Michael Stroyeck

Michael Stroyeck asked for insight into the growth of non-same store SHOP assets and whether significantly different NOI growth is expected relative to the same-store pool in 2026. He also questioned how long the mid-single-digit RevPOR growth in the Canadian portfolio is expected to continue and when the U.S. business might catch up.

Answer

Talya Nevo-Hacohen (EVP, Chief Investment Officer, and Treasurer, Sabra Health Care REIT) explained that non-same store assets include recent investments with room for NOI growth and assets undergoing recovery, which will eventually be folded into the same-store pool. Richard K. Matros (CEO, President and Chair, Sabra Health Care REIT) clarified that this will not reduce overall numbers. Ms. Nevo-Hacohen expects Canadian RevPOR growth to continue for at least another year, with U.S. pricing power increasing as occupancy rises, but Mr. Matros noted it's difficult to predict when the U.S. market will catch up to Canada.

Michael Stroyeck asked for insight into the growth of non-same store SHOP assets and whether their NOI growth is expected to differ meaningfully from the same-store pool in 2026. He also questioned how long the mid-single-digit RevPOR growth in the Canadian portfolio is expected to continue and when the U.S. business might catch up.

Answer

CIO Talya Nevo-Hacohen explained that non-same store assets include recent investments with high 80s/low 90s occupancy and assets undergoing repositioning, all offering opportunity for increased NOI growth. CEO Richard K. Matros added that integrating these assets over time will not reduce overall numbers. Talya Nevo-Hacohen expects the Canadian portfolio's RevPOR trajectory to continue for at least another year, but noted it's difficult to predict when the U.S. market will catch up due to the current gap, as U.S. pricing power depends on occupancy increases.

Michael Stroyeck from Green Street Advisors, LLC asked about the current rate of wage increases for operators and whether there were differences between the skilled nursing and senior housing portfolios. He also inquired about any specific markets experiencing particularly tight labor conditions.

Answer

CEO Rick Matros reported that wage increases are steady at around 4% for both asset classes, a level that has held for nearly three years since the major adjustments in 2022. He added that while labor conditions have improved everywhere to varying degrees, he could not pinpoint any specific market that was suffering from undue tightness.

Michael Stroyeck from Green Street Advisors, LLC inquired about the current rate of wage increases being passed along by operators, any differences between SNF and senior housing, and whether any specific markets face particularly tight labor conditions.

Answer

CEO Rick Matros reported that wage increases are stable at approximately 4% across both skilled nursing and senior housing portfolios, a level that has held since major adjustments in 2022. He added that while labor conditions have improved everywhere, he could not pinpoint any specific market experiencing 'undue suffering'.

Michael Stroyeck from Green Street Advisors, LLC asked about the current rate of wage increases for operators, any differences between SNF and senior housing, and whether any specific markets are experiencing particularly tight labor conditions.

Answer

CEO Rick Matros reported that wage increases are stable at around 4% for both skilled nursing and senior housing, a level that has held since a major adjustment in 2022. He noted that reaching pre-pandemic employment levels proves this strategy is working. He added that while there are varying degrees of improvement, no single market is experiencing 'undue suffering' from labor tightness.

Michael Stroyeck of Green Street Advisors inquired about the reasons for passing on SHOP deals and the drivers behind the significant increase in SNF coverage.

Answer

EVP Talya Nevo-Hacohen cited a focus on asset quality, market viability, and relationships, not just price. CEO Rick Matros and CFO Michael Costa explained the SNF coverage jump was due to operating leverage from occupancy gains and substantial Medicaid rate increases that recently took effect.

Michael Stroyeck of Green Street asked for a quantification of the flow-through from incremental occupancy to NOI in the SHOP business. He also inquired about the drivers behind the increase in SNF transaction opportunities and the types of sellers becoming more active.

Answer

EVP & CIO Talya Nevo-Hacohen explained that the nearly flat exPOR (expense per occupied room) demonstrates the operating leverage, with most incremental revenue flowing to the bottom line after variable costs. CEO Rick Matros stated that the increase in SNF opportunities is driven by sellers who had been waiting for their NOI to stabilize post-pandemic, allowing them to achieve a better price now that reimbursement rates are baked in.

Michael Stroyeck inquired about CareTrust REIT's underwriting criteria within SHOP, specifically if it has changed due to increased competition, and how the company plans to fund future external growth given its minimal leverage.

Answer

James Callister, Chief Investment Officer, confirmed they still target a low double-digit unlevered IRR for SHOP deals, adapting their path to achieve it given market compression, but their core underwriting hasn't changed. Derek Bunker, CFO, indicated a continued balanced approach to funding, leveraging favorable capital markets and potentially increasing balance sheet usage (revolver, then bond market for IG savings) as rates decline, to maintain full capacity for larger opportunities.

Michael Stroyeck asked about CareTrust REIT's underwriting criteria within the SHOP sector, specifically whether it has changed due to increased competition, either at the property level or in terms of IRR requirements, or if the company is simply passing on more deals. He also inquired about the company's strategy for funding future external growth given its minimal leverage, and at what point it would prioritize balance sheet capacity over equity issuances.

Answer

James Callister, Chief Investment Officer, affirmed that CareTrust still targets a low double-digit unlevered IRR for SHOP deals. He explained that while underwriting hasn't fundamentally changed, they now consider a deal's specific path to that IRR, factoring in market compression, CapEx needs, location, and revenue/expense growth. Derek Bunker, Chief Financial Officer, stated that the funding approach remains consistent, balancing equity trading with revolver usage. He noted that as rates have come down, they might increase revolver utilization and explore the bond market, especially to realize investment-grade savings, to maintain full capacity for larger opportunities.

Michael Stroyeck asked if Healthcare Realty has observed any changes in the number of office repositionings across its markets, specifically regarding trends in shadow supply from traditional office spaces. He also inquired about the company's target mix between fixed and floating rate debt as interest rate swaps begin to burn off later in the year.

Answer

President and CEO Pete Scott and COO Rob Hull stated they have not seen any significant change or trend in office repositionings or shadow supply impacting their markets, especially for health system leasing. CFO Dan Gabbay explained that the company aims for efficiency and maturity extension, targeting a floating rate mix generally in the mid-single digits to upper-single digits proportion of overall debt, while emphasizing they will not suddenly shift to all floating rate debt.

Michael Stroyeck asked if Healthcare Realty Trust has observed any changes in the number of office repositionings across its markets, specifically looking for trends in shadow supply originating from traditional office conversions to medical office.

Answer

President and CEO Peter Scott and COO Rob Hull stated they have seen 'nothing of note' regarding changes in office repositionings or shadow supply from traditional office. Rob Hull explained that health system leasing for critical service lines often requires specific building designs and parking ratios, making traditional office conversions generally not a significant factor in their day-to-day operations. CFO Dan Gabbay addressed a follow-up on debt mix, indicating a target of mid-single to upper single digits for floating rate debt proportion, emphasizing prudence.

Michael Stroyeck requested specific NOI growth expectations for 2026 across Welltower's sub-portfolios, including U.S. SHOP, U.K., Canada, and active adult businesses.

Answer

Shankh Mitra (CEO, Welltower) stated that the overall portfolio NOI growth is expected to be 15%-21% but declined to provide specific guidance for individual sub-portfolios.

Michael Stroyeck asked for the expected levels of NOI growth in 2026 across Welltower's U.S. SHOP, U.K., Canada, and active adult businesses.

Answer

CEO Shankh Mitra stated that the overall SHOP portfolio guidance is 15%-21% but Welltower does not provide guidance on sub-portfolios.

Michael Stroyeck asked about the drivers behind the expected acceleration in RevPOR growth for 2026 and whether the 2026 OMR guidance assumes any further occupancy loss in the research portfolio or if NOI has troughed.

Answer

J. Justin Hutchens, EVP of Senior Housing and Chief Investment Officer, explained that RevPOR growth is broad-based, primarily driven by higher in-house rent increases (8% this year vs. 7% last year) and solid move-in rent trends. Robert F. Probst, EVP and CFO, stated that the 2026 OMR guidance is similar to 2025, with outpatient medical outperformance leading growth and the research business 'hanging in there,' implying no significant further occupancy loss or a trough in NOI.

Michael Stroyeck asked about the drivers behind the expected acceleration in RevPOR growth for 2026, and whether the 2026 guidance for the outpatient research business assumes any additional occupancy loss, inquiring if NOI has troughed in that segment.

Answer

J. Justin Hutchens, EVP of Senior Housing and Chief Investment Officer, explained that RevPOR acceleration is broad-based, primarily driven by 8% in-house rent increases (up from 7% last year) and solid underlying move-in rents. Robert F. Probst, EVP and CFO, stated that the 2026 OMR guidance is similar to 2025, with outpatient medical outperforming and the research business 'hanging in there,' implying modest decline in research occupancy and NOI consistent with prior year trends.

Michael Stroyeck asked about the potential impact of the CMS proposal to eliminate the inpatient-only procedure list on the expansion of outpatient services. He also inquired about the performance and stabilization outlook for the post-acute portfolio.

Answer

Robert Probst, EVP & CFO, stated that the push toward outpatient settings has 'stepped up a level or two,' which he described as 'great for our business.' Debra Cafaro, Chairman & CEO, added that the post-acute portfolio's performance is improving as expected and should continue to strengthen as occupancies rise.

Michael Stroyeck from Green Street asked for details on the Research segment's tenant base, specifically the percentage in traditional biotech and their average lease term, and inquired about the expected occupancy trend over the next year.

Answer

EVP Peter Bulgarelli detailed that 75% of tenants are investment grade, with about 12% of the portfolio being earlier-stage biotech or innovation space with typical lease terms of 5-10+ years. CEO Debra A. Cafaro reaffirmed the OMAR same-store NOI guidance of 2-3% and noted strong institutional leasing demand. EVP J. Hutchens added that redevelopments are temporarily impacting total portfolio occupancy.

Michael Stroyeck from Green Street asked about the remaining NOI and occupancy upside in the legacy Lillibridge medical office portfolio and requested details on a recent secured loan investment.

Answer

Executive Peter Bulgarelli reported that the growth outlook for the legacy Lillibridge portfolio is now stronger than at acquisition due to significant operational improvements. CEO Debra Cafaro added there is over 8% of occupancy upside remaining. J. Hutchens described the secured loan as a high-yield investment on a premier Seattle senior housing asset with a right of first offer (ROFO).

Michael Stroyeck asked about the modest decline in the percentage of resident days from Medicare and Medicare Advantage within the Trilogy business as the year progressed, inquiring if this was due to seasonality or increased difficulty in pushing occupancy from those payer sources. He also asked about Trilogy's headcount increase with higher acuity and how quickly they could reduce expenses if acuity increases become harder to achieve.

Answer

COO Gabe Willhite confirmed a seasonality component, with skilled nursing occupancy typically troughing in September and peaking in Q1, though this year shows less seasonality. Regarding staffing, Gabe Willhite explained that Trilogy uses a 'flex force' (their own travel nurse organization) for staffing adjustments rather than permanent hiring/firing. CEO Danny Prosky added that Trilogy's industry-leading low turnover (40% vs. 100% for peers) means hiring is a perpetual process to replace those leaving and improve the workforce, which is partially census-driven.

Michael Stroyeck asked about the modest decline in Medicare/Medicare Advantage resident days within Trilogy, questioning if it's seasonal or due to increased difficulty in pushing occupancy from these payer sources, and how Trilogy manages headcount and expenses with higher acuity.

Answer

COO Gabe Willhite confirmed a seasonality component, noting that skilled nursing occupancy typically troughs in September and peaks in Q1. He stated that this year shows less seasonality, contributing to Trilogy's year-over-year occupancy increase. Regarding headcount, COO Gabe Willhite explained that Trilogy flexes staffing using its internal travel nurse organization and additional hours rather than permanent hires or layoffs. CEO Danny Prosky highlighted Trilogy's industry-leading low turnover rate (40%), indicating that hiring is a perpetual process focused on improving the workforce, driven by both census and ongoing needs.

Michael Stroyeck from Green Street asked about the expected cap rates and sale timing for the 12 outpatient assets removed from the same-store pool and sought an explanation for the deceleration in Trilogy's Senior Housing average daily rate (ADR) growth.

Answer

CIO Stefan Oh stated the outpatient assets are a mixed bag, making an average cap rate difficult to pinpoint. COO Gabe Willhite confirmed two have sold and two are under contract, with the goal of refining the portfolio. President and CEO Danny Prosky explained the ADR deceleration was due to a bed mix shift toward lower-rate, higher-margin independent living villas, not a lack of pricing power, noting a ~6% rate increase was still implemented.

Michael Stroyeck asked about the potential floor for Medicaid as a percentage of revenue at Trilogy. He also inquired about the outpatient medical business, asking where occupancy might trough and if there are additional known move-outs.

Answer

President and CEO Danny Prosky and COO Gabriel Willhite explained that while Trilogy could physically pivot to 0% Medicaid, it's unlikely as it serves as a resident accommodation. They noted a cut severe enough to force this would cripple the broader SNF industry. For the outpatient portfolio, management expects occupancy to remain in the high 80s, acknowledging known move-outs from April to November could cause a trough in late Q2 or Q3 2025, which they are actively working to backfill.

Michael Stroyeck asked about outpatient medical retention rates, specifically excluding CommonSpirit leases, and whether there has been any decline due to the company's push for harder pricing. He also inquired about any spread in pricing power between health system and non-health system tenants.

Answer

Scott Brinker, President and CEO, stated that outpatient retention rates have consistently been in the 75%-85% range, acknowledging a couple of large, known non-renewals from legacy assets this quarter. He emphasized that overall leasing volume has been phenomenal, with attractive economics including better escalators, strong renewal spreads, minimal tenant improvements (TIs), and long lease terms. Regarding pricing power, Mr. Brinker noted a distribution in re-leasing spreads, with some exceeding 10% and others slightly negative, but attributed this more to building quality and space uses rather than tenant type (health system vs. non-health system).

Michael Stroyeck asked about outpatient retention rates, excluding CommonSpirit leases, and whether there has been a decline due to the company's more aggressive pricing strategy compared to historical sector trends.

Answer

President and CEO Scott Brinker confirmed that retention rates have consistently been in the 75%-85% range. He highlighted strong leasing volumes and attractive economics, including improved escalators, robust renewal spreads, minimal tenant improvements, and long lease terms, indicating favorable performance despite pricing strategies.

Michael Stroyeck of Green Street asked what percentage of the at-risk tenant base needs to raise capital in the very near term (3-6 months). He also questioned if the lower rents on new lease signings were due to a mix issue or real pressure on asking rents.

Answer

CEO Scott Brinker clarified that the 10% figure refers to all small-cap and private biotech tenants, not the 'watch list,' and that only a handful within that group are being monitored carefully due to their cash position. Chief Development Officer Scott Bohn explained the lower new lease rent was a mix issue, largely attributed to a single large deal with a robotics R&D tenant, which commands a different rent than wet lab space, but was still a 15% increase over the previous tenant's rent.

Michael Stroyeck of Green Street Advisors asked what portion of the at-risk tenant base needs capital in the near term and questioned if lower new lease rents were due to market pressure or portfolio mix.

Answer

CEO Scott Brinker clarified that the 10% figure refers to all small-cap and private biotech tenants, not a 'watch list,' and only a handful are being monitored closely for near-term capital needs. Chief Development Officer Scott Bohn attributed the lower new lease rent to mix, specifically a large deal with a robotics R&D user, noting the rent was still a 15% increase over the prior tenant's.

Michael Stroyeck of Green Street Advisors, LLC asked about the current wage inflation operators are experiencing and whether there are meaningful differences in wage growth between the SNF and senior housing portfolios or by specific job roles.

Answer

Megan Kroll, SVP of Operations, responded that wage growth has normalized to typical inflationary increases, moving past the volatility of the post-COVID era. She noted no significant difference between SNF and senior housing wages, though hiring for Certified Nursing Assistants (CNAs) remains a challenge that operators are managing through a focus on workplace culture.