Austin Wurschmidt

Austin Wurschmidt from KeyBanc Capital Markets asked if the strong Average Daily Rate (ADR) growth was driven by the Medicare Advantage strategy and if this trend would persist. He also inquired about the pipeline for new Medicare Advantage plans and the rate differential of new contracts.

Answer

COO Gabe Willhite and President & CEO Danny Prosky confirmed that improved quality mix and a strategic focus on higher-paying Medicare Advantage contracts drove rate growth. They noted that higher occupancy enhances their bargaining power. CFO Brian Peay highlighted that Medicare Advantage rates are 79% higher than Medicaid, underscoring the positive financial impact of the mix shift.

Austin Wurschmidt of KeyBanc Capital Markets asked if the strong Q2 Average Daily Rate (ADR) growth was indicative of the company's Medicare Advantage strategy and whether this benefit would persist. He also sought to understand the rate differential on newer Medicare Advantage contracts.

Answer

COO Gabe Willhite and President & CEO Danny Prosky confirmed that strong ADR growth was driven by an improved quality mix, particularly a higher concentration of Medicare Advantage (MA) residents, which gives them greater pricing power. CFO Brian Peay noted that MA rates are substantially higher than private pay and Medicaid. While declining to provide specific contract details, management confirmed that newer MA contracts feature more favorable rates with smaller discounts to standard Medicare.

Austin Wurschmidt of KeyBanc Capital Markets asked if the strong Average Daily Rate (ADR) growth was primarily due to the expansion of the Medicare Advantage business and if this trend would persist. He also inquired about the pipeline for new Medicare Advantage contracts and the rate differential of these new agreements.

Answer

COO Gabe Willhite confirmed that optimizing the resident mix toward higher-paying Medicare Advantage plans was a key driver of rate growth, a trend he expects to continue outpacing inflation due to increased bargaining power at higher occupancy levels. President and CEO Danny Prosky added that AHR's strong reputation for quality care enhances their negotiating position. CFO Brian Peay highlighted that Medicare Advantage rates are 79% higher than Medicaid, underscoring the financial benefit of the mix shift.

Austin Wurschmidt of KeyBanc Capital Markets asked if the strong Q2 ADR growth reflects the benefits of expanding the Medicare Advantage business and if this trend is sustainable. He also inquired about the pipeline for new Medicare Advantage plans and the rate differential between new and historical contracts.

Answer

COO Gabe Willhite and President & CEO Danny Prosky confirmed that improving quality mix and optimizing Medicare Advantage (MA) contracts drove strong rate growth. They explained that high occupancy provides greater bargaining power with MA plans. While specific future growth rates are hard to predict, they expect it to outpace inflation. CFO Brian Peay added that the accretive nature of this shift is significant, as MA rates are 79% higher than Medicaid and 42% higher than private pay.

Austin Wurschmidt from KeyBanc Capital Markets asked for details on the $300M+ investment pipeline, including deal competitiveness and economics, and questioned the funding strategy between the ATM program and non-core asset sales.

Answer

President and CEO Danny Prosky described the pipeline as over $300 million, primarily newer SHOP and Trilogy assets with attractive per-unit costs and yields from mid-6% to 8%. CIO Stefan Oh added that most deals are off-market. CFO Brian Peay outlined the funding priority as retained earnings first, followed by dispositions, and then price-sensitive use of the ATM program.

Austin Wurschmidt asked about seasonal factors in guidance beyond Q1, the expected change in the senior housing vs. SNF mix at Trilogy over the next few years, and opportunities for further deleveraging.

Answer

President and CEO Danny Prosky and CFO Brian Peay confirmed Q1 has the primary seasonal headwinds. Danny Prosky described the portfolio mix shift toward AL/IL as a "slow and steady progression" driven by new campus designs. Regarding leverage, he stated the most expensive debt has been paid off, the current 4.3x net debt to EBITDA is a comfortable level, and the remaining Trilogy debt is attractive, long-term HUD financing.

Austin Wurschmidt inquired about the potential bottom-line impact of Trilogy's increasing selectivity in resident admissions and the strategic mix between senior housing and skilled nursing. He also asked for a distinction between the investment pipeline for Trilogy developments versus external SHOP acquisitions, given the company's improved cost of capital.

Answer

President and CEO Danny Prosky detailed that the strategy for Trilogy's skilled nursing is to optimize for higher acuity residents and favorable payor mix, not just maximize occupancy, which in turn feeds the higher-margin senior housing side. Regarding growth, Prosky confirmed the improved cost of capital makes external acquisitions more accretive and outlined a multi-pronged growth strategy: consistent annual development at Trilogy ($100M-$200M), buying out remaining non-owned Trilogy assets, and pursuing more off-market SHOP acquisitions sourced through established relationships.

Austin Wurschmidt asked about the extent to which the government shutdown impacted the guidance change, how quickly demand typically returns post-shutdown, the current percentage of government business, and any strategic changes regarding government exposure.

Answer

CFO Liz Perkins detailed that Q4 2024 had tough RevPAR growth comps. Approximately one-third of the Q4 guidance adjustment was due to softening fundamentals, and two-thirds was related to the government shutdown. CEO Justin Knight noted that historically, a meaningful pickup in business followed past shutdowns, indicating pent-up demand. Liz Perkins added that government business, typically stabilizing, was 5.5% of occupancy mix last year, 5.2% in Q3 2025, and dropped to under 4% in October 2025, reinforcing the value of diversification.

Austin Wurschmidt from KeyBanc Capital Markets asked about the extent to which the recent guidance change is attributable to the government shutdown, directly or indirectly, and how quickly demand typically returns once the government reopens. He also inquired about the government segment's percentage of business during the disruption and any strategic changes regarding government business given recent volatility.

Answer

Liz Perkins, Chief Financial Officer, detailed that Q4 2024 had strong RevPAR growth, making for tough comparisons. She estimated that about one-third of the Q4 guidance adjustment was due to underlying fundamental softening in transient pickup, and two-thirds was related to the government shutdown. Justin Knight, Chief Executive Officer, noted that historically, there's been a meaningful pickup in business following government shutdowns, suggesting pent-up demand. Liz Perkins added that government business, historically stabilizing, was 5.5% of occupancy mix last year, 5.2% in Q3 2025, and dropped to slightly under 4% in October due to the shutdown. The company emphasizes broad diversification to mitigate segment-specific volatility.

Austin Wurschmidt sought clarification on RevPAR trends, confirming if Q2 was expected to be the weakest quarter with 1% growth in the second half. He also asked if the revised guidance reflects March's softness or the more recent stabilization, and how the company views the ADR and occupancy trade-off after remixing its business.

Answer

CFO Liz Perkins confirmed that Q2 is expected to be the year's low point for RevPAR growth, with about 1% growth anticipated for the second half. She clarified the guidance was based on Q1 performance and trends before the most recent encouraging week. Perkins also stated that the company expects to maintain ADR strength even with mix shifts, as new property-direct business is being booked at healthy rates.

Austin Wurschmidt asked about the midweek occupancy threshold needed to drive more significant rate growth and what factors might narrow the bid-ask spread in the hotel transaction market.

Answer

CFO Liz Perkins noted they are getting closer to the occupancy levels needed for meaningful rate growth, highlighting a remaining 5% gap to pre-pandemic compression levels. CEO Justin Knight stated that lower interest rates or a reacceleration in fundamentals could narrow the transaction spread, and confirmed their current tactical sales strategy is customized to the market environment, favoring individual asset sales over portfolios.

Austin Wurschmidt from KeyBanc Capital Markets asked about the key drivers for optimism heading into 2025, the occupancy level needed to effectively mix-manage midweek rates, and the strategy behind share buybacks versus asset sales.

Answer

CEO Justin Knight expressed optimism about the resilience of leisure travel and the opportunity to build midweek occupancy, which he believes now positions the company to more meaningfully grow rates. Regarding capital allocation, Knight highlighted the attractive spread between asset sale prices and share repurchase prices, emphasizing the goal of optimizing capital deployment. CFO Liz Perkins added that the team refocused on mix management in Q3 to capitalize on this opportunity.

Austin Wurschmidt inquired about AvalonBay's capital readiness for potential future share repurchase activity and whether dispositions remain the primary funding avenue.

Answer

CFO Kevin O'Shea emphasized the company's strong balance sheet, with leverage at 4.5x net debt to EBITDA (approximately 4x with forward equity) and ample liquidity. He confirmed a reloaded $500 million share repurchase authorization and stated that funding would likely come from available liquidity, such as commercial paper, with an intention to term out buybacks on a leverage-neutral basis, potentially using recycled asset sales and incremental longer-term debt. He stressed a nimble approach, not a binary choice between buybacks and development.

Austin Wurschmidt from KeyBanc Capital Markets asked which specific markets were dragging on the asking rent growth curve and how the current cost of capital and rent trajectory are influencing decisions about future development starts.

Answer

COO Sean Breslin identified the Mid-Atlantic and Southern California as the primary underperformers due to job market softness. CEO Benjamin Schall added that 2025 development starts are advantageously pre-funded at a 5% cost of capital, which provides a sufficient spread against projected yields, especially given observed construction buyout savings.

Austin Wurschmidt questioned the reasons for moderating renewal rate growth and whether it has reached a low point. He also asked if the recent Sunbelt portfolio acquisition was a unique opportunity and about the potential for similar large-scale transactions.

Answer

Chief Operating Officer Sean Breslin explained that renewal growth is tracking to plan and is expected to strengthen in the second half due to tougher prior-year comparables in H1. Chief Investment Officer Matthew Birenbaum described the Sunbelt deal as unique due to the seller and asset fit, with CEO Benjamin Schall adding that it was an opportune time to enter those markets at an attractive basis.

Austin Wurschmidt questioned the state of the transaction market and its effect on AvalonBay's ability to fund its rotation into expansion markets. He also asked how the company plans to leverage its strong balance sheet, forward equity, and stock price to capitalize on opportunities, and if other capital sources would be considered.

Answer

CIO Matthew Birenbaum described the transaction market as volatile and rate-sensitive, noting they have a head start on dispositions for the year. CFO Kevin O'Shea and CEO Benjamin Schall emphasized that development is primarily funded by the equity forward and free cash flow, not dispositions. They highlighted their financial capacity to be nimble, with Schall adding that their operating model initiatives add 30-40 basis points of incremental yield to new investments, enhancing their competitive advantage.

Austin Wurschmidt of KeyBanc Capital Markets questioned whether underwriting new starts on current rents in expansion markets signals a belief that rents have bottomed out. He also asked about the current state of the transaction market and whether the recent equity raise allows for an acceleration of the company's disposition-acquisition "pair trade" strategy.

Answer

CIO Matthew Birenbaum clarified that underwriting on an untrended basis is a conservative approach and does not depend on future rent growth to make a deal work. CEO Benjamin Schall emphasized the strategy is supported by a cost of capital advantage and falling construction costs. Regarding transactions, Birenbaum described the market as "thin" and noted that while the company aims to be net-neutral on transactions, it will likely be a net seller this year. The equity proceeds facilitate this strategy by removing the need to fund development with disposition capital.

Austin Wurschmidt asked about the percentage of the senior housing operating portfolio's NOI represented by the three operators under RIDIA 6.0, how Welltower plans to maintain a high percentage of NOI under this new alignment as it grows, and if there are any near-term hurdles to adding more operators to the structure.

Answer

Co-President and CFO Tim McHugh stated that the three operators under RIDIA 6.0 represent 20% of the senior housing operating portfolio NOI. CEO Shankh Mitra reiterated that these are the "founding class" and the company is open to including other operating partners to align interests and leverage regional density, not foreseeing significant hurdles as long as interests remain aligned.

Austin Wurschmidt of KeyBanc Capital Markets asked what strategic 'moat' Welltower is building to withstand an eventual pickup in new senior housing construction.

Answer

CEO Shankh Mitra stated the strategy is to focus on properties in highly affluent, difficult-to-build markets. He also urged a shift in thinking from 'supply' to 'excess supply,' emphasizing that unlike the last decade, future supply will be met with rapidly rising demand from the baby boomer generation. The key is the relationship between demand growth and potential supply growth.

Austin Wurschmidt asked how senior housing is expected to perform in a macro environment of higher inflation and potential pressure on asset prices, given seniors' reliance on savings and home equity.

Answer

CEO Shankh Mitra expressed confidence in the sector's resilience, noting it held up well even during the GFC. He emphasized that Welltower is positioned for any environment, and its strong balance sheet would allow it to capitalize on opportunities arising from market disruption that pressures more highly levered owners.

Austin Wurschmidt from KeyBanc asked if the combination of significant occupancy gains and strong pricing power in stabilized assets points to a potential reacceleration of RevPOR growth in 2026.

Answer

CEO Shankh Mitra confirmed the logic was correct but cautioned that reported metrics are affected by new, lower-occupancy acquisitions. He reiterated his previous outlook that the RevPOR environment should improve notably after the summer 2026 leasing season, emphasizing the company's focus on long-term positioning over short-term prediction.

Austin Wurschmidt asked if the industry is on the cusp of absorption reaccelerating, linking it to management's comments about the potential for better occupancy growth next year.

Answer

Shankh Mitra (CEO & CIO) clarified that Welltower's focus is on gaining market share through its proprietary operating platform, not on relying on macro industry absorption trends. He stated that any improvement in macro absorption would be a bonus, not the core of their strategy.

Austin Wurschmidt inquired about the near-term earnings impact of recycling outpatient medical proceeds and the timeline for earnings accretion from reinvesting in lab opportunities or development projects.

Answer

President and CEO Scott Brinker stated that the $1 billion in potential proceeds, if realized at strong pricing, could be immediately accretive depending on its deployment into outpatient development or opportunistic life science investments. He expects meaningful accretion either day one or within two to three years, emphasizing the strategic value creation.

Austin Wurschmidt asked about the near-term earnings impact of recycling outpatient medical proceeds and the timeline for earnings ramp from reinvestment, distinguishing between development and stabilized lab deals. He also sought details on the average size of tenants in the lab leasing pipeline, specifically if larger space requirements (e.g., 30,000+ sq ft) are prevalent, and the average yield on current outpatient medical developments.

Answer

Scott Brinker, President and CEO, stated that strong pricing on outpatient sales, significantly better than the implied stock price, has the potential to be immediately accretive depending on the use of proceeds. He expects reinvestment into outpatient development and opportunistic life science investments to generate returns far exceeding sale returns, leading to meaningful accretion over time. Kelvin Moses, CFO, confirmed that 30,000 sq ft remains an accurate marker for average tenant size in the lab pipeline. Mr. Brinker added that outpatient medical developments are yielding 7+% and are mostly highly pre-leased, offering a compelling spread to disposition cap rates.

Austin Wurschmidt of KeyBanc Capital Markets asked if the lab credit issues are backward-looking or if challenges could persist for the 10% of at-risk tenants. He also requested a breakdown of the 503,000 square feet of Q2 lab leasing, specifically the mix of new versus renewal activity and details on any early renewals or space givebacks.

Answer

CEO Scott Brinker explained that recent tenant failures were due to an inability to raise capital, not failed science, and that while some risk remains, the environment has improved in the last 30 days. Chief Development Officer Scott Bohn clarified that of the lab leasing, 85% was renewals, with expansion space being categorized as new leasing. Mr. Brinker added that some of the renewals were for 2026-2028 maturities, reflecting proactive portfolio management.

Austin Wurschmidt of KeyBanc Capital Markets asked if the lab credit issues are backward-looking and sought details on recent lab leasing activity, specifically the mix of renewals versus new leases and the nature of those renewals.

Answer

CEO Scott Brinker explained that recent tenant failures were often established companies that couldn't access capital, linking the issue to the market environment, which has recently improved. Chief Development Officer Scott Bohn clarified that while Q2 renewals were heavily weighted to near-term expirations, some were early renewals to accommodate tenant expansions, with the expansion space being counted as new leasing.

Austin Wurschmidt asked about the potential significance of growth projects 'outside the traditional SFR box' and sought details on the company's evaluation of new markets, including its ability to gain immediate scale.

Answer

Chief Financial Officer Jonathan Olsen highlighted that the third-party management business has already been substantial, contributing $0.09 per share to 2024 FFO and a projected incremental $0.02 in 2025. Chief Executive Officer Dallas Tanner added that they are exploring new markets like Salt Lake City and San Antonio and that technology and automation are enabling the platform to scale more efficiently, potentially into one or two new markets over the next few years.

Austin Wurschmidt of KeyBanc Capital Markets questioned whether leading indicators suggest a potential moderation in leasing momentum heading into the peak season, similar to the prior year.

Answer

President Charles Young responded that the year is unfolding as expected with healthy demand and accelerating new lease rate growth. He anticipates this will continue into the summer, peaking around June or July. While occupancy is expected to moderate slightly from Q1 highs during the peak move-out season, this is a planned strategy to optimize for market rent growth.

Austin Wurschmidt of KeyBanc Capital Markets asked about recent leasing demand trends, specifically how web and in-person traffic, seasonality, and prospect conversion rates have been trending in recent months.

Answer

President and COO Charles Young described demand as 'quite healthy,' giving the company confidence it can absorb available inventory. He noted that website traffic was up from Q2 to Q3, and while slightly down year-over-year from a very strong 2023, it remains at historically high levels. Young stated that showings are healthy and they are seeing strong demand across markets, which supports their ability to maintain a mid-96% occupancy level for this time of year.

Austin Wurschmidt of KeyBanc Capital Markets inquired about the booking pace for August and September 2025 and asked which specific market segments were underperforming relative to the company's prior guidance.

Answer

CEO Leslie Hale explained that Q3 is anticipated to be the weakest quarter due to a "layering effect" of headwinds, including holiday shifts, tough year-over-year comparisons, and softness in government and international travel. Hale projected that August's performance would be similar to July's mid-single-digit RevPAR decline, with September showing slight improvement. She attributed the underperformance to the compound effect of these factors rather than a single segment's weakness.

Austin Wurschmidt of KeyBanc Capital Markets asked for more detail on the Northern California recovery, questioning if it was a gradual improvement or a recent step-change. He also inquired about the timing of the recent asset disposition and the company's appetite for further sales and share buybacks.

Answer

President and CEO Leslie D. Hale cited positive headlines and strong Silicon Valley performance (up 11% RevPAR in Q1) as momentum drivers. EVP and CFO Sean Mahoney added detail on the strong Moscone Center citywide calendar and the growth in AI-related conferences. Regarding capital allocation, Hale stated the disposition was under contract before recent market uncertainty and that the transaction market is now paused. She confirmed that share buybacks remain an attractive, leverage-neutral priority.

Austin Wurschmidt inquired if the recent trend of ADR-driven RevPAR growth would continue and asked about the potential impact on margins if rate, rather than occupancy, remains the primary growth driver.

Answer

President and CEO Leslie D. Hale affirmed confidence in continued rate momentum, supported by strong BT and group demand. EVP and CFO Sean Mahoney added that January's growth was also rate-driven and explained that such growth flows more efficiently to the bottom line, potentially leading to margin performance between the low-end and midpoint of their guided range.

Austin Wurschmidt asked for more detail on the improving large corporate account demand, including specific industries, and what level of occupancy increase is needed to sustain mid-single-digit rate growth for midweek travel.

Answer

President and CEO Leslie D. Hale noted that GDS data shows improving national accounts, strengthening Monday-Wednesday demand. COO Thomas Bardenett specified that consultants, accountants, and international tech travelers are driving this growth. Hale added that the return of these less price-sensitive customers is boosting ADR, which accelerated from Q2 to Q3, and that they are already seeing sustained revenue growth at current levels.

Austin Wurschmidt of KeyBanc Capital Markets asked about the drivers of the recent pickup in group booking pace for 2025 and the key markets contributing to the strong group pace outlook for 2026.

Answer

CEO Jeffrey Donnelly attributed the 2025 group pace improvement primarily to the urban portfolio. President & COO Justin Leonard added that Q4 has more availability without a major election. For 2026, Leonard identified Boston as the biggest driver, citing a phenomenal citywide calendar.

Austin Wurschmidt of KeyBanc Capital Markets asked about the drivers behind the recent pickup in group booking pace for 2025, the potential drag from group on this year's RevPAR, and which markets are driving the strong group pace for 2026.

Answer

CEO Jeff Donnelly attributed the 2025 group pace improvement primarily to the urban portfolio and short-term bookings. He clarified that group has not been a drag, but Q3 faces a tough comp from last year's DNC. President & COO Justin Leonard identified Boston as the biggest driver for the strong 2026 group pace, citing a phenomenal citywide calendar.

Austin Wurschmidt asked for an outlook on the Florida resort assets and the normalization process, and also inquired about any other hotels with large, mandated CapEx projects that might be considered for sale.

Answer

CEO Jeff Donnelly stated that DiamondRock expects its Florida assets to 'find its footing' in the second half of 2025 but is not forecasting a 'hockey stick recovery' due to economic pressures on consumers. Regarding CapEx, Donnelly and President & COO Justin Leonard explained that they evaluate dispositions when required capital is large relative to a hotel's earnings, not just in absolute dollars. They noted the challenge is that assets needing significant capital often don't trade at premium prices.

Austin Wurschmidt from KeyBanc Capital Markets asked how the strategic shift to booking more group business at smaller resorts and weaker weekend transient demand impacts the outlook. He also questioned if the focus on cash flow alters portfolio allocation goals and requested an update on the group booking pace for 2025.

Answer

CEO Jeff Donnelly clarified that his optimism for resorts is a long-term view based on low supply growth and favorable demographics, while acknowledging near-term softness. He stated the cash flow focus doesn't fundamentally change allocation strategy but sharpens their evaluation of markets. He reiterated that the 2025 group pace is down slightly over 3% for the full year but is positive for the first half, reflecting their shorter booking window.

Austin Wurschmidt from KeyBanc Capital Markets asked if the SHOP operators CareTrust is in discussions with are primarily existing relationships and whether the company has considered converting any triple-net leases to RIDEA structures. He also requested a specific update on the realization of synergies from the Care REIT integration.

Answer

CEO Dave Sedgwick explained that they are casting a wide net for SHOP operators, including new relationships and long-standing connections of individuals at the firm, and confirmed the focus is on de novo growth, not conversions. SVP of IR & Strategy Derek Bunker reiterated that synergies from the acquired manager's $10 million run rate are about 50% and are on track to be realized starting in Q1 of the following year.

Austin Wurschmidt asked for an update on the expected accretion from the Care REIT transaction, the potential investment volume and yields in the UK market, and the performance of recent investments relative to underwriting.

Answer

President and CEO Dave Sedgwick deferred detailed comments on the Care REIT deal's financial impact until its closing. He noted the UK pipeline will take time to build, with potential cap rates in the high 7s to 9s. Both Sedgwick and CIO James Callister emphasized a focus on finding the right deals rather than a specific volume target. Sedgwick declined to comment on specific operator performance beyond publicly available data.

Austin Wurschmidt asked if the potential use of the credit facility implied a near-term slowdown in deal activity and whether stock price volatility affects their strategy on value-add investments.

Answer

CFO William Wagner denied any 'air pockets' in the pipeline, stating it continues to replenish and that cash on hand would be used first. President and CEO David Sedgwick affirmed that stock price fluctuations do not alter their underwriting discipline, as they focus on securing appropriate risk-adjusted returns for each deal.

Austin Wurschmidt requested details on the Tennessee portfolio's joint venture structure, including any purchase options, the deal's timeline, and whether the company's expansion is deal-driven or a strategic geographic focus.

Answer

Chief Investment Officer James Callister explained the JV structure, noting CareTrust holds a perpetual preferred equity position and has a call right to acquire the entire venture between years four and seven. He mentioned the deal began to materialize between April and June 2024. Callister clarified that investment opportunities drive geographic expansion, not the other way around, stating 'it's the deal that takes us to the new market.'

Austin Wurschmidt of KeyBanc Capital Markets asked about the reasons for a delay in investment closings, the company's strategy for evaluating larger portfolio transactions, and its approach to funding future investments.

Answer

Chief Investment Officer Kevin Pascoe explained that the investment timing was affected by the company's focus on a major SHOP conversion and that a robust pipeline remains. He clarified that larger deals are evaluated but kept separate from the quoted pipeline. Chief Financial Officer John Spaid added that while the company aims for a leverage-neutral funding approach, it has recently utilized more equity due to favorable market conditions but values maintaining multiple liquidity options.

Austin Wurschmidt of KeyBanc Capital Markets asked for the drivers behind the accelerating deal flow and the depth of the investment pipeline. He also questioned if the pace of acquisitions could increase further and what factors are causing cap rates to flatten.

Answer

CIO Kevin Pascoe attributed increased deal flow to sellers accepting the current high-rate environment and a limited buyer pool, making NHI more competitive. He noted the pipeline is $264 million with a funnel 3-4x that size. Pascoe believes the acquisition pace can increase but will remain selective. He stated cap rates are flattening due to expensive debt and stabilizing property performance.

Austin Wurschmidt of KeyBanc Capital Markets asked about NHI's confidence in backfilling its investment pipeline, the potential size of larger portfolio deals not included in the pipeline, and the scale of the SHOP conversion opportunity, including whether it involves the Discovery assets.

Answer

CIO Kevin Pascoe stated that while the pipeline's dollar value is stable, the opportunities within it are constantly churning from a total funnel of over $1 billion. CFO John Spaid added that deals remain accretive despite cost of capital changes. CEO Eric Mendelsohn confirmed the Discovery portfolio is a candidate for SHOP conversion and that they are exploring opportunities with other experienced operators.

Austin Wurschmidt asked if any potential investments in the pipeline involve the tenant PAC. He also questioned the potential for NHI to accelerate its investment pace beyond the typical $200-$400 million annual run rate and whether that would require additional overhead. Finally, he sought to understand the implied moderation in Q4 SHOP NOI growth.

Answer

Chief Investment Officer Kevin Pascoe confirmed there are no deals with PAC currently in the pipeline. President and CEO Eric Mendelsohn acknowledged the potential to exceed the typical investment pace if the cost of capital remains attractive, noting a recent hire to bolster legal and closing capabilities. Regarding SHOP NOI, Kevin Pascoe explained the guidance is mindful of incentive use, and they want to ensure occupancy stabilizes above 90% before forecasting accelerated growth from reduced incentives.

Josh Friedland, on behalf of Austin Wurschmidt of KeyBanc Capital Markets, asked about the government demand headwind and its expected impact. Wurschmidt then followed up, asking what is needed for the current demand remixing to provide a lift to ADR.

Answer

President & CEO Jonathan Stanner explained that government-related demand, which contracted sharply in March and April, has now stabilized at lower levels and this is factored into the company's outlook. To achieve an ADR lift, Stanner stated that the industry needs to see broader demand growth across segments. He emphasized that despite pricing headwinds, the company has effectively managed the bottom line, with full-year EBITDA and FFO per share expected to be down only 1-2% on softer-than-anticipated RevPAR.

Austin Wurschmidt of KeyBanc Capital Markets asked for an update on the company's plans to address the 2026 convertible notes maturity.

Answer

Executive William H. Conkling acknowledged the large maturity but expressed confidence in refinancing it in 2025, given the constructive capital markets. He stated that 'all options are on the table,' including the secured, unsecured, bank, and convert markets, with a focus on minimizing the mark-to-market on the interest rate. The company plans to be patient in the near term due to the note's low existing coupon.

Austin Wurschmidt inquired about the specific drivers behind Summit's confidence in the continued outperformance of its slower-to-recover markets and asked about any significant expense comparisons to be aware of for 2025.

Answer

President and CEO Jon Stanner detailed market-specific catalysts, such as the upcoming Super Bowl in New Orleans and resurgent tech demand in San Jose, which support the growth outlook from a low base. EVP and CFO William H. Conkling added that the expense environment has normalized better than initially forecast in 2024, with moderating wage pressures creating a cleaner and more stable expense base heading into 2025.

Austin Wurschmidt of KeyBanc Capital Markets asked new CEO Mark Decker to outline his immediate strategic priorities and what the company might do differently. He also inquired about the types of assets targeted for capital recycling and the potential investment spread between dispositions and acquisitions.

Answer

CEO Mark Decker identified his immediate priorities as finalizing a strategy with the team and board, refinancing the company's credit facility and term loan, and pursuing capital recycling. Decker noted that ideal dispositions would be low-yielding, high-quality assets or properties that don't fit the long-term strategy. CIO Alfonzo Leon added that while the market sees high-quality assets trading at low-to-mid six-percent cap rates, GMRE focuses on higher-yielding opportunities, often above a mid-seven cap, where they see inefficiencies to exploit.

Austin Wurschmidt inquired about the re-leasing timeline and potential rent for the vacant East Orange facility, its inclusion in guidance, and the status of other Prospect Medical properties. He also asked about the CEO succession process and whether the Board evaluated other strategic options.

Answer

Chief Investment Officer Alfonzo Leon detailed the multi-step re-leasing process for the East Orange facility, noting encouraging early interest and a goal to restore NOI by next year. Chief Financial Officer Bob Kiernan confirmed the impact is factored into 2025 guidance but is not significant. Regarding other Prospect assets, Kiernan stated there has been no indication of lease rejection. CEO Jeffrey Busch added that the CEO search has been narrowed to a few final candidates and that the Board continuously evaluates strategic options.

Austin Wurschmidt asked for details on the assets sold into the Heitman joint venture and the associated cap rate. He also questioned how GMRE plans to fund its remaining acquisition pipeline, particularly given the preference not to sell more assets into the JV, and whether the company is pursuing a dual-track investment strategy for both the JV and its own balance sheet.

Answer

CIO Alfonzo Leon stated that two single-tenant assets were sold into the JV at a low 7% cap rate. CEO Jeff Busch explained that funding for future acquisitions could come from the ATM program if the stock price is favorable, or more likely, from selling non-core assets to improve the overall portfolio quality. Mr. Busch confirmed they are still actively seeking higher-yielding opportunities, such as 9% cap rate deals, for GMRE's own balance sheet, creating a dual-track approach to acquisitions.

Austin Wurschmidt inquired about Global Medical REIT's strategy for maintaining a strong balance sheet, asking whether equity or dispositions are the more attractive funding source and how much capital is needed to reach the company's leverage target. He also asked about the current market for asset sales and the impact of higher interest rates on buyer demand and cap rates.

Answer

CFO Robert Kiernan explained that year-end leverage would be 46% without further action, just outside their 40-45% target range, which doesn't require significant asset sales or equity to correct. He confirmed they are considering sales opportunities. CIO Alfonzo Leon added that while the market had been optimistic, the recent rise in mortgage rates has subdued buyer interest, creating mixed signals. He affirmed they are taking a cautious, step-by-step approach to new acquisitions while evaluating the portfolio for potential dispositions.

Austin Wurschmidt from KeyBanc Capital Markets questioned the timeline for the Holiday portfolio transition decision, the performance of the five assets excluded from the same-store pool, and the occupancy momentum for the transitioned assets through Q2 and into July.

Answer

CEO Rick Matros revealed that serious discussions began last year after results failed to meet expectations. CFO Michael Costa noted that some of the excluded assets were already out of the same-store pool. CIO Talya Nevo-Hacohen confirmed positive momentum, with tours and move-ins picking up while move-outs declined, suggesting the transition disruption is now in the past.

Austin Wurschmidt from KeyBanc Capital Markets questioned the timeline of the Holiday portfolio transition decision, the performance of assets excluded from the same-store pool, and the occupancy momentum for the transitioned assets through the quarter and into July.

Answer

CEO Rick Matros stated that discussions began last year after observing underperformance. CFO Michael Costa noted that the excluded assets did not significantly impact the pool. CIO Talya Nevo-Hacohen confirmed positive momentum, with tours and move-ins increasing while move-outs declined, suggesting transition-related disruption is now in the 'rearview mirror'.

Austin Wurschmidt from KeyBanc Capital Markets questioned the timeline of the Holiday portfolio transition decision, the performance impact of the assets excluded from the same-store pool, and the occupancy momentum for the transitioned assets through Q2 and into July.

Answer

CEO Rick Matros revealed that serious discussions about the transition began last year after results failed to meet expectations. CFO Michael Costa noted the excluded assets were already underperforming. CIO Talya Nevo-Hacohen confirmed positive momentum, with tours and move-ins up and move-outs down, suggesting the transition 'noise' is in the rearview mirror.

Austin Wurschmidt of KeyBanc Capital Markets requested details on the $200 million of awarded senior housing acquisitions, including their location and operating metrics. He also asked why management broke from its historical practice of only announcing closed deals.

Answer

EVP Talya Nevo-Hacohen stated the deals are all domestic, biased towards the eastern U.S., and have embedded growth potential. CEO Rick Matros added they are weighted towards assisted living and memory care. Regarding the disclosure, Rick Matros explained it was a one-time decision to provide visibility into the high volume of activity, given the company's strong track record of closing awarded deals, and that they may not do so in the future as closed deals will be available to announce.

Austin Wurschmidt of KeyCorp inquired about the definition of 'full recovery' for the SHOP portfolio in terms of margins and NOI, and whether any operators have surpassed pre-pandemic levels.

Answer

EVP Talya Nevo-Hacohen indicated there is visibility towards reaching pre-pandemic metrics, particularly in assets that can drive rate. CEO Rick Matros confirmed some operators in both senior housing and skilled nursing have already exceeded pre-pandemic performance, highlighting the overall strength and quality of the current portfolio.

Austin Wurschmidt of KeyBanc Capital Markets questioned why Sabra hadn't acquired more assets, particularly in skilled nursing, given its improved cost of capital. He sought clarification on the commentary about seeing more portfolio deals but not being interested, and asked about the profile of a recent acquisition.

Answer

EVP & CIO Talya Nevo-Hacohen explained that the company is being highly selective, passing on challenged assets and focusing on high-quality opportunities. CEO Rick Matros added that portfolio deals they've seen have 'hair on them' and the company is avoiding the heavy lifting required for such transactions. On behavioral health, Matros stated they prefer a specific private equity-backed operator model, which is rare. Nevo-Hacohen confirmed the recent acquisition is a good example of their target profile.

Austin Wurschmidt from KeyBanc Capital Markets asked about the size of the SHOP investment pipeline beyond the disclosed $320 million, the sustainability of the current investment pace, and the specific drivers behind the increase in the 2025 FFO guidance.

Answer

Co-CEO Clint Malin stated that while LTC has issued LOIs for other deals, the market is competitive, and the current success stems from intentional pre-marketing of the SHOP platform. He noted LTC's focus on smaller deals provides an advantage. EVP of Asset Management Gibson Satterwhite mentioned that Q2 SHOP NOI exceeded internal expectations due to expense savings, but they are maintaining the original guidance for the initial portfolio for now. Co-CEO Pam Kessler confirmed the overall FFO guidance increase is driven by the newly projected acquisitions.

Austin Wurschmidt asked for details on how the SHOP NOI guidance range was determined, potential expense-side opportunities, and the strategy regarding going-in cap rates and diversification for new SHOP investments.

Answer

J. Satterwhite, EVP of Asset Management, explained the SHOP NOI forecast of $15.2 million for 2025 is based on pro forma 2024 results and assumes continued lease-up in the Anthem portfolio. Clint B. Malin, Executive VP, added that LTC is targeting 7% going-in yields on SHOP deals, balanced by higher-yield traditional financing, while focusing on operator diversification through smaller, often off-market, transactions.

Austin Wurschmidt of KeyBanc Capital Markets Inc. inquired about the operator who is not renewing a major lease, the timeline for selling those assets, and whether the redeployment of proceeds would be earnings-neutral. He also asked for clarification on the financial impact of the RIDEA transition, including CapEx and the initial yield.

Answer

Clint B. Malin, Co-CEO, explained the non-renewing operator is strategically exiting the region and that LTC expects to fully replace the $8.3 million in rent by recycling the capital into new investments at current rates. Pamela Shelley-Kessler, Co-CEO, confirmed the transition to RIDEA is expected to be earnings-neutral in year one, accounting for setup costs, and stated the initial portfolio's in-place yield is approximately 8%.

Austin Wurschmidt inquired about the necessary upfront platform investments for LTC's new RIDEA venture, its potential immediate accretion, external growth conversations, and the expected long-term size of the RIDEA business relative to the legacy triple-net portfolio.

Answer

Co-President and CIO Clint B. Malin explained that LTC is currently analyzing the required resources, noting that converting existing triple-net leases is a manageable first step. He confirmed seeing external RIDEA opportunities. Co-President and CFO Pamela Shelley-Kessler added that RIDEA could become a very significant part of the business, as not having the structure excludes LTC from many investment opportunities.

Austin Wurschmidt from KeyBanc Capital Markets asked about the potential for rent growth in the coming years, given strong affordability and moderating supply, and if the current environment is analogous to any historical period.

Answer

Chairman & CEO Ric Campo compared the current setup to the 2010-2013 period following the Great Recession, predicting strong future rent growth. He noted that with new construction starts down significantly, the market is positioned for a rebound. He cited Witten Advisors' forecast for over 4% rent growth in Camden's markets in 2026, accelerating to 5% and beyond in 2027.

Austin Wurschmidt asked about Camden's portfolio management objectives, including the target exposure for its largest markets, the possibility of entering new markets, and the conditions under which the company would use its balance sheet for growth instead of matched-funding.

Answer

President and CFO Alexander Jessett outlined the strategic goal to have no single market represent more than 10% of NOI (targeting reductions in D.C. and Houston) and no market less than 4% (targeting growth in Nashville) by the end of 2027. He affirmed that Camden is prepared to utilize its balance sheet and increase leverage (while staying below 5x net debt-to-EBITDA) for compelling value-creation opportunities once the transaction market shows more stability.

Austin Wurschmidt asked about Camden's strategy to reduce its Houston market exposure, questioning the target NOI percentage and if dispositions would fund new investments.

Answer

Chairman and CEO Richard Campo confirmed the strategy to lower exposure in both Houston and Washington D.C. He stated that dispositions are a potential source of funds, but not strictly necessary given the company's low-levered balance sheet. He suggested an ideal market balance is around 6% to 9% of assets, though a larger market like Houston could support a slightly higher concentration. The goal is to trim slower-growing assets and rebalance the portfolio over time.

Austin Wurschmidt of KeyBanc Capital Markets inquired about the drivers of the group booking pace, specifically the mix between volume and rate, and asked about the performance and profitability of the Northern California assets.

Answer

EVP & CFO Atish Shah detailed that the H2 group pace is two-thirds volume and one-third rate. President & COO Barry Bloom added this was a strategic effort to fill need periods, driving significant ancillary spend. Regarding Northern California, Bloom confirmed strong demand growth but noted that high wage costs present a challenge to margin expansion, though EBITDA is increasing.

Austin Wurschmidt asked for early thoughts on the remaining rate normalization within the soft leisure segment and how that trend might affect margins heading into 2025.

Answer

Chair and CEO Marcel Verbaas responded that it is too early to predict 2025 leisure trends due to short booking windows. However, he expressed optimism that a strong group business base already booked for next year will provide a foundation for better overall revenue management. He also cited a potential, albeit modest, tailwind from a rebalancing of international inbound versus outbound travel.

Austin Wurschmidt of KeyBanc Capital Markets questioned the company's confidence in achieving significant rent growth in its redevelopment pool, from the low $20s to nearly $40 per square foot. He also asked about the significant increase in capitalized interest and whether that level of spend would continue.

Answer

President & CEO Peter Scott clarified that the White Plains example with rent doubling was an exceptional case, not the standard expectation, but affirmed the strategy is to drive significant rate pops through capital investment to achieve a 10% cash-on-cash yield. EVP & CFO Austen Helfrich explained the rise in capitalized interest was due to nearly 2 million square feet of projects commencing redevelopment in Q2 and advised that this level of capitalized interest is a good assumption going forward.

Austin Wurschmidt asked about the potential for NOI margin upside, including low-hanging fruit like leasing internalization, and requested details on the current size of the leasing pipeline compared to prior quarters.

Answer

CEO Peter Scott identified empowering local teams, improving technology, and G&A savings as key drivers for margin improvement, noting that most leasing internalization is already complete. COO Robert Hull described the leasing pipeline as historically strong, with growing health system participation, and stated that Q1's new lease volume puts the company on pace to meet its annual targets.

Austin Wurschmidt asked for a breakdown of new leasing related to the backfilling of Steward Health space and inquired if the 2025 same-store net absorption guidance includes any re-leasing of that space.

Answer

COO Robert Hull clarified that the majority of Steward-related activity was treated as renewals, not new leasing. CFO Austen Helfrich confirmed that the 2025 absorption guidance of 75 to 125 basis points excludes any impact from Steward, providing a cleaner view of core portfolio growth.

Austin Wurschmidt inquired about the dynamics behind the multi-tenant same-store NOI growth, specifically the timing of move-ins versus move-outs, and the expected commencement dates for leases backfilling the Steward Health Care space.

Answer

Executive Todd Meredith explained that Q3 occupancy was lower for much of the quarter before a strong rebound in September, creating a lag effect on average occupancy and NOI. He confirmed that future growth will be driven by contractual increases, cash leasing spreads, and occupancy gains. Interim CFO Austen Helfrich added that the backfilled Steward leases, representing $17 million in NOI, are expected to commence without a significant timing mismatch.

Austin Wurschmidt from KeyBanc Capital Markets asked about the quantifiable free cash flow benefit from the lease expiration optimization initiative and how it might alter the seasonal leasing ramp in future years.

Answer

CEO Bryan Smith explained that while the initiative is a key part of their overall revenue optimization, it is difficult to isolate a specific financial benefit. CFO Christopher Lau added that the program provides earlier visibility into leasing trends, maximizes leasing during peak season, and creates a favorable earn-in for the following year. He also noted it should help reduce days-to-re-resident, which is currently in the low 40s.

Austin Wurschmidt asked about the quantifiable free cash flow benefit from the lease expiration optimization initiative and how the seasonal leasing ramp-up in spring might change in the future as a result of these efforts.

Answer

CEO Bryan Smith explained that it is difficult to isolate the exact financial benefit, as the initiative is part of a broader revenue optimization strategy that improves both occupancy and rate. CFO Christopher Lau added that the program provides benefits like earlier visibility into leasing trends and a favorable earn-in for the following year. He also noted an expectation that it will help lower the days-to-re-resident metric over time, which currently stands in the low 40s.

Austin Wurschmidt asked about the quantifiable value creation from the lease expiration optimization initiative and its potential impact on the 'days to re-resident' metric.

Answer

CEO & Trustee Bryan Smith explained that the initiative is part of a broader revenue optimization strategy, making a specific value difficult to isolate, but it provides benefits to both occupancy and rate. SEVP & CFO Christopher Lau added that the program enhances visibility and creates a favorable earn-in for the following year. He confirmed the expectation is that it will benefit 'days to re-resident' over time, which currently stands in the low 40s for Q2.

Austin Wurschmidt of KeyBanc Capital Markets asked how an improved cost of equity might influence capital allocation and if hurdle rates have changed. He also inquired about regional differences in the rent-to-income affordability stream.

Answer

CFO Christopher Lau stated that the core development program doesn't require equity, making it an opportunistic tool for potential growth in development or portfolio acquisitions that meet their strict criteria. COO Lincoln Palmer noted that the rent-versus-buy affordability gap is smallest in the Midwest and largest in markets like Salt Lake City, but overall demand for AMH's product remains strong across the portfolio.

Austin Wurschmidt of KeyBanc Capital Markets asked at what yield development would become less attractive, prompting a scale-back. He also questioned the ability to sustain high occupancy if the for-sale housing market strengthens.

Answer

CEO Bryan Smith reiterated the long-term attractiveness of the development program's returns, noting that potential cost increases from tariffs would not be a 'huge needle mover.' Regarding occupancy, he stated that while move-outs to buy are the top reason for turnover, the significant affordability gap between renting and owning provides a strong buffer. He added that AMH is focused on bolstering its service offering to enhance resident retention, making the convenience of renting difficult for homeowners to replicate.

Austin Wurschmidt asked how AMH's portfolio rent growth has historically performed relative to third-party market forecasts and inquired about the competitiveness of the recent portfolio acquisition process.

Answer

COO Bryan Smith stated that, excluding the unpredictable COVID period, AMH has typically tracked at the top end of market rent growth forecasts and believes the company is well-positioned for 2025. Regarding the acquisition, he confirmed the process was competitive and noted that opportunities are coming through various channels, including brokers and direct relationships, with AMH being a logical solution for many sellers.

Austin Wurschmidt of KeyBanc Capital Markets questioned the strategy behind dialing back renewal rate growth expectations despite strong retention and asked about back-half comps and retention assumptions in the updated guidance.

Answer

SVP & COO Michael Lacy explained that UDR became more aggressive on renewals in Q2 to test retention strength but is now scaling back slightly for Q3/Q4 because market rent growth has been more muted than expected. Regarding guidance, he noted that occupancy is in a much better position than last year, and while back-half comps are easier, the company is not banking on that. He expects retention to remain strong, running 300-350 basis points better than the prior year.

Austin Wurschmidt of KeyBanc Capital Markets inquired about which markets are showing the most acceleration in blended lease rates and if any have slowed in April. He also asked about operational strategies being employed to de-risk performance in the second half of the year.

Answer

COO Mike Lacy reported broad-based acceleration, with the most significant pickup in the Sunbelt, particularly in Texas and Florida, where Austin saw a 500 basis point improvement from a low base. He also highlighted strength in D.C., Boston, San Francisco, and a notable acceleration in Seattle. To de-risk the back half, Lacy explained they are sending out renewal offers of 4.5% to 5% for July/August. He noted new lease growth turned flat in April (up from -3% in Q1), providing momentum to be more aggressive on pricing while strategically managing occupancy during the peak leasing season.

Austin Wurschmidt questioned the assumed revenue growth deceleration in coastal markets despite a higher earn-in and asked for the company's view on the potential privatization of Fannie Mae and Freddie Mac.

Answer

COO Mike Lacy clarified that the apparent deceleration on the West Coast is not from core operations but is driven by a $2-3 million revenue drag from new rent control measures in Monterey Peninsula affecting utility reimbursements. CEO Tom Toomey declined to speculate on the future of the GSEs, stating they are a high-functioning and stabilizing force for the market that he does not expect to see disappear.

Austin Wurschmidt of KeyBanc Capital Markets asked for clarification on the definition of 'stability' in Sunbelt markets and inquired about the 2025 outlook for resident turnover.

Answer

SVP of Operations Mike Lacy clarified that while Sunbelt pricing is stabilizing, a key factor impacting recent blended lease rates was a higher-than-usual number of short-term leases converting to long-term ones. On turnover, Lacy highlighted the success of the 'customer experience project,' which has led to 1,800 fewer move-outs year-over-year, translating to a $9 million NOI benefit. He noted that saving a single resident from turning over is worth approximately $5,000.

Austin Wurschmidt of KeyBanc Capital Markets inquired about the drivers behind improving July leasing trends and the rationale for the updated 2025 lease rate growth guidance.

Answer

EVP, Chief Strategy & Analysis Officer Timothy Argo explained that July's improvement is driven by both continued renewal strength in the 4.5% range and the best new lease rate performance of the year. He noted the guidance change was primarily impacted by weaker-than-expected new lease pricing in the second quarter.

Austin Wurschmidt sought to confirm if easier comps in the second half of 2025 could drive stronger blended rate growth, asked when year-over-year net effective rent growth is expected to turn positive, and inquired about the performance gap between large and secondary markets.

Answer

Tim Argo, EVP and Chief Strategy Officer, agreed that less seasonal deceleration is possible in late 2025 due to moderating supply and easier comps. Clay Holder, CFO, projected that year-over-year net effective rent growth would likely turn positive around the middle of Q3 2025. Tim Argo also noted that the blended rate performance gap between smaller secondary markets and larger primary markets has narrowed to approximately 50 basis points.

Austin Wurschmidt of KeyBanc Capital Markets questioned the assumptions behind the revised second-half 2025 outlook, asking about the drivers for the implied lease rate acceleration and recent July operating trends like traffic and conversions.

Answer

President & CFO Jim Sebra explained the outlook is based on comparing expiring rents to current market rent estimates. He noted that while new lease trade-outs are expected to improve sequentially, they will remain negative at -2.7% for H2. Sebra confirmed that lead volumes and tour velocity remained strong in July, up 3-4% year-over-year, indicating solid demand.

Austin Wurschmidt asked if improving month-to-month market rents are translating to accelerated leasing spreads in Q2 and inquired about current leasing traffic and conversion trends.

Answer

President and CFO Jim Sebra confirmed that lease trade-outs are improving sequentially each month and that leasing demand in April and May is up 20-25% year-over-year, with conversion rates remaining stable. EVP of Operations Janice Richards added that seasonality is unfolding as anticipated.

Austin Wurschmidt inquired about the 2025 new lease rate growth assumptions within guidance and the composition of the current investment pipeline.

Answer

CFO James Sebra clarified that the 1.6% blended lease rate growth guidance assumes 0% new lease growth for the year, starting negative and turning positive by April, excluding any value-add benefits. Executive Scott Schaeffer described the investment pipeline as 'fulsome,' containing both new construction lease-ups and Class B assets, with some opportunities arising from distress due to maturing financing.

Austin Wurschmidt from KeyBanc Capital Markets asked for the updated revenue earn-in projection for 2025, the company's target occupancy level, and the expected timing for new lease rate growth to turn positive.

Answer

CFO James Sebra estimated the 2025 revenue earn-in at approximately 50 basis points. Executive Scott Schaeffer stated that at 95.5% to 96% occupancy, the company has reached its target and will now pursue a more balanced approach to rent growth. Sebra and Executive Janice Richards added that new lease growth should improve rapidly in early 2025 as new supply diminishes.

Austin Wurschmidt from KeyBanc Capital Markets asked about the seasonal impact on new lease rate growth and the sustainability of strong renewal rates.

Answer

President & CEO Angela Kleiman noted that including all leases added 100 basis points to the blended rate in Q2 and expects the full-year 'all-in' blend to be near 3%. Regarding renewals, she stated that while Q2 renewals were strong at 4.2%, and August/September notices are being sent at slightly higher rates, it is too early to determine if this level can be sustained, especially given softness in Southern California.

Austin Wurschmidt inquired about how different regions were tracking against initial market rent growth assumptions and asked if the current renewal rate achievements should be seen as an indicator of how market rents are tracking.

Answer

Executive Angela Kleiman responded that Northern California (especially Santa Clara and San Mateo) and parts of Seattle are leading the portfolio and tracking toward the higher end of their internal range, while Southern California, particularly Los Angeles, is softer. She affirmed that it is a fair assumption to view the strong renewal rate performance as indicative of how market rents are tracking.

Austin Wurschmidt of KeyBanc Capital Markets inquired about the cadence of new lease rate growth and any concession burn-off benefits within the market rent growth assumption. He also asked for the reasons behind the sequential decrease in core FFO from Q4 2024 to the Q1 2025 guidance.

Answer

Executive Angela Kleiman confirmed expectations for a normal seasonal leasing curve in 2025, similar to 2024. Executive Barb Pak explained the sequential FFO decrease is driven by the timing of operating expenses, which are guided to be higher in Q1, and increased interest expense due to a higher line of credit balance.

Austin Wurschmidt of KeyBanc Capital Markets asked for the primary drivers of the expected acceleration in senior housing same-store growth in the second half of the year and questioned what was behind the recent reacceleration in RevPOR growth.

Answer

EVP & CFO Robert Probst pointed to strong move-in demand, favorable labor expense trends, and the key selling season as drivers for the second half. EVP & Chief Investment Officer J. Hutchens attributed the strong RevPOR growth to a deliberate price-volume optimization strategy, stronger street rates, and 7% internal rent increases, noting good pricing opportunity remains even at current occupancy.

Austin Wurschmidt asked if the 2025 guidance includes any FFO impact from the Brookdale portfolio transition and questioned what drove the increased confidence for a higher occupancy gain forecast this year compared to last year's initial guidance.

Answer

CFO Robert Probst clarified that the guidance assumes the Brookdale assets remain triple-net for most of 2025, making the FFO impact a 2026 story. Executive J. Hutchens attributed the confidence in occupancy gains to strong fundamentals but stressed that achieving the forecast is highly dependent on the key selling season.

Austin Wurschmidt from KeyBanc Capital Markets asked about the occupancy of recent acquisitions, the company's appetite for different investment profiles, and the potential for a hybrid solution for the Brookdale lease.

Answer

CEO Debra Cafaro emphasized the attractiveness of their current investment profile—high immediate yields with embedded growth—and noted any deviation would require a compelling risk-adjusted return. Regarding Brookdale, J. Hutchens acknowledged that while Brookdale holds the renewal option, a mutually agreed-upon 'in-between' outcome could be a win-win scenario.

Austin Wurschmidt of KeyBanc Capital Markets asked about attractive acquisition markets for the post-spin AIR entity and inquired about the potential pipeline size and funding options for the IQHQ life science multifamily developments.

Answer

Chairman and CEO Terry Considine identified faster-growing, less-regulated markets like Florida, Georgia, Tennessee, North Carolina, and the Rocky Mountain West as targets for AIR. He deferred specifics on the IQHQ venture but suggested its pipeline would be multiples of the initial investment and funded via project financing and private equity. He also discussed balancing simplicity with the attractiveness of another large joint venture.

Austin Wurschmidt of KeyBanc Capital Markets questioned Aimco's pricing strategy, asking if there is a target occupancy level below which they would not fall. He also sought to reconcile the current $350 million disposition plan with a $750 million figure mentioned in the prior quarter.

Answer

Keith Kimmel, EVP of Property Operations, emphasized a focus on long-term contribution margin over hitting a specific occupancy number, stating they are unwilling to compromise on resident quality for short-term gains. CFO Paul Beldin clarified the previous $750 million sales figure was an illustrative example, not a formal target, and stressed that Aimco's strong balance sheet removes any pressure to sell assets hastily.