Welltower Inc.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Welltower fourth quarter earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Matt McQueen, General Counsel. Please go ahead.

Thank you, and good morning. As a reminder, certain statements made during this call may be deemed forward-looking statements in the meaning of the Private Securities Litigation Reform Act. Although Welltar 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 conference filings with the SEC. And with that, I'll hand the call over to Sean.

Thank you, Matt, and good morning, everyone. I will review fourth quarter and the year and describe high-level business trends and our capital allocation priorities. John will provide an update on operational performance of our show and MOB portfolios, and Tim will walk you through our triple net business, balance sheet highlights, and 2023 full-year guidance. Nikhil, our newly appointed CIO, is also on the call to answer questions. While we're happy to bring back full year guidance after three years, I'll point out there are many macro and business uncertainties remain. I would recommend investors and analysts to focus on 2023 exit run rate to understand the earnings power of this platform and not overly emphasize the calendar year guidance. I have mixed emotions as I reflect back on 2022. As I've described during my prior calls, our results frankly underwhelmed our expectations during the first half of the year. While we don't like to fix it on short-term stock performance, as we believe an appropriate window to gauge our performance is at least three to five years, you should throw tomatoes at us for generating an unsatisfactory return, total return in 2022. But remember, a stock is a fractional ownership of a business and not a ticker. We view our fellow investors as partners for the long haul and continuously strive to improve the prospect for long-term compounding of this business. In spite of some of the headwinds that we experienced in 2022, my team and I are pleased with the underlying improvements we have seen in this platform and our talent base, resulting in a strong rebound of performance in fourth quarter and further improving momentum being carried into 2023. Our recent progress is only the tip of the iceberg of many of our initiatives will truly manifest themselves in the year, next year or two, which I'll go in a minute. While overall macro headwinds persist, we have seen a considerable improvement in the key indicators of the unit economics of the business as reflected by expense power occupied room or export or revenue power occupied room or report. On the expense front, we have seen significant progress on addressing certain challenges We're faced over first year plus, most notably on the agency and temp labor situation. In fact, export has moderated in Q4 to 3.4%, driven largely by a deceleration in compensation per occupied room, or compor, to 2.6%, the lowest level we have seen in our recorded history. At the same time, repor, again, the revenue per occupied room, remain a consistent bright spot for us. increasing 7.5% in Q4, a clear reflection of strong pricing power resulting from our premier locations, product, and operator base. As I mentioned on our last call, one of our largest operators pulled forward January rent increases in Q4. Even without that, our Q4 report would have exceeded 6%, plus reflecting a broad base strength across our portfolio. And while we achieved record rep for growth in 2022 of 5.5%, we expect to surpass this level of growth in 2023. While we achieved an impressive 19% sharp NOI growth in 2022 and expect circa 20% NOI growth in 2023, I believe we're only at the beginning of a multi-year double-digit NOI growth resulting from a long runway of occupancy gains rate growth, and operating margin expansion. And despite significant macro uncertainty already weighing on the fundamentals of many other sectors, our confidence in future growth of our business is supported by the need-based nature of our asset class, along with a favorable demand-supply backdrop, which is getting better every single day. I'm pleased to report that 2023 is already off to a great start, with January movements up 16% of our 19 levels, representing a meaningful acceleration from the fourth quarter. Forward-looking indicators are also showing promise in January, with our total tour volume across our senior housing operating portfolio is up 25% year-over-year. I would be completely remiss to ignore perhaps one of the most important milestones in the 53-year history of our company, and that is the private letter ruling we received, which permits us to both own and self-manage independent living assets. The PLR provides us significant flexibility in operating our assets, and its timing coincides almost perfectly with the build-out of our industry-leading operating and asset management platform, which John and his team have been tirelessly working on. We remain optimistic that further investment in our platform will not only result in a better margin profile of our assets, but also will meaningfully benefit the third-party operating partners across the senior living spectrum who we choose to do business with in the future. We continue to see a tremendous opportunity to professionalize and modernize the operating side of senior living business, following our instinct, where there is mystery, there is margin. And our PLR gives us significant ammunition to accelerate the pace for what 3.0 might look like. I want to thank Mike Gerst, our tax team, and many others whose efforts have led to this game-changing achievement. Before turning to investing environment, I want to highlight the addition of Retirement Unlimited, or RUI, to Welthouse's roster of exceptional operating partners. RUI is one of the best performing senior housing operators in the East Coast with the highest quality programming and care standards. RUI has consistently maintained occupancy levels at north of 90%, and with hardly any use of agency labor past few years. We announced today that RUI has assumed the management of our first community together in Alexandria, Virginia, with plans to meaningfully grow our relationship in near term through acquisitions, transition, and development. We're extremely excited and humbled to partner with the Fralin and Waldron families and RUI's all-star president, Doris Sally Sullivan, and welcome them to our Waldron family. In terms of other growth partners, it was exactly a year ago when we announced our partnership with David and Simon Rubin, along with their acquisition of Avery Healthcare in the UK. As you know, Rubin Brothers is one of the most sophisticated, forward-thinking, and well-capitalized global investors with a reputation of attracting best-in-class talent and technology platforms. Our thesis was validated when Rubin Brothers attracted Lorna Rose, one of the most well-respected senior housing operating executives in the UK, to join Avery as the company's CEO in December. Lorna has spent 25 years in the industry and was most recently with Barchester, one of the UK's largest senior housing platform. Next, on the capital allocation side, we have rarely seen a favorable environment across all our product types in all three countries we do business in. There are 20 plus billion of exit queue for poor real estate funds and perhaps even a longer one for non-traded REITs. This, along with the challenging debt market, give us an enormous advantage to buy the right product at the right location at the right basis. Please note that while we are under-earning by more than half a billion dollars of EBITDA from pre-pandemic levels, we just reported debt metrics that are better than Q4 of 2019, along with more than $5 billion of near-term available liquidity. We have many avenues to access and deploy capital that I've described before, and we remain busy on all fronts. But our North Star remains consistent and simple. We strive to create partial value for our existing owners by compounding over a long period of time within our circle of competence, which we define as the area where we can assess and allocate capital with house odds rather than gambler's odds. With that, I'll pass it over to John.