right way to think about it is beginning of the year outlook, as we sat here last February, we actually -- we had a similar outlook for ExpPOR as we have today. Where we ended the year, we drove more occupancy. ExpPOR is a direct beneficiary of occupancy and being able to scale cost. So I think sitting here today, conservatism is -- we're going to be kind of used within about our guidance, but it is just in our business. A disproportionate amount of the year-over-year growth is driven over a 6-month period. So consistent with how we've talked about guidance in the past, when we sit here in February and that -- those 6 months kind of kick off in April and May. It's just the appropriate kind of view of probability, what -- or possibilities of what could happen in the year and framing it in a way now that certainly we hope we can outperform, and I'll leave it at that.

Your next question comes from Rich Anderson with Cantor Fitzgerald.

Congrats. And congrats to the 12 employees. I hope you don't get sick of one another in the next 10 years. So my question is -- everything is great, great growth, all that sort of stuff. I have a question about -- the main problem with Welltower, if there is one, and that is everyone owns it. And it's -- everyone is full on Welltower, you got to own it and everything else.

So I'm curious, can you talk about the company's outreach to a broader swath of investors, generalists, international? Can you talk about the success you've had, just sort of getting the word out beyond the confines of the REIT industry to sort of make sure you're getting your fair share? If you're not already, of course, but you, in the future, get your fair share of upside for all the successes that you're having as a company?

Rich, I don't really know how to answer the question. I -- we manage the business. We work 24/7, all of us together, to create what we think drives shareholder value over a period of time, which is per share earnings and cash flow growth. And we believe we can do that. We're a tiny company in context of U.S. or international capital markets.

The investors will find us, right? That's not our job. Our job is to execute. It's a hard business. I don't think I want -- I don't want you to walk away with this idea that everything is great, right? You guys see we have a large portfolio. You see on average what's going on in our portfolio. And that does look good. I'm not going to say it doesn't.

Having said that, it's a very hard business. We're fighting challenges every day. And our job is to execute with our operating partners, from capital allocation to operations to everything in between. And if we can drive per share earnings and cash flow growth, I don't worry about that we don't have enough investors who will not find us. It's a matter of growth, right? So I will keep this organization focused on growth delivering actual operational and capital allocation outcomes, and I don't worry about that.

Having said that, the company has sort of gotten to a size finally where it is showing up as sort of -- from a size standpoint with a lot of investors who didn't know we exist despite the fact we sort of don't get into what a lot of companies do get on CNBC, Bloomberg, et cetera, we know how to do that. However, a lot of investors are sort of seeing that this has become -- just from a size standpoint, market cap standpoint, has become large enough. They're sort of finding what is this company about and reaching out to us, and we have a very good capital markets team, very capable team to sort of tease them how we think about the business. And there is enough material on us that we have written over the time. That is not a hard business to understand from that perspective. But I will leave it there, and we can have future conversations about this stuff.

Your next question comes from [ Seth Bergey ] with Citi.

I guess just going back to the funds business, you announced the debt funds, you've deployed some of the equity funds, kind of -- and you've talked a little bit about the funds business as a way to kind of monetize the Welltower Business System and the successes you've had with the data science platform. How -- kind of how do you see the trajectory of that funds business? And should we expect that to be kind of a larger piece of the story over time?

Yes. I think, Seth, as I said in my prepared remarks, it's opportunistic as tactical, right? We're not asset gatherers. If there are opportunities that are complementary to our balance sheet where we can make money for our capital partners, we will continue to do more. If there aren't, we won't, right? So there is no mandate beyond that. The simple mandate is to make money if there's interesting opportunities to go do so. That being said, just like the debt fund. There was an opportunity for that, that 1 of our LPs reached out to us about. And based on their suggestions, we created a strategy that was -- that's appealing to several folks.

Yes. I just -- I don't want to repeat what Nikhil said, but I will. I have a significant problem with a lot of fund management business that have become just plain straight asset gatherer, and I never want this company to become that, right? So we -- as we have said that we could have had this fund significantly bigger than where it was, right, because out of -- we had -- our demand has meaningfully outpaced what we were trying to do from a size standpoint, we want to remain what Nikhil said, that we take our LP capital's -- or LP investors' capital as seriously as we take our public market investors capital.

We will take capital only if we think we can make a significant return on it. Otherwise, we won't. We have no desire to become asset allocator and become a big fund management business where in my personal humble opinion, a lot of these places have become capital raising places instead of actually making money business, which they used to be. We'll never let this company become that.

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

Congrats on the results. Just curious on the capital side with regards to CapEx for seniors housing, how we should think about that? Both the recurring and other CapEx in SHOP has been fairly significant. And so just curious, kind of what you're doing at the asset level to maybe try to future-proof these assets versus your competition or what the capital is largely going to given the assets are generally newer than you're acquiring?

Yes, it's a great question. When you look at -- starting with what we're acquiring, at this point, we're acquiring very good assets, and they're younger assets, and you can actually see that pretty easily when you look at the average age of the assets and the fact that every year, I get a year older, but our portfolio has actually stayed the same. And so that really tells you the quality of the assets that Nikhil is buying. And so I do want to highlight that.

At the same time, some of those assets are or bought where there's been issues in the capital stack, which drives cash flow. And that also drives decisions by the previous owners to hold back a little bit. So even though they're newer assets, some of them need a certain amount of capital to get them up to the appropriate standards.

From a -- what we're doing, we're really reinventing how the world looked at. And Russ is heavily involved in this. I'm involved with it, and others are involved with it. Looking at it from a life cycle cost, what is the life cycle cost, how do we provide a great customer experience and manage things throughout the entire life cycle. So whether it's flooring, whether it's siding, whether it's how we paint wrought iron, every aspect of the business, we're turning upside down and saying, what would the smart person do if they're going to own this asset and they wanted to maintain it. That does require, in many cases, upfront cost, higher upfront cost. But what you're looking to do is to lower the run rate over time, and that's exactly what's happening. I don't want to get too much into the weeds and give out some of our secrets. But it's exactly where we're going after, it is looking at each component, what is the lifetime cost.

One, I'll add 2 things. As you sort of look at near-term historic and forward CapEx, 2 [ MOAs ] you have to think about. One is holiday, which we talked about. We bought holiday, obviously, at a very, very low basis. And when we bought it, we said that you will recover investment, we're sort of coming to the tail end of the investment cycle. So that's very important.

And remember what we said last call on HC-One that will require that kind of investments. And we, again, bought it at a very meaningful, I think, what, GBP 95,000, GBP 96,000 per bed. And we would require investment into that probably GBP 20,000, GBP 25,000, GBP 30,000 per bed, something like that. And you just think about the total, there will still be in these assets for less than GBP 100,000 or GBP 125,000 per bed, which you know is a very meaningful discount to where it's today trade at or it requires to build.

So just sort of think about these 2 anomalies. Generally speaking, other than that, we're buying 2-, 3-year old assets which does not require a lot of work. But these 2 large portfolios, 1 is sort of falling off from that spend perspective. One is just taking off.

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

I wanted to circle back on the spread between RevPOR and ExpPOR topic. How wide has that spread gotten in the recent past? And should we think about that spread continuing to widen out over the next few years, just given that operators gain pricing power when occupancy is above 90% and the natural scale that the space has when occupancy starts to exceed 90%? I mean, how wide could that spread yet?

If you have a stable portfolio, right, that is growing from, say, 90% to 95% occupancy, and all things being equal, your answer should be yes. Right? So let's just go into sort of the -- a little bit deeper. Let's double-click on that conversation and then go a little bit deeper. You should gain pricing power as assets lease up, there's no question about it. And obviously, your ability to scale your costs, particularly labor will come into play, right?

But on the other hand, just think about there are other costs outside labor that are obviously problematic for every single owners of real estate, whether you are a single-family housing or you are owners of commercial assets like ours, line items such as utility cost, right? So that sort of is a headwind to that. Taxes, finally, you have to think about real estate taxes. Finally, cash flows are recovering, and that has an impact.

But generally speaking, as we sort of think about -- if we think about 2 main drivers of scaling labor versus your pricing power, you will think that, that gap will widen or stay very wide as we move forward. But just remember, Mike, that a lot of things happening on our reported numbers. You have to think about how large this portfolio is, what we are buying, how same-store changes and all of that. That's why I said you just think about it. At the end of the day, what matters is bottom line growth, right? And look at the bottom line growth, in fourth quarter, we pulled off an FFO per share growth in high 20s and cash flow per share growth in high 20s, right? So that sort of tells you that all optics aside, the portfolio is firing in all cylinders.

Your next question comes from [ Michael Stoyet ] with Green Street.

Can you just put brackets around the levels of NOI growth expected in 2026 across the U.S. SHOP, U.K., Canada and active adult businesses?

Yes. Overall -- you say bracket, so the overall portfolio is 15% to 21%. We don't provide guidance on the sub portfolios.

Your next question comes from Jim Kammert with Evercore.

I've read in some trade publications in the senior housing industry that today's independent living and increasingly, maybe even the AL customer prefers larger residential units. I'm just curious, does Welltower detect or agree with that assertion? And if so, how do you think your portfolio is positioned to maybe you've addressed the shifting taste of the boomers coming into your portfolio?

Yes. So I will -- I'm going to -- I think someday, you guys are going to get really bored of me saying the same thing again and again and again. You're picking up on something very important here, Jim, which is I've said this several times that this is a business optimization of location, product, price point, and operating overlay. What we mean by product that treat the 2 different ways you should think about senior housing as a product, which is IL/AL/memory care, what services do you offer. And is it a 2-bedroom, 1-bedroom or a studio, right? So there's 2 ways you can think about product.

There is no question in my mind that, that product optimization, along with location, price point and operating overlay is very, very important. We have said this several times that we have seen because of our, say, probably wrongly interpreted view that we focus as the largest owner of the space on price per unit, a lot of developers have built a lot of studios. And studios, as a function of a large building, is completely fine. You think about you have a 100-unit buildings and you have 20 studios, that's okay. I have seen many, many buildings that I consider functionally obsolete that has 60 in its studio. Recently, I saw 1 that has 6 units of studio out of 98, right?

So you're picking up on something absolutely very good. And these are the reasons that sort of you can see that we remain 1 of the very few who actually understood the business from the perspective of that optimization and not a perspective of location maximization, which most real estate investors think about, and our results speaks for itself. But you have to think about an optimization of all 4 and not just pick one. In this case, you are picking obviously on larger units versus smaller units and run with it.

Your next question comes from Mike Mueller with JPMorgan.

For a quick follow-up on the fund vehicles. Is the capital and the debt fund going to be focused on assets that WELL would ultimately like to own? Or do you just see it as an in and out lending vehicle?

Yes. Mike, it's not set up as a loan-to-own strategy. These are -- we're lending on existing cash flow and covering assets. But that being said, our general philosophy is we wouldn't lend on assets that we don't like as equity owners, but it's not a loan-to-own strategy. And like Shankh said, we were talking about studios and buildings that are functionally obsolete or don't make sense. Those buildings are not a fit for anything we do, whether it's debt equity, whatever it is, we're not going to touch them. So we only lend on product we like, but it's a lending on quality product that's covering cash flow.

It's lending on quality product with strong sponsors that are -- these are all -- this is an acquisition credit vehicle, right? So in place cash flow and all. It's a simple lending business that 1 of our most important LP came to us and say, do you want to build a product together with this idea, and we thought that makes sense. That's what we're doing, very, very simple. Do I do a lot of creative credit structures? Mike, I do. Nikhil, Patrick and I have been sort of on the journey for a long time and rule out it as well. So we do it. Yes, we do. You have seen 1 of them is HC-One, right? But there are many others. But you will see some -- we will sort of retain those for -- on our balance sheet for all these experimentation on the structures that we do. This is a simple first mortgage lending on assets that are acquisition vehicle with strong sponsors.

This concludes the question-and-answer session and will conclude today's conference call. Thank you for joining. You may now disconnect.

Thank you for standing by. At this time, I would like to welcome everyone to today's Welltower Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Matt McQueen, Chief Legal Officer and General Counsel. Matt?

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.

Thank you, Matt, and good morning, everyone. Given the sheer volume of announcements last evening, we'll keep our Q3 related comments concise, but I'm pleased to report that it was another record quarter with occupancy, margins and net operating income, all exceeding our already very high expectations. However, it was a watershed period in our company's history from 2 important perspectives: capital allocation and people. After I walk you through our significant capital allocation-related activities, the team will provide details of Q3 results.

Then I'll return to discuss my favorite topics of people, culture, incentive design and beginning of a new era of our firm, Welltower 3.0. Let's start with acknowledging luck. Many of yesterday's transaction announcements started 6 months ago at the height of uncertainty post Liberation Day. We always believed that life is not about predicting. It is about positioning. So when the luck knocked on our door in April and May, we are positioned with our balance sheet, exceptional team, technology platform and perhaps most importantly, courage to run towards this uncertainty and chaos.

This positioning drove more than $23 billion in incremental transactions, resulting in year-to-date activity over $33 billion and bringing us closer to ever realizing our decade-long ambition of transforming Welltower into a pure-play rental housing platform for the rapidly aging population. At the core of our offering will always be systems, process, technology and data-driven insights to enhance the experience of our customers and site level employees, not capital, which is ultimately a commodity. Every capital allocation decision made at Welltower is viewed through an opportunity cost prism, evaluating the value foregone by pursuing a specific course of action while considering all implication of those decisions well into the future.

And that opportunity cost prism allow us to narrow our focus on technology-driven transformation of our niche housing business. There is always room in organizations to boost performance by amping up their pace and intensity. And the fastest way to move the dial is to narrow the focus in a maximum growth, maximum gain war. This is why we're exiting our Outpatient Property Management business. While we'll continue to own some outpatient medical assets, it will consume little management time and effort due to triple net nature of the retained properties.

This is not to say a B2B business like OM is not a good business, but the intensity that is needed to achieve our audacious dream of transforming a tech for TAM-rich B2C industry like senior housing requires the laser focus of a hedgehog and the discipline to say no to hundreds of good ideas. While our motivation to go all-in on senior living with focus and opportunity to enhance the enterprise growth rate, we recognize that the direction of asset prices for what we are giving up is uncertain.

Hence, we structured our large OM sale with significant participating profit interest while the deal structure reflects a degree of heightened creativity, it is by no means a novel approach within our firm. We applied a similar idea nearly 5 years ago when we wrote a participating senior credit note on HC-One assets in the U.K. with warrants and equity kicker at the height of Brexit and COVID uncertainty. I am delighted to inform you that the significant downside protected structure has generated a nearly 14% unlevered IRR at exit while providing us an opportunity for the seat at the table in a bilateral negotiation for this recap.

This recapitalization transaction marks the beginning of new chapter of new operating income growth as our long-duration strategy unfolds for HC-One assets. Speaking of the U.K., I'm delighted to announce that after 6 years of conversations, negotiation and a near transaction, we're finally the proud owner of Barchester Senior Living portfolio. We recognize that buying highly successful family-owned businesses requires patience, finance and a commitment to excellence that their legacy deserves. While a large checkbook that no counterparty ever question is necessary, it is by no means a sufficient condition.

We have carefully studied many transactions that Warren and Charlie have completed over the years with family-owned businesses. And I'm delighted to inform you that this $7 billion negotiation was done during a single sitting resulting into a firm handshake. Our years of conversation and close familiarity with the Barchester assets and management was certainly helpful as preparation. Equally important with the integrity and professionalism demonstrated by our counterparty.

We're proud to welcome Pete and Barchester management team to Welltower operating partner family. Despite giving up in-place yield in HC-One and other loans and initial dilution incurred from 170 assets that are in lease-up from our recent acquisitions, together, the dispositions and acquisitions are expected to be accretive to FFO per share in 2026. To be clear, we would have completed these deals even if they are collectively near-term dilutive because of the significant opportunity of earnings and cash flow growth in '27 and beyond and due to the long duration aspect of the transactions.

These capital allocation decisions together are expected to change the near- and long-term growth rate of our firm despite the significant size of our asset base. This speaks to the level of excitement and high expectations we have from this year's $33 billion of transformative capital allocation activity. With that, I'll pass it on to John.

Good morning, everyone. I'll keep my comments relatively brief this morning. But as Shankh mentioned, we reported another fantastic quarter with no let-up in the strong momentum experienced in the first half of the year. While uncertainty persists for the direction of the broader economy, our business continues to gain strength given the needs-based and private pay nature of our business, while our asset management initiatives through the Welltower Business System, or WBS, continue to bear fruit.

Our strong results this quarter were once again driven by the exceptional performance from our senior housing portfolio. In fact, Q3 marked the 12th consecutive quarter in which SHO portfolio same-store NOI growth exceeded 20%. Attaining 20% plus NOI growth for any sector is an incredible achievement, but 12 consecutive quarters is truly exceptional and likely unprecedented.

Year-over-year organic revenue growth remains at approximately 10%, driven by a 400 basis point occupancy gain and strong pricing power. Our solid top line results were led by our U.K. portfolio as a 550 basis point year-over-year ramp in occupancy drove a 10.4% increase in revenue. Operating margins across the same-store portfolio took another step higher, rising 260 basis points as growth in RevPOR or unit revenue continues to solidly outpace growth in ExpPOR or unit expense.

And while we've experienced a substantial recovery in margins over the past few years, we have a long runway for further expansion due to the scaling benefits achieved through higher occupancy, i.e., greater operating leverage, which will be further amplified by our far-reaching WBS initiatives aimed at transforming the Senior Housing business. The backdrop for growth in 2026 and well beyond remains favorable as senior housing demand is expected to grow even stronger while supply remains dormant.

The beta of the sector remains attractive. But what truly sets us apart are our efforts to generate outsized alpha through operational excellence. And with the exit of our Outpatient Medical Property Management business, we are doubling down our efforts, attention and resources to our Senior Housing business with a singular focus of operational excellence through digital transformation.

This includes the appointment of Russ Simon, as EVP of Operations. Russ has created tremendous value for Welltower shareholders as Co-Head of U.S. Investments as well as partnering with me on asset management. Going forward, Russ will shift his focus to overseeing our asset management, capital planning and experiential solutions initiatives.

Additionally, as Shankh will describe in greater detail, we are in the midst of a complete reimagination of our technology ecosystem. We're delighted to have Jeff Stott join us from Extra Space Storage as our Chief Technology Officer. While Logan Grizzel and Tucker Joseph have been appointed Chief Innovation Officer and Chief Information Officer, respectively. I'll conclude by saying that we've never been more excited as we are today about the prospects for our company.

The Welltower team continues to work tirelessly alongside our best-in-class operating partners to reinvent our business through WBS and to elevate the experience of senior housing residents, their families and the site level employees. While I'm thrilled about the progress we've made to date, our excitement truly lies in what's to come as we enter Welltower 3.0, which will be defined by operations first. With that, I'll turn it over to Nikhil.

Thanks, John, and good morning, everyone. Since our last call 3 months ago, we have expanded our year-to-date transaction activity by $23 billion, including $14 billion of acquisitions and $9 billion of dispositions and loan payoffs. With today's announcements, our year-to-date investment activity now totals $23.2 billion, up from the $9.2 billion announced on the second quarter call. Of this $23.2 billion, $5.4 billion closed through the end of the third quarter and nearly another $11 billion has closed since, with the remaining $7 billion expected to close later this year and in the first half of next year.

On the disposition front, we are under contract to sell an additional -- to sell an 18 million square foot outpatient medical portfolio for $7.2 billion, resulting in a $1.9 billion gain on sale. We structured this investment to retain a $1.2 billion preferred equity stake accompanied by a profits interest, giving us 25% of upside while protecting our downside through the buyer's subordinated equity. We closed on the first $2 billion tranche of this transaction last week with subsequent closings expected through next summer.

Additionally, we will exit the OM Property Management business with over 160 of our colleagues transitioning to Remedy Medical properties, allowing them to continue their career growth. Following this transaction, our residual OM portfolio will essentially consist of premium net lease assets to high-quality investment-grade tenants. The long-term absolute net nature of these leases require minimal management intensity. Turning to acquisitions. We are pleased to announce the GBP 1.2 billion acquisition of the HC-One portfolio in the U.K. Many of you will recall our courageous GBP 540 million first mortgage investment in HC-One's recapitalization at the height of COVID and Brexit uncertainty.

That investment was structured with downside protection through a claim on HC-One's real estate portfolio at a last pound basis of approximately 40,000 a bed and upside participation through warrants and equity kickers. We have enjoyed a close working relationship with the company's management and ownership and have supported the company's growth through modest additional capital support. This investment has now delivered a profit of greater than GBP 350 million and over the last 4-plus years with an unlevered IRR of nearly 14% and a 1.6x equity multiple.

While the payoff of this high-yield loan is modestly dilutive near term, the equity ownership of these assets adds significant duration to our returns. By deploying significant value-add capital and leveraging Welltower business systems and the best practices from our broader U.K. business, we expect this transaction to generate an unlevered IRR in the low teens.

Moving on to our GBP 5.2 billion acquisition of Barchester which spans 3 buckets. First, 111 assets under a highly aligned RIDEA 6.0 structure. These high-growth assets rank in the top quartile within the U.K. and have in-place occupancy in the high 70s due to 39 newly delivered assets. Second, 152 mature assets in a triple net structure. These mature assets are 90% occupied with strong coverage, 3.5% annual rent escalators and the ability for Welltower to reset rent every 5 years to capture additional upside.

Third, 21 assets that are currently being developed. In addition, through several other transactions, we are acquiring an additional 9 assets under construction in the U.K. Given the significant nonpurpose-built stock and negative net supply growth over the last 10 years in the U.K., we are ecstatic about the significant growth opportunity embedded within this portfolio.

While I have highlighted our larger transactions, our focus on granular activity remains unabated. The $14 billion of new investments announced today span more than 46,000 units across 700-plus communities across 50 different transactions. Our team spent the last few months walking every single one of these communities, conducting their diligence and establishing business plans with our operating partners. 91% of this activity was sourced off market. 16 of these transactions were in the U.K., 2 in Canada and the remaining 32 in the U.S.

I expect that with our narrower focus and relentless pursuit of better outcomes, the transactions announced today will fundamentally enhance the long-term growth potential of our company's earnings. With yesterday's announcement, we have added over 170 senior housing communities to our investment pipeline that are under development or still in lease-up. These communities will be a drag on near-term results, but as we detailed in our letter to our future shareholders, we will not hesitate to make capital allocation decisions, which are a drag today, but have the potential to create significant value tomorrow. I'll now turn the call over to Tim to walk through our financial results and updated earnings guidance.

Thank you, Nikhil. My comments today will focus on our third quarter 2025 results, the performance of our triple-net investment segments, our capital activity, a balance sheet and liquidity update and finally, an update to our full year 2025 outlook. Welltower reported third quarter net income attributable to common stockholders of $0.41 per diluted share and normalized funds from operations of $1.34 per diluted share, representing 20.7% year-over-year growth. We also reported year-over-year total portfolio same-store NOI growth of 14.5%.

Now turning to the performance of our triple-net properties in the quarter. As a reminder, our triple-net lease portfolio coverage stats are reported a quarter in arrears. So these statistics reflect the trailing 12 months ending 6/30/2025. In our senior housing triple-net portfolio, same-store NOI increased 3.1% year-over-year and trailing 12-month EBITDAR coverage increased to 1.21x.

Next, same-store NOI in our long-term post-acute portfolio grew 2.7% year-over-year and trailing 12-month EBITDAR coverage was 2.02x. Moving on to capital activity. We continue to capitalize our investment activity with predominantly equity, raising $2.9 billion of gross proceeds in the third quarter. Additionally, in August, we completed a follow-on issuance of $1 billion in senior unsecured notes across 2 tranches for a blended coupon of 4.875%. This capital, along with retained cash flow, allowed us to fund $1.7 billion in net investment activity and end the quarter with $7 billion of cash and restricted cash on the balance sheet, while driving net debt to adjusted EBITDA to 2.36x, representing yet another record low leverage level for the company.

With our current capital position, near-term liquidity profile and expected proceeds from asset sales and loan payoffs, we are fully funded for the entirety of our acquisition pipeline, including the $14 billion of new acquisition activity, which we announced last night. And we expect run rate net debt to adjusted EBITDA to tick modestly higher by approximately 1 turn on a run rate basis for all of our announced transaction activity.

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 what has been closed or publicly announced to date. Last night, we updated our full year 2025 outlook for net income attributable to common stockholders of $0.82 to $0.88 per diluted share and normalized FFO of $5.24 to $5.30 per diluted share or $5.27 at the midpoint.

There are 2 items I want to highlight in last night's net income guidance that relate to fourth quarter activity and beyond. The first is our medical office portfolio sale, which, as Nikhil detailed earlier, is expected to have a total gain on sale of approximately $1.9 billion, $400 million of which is expected to be reflected in net income in the fourth quarter with the remaining $1.5 billion expected in 2026.

The second item relates to the 2035 10-year executive continuity alignment program. We expect approximately $1.1 billion of upfront costs associated with the initiation of the plan to impact net income in the fourth quarter, which will be adjusted out of normalized FFO. In addition, the program will result in a recurring amortization expense stream that will flow through normalized earnings over the next decade, alongside the ongoing impact of the increased diluted share count.

Now turning to our normalized FFO guidance. Last night's increased range represents a $0.17 increase at the midpoint from our prior normalized FFO range. This increase is composed of a $0.045 increase from higher NOI in our senior housing operating portfolio, $0.105 from accretive capital allocation activity and a $0.02 increase from FX and income tax benefits.

Underlying this FFO guidance is an estimate of total portfolio year-over-year same-store NOI growth of 13.2% to 14.5%, 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 20.5% to 22%. This is driven by the following midpoints in their respective ranges. Revenue growth of 9.6%, driven by increased expectations for occupancy growth of 390 basis points and RevPOR growth of 5.1% and expense growth of 5.25%. And with that, I will hand the call back over to Shankh.

Thank you, Tim. Before we start Q&A, I want to highlight the most important announcements we made last night, the launch of Welltower 3.0, an operations and technology-first platform. This is the third iteration of our company after refounding our firm from a deal shop called Healthcare REIT. We took HCN down to its studs and built Welltower 1.0 with a goal of being a great capital allocator. We turned over half of the assets, majority of the operators and 95% of the people.

And we launched a data science platform that in words of a CIO from a leading private equity firm has become synonymous with the category, much like Band-Aid or Kleenex. Then came COVID. And with Charlie's prodding, I realized we needed to recruit individuals from industries of high standards or equivalent of short-haul trucking executives to address the challenges of the railroad industry decades ago.

The hiring of John Burkart from multifamily industry and subsequent hiring of hundreds of our colleagues who are focused on operations and asset management to delight customers and site-level employees marked the beginning of Welltower 2.0, a well-oiled capital allocation machine with high-performance compute power to sort through trillions of data points to buy one asset at a time. We brought in best-in-class operators under aligned contracts and provided them with an end-to-end asset management and technology platform while also building regional density.

Things have been going on well in recent years, which -- with performance, which I would describe as being somewhat satisfactory. And yet again, we are disrupting our own firm from within, which we believe will create a leaping emergent effect culminating into Welltower 3.0, an operating company in a real estate wrapper. This new era places operations and technology first with a singular focus on delighting customers and prioritizing site-level employee satisfaction with complementary capital allocation actions to go deeper in our markets with a narrower focus.

This phase starts with a complete retooling of our organization, not writing a manifesto. Many organizations hire management consultants, create pretty PowerPoint decks, announce new mission and vision statement, but ultimately change nothing about how they go about doing business. There is no place for consultants, [ Silverton ] bankers or managerial layers at our shop, only leaders who are willing to get their hands dirty by actually doing the work and building the business, laying one airtight brick at a time.

We're taking the best from our capital allocation side of our house, including Tim McHugh and Russ Simon to lead the next phase of our journey focused on operations, technology and innovation. Additionally, we are once again bringing in significant talent from industries with higher standards, which includes proven tech executives such as Jeff, Logan and Tucker to join Swagat to form a tech quad, which will serve at the core of Welltower 3.0's growth engine.

I'm convinced you will see a new wave of talent from -- will follow these leaders, similar to what we have witnessed in recent years on the capital allocation side of the house, which has become the envy of the real estate industry. This newly established tech quad will be key to reduce latency in a complex adaptive system like our business. As latency shrinks materially, the network effect will kick in high gear, creating a new paradigm of maximum growth and maximum gain that simply does not occur in an industry like ours with changes at glacial pace.

Lastly, today, I will describe a dramatic change, which strikes at the heart of this company's incentive structure. From my first day in this business, I've been bothered by the misalignment of the incentives between our company, the owner of our assets and our operating partners, the manager of the community. I wish I could have said better things about the alignment between management and forever owners of a company like ours. Hence, you have seen a decade-long effort from us to fix and align external and internal incentives.

And Charlie would constantly tell us, show me the incentives, and I'll show you the outcome. Following years of deep structural changes in this area, I'm delighted to inform you that my utopian idea of everyone swimming or sinking together is finally taking shape, an ecosystem of internal and external participants where everybody is fully aligned and everybody is all in. I would urge you to read our press release from last night carefully to fully grasp the changes that are taking place in 3 distinct steps to achieve the same goal of alignment and ownership. One, elimination of compensation for Welltower management and making them owners through performance-oriented Welltower stock; two, introduction of RIDEA 6.0 construct where the operator wealth creation is now irrevocably tied to Welltower stock; and three, a $10 million annual grant for site-level employees for the 10 best performing senior housing communities also in Welltower stock.

All of them capture the 5 key tenets of the incentive design that we have previously laid out to you. Simple, significant, nongamable, earned as a team and duration matched with the immediacy of a role's impact, 10 years to forever for Welltower management, 5 to 7 years for operating partners and 1 year for site level employees. I would underscore that my colleagues are betting their prime years of their career on this idea, and so are many of my operating partners, Dan Hughes at StoryPoint, Matthew Duguay at Cogir and Courtney Siegel at Oakmont.

While we are embarking on -- what we are embarking on embodies a unity of purpose, shared sacrifice and perhaps some share dilution, woven in a seamless wave of deserved trust and mirrored reciprocation by a group of random employee people from different walks of life. And they share 2 rare genetic qualities, a fiduciary gene representing their innate desire to put the interest of our owners ahead of their own and a delayed gratification gene, which refers to their instinctive bias towards sacrificing an immediate reward for a much larger gain tomorrow.

While a long-winded person like me with long attention span is perfectly capable of spending hours detailing every part of this plan, let's focus on my favorite, the Welltower grant for site-level employees to honor the memory of Charlie Munger. And let's start by inverting. Our ultimate goal is to delight customers and their family. And of course, they want a digital experience, the ability to find us easily in a crowded and rapidly changing digital world and so on and so forth.

But more than anything, residents want a consistent and happy pace who cares for them. Imagine a world where our site level employee work in beautiful and inviting communities equipped with most advanced and easy-to-use digital tools, freeing them from paperwork and administrative burdens. Not to mention meaningful career advancement opportunities in sister communities with only regionally dense portfolio of scale in this business and they get paid more than they otherwise would in a competitive community, sometimes in a significant and life-changing way due to Welltower grant.

Why would they leave? Costco's experience many -- over many decades suggest perhaps they won't. Instead, they will continue to delight our customers. Our reputation of happy customers will further attract even more customers who are willing to pay for that level of service in an industry where usually half of the phone calls go unanswered.

That's network effect, pure and simple. And the fruits of this network effect will silently compound over many years and decades to come. Charlie often said, take a simple idea and take it seriously. He would be happy to know today that we have taken the simple idea of Berkshire-style stewardship, along with Costco-style customer obsession very, very seriously and betting our life on it. And with that, I'll open the call up for questions.

[Operator Instructions] All right, it looks like our first question today comes from the line of Vikram Malhotra with Mizuho.

Congrats on the strong results, all the transactions. I guess just, Shankh, you've outlined a lot of changes, portfolio, personnel, comp plan, et cetera. And I'm just trying to understand like you talked about Welltower 3.0, but things have been going really well for a while. The industry is -- you've got leading results, stock 2x, 3x depending on when you measure it. So I'm just trying to get a sense of like ultimately, 2 things. One, in general, is there a goal? Is there something you're trying to prove? And kind of how should we think about the growth engine from a cash flow standpoint from here on?

Thank you, Vikram. We're not trying to prove anything. We fundamentally believe -- I personally fundamentally believe that we're here to contribute. We have really nothing to prove. Fundamentally, what we are trying to do is to take away if you just think about agency problem from the system across the board and try to align people to be owners, right? So align interest with our owners across the way through the whole ecosystem. That's all we are trying to do.

And bringing sort of the second question you asked, which is a very important one, which is how do we elongate the growth curve well into the future. Making real money is all about duration. And duration of growth is all that it matters. We're too focused on near term. We're too short term in this world. And if you think about -- think through how real value creation works. It's all about duration. So part of your question was why things are going well, why are we again disrupting it?

Think about things were going well -- very well for Netflix when they're killing it by sending people DVDs. And what would -- where would they be if that's what they're still doing today, right? If you don't disrupt your organization from within, somebody else will do it for you. And so that's what we are trying to do, thinking through what the future of this business will look like, and we have taken it on ourselves to transform this business digitally to get to a better outcome for our customers and site level employees. That's all we are doing, and we hope that will generate very significant growth and compounding of cash flow over a period of time for our owners. And frankly speaking, that's the journey we're in.

My apologies for the delay. I had a network hiccup there. And our next question comes from the line of Jonathan Hughes with Raymond James.

And congrats on the announcements. A lot to talk about, but hoping you can share more details on this new comp plan. Was that presented by the Board as a team package as an all or nothing proposal? Did it evolve into that? And then the 3 operators that are now similarly changing their incentive fee to take units, is that structure being offered to other partners as part of RIDEA 6.0 to further align them with shareholders, now management and extend the duration of hopeful outperformance?

Okay. So let me answer the first question, and then we'll go to your second question. So our Board has spent enormous amount of time with leading comp consultants, several law firms and many, many consultants and advisers for months at this point and spend hundreds and hundreds of hours to come up with what they consider is the right plan, which you saw.

So I have really nothing to add to that other than the fact that it aligns with the 5 tenets of the incentive design that we have always talked about, right? Simple, significant, earned as a team, duration matched and nongamable, right? That's really what it is. As I said, the first 3 operators that we mentioned, they're the founding class, they don't necessarily have to be the only ones, right? We are trying to simply align the interest of our operating partners with our owners.

And obviously, as you know, that regional density is very important to us. So if there will be opportunities to bring in other operating partners into the fold, we'll consider it. But at this point in time, we only have the 3 partners who are the founding class of this new program, and we'll see where future gets us.

And our next question comes from the line of John Kilichowski with Wells Fargo.

Shankh, in the past, you've talked about the various source of capital available to the company. In the case of the acquisitions you announced yesterday, why not issue equity to fund some of those investments instead of the asset sales?

Very, very good question. So if you go to John, the first call I did as CEO, I laid out my belief of how capital allocation works. Most people think of capital allocation as a function of where capital goes or what you buy in a very simplistic term. It's actually so much more intricate than that. And then you have to think about your source of capital and you have to think about relative cost of that capital.

And so as you can think about what we are doing, if you fix aside, which is the buy and just purely consider the sell, you're right, correct. We could have done it through equity. And frankly speaking, the spot cost of that equity is lower than the spot cost of that asset sales, which is like $9 billion of asset sales that Nikhil talked about. So it would have generated a higher near-term accretion and it would have created a disaster for the long-term value creation of this company.

So in other words, if you think about our assessment of what we are giving up, you have to think about these things from an opportunity cost standpoint. What we are giving up by definition that we are not doing it through equity tells you that our view, which is a view you don't have to agree with, our view of our cost of equity is higher than the cost of the capital of the asset sales.

So you can come to the decision, obviously, why is that? Because we have a higher view of growth and the duration of growth of that equity. It is an incredibly important question. I have seen so many companies and their management get sucked into near-term FFO accretion math and dilute their shareholders without thinking through how long-term value creation works. Thank you for the question.

And our next question comes from the line of Michael Carroll with RBC Capital Markets.

Shankh, I wanted to circle up on the recent Care Home deals, the Barchester and HC-One. I mean how do these portfolios compare to Welltower's current portfolio in terms of asset quality and maybe the private pay percentage? And does that impact the growth outlook of those assets at all? Or is it very similar to the current portfolio?

Yes. On a cumulative basis, it's very, very similar. It's similar quality assets on a blended basis, similar metrics. So yes, really no change there.

And our next question comes from the line of Farrell Granath with Bank of America.

I know in the opening remarks, you outlined a lot of the aspects of the MOB disposition. But I was wondering if you could discuss your decision why for the structure.

Yes. So let me repeat, Farrell, what I said. If you just think about it, we are making an opportunity cost decision of 2 things. First, refocusing and entirely have a singular focus of management's time and attention into this digital transformation of an industry called senior living. That's what we are focusing on. So that's sort of one aspect of a strategic move that's behind this. The second, obviously, is the cost of capital conversation we just had.

Now remember, at the end of the day, we have no idea what the future looks like. We don't have a crystal ball. It is entirely possible that the value of these assets tomorrow is significantly higher, right? We obviously have a view that the next 10 years is in a deglobalized world. It is going to look, obviously, relative to the last 10 years when we had 0 inflation, 0 rates, it's going to be different. But we have no idea we're right or not.

So the structure reflects that if values go up significantly, right, or value goes up at all, we -- our shareholders will still reap the benefit of that value accretion that we are leaving behind today. That's what the whole structure is about, is how do we sort of do what we are trying to do and focus that capital into high-growth opportunities at the same time. We think very highly of Remedy as an operator. All our colleagues are going there. We think they will continue to create a lot of value.

It is entirely possible that cap rates come down, interest rates come down. We're totally wrong about our macro views. And if all of those things happen, you have to sort of think about, okay, did I sell these assets in the wrong time in the cycle, right? So it's just sort of think about an opportunity cost from a strategic standpoint, also an opportunity cost from a capital standpoint, and that's how we came to this conclusion.

And our next question comes from the line of Nick Yulico with Scotiabank.

Just following back up on the outpatient medical sale. Just a few questions there. I mean you guys in the sub give that held-for-sale NOI. I just want to make sure that, that's sort of apples-to-apples to apply that to the sale of the $7.2 billion, and that looks like it's a 6.25% cap rate. And I just want to see if that's right. And then also on the preferred, if you could just talk about what the yield is you're getting on the preferred and then also if you guys are offering any seller financing as part of the transaction?

Sure. So I'll start kind of backwards. On the preferred, the coupon is 8% and it's $1.2 billion, and that's really all we're leaving behind. That's why the $7.2 billion transaction results in net proceeds of $6 billion. So no seller financing. This will be financed through bank financing. Then secondly, to answer your question about the yield, that 6.25% is in the right ballpark. That includes some property management and profitability as well. The real estate yield is a little bit lower. But then obviously, if you think about the net yield once you factor in the reinvestment of the pref, that's closer to 6%.

And our next question comes from the line of Omotayo Okusanya.

More high-level question for you guys. When your numerous press releases hit last night, I couldn't help but go back to Shankh's annual letter where you really kind of doubled down on this idea that you can actually grow faster at a bigger size and that because of various network effects you would get.

And you also kind of talked a lot about doubling down on data design because of just kind of improved latency and how it will just kind of help you do business with better operational efficiency. Could you talk a little bit about just again, Welltower 3.0 and everything that's going on, whether it's RIDEA 6.0, all this alignment with management compensation, how do you kind of just see all that fitting together? And exactly what does that set you up for going forward?

Yes. Very, very good question. So tell -- think about -- let's take it simplistically, let's talk about, obviously, we laid out in our -- in my annual letter, how sort of a growth curve for an organization works, right? We sort of talked about first to get a team of people together in close proximity, which is obviously -- I talked about how that works according to Newton's law of gravitation. So you got it, obviously, that force is proportional to the -- inversely proportional to the square of the distance. So it's a very important factor that you bring this team as tight and close as possible. Why?

Because the tight team is where you have very, very little latency. But let's think about that a little bit more about how that reflects, right? You think about, okay, let's just take easy example, dumb examples, right? This is a business John talked a lot about like if you call a community, there is a pretty good chance that -- 50% of the chance that you will not hear back. And if you do hear back, there's a pretty good chance that you will hear back in 2 business days.

Now think about where Welltower business system has been deployed? Our customers, prospective customers are hearing back in single-digit minutes, which is still not acceptable to me. But at least that's we're hearing back in single-digit minutes instead of 2 days. That's significantly reducing latency. Think about historically, this business room turned happened in 37 days. Now it's happening in 11, still significantly higher than what John did or Jerry did, which was 3 to 5 days, but we're getting there. That's latency. That's you are taking latency out of the system, right?

You think about -- we just talked about, right, in our company, I'll give you a third corporate level example. In our company, there is no management layer. It's not like things flow through layers from A to B to C to D and finally, it comes to the executive, and we make decisions. That's not how this organization works. We actually do the work with the bare hands sitting down and make decisions on the spot, right? So you think about that's taking latency out of the system and you make decisions fast, right?

That's how you get these kind of results. When latency comes down in the system, that's when network effect kicks into gear, high gear and you get into a world of maximum gain, maximum growth. In otherwise, what is a glacially moving pace of doing business. That's what we are trying to do. We have done that, as I have talked about on my annual letter on the transaction side, deal side of the house, right? Think about how many people have. Think about the comment Nikhil made, we have bought 700 communities.

And I'm going to repeat what he said. We have walked every single one of these communities. That is not given. How do we do that, right? Sort of that how do we take the latency out of the system is a lot of technology initiative, a lot of decade of effort. So that's kind of what we do. And on the other hand, if you just think about it, the hiring of Jeff and Tucker and Logan and what is the next step of that is to do that in the operations.

I expect someday that no calls will go unanswered. And every call, if it goes, it will be returned immediately. That will be taking latency to 0. And those days of operations are coming.

And our next question comes from the line of Michael Goldsmith with UBS.

Lots of exciting news today, so I'll ask something maybe more holistic in that how do you go about managing the execution risk of everything announced today, including acquisitions, dispositions, new leaders? Where are you focused from an operational perspective to ensure these changes are implemented successfully? And what could go wrong here?

That's a very, very broad question. So look, the fact of the matter is how do we manage risk on -- on the deal side of the house, we have a very, very large team, which obviously has more experience in doing transaction than pretty much any team in this business, right? That doesn't require an asterisk. It does. So you think about it, that's -- obviously that happens. That team has done even during COVID, incredible execution when you couldn't fly, you couldn't do all of those things, so that sort of it.

And that team is Tim's and Nikhil's team, deal tax, deal accounting and deal law sort of on the legal side. So there's a very, very strong team combined whether it's U.S., Canada and U.K. On the operations side, the reducing risk and operations is a purely function of what we've talked about building out Welltower Business Systems and trying to put that into high gear. And we are constantly evolving that, right? We're bringing in executives from industries of high standards. We obviously talked about a few. And that process is evolving. Our view of what the opportunity is, we're getting more and more and more excited about it every day.

And we're bringing people who are looking at ourselves and say who -- what kind of skills we're missing. And we're bringing in people to complement that and take this thing forward. That's really what it is, and that's what we are doing. Remember, business is all about people. Spreadsheets don't do business with spreadsheets, legal documents don't do business with legal documents, right?

It is entirely a people-driven business. Most business, I believe, are people-driven business. And for us, it is all about bringing and attracting the best talent and retaining the best talent. That's all we are trying to do. That's your ultimate risk mitigation through building a real vibrant culture where people, everybody is all in and they behave like owners.

And our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Great. Quick 2-parter for me. So on the incentive structure for Welltower 3.0, the presentation mentioned the 5 named executive officers, but far down in the release, it also notes that management is working with the Board on long-term incentive and retention for 2 existing and 5 newly promoted EVPs. So I guess my first question is, was it possible for all 12 to go all in on the incentive structure?

And then my quick follow-up is just on competition over the next 10 years, whether it's talent, whether it's technology, as more capital comes to the space, how do you think about protecting Welltower's moat over that time period?

Thank you, Ron. Those 2 questions are actually fairly correlated. So let's start with your first question. As we said, that we are working with our Board to come up with a strategy to retain our colleagues who are actually doing all the work. We're absolutely doing all these things and hopefully, that you guys are pleased with our execution. That's not because of me or Tim or Nikhil, that's our group of team. This is a team game. We're all putting tremendous amount of effort 24/7, and this has been 10 years in a row. So this has been obviously for us that retaining that group of people that you mentioned is extremely important. How we go about it, it's a broad process.

As I mentioned in the previous question that our Board has gone through enormous amount of effort with their lawyers and bankers and comp consultants to come up with a process that has been satisfactory for us. And we'll hope that, that same process will unfold, and we'll get to the satisfactory answer for our rest of our colleagues here that you mentioned. But as far as I'm concerned, as you know, I only believe in one way of living, go all in and do it in that manner, right?

Do very few things. The only things I'd like to do is to go absolute all in. So that will be my hope. And think about it, the second point of your question, as more capital comes in, there's a structural element to that question. As you think about it, a lot of capital is structured in GP/LP style. Frankly speaking, LPs don't pay GP enough to spend the hundreds of millions of dollars that we spend on technology to get there because there's no way to get that money back, frankly speaking. So we shall see how that happens. It needs to be done by permanent capital.

And from a permanent capital standpoint, you need a mindset. It's not a question of money. You just need a mindset to say, how do I transform a business? How do I invest today where I may or may not see the benefits of which for a long time to come.

That's the question of long attention span. You guys don't remember, but when we went after this sort of the data science approach where in those days, we did was not called AI or something, we call machine learning, supervised learning, unsupervised learning. We got nothing out of it for 3 years. And we keep investing, right, and kept going around and seeing if we can get there. Ultimately, it's exciting to talk about after 5 years, we got something out of it and what has done to today for latency in our firm.

But it requires years of investment and that sort of evolves the needs of the organization, the talent of the organization. We are constantly trying to move the ball forward. And we welcome other people to do, most people so that we want to see what is out of the possible looks like. And if other people come up with good stuff, we have no problem to copy. But unfortunately, in this world, most people don't have long attention span. Instant gratification is how most of the companies work. And as I said, GP/LP structure is actually not very amenable to long-term innovations. It needs to come from forever capital.

And our next question comes from the line of [ Seth Berge with Citi. ]

It's Nick Joseph here for [ Seth. ] Shankh, just one question, obviously, on the strategy change. Curious if you could touch on the balance between going more all in on senior housing versus the earnings volatility as Welltower becomes less diversified going forward.

Very good question. So Nick, I would refer you to sort of understand how we think about this topic starting from our foundational document, which is called the letter to future shareholders. You will see that there's a whole section I wrote about this topic of volatility versus risk. We are not concerned about volatility. We're concerned about risk. And risk is the probability of losing permanent capital.

So for your first question, if you just think about how we behave, let's take an example of the last 5 years. What are the 2 periods of volatility? One was COVID, right, and sort of what happened subsequent to that COVID, whether it's labor and other inflation issue all. What did we do? We ran towards it, not ran from it. So we like volatility. What happened 6 months ago, liberation, the exact same thing. So if you think about where we built our organization, we built through the bouts of volatility.

We love volatility. But on the other hand, risk mitigation, that's why you are seeing we're running a balance sheet impossibly low leveraged, right? So risk management is not just you have to think through, you can do it from the asset size, asset mix, or you can do it through the liability side. So that sort of thing I sort of -- I would like you to sort of think about that, some kind of belts and suspenders we have built into it. Second is operational. And think about what we are doing in this business from an operational standpoint to reduce -- meaningfully reduce risk to get into to understand how this business works, right?

It's -- obviously, it is a business where it's a complex adaptive system. Different people got, obviously -- results are almost always on the tails. I wrote about that [indiscernible] for many years in my annual letters. And so we know how to manage that tail risk, and that's what we are doing. Everything we are doing to build out our operating systems, Welltower Business System is to manage that risk.

We like volatility. We're trying to manage risk. And that comes in both forms. One is to managing the risk through balance sheet and managing operational risk throughout our business system, which is where we're putting all the efforts. Hopefully, that answers your question.

And our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just on the investment side, curious on your thoughts on both single-family and manufactured housing and opportunities or lack thereof in that -- in those 2 good groups relative to the seniors and active adults.

Very, very good question. Finally, somebody gave me an easy question to answer. I remain within my circle of competence. I don't comment on things that I don't know anything about. So that's one of our key tenets of our business that we are very much focused on what we know and our cycle of competence, what do I know about manufactured housing and nothing. So we'll remain within our cycle of competence, keep doing what we do.

And our next question comes from the line of Richard Anderson with Cantor Fitzgerald.

So the investments in hard assets is real interesting and headline grabbing and all that. But I think you would agree the most important investments you're making are -- I don't even know, I don't have to guess in people, but also in operating systems and technology. But -- so I want you to reconcile something for me and how you're approaching this. So your incremental tech investment is requiring a requisite return on that investment for it to be a reasonable investment.

And so for all the customer experience that you're talking about and happy customers, happy associates and all that sort of stuff, what do you -- do you have concern about fatigue at the rent level? In other words, everyone's happy, but then they see a 10%, 12% increase in their rent every year. At what point are you kind of watching it to make sure it's not happening and to maybe have to sort of scale back some of these internal investments that are really what are going to sustain you for the next 5, 10 years? I'm just curious how you approach that line of sight.

Very, very good question, Rich. So if you just think about the 2 questions inside your question. First is the technology investments, whether it's technology itself or it's people around technology, we almost have an unlimited appetite to do it. And the way we see that returns, it's a significantly higher returns than real estate returns, and you see that returns come through your real estate P&L. I hope you are seeing that.

Look at your performance relative to the industry performance or relative to anybody, and you will see that, and this performances are not coming through because we have easy comps. We have very, very hard comps. And despite that, these results are coming through. So you are getting back that ROI, which is significantly higher than, as I said, real estate ROI through the P&L.

So that's sort of the first question. Second question is a nuanced question, much more nuanced question. which is if you think about -- I've said this before, we like -- think about how this business works. Obviously, if you have no rooms to sell by nature of demand supply, rents go up. However, we have always kept rents sort of in high single-digit level. We think that's sustainable in that sense, and we have no problem leaving money on the table today for tomorrow, right?

Now one of the things that in senior living business, if you think about sort of the how long people stay in the community on average of, say, 20 months, you only get one of those rent increases, right? So from your perspective, I'm thinking people are getting -- first, 10%, 12% is not something we send people. But regardless, if you're thinking, okay, what if somebody gets 10% rent increase for 5 years, that's not really how it works, right?

An average duration is, call it, 18 to 24 months, so you usually get one rent increases. So put all of those things together, just know philosophically, if the question is a philosophical question, I've said this that delayed gratification gene is part of this organization's ethos. We will always leave money on the table today for a greater gain tomorrow. That's just how this place works. So we're not in a hurry. We want the duration of that growth and duration of the growth comes from happy customers and happy employees, and that's what we're focused on.

And our next question comes from the line of Jim Kammert with Evercore.

Apologies, a bit of a pedestrian question, but maybe for Tim, how was the $1.1 billion noncash charge for the comp plan calculated? Just trying to understand some of the accounting mechanics here, please.

Yes, Jim. So the plan is as highlighted in our 10-Q, the plan is essentially broken up into 2 pieces. There's an upfront expense piece of it, which is the $1.1 billion that you're alluding to. And then there's another $200 million that will be amortized over the following 10 years of the plan.

And our next question comes from the line of Wes Golladay with Baird.

Do you see similar opportunities for the Welltower business system in the U.K. as you do in the U.S.? Is it pretty much plug and play?

It is nothing but plug and play. But yes, we do enormous opportunity. Just think about, generally speaking, there's a tremendous amount of opportunity overall in this business from an operations and operations sophistication perspective, and that same opportunity exists in U.K. as well and very much so.

And our operating partners are welcoming us to bring in new ideas, new technology, new process. Business systems is about business first, systems later. It's about process first, technology later. But still all of those things, we're enormously excited about that opportunity. Nikhil, do you want to add anything to that or John?

No, I think that covers it. It's really the same opportunity.

One of the things I'll just mention from a U.K. standpoint, as you have seen, hopefully, in the quote on our press release that the U.K. government is meaningfully welcoming us to bring that technology, that operational sophistication to the care sector. So that's also very much of a strong angle that we have been working with the government.

And our next question comes from the line of John Pawlowski with Green Street.

Can you help frame how NOI is performing on the 2024 vintage of senior housing acquisitions versus expectations at underwriting?

John, generally speaking, we have -- let's just talk about where it's not performed. We were hit obviously very big in holiday, right? Other than holiday, I would say most -- not just as an individual, but also as an aggregate, acquisitions have performed in line to higher than what we underwrote. Nikhil, would you say that?

Yes, absolutely correct, yes.

And our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Just curious what percent of the SHO NOI the 3 operators under RIDEA 6.0 represent? And I guess as you continue to grow, how do you keep a large percentage of the SHO NOI under that new alignment? And just curious if there are hurdles to adding other operators to the structure in the near term?

Yes. So I don't really have that information...

I don't have the number on top of my head.

20%.

So that's the -- Austin, that's the answer 20%. But remember, as I answered in the previous question that this doesn't have to be -- that was the founding class. This doesn't have to be only those 3 operating partners. And what we are trying to do is to run a regional density of a business, bring in our operators, operating partners to focus on what they do.

This is a business that has unremoval complexity at the customer level, which our operating partners do an exceptional job of providing their care and handling that complexity. On the other hand, we are only focused on where scalability creates a strategic advantage, right? So that's sort of how the responsibilities are being divided.

And we're both, as I know, as I mentioned times -- several times, our interests are aligned, and we're all trying to get to the same place, right? So if that's the case, we don't see a lot of issues to get there. As operational issues come up, we're obviously solving it together. And we'll see where we get to.

And our final question today comes from the line of Mike Mueller with JPMorgan.

Just a quick one on the announced investments. You've talked about IRRs, but can you just give a sense as to the overall initial blended yield on the $14 billion and maybe parameters for how wide the range was between the different components?

Yes, Mike, we never really disclose yields until the transaction is closed and then it shows up in the sub. But in general, the activity is not that dissimilar to our activity in the last couple of years.

All right. Thank you, Mike, and thank you all for your questions today. Ladies and gentlemen, this does conclude today's call. So again, thanks for joining in. You may now disconnect. Have a great day, everyone.