Welltower Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2020 Welltower Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, to Mr. Matt Karras,

Thank you, Dylan. And good morning, everyone. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the private securities litigation format. 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. With that, I'll hand the call over to Shank for his remarks. Shank?

Thank you, Matt, and good morning, everyone. First and foremost, I hope that all of you and your families are safe and healthy during these extraordinary times. In the spirit of this year-end call, I would like to review year 2020, the most challenging in our history, and discuss different paths of growth, long-term value creation for our continuing shareholders on par share basis. We came into 2020 prepared for perhaps a plain vanilla business cycle downturn. We pushed out our maturities in Q4 of 2019, sold a lot of short-duration assets, bought a lot of longer-duration assets, and continued to upgrade our portfolio, operators, management contract, and talent. We are hopeful that with the continued decline in senior housing deliveries and and start on one hand and the aging of the population finally picking up on the other hand that 2020 would serve an inflection point for the fundamentals after decades of weak demographics resulting from the aging of the baby bus generation. Then a once a century pandemic happened that would turn out to be particularly devastating for our business. The backup of first quarter second and third quarter were all about long-term value preservation. We enhanced our liquidity profile dramatically by selling assets in record time at or near pre-COVID pricing. More importantly, avoided mistakes of raising long-term dilutive capital, a consistent theme for managing the company for continuing shareholder on a partial basis. We started during the dark days of March and April 2021 by selling a billion-dollar asset at great prices in record 43 days, from signing a confidentiality agreement to receiving cash. We continued this journey during Q2 and Q3 and eventually executed on $3.7 billion of disposition at extraordinary prices to build an unprecedented war chest. Two things particularly surprised me during this time. The resilience of our team during our experience including our extended team of operating partners and the liquidity of our assets. Not that we didn't have doubts or failures, but we continue to move forward in spite of them with a steady hand on the wheel and an unwavering belief that we'll get to the other side. Our team's stoic resilience reminded me every day of Winston Churchill's famous quote that success is not final. Failure is not final. It is the courage to continue that counts. In those moments of reckoning, I realized how privileged I was to be part of this team that didn't miss a beat and blaze new trails. For years, I have heard that healthcare-oriented real estate deserves a discount to a shiny tower in the middle of a large gateway city due to the lack of liquidity and smaller ticket size, especially during down cycles. I hope that during the worst down cycle of our asset class, this debate has been finally settled as demonstrated by our execution and that of our colleagues at HealthPeak. In the fall, we pivoted again from defense to office as we started underwriting and shaking hands on new acquisition. It is important for you to understand that we don't shake hands and find excuses to walk or chip away. If we shake hands, we close. Our handshake in this business is worth gold, and we only enhanced our long-term reputation during this pandemic. During last quarter's call, I discussed a billion dollars of deep value opportunities. I'm delighted to report that we have closed roughly 700 million of acquisitions since the start of fourth quarter at a significant discount or replacement cost. Our acquisition pipeline has grown meaningfully since And as I sit here today, I'm optimistic this year is shaping up to be a year of net acquisition, perhaps significantly so. At the same time, I will remind you that we're not driven and incentivized by volume of acquisition, but the value of it. Asset price is the ultimate determinant of how we'll behave. In this moment of confusion and ambiguity, I indulge you to focus on four distinct pillars of long-term value creation for WorldTower. One, operating fundamentals. Tim will get into the details of what happened last quarter and what might happen next quarter. While operating fundamentals is awful right now, With little near-term visibility, we are optimistic about the vaccine rollout as 90% of our assisted living and memory care facilities have conducted their first vaccination clinic with virtually all residents taking the shot. While I would not expect this to be a source of value creation in the very near term, I'm hopeful about the second half of the year. Normalization of operating performance remains the largest source of value creation for our shareholders. It is too early to comment on exact timing of the trough and the shape of the recovery, but we'll keep you posted frequently intra-quarter so that you can see what we see. Our focus remains on upholding the reputation of our communities and maintaining the safety of our operator staff and residents. We spared no expenses and have already spent in excess of $80 million on COVID-related expenses to date, doing everything we can within our control to support their wellbeing. Due to the great reputation of our operators and the extraordinary value they provide, rates are holding up. In 2020, LabCorp was up 2% in AL memory care, 1% in independent living, and 4.4% in our senior department business. This growth occurred despite the headwind resulting from lower community fees driven by a decline in move-in activity. Number two. Operator platform enhancement, management contracts, leadership and system enhancement, and building local scale are some of the examples of this. Let me highlight two specifics here. A, Sunrise. We're delighted by the appointment of Jack Carlson as the CEO of Sunrise Living, our largest operating partner. Jack will bring much needed attention to operating excellence with an operations first culture. We are also negotiating a new management contract that will align the interest of Sunrise and WorldTower as the owner of the assets. We're diligently working with the management of Regara, Sunrise's majority owner, to enhance Sunrise's position so that it can emerge from this pandemic as a leading operator poised for excellence and growth. B, building local scale. If I can quote Charlie Munger, the advantage of local scale are of ungodly importance to this business. We have and will continue to scale our most important strategic partners as we expand our senior housing footprint. To name a few in alphabetical order, Balfour, Brandywine, Clover, Cogier, Frontier, Kelsey Siebold, Kitsco, Oakmont, StoryPoint are just some of the examples of the partners we have grown significantly during this pandemic. What is common amongst them? They're excellent operators in their markets. They have great leadership. They're disciplined yet courageous. And they have an aligned relationship with World Tower. We rise and fall together. This list is expanding with a significant opportunity set that I mentioned a few moments ago. Number three, capital deployment opportunities. I have already commented on the acquisition opportunity on the deep value side. At the risk of sounding like a broken record, I would remind you that we're an IRR buyer with an incredible focus on basis, operators, and structure. Our opportunity set is rising rapidly, and I hope to provide you with more specific colors in the next 60 to 90 days. This comment is obviously focused on the current opportunities. Let me provide you some color on a related topic, but on future opportunities. We at World Tower have never been in a more advantageous position as a partner of choice. For years, we have focused on growth strategy driven by our relationship-based and alignment-focused structures and data analytics platform rather than prioritize on cost and access to capital advantage. After all, not all capital is equal. We never imagined that we'd encounter today's extreme stress, but as you can see, we stood by our operators during these difficult times not only to preserve their businesses but also to grow it significantly. Talk is cheap, but action is not. For this reason, we are inundated with requests as a partner of choice from all asset classes we play in. As much as I like Zoom calls, we have been on roads throughout this pandemic meeting with prospective partners. This is bearing meaningful fruit. We have executed more partnership and pipeline deals in the last nine months than over five preceding years combined. we expect to deploy 10 plus billion dollars of capital in these opportunities in next few years. In other words, we are not only executing on deep value early cycle opportunities, but also laying a strong foundation of growth through the entire cycle when inevitably the significant price discrepancies of today will be gone. To give you an example, We recently re-upped our master development agreement for five years with Kelsey Siebel, our largest MOB tenant. We're looking to start approximately 600,000 square feet of 100% pre-lease development in 2021 and 2022. Number four, talent opportunity. I touched on this last call, but let me elaborate for those of you who are focused on long-term. We're seeing an incredible interest in our platform from seasoned professionals to early career applicants. We have taken advantage of recent disruption and brought in 41 new professionals in 2020. We expect at least as many, if not more, to join our team in 2021. In addition to new talent, our existing talent pool is taking on more responsibilities and reaching new heights. As a result, we had 50 new promotions at World Tower. Through this, though this puts some early pressure on GNA, which is partially offset by lower executive comp, we think this incredible talent pool is equivalent of a coil spring, which will manifest itself in a meaningful growth for the firm. Speaking of talent pool, how is the mood inside today inside World Tower? What I described to you as a stoic resilience last year has transformed into an environment of optimism and unbridled passion this year. I want to make it abundantly clear we have no crystal ball about the near-term operating fundamentals, but we are doing meaningful work that matters. We have meaningful relationships, and we're seeing a new level of positive energy of people who want to be part of this team internally and externally to create meaningful value and make a disproportionate impact. With that, I'll pass it over to the microphone to Tim. Tim?