Welltower Inc. (NYSE:HCN.PRJ) Q3 2016 Earnings Conference Call - Final Transcript

Nov 02, 2016 • 10:00 am ET

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Welltower Inc. (NYSE:HCN.PRJ) Q3 2016 Earnings Conference Call - Final Transcript

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Operator
Operator

Good morning ladies and gentleman and welcome to the Third Quarter 2016 Welltower's Earnings Conference Call. My name is Holly and I'll be your operator today. At this time all participants are in a listen only mode. We will be facilitating a question-and-answer session towards the end of this conference.

[Operator Instructions]

As a reminder, this conference is being recorded for replay purposes.

Now I would like to turn the call over to Jeff Miller, Executive Vice President and Chief Operating Officer. Please go ahead, sir.

Executive
Jeff Miller

Thank you, Holly. Good morning everyone and thank you for joining us today for Welltower's third quarter 2016 conference call. If you did not receive a copy of the news releases distributed this morning, you can access via the company's website at welltower.com. We are holding a live webcast for today's call which may be accessed through the company's website.

Before we begin, let me remind you that certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Welltower believes results projected in any forward-looking statements are based on reasonable assumptions, the company can give no assurance that its projected results will be attained.

Factors and risks that could cause actual results to differ materially from those in the forward looking statements are detailed in the news release, and from time to time in the company's filings with the SEC.

I will now turn the call over to Tom DeRosa, our CEO. Tom?

Executive
Tom DeRosa

Thank you, Jeff. I'm pleased that the strong results we announced today reflect solid operating performance across all business segments, as well as strategic capital allocation decisions. Normalized FFO and FAD were up 4% and 5% respectively. These excellent results were driven by core growth, same store NOI was up 2.6% and our track record of making accretive investments.

Our class A healthcare real estate concentrated in major markets has consistently demonstrated resilience and in a year where wage pressures are challenging operators across the senior care industry, as well as new supply coming into many secondary markets, we are confident in our position and we are raising 2016 same store NPI guidance to 3% to 3.25%.

Let's take a closer look at our senior housing operating portfolio. Year-to-date, same NOI store growth in this business is average 3.9% relative to our initial guidance of 2% to 3%. Compared to the third quarter of 2015, these assets saw a strong occupancy increase of 70 basis points and rental rate growth of 4%.

Offsetting these strong top line results has been wage increases, which have been growing at 6% plus year-to-date. Our focus on major markets allows us to pass along much of this expense growth to the consumer. And same store growth for our operating portfolio resulted in an expected 2.2% increase for the quarter.

Wage inflation is not unique to the senior care industry. Its impact is being felt across all sectors of healthcare. This creates