Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph, here with Seth Bergy. We're very pleased to have with us Welltower CEO, Shank h Mitra. This session is for Citi clients only. Disclosures have been made available at the access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit any questions. Shank, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, then we'll get into Q&A. Oh my God. Okay. To my left is Tim McHugh, our CFO and Co-President. To my right is Nikhil Chaudhri, our CIO and Co-President. To Nikhil's right is sitting John Burkart, our COO and Vice Chair. Welltower is a company that plays at the cross-section of housing, aging, and wealth. We do senior housing. We're mistakenly known as a healthcare REIT. We don't do much healthcare. We don't know much about healthcare. We're in a business of providing housing to seniors, that's what we do. That's sort of our business. We're in three countries, U.S., U.K., Canada. I've never asked anyone to buy our stock, I'm not gonna come up with a answer here. That's not my job. We run the company. Got it. Yeah. No, I feel like you'll never tell someone to buy your stock, but maybe to rephrase it a different way, you know, what's misunderstood right now? If someone doesn't own your stock, what, you know, what maybe are they missing about the story? That's a different question. It is a pretty well-known, well-understood bias of the market that people, you know, sort of fade growth in all industries. Depending on what industries you look at, what you grew up looking at, different industries have different sort of a time horizon, no? If you cover tech, you're used to look at things five years, seven years, 10 years out, right? By being the virtue of being a REIT, majority of people who grew up in this industry have learned only to look at things 12 months out, 18 months out. That sort of create an interesting situation where people don't know how to value compounders, right? At least my perception, because not a lot of companies have been compounders in REITs, at least not for last 10 years. If you really want to understand our company, understand what the company, you know, I would suggest you look at understand what the earnings power of the company is years out, not just 12 months out. That would be an observation from me. Thanks. Ahead of the conference, I guess two days ago now, you announced, Welltower announced a strategic data science partnership with self-storage company, PSA. I guess, what is the benefit to Welltower of this partnership? Where, where do you see it going, and kind of what is the opportunity for you? Yeah. I think the announcement was Public Storage and a private equity group as well. Public Storage on the storage side, the private equity group on the medical office side. I think from our perspective, you know, A, it's economics. We're getting paid a licensing fee from both parties. B, more importantly, you know, we're focused on the potential of tapping untapped value from an asset on our balance sheet. If you all think about the data science journey we've been on, which now goes back 11 years, we have, you know, spent hundreds of millions of dollars to build out a data science platform that has allowed us to quite effectively allocate capital. you know, as part of the fundraising process we were on last year for our private funds management business, you know, some of the largest sovereign wealth funds in the world dug into how we allocate capital, how our models work, they liked what they saw. They challenged us to ask us, "Can we apply that to other geographies? Can we apply that to other asset classes?" They liked what they saw. One of them is a prolific investor in the broader AI space, whether it comes to, you know, AI infrastructure, software models, all kinds of things. They suggested, you know, at a multi-billion dollar valuation, investing $1 billion into this platform to try and commercialize it. We just fundamentally never want to take money from anyone unless if we're confident we can earn an attractive return on that. We said, "Let us go figure this out. Let us go figure this out if there is true commercial interest for this. If there is, then we'll figure out how to capitalize this." We started having a few conversations, and you all are seeing the first couple of folks that have gone over the finish line, and we're in active conversations with many others. Let's see where this goes, but it's an asset on our balance sheet that has created substantial value for our shareholders, and there is a potential that there is significant incremental value to be captured from that. That's the journey we're on. Does it change anything internally at Welltower, or is it just leveraging what you're already doing and essentially being able to monetize it? Yeah. It's predominantly leveraging what we've already built and, utilizing it for other asset classes. I think one of the broad themes here at the conference this year has been AI, and I wanna kind of talk about maybe the potential impact to the broader senior housing sector, but more specifically to Welltower. I mean, this is obviously an example of work you've been doing in data science and now AI, but where are you seeing the other opportunities to either be more efficient or across the investment capabilities? You know, how are you deploying AI internally, and what could we expect to see as kind of the benefits from it? I think most people these days thinks LLMs are AI. I don't, right? I think AI is a much bigger, broader discipline than LLMs, and I think if you look at my comments on the press release, you will see that try to reflect that. Look, the fact is that, you know, we thought that commercial real estate is world's largest asset class, and it still works from a corner and a gut feel, and that we could disrupt that, and that's the journey we have been on. We didn't call it AI. We call it machine learning, right? You know what is machine learning? It's statistical learning, supervised learning, unsupervised learning on structured data, right? Obviously the transformer model came, and that paper came in 2018, which changed the world, right? What we happen is from there, we went from structured data to unstructured data, right? That's the journey we have been on. I think you don't have to go and look at very far to see that actually it works. You can see how effectively we allocate capital, with what velocity we allocate capital. If you go and read my last annual letter, I wrote a lot about this topic. You know, commercial real estate transaction takes five to nine months, right? We can give you a price that we'll live with in two, three days, right? You know, and we give you people a handshake. We never walk away from it. That sort of change of velocity in an industry can in absolute change the game. That's what we have been doing. There is more to the aspect of, you know, I think less about cost and more about revenue. I sort of have a mindset of not cost mindset, a revenue mindset. Having said that, you can see what that does, that kind of use of models do to our own people. I mean, our investment team has not changed in its size in the last four years. It's a substantial team. We're not, you know, sort of algorithmic traders, so our last mile is always people. That team has not changed, yet the volume of transaction that we process, that team process has gone up 4X, 5X in the last five years, right? That's sort of one aspect of how we think about these things in our firm. Tim and Nikhil and John are sort of thinking about this across the board, different aspect, how you source leads, where people show up, all of those things that every organization is thinking about that we're not any special. I would tell you that senior housing as an industry is particularly interesting, where last few weeks of all these conversations where people are sort of focused on whether it's SaaS, it's others, types of businesses where potential of disruption. You'll notice that in majority of those businesses, whether it's brokers, insurance brokers, others, you will notice that in majority of those cases, people are revenue in these businesses, wealth managers and others, right? It is interesting to me that I don't know it's gonna happen, not happen, it's true, not true in the markets. You're gonna move on from there. It is interesting senior housing is a business, not the business, but a business where people equals to cost. There is an aspect of it you think about, whether it's AI or broader technological change or automation, you would think, okay, you know, you have on average 57, 60 FTE in a community, probably 30, 35 of them are caregivers. There is substantial number of people who are not, right? You have on-site HR, on-site payroll, on-site this and that and others. Whether it's not less of a question of AI, more of a question of probably broader automation and technological use, what would that look like 10 years from now? It's an interesting sort of a thought process to think about. It is. As you think about either developing these tools, are you buying them off the shelf? Are you partnering? You know, and what's the investment level from Welltower? Yeah. Our entire platform we have built ourselves over last 10, 11 years. Entirely we built ourselves in-house. As you think of some of the advancements of AI, we've seen some reports on anti-aging or delay aging and maybe people living longer and all those kind of considerations. How do you think that could impact senior housing? I know it's still a little far out, but you are seeing some stuff go through the FDA that could maybe delay when people would actually need senior housing. Do you think that's something to keep an eye on, or do you think kind of the value that Welltower and senior housing is delivering would remain static even if people lived for longer? Can you two want to take that, and I'll wait too? I think in general, you know, the problems that, you know, we face in our business, right? Short length of stay. If folks are healthier, that is a positive. That helps with length of stay. If life expectancy is longer, that is a you know, benefit. If you still... I was looking this up on ChatGPT earlier today. I don't know if this is factually correct or not, but the average lifespan of males in the United States is still 79 years, right? Our average customer is 84 years old. If longevity is good for our business, there might be some short-term disruption potentially if, you know, in a particular year, less folks age this or that. As a more broad-based concept, folks living longer is good for society, and we happen to be in a business where, you know, it's positive for us. Yeah. I would just add that, you know, really what the type of care that goes on in our buildings is for frailty, right? You think about where a lot of these breakthroughs and what's happened. It's not just what's going on with AI. There's been longevity breakthroughs for a couple decades now. The people, the residents of our buildings are generally healthy people. They've reached a point in their life where they're frail. They have actually, you know, I say survived, but they have not had something else impact them that's allowed them to be 85, 86 years old. I think the idea that the last 18-24 months of your life, you're gonna need some assistance with daily living and a, and a focus on wellness care. That likely doesn't change. If anything, Nikhil said you end up with a healthier resident, which is a lot of benefits to both the residents and the business. Going back, to the partnership that you announced, you know, kinda what is the opportunity set here? You announced it with PSA, and then another, you know, private equity that's looking at medical office building. Do you see kind of this licensing structure applicable to kind of the entire kind of commercial real estate asset class? Or just where do you kinda see the trajectory of monetizing that going? Can it be the answer is yes? Nikhil already said that some of our sovereign partners asked us to prove the models in other asset class. We mentioned some of those on that page, that if you look at our business update, remains to be seen, right? You know, we'll see. We have proved that we have better capability of, you know, predicting multifamily rents than a lot of other multifamily companies or data providers and others. Will somebody pay us to do that? I don't know. If they do, we'll do it. If not, no problem, right? That's sort of what you gotta understand is sort of a life is that as an investor, we are investors. We always think about we know what we know, particularly we're focused on what we don't know and don't try to solve for that. Can these be, we build our platform, can we build a business around it? I don't know the answer to that question. We'll see. Definitely the potential is there and the capabilities have been already proven. It does work. Just keeping with, you know, the technology theme, you hired Jeff and announced the formation of kind of the Tech Quad. You described yourselves as, I believe it was mediocre minus. As you think about the use of digitization in the platform, can you kind of talk about kind of the key priorities and how, you know, the digitization process will impact both the resident and employee experience? You know, how have your expectations kind of changed since you initially thought of the Tech Quad and the hiring of Jeff and maybe where you are now a few months down the road? Yeah. Let me start and explain what I said about mediocre minus, then Tim McHugh can answer the rest. I think about technology in two different aspects. One is what we have been talking about, which is data science, and this is an umbrella term we use for ML, machine learning, deep learning, and AI in our place. It's statistical learning at its foundation. That is a mature platform that works extraordinarily well. I cannot give a letter grade to it because there's no comparable set anywhere in the world. What I have described as mediocre minus is our operating technology platform, which we call Welltower Business System. Just because we do better than the people or other participants in this industry where these types of capabilities are non-existent, that does not tell you that we're good. I personally think that we are in the infancy of what the capabilities should be, and hopefully they will be, but that's mediocre minus. With that, Tim will answer the rest of the question. I like how you ask kind of the impact of digitalization on the resident and employee experience, 'cause I think that's the right way to frame it. The, you know, where you're going to see the biggest impact of it and where you'll see the impact of investment in technology at the property level is going to be in freeing up time on the employee side, caretaker side. This is a business with very high turnover on the front lines. It's a very challenging job, and every minute that someone spends in the system means they're not spending it with a resident. I'd also say if you have difficult systems to use and you have a lack of digitalization, you should expect to get less and less data from a property because people are gonna prioritize the right thing, which is spending time with the resident versus, you know, making sure you've got the correct data flowing up. Then from there, it's where we started or where we were a few minutes ago in this conversation around AI and the applicability of the business. There's, you know, two layers that sit above a property kinda between that data and you all, and that's both the management companies and then also the Welltower team. The more that we're able to get that first, that kinda analog to digital, done seamlessly at that property level, you create a better experience, you create a better business, and you also create the ability to apply AI to that data in a way that you start to get some significant efficiencies to how the business runs. It's all connected, but it does start at that kind of employee and resident experience. As AI tools become more accessible, you know, if AI allows people to kind of develop software without having to outsource to software engineers, you know, do you think that that narrows the competitive gap between, you know, sophisticated operators and smaller operators? Does kind of the data scale that you have actually widen the moat, against the competitive set? You wanna take that or you want me to? Well, I'll start, and you can jump in, Shaun. I think a lot of what you're seeing, is, I guess, in the development of AI is likely impacting software first. It's making data more valuable, right? A lot of that is taking what is software, particularly kind of vertical, software that's applied to an industry and that's integrated into workflows, and it's creating automation around that that's somewhat removing the need of it. The actual data that belongs to the company, is considerably a stronger asset. I think on your question around. Kind of whether or not the, you know, vibe coding of software will allow for to take away some of the competitive advantage a large operator or sophisticated operator has relative to a less sophisticated. I don't think that right now what you've seen is that software is the differentiator. There's a discipline around it and a way in which processes are run at the better operators. We see We interact with them. We think we have the best operators in business that we work with. We think technology enhances what they do. It's not the technology is the moat for them. It's going to create a better advantage. You know, software, being able to write your own software, there's gonna be no substitute for process and mindset and motivation when it comes to running a business. I don't see that playing a big role in senior housing. I have nothing to add to that. you know, how long does it take to kinda typically deploy the Welltower Business System onto new communities as you acquire them? On the new communities you acquire them, it's actually, it's pretty seamless. That's one of the areas where, you know, we're already seeing the efficiencies of it. It's more so the conversion of operators of existing properties and the change management that goes with that. On the new communities is actually where we're seeing a lot of the promise of how this is gonna create more seamless data flow in the future. You've messaged kind of you expect to drive multiple years of margin expansion, both driven by strong fundamentals, the operating leverage within the business, and then some of the operational improvements driven by the Welltower Business Systems. You know, is there a way to think about, you know, kind of looking back how much of that you would kind of attribute to those different buckets? How much is just the operating leverage and the incremental margin flow through as occupancy, as you make occupancy gains, and how much of it do you think is attributable to kind of the Welltower Business Systems and kind of, the Welltower platform? Welltower platform or Welltower Business System? Completely different answers. If you look at we own the best assets in this industry by a very long shot. If you have operating leverage in a business and your occupancy goes up, your margin should impact, expand. There's no question about it. So far what you have seen, the significant excess alpha, operating alpha that has come through our system is a function of two things, right? Three things. First, our asset selection, which is the capital allocation and all the things on data science and everything we talked about. B, the operator selection, and C, brute force asset management, right? That's what you have seen the impact of is the Welltower platform impact, right? All three of them. Welltower Business System, you know, is nascent enough that I wouldn't say that you have seen a lot of impact of that. You will. Does that make sense? We've got only 250 properties that has been on that system for the last six, nine months. You haven't had the chance to see what that could look like. Yep. Then just kind of, you know, what's the current penetration rate across the portfolio? And then, you know, as you think about kind of the adoption curve and some of the operational improvements that you're able to make with the Welltower Business System, you know, maybe just using a sports analogy, kind of what inning are we in with where we're at and some of the operational improvements? Yeah. You're saying the penetration, you're asking how many assets are on the system? It's roughly 250, as we've said. It's a small amount, and my friend over here keeps buying more, so it's, it hurts that penetration percentage. As it relates to... What's your next question? Just what inning we're in in terms of, you know, how much upside there is. Hey- for the Welltower Business System. Yeah. No, I think Shankh just said that. I mean, you know, when we talk about brute force, what we're really saying is that's just hard labor. That's us, with great tenacity addressing things from an asset management perspective. What Welltower Business System does is it's digitizing the business. It's providing robust data enabling us to actually get insightful reports and drive value. We're at the very beginning of that game. Ownership to capital allocation, obviously you've been very active over really over the past few years, both in terms of buying and selling and different structures in terms of the fund and everything else. Are you starting to see more competition? I mean, it feels like senior housing is at the top of a lot of institutional investors kind of surveys. I think everyone sees the supply and demand dynamics there. Does it feel like competition is increasing right now? I think, how I would describe it is I think Shankh's annual letter from last year does a really good job of explaining how we have been able to quite substantially eliminate the latency in our process, right? How quickly we can, you know, have something hit our desks and within a couple of days in a very narrow range have a view on pricing of the asset, right? Those are our capital allocation tools we talked about earlier today. We're, we're market, you know, participants in terms of what pricing makes sense, right? We're not trying to, you know, steal assets. It makes sense if you're a seller, it's a free option to give Welltower a quick call and say, "Hey, do you wanna buy my assets?" You know, at worst you lose 2 days compared to a process that runs 6-9 months. Everyone still does that with us, and every quarter I quantify what percentage of our transaction activity has been done on an off-market basis, and it's pretty much all of it. That part is still happening. The difference between two years ago versus today is two years ago, when we would say no to a transaction, and our hit rate's probably about 10% on the stuff we look at. When we would say no to a transaction, it wouldn't get done. Today, those are getting done. We are still getting to do transactions and acquire assets that we like. Values are a little bit higher today, but the competition part is irrelevant because that's when we say no to an asset that somebody else gets to buy. What hasn't changed is all the assets that trade away from us. Not all. I shouldn't make a general statement. Majority, a vast majority of the asset that trades away from us, it trades away from us because we made a decision not to buy them. Usually because of quality and product market misfit that we think about what drives it. I have seen other problems show up, which is I talked about on the call, such as we have seen, that some participants have started buying assets with encumbrance of operations and all of those things, which we think an absolute hard line for us. We would not do that. But you should assume that if an asset ABC traded, you know, a owner, you know, XYZ bought it, you should assume that there's a 90% probability we looked at it and said no for a reason. We've seen private equity come in and out of this space in the past. You know, some that clearly were not successful in it. Part of that was probably a mismatch of supply and demand. For these assets that you're passing on, is it just the CapEx or the growth rate isn't up to what Welltower needs? Or do you think, you know, do you think that there's gonna be a concern if we're looking back in five years off of some of these deals that you don't get? Look, I mean, we're not scared of CapEx. We have great CapEx capabilities, and if an asset requires CapEx that is a worthwhile asset, we would gladly do that. For us, if we say no to an asset, it is, you know, we think about the incredible growth prospects that, you know, the assets we already own have. When we add something to the mix, we say, "Is this going to enhance or subtract from the growth prospects of our company?" You know, that's where our data science platform comes in, right? We're looking at, you know, not assets at a market level, which is like a metro level that everybody else looks at. We look at assets, you know, based on what corner they're at. We have the insights into being able to look at that granular F level. You know, we've showcased some of that with a lot of you in the room. It's just a different view of the terrain, right? Where someone might say, pick a market, that this is a Miami asset. We'll say that this is a Hollywood asset versus you know, this, you know, this neighborhood versus that neighborhood asset. It's a different lens. It could be the Product Market Fit. It could be what's within the walls of the asset in terms of, you know, you open a door, how big is the unit behind it? It could be, you know, operational aspects. How big is the floor plate? Is it efficient from a staffing perspective? It could be the management contract that it's encumbered by. There's multiple reasons. It could be price. All of those. Are you seeing divergence in underwritten expected returns across the different geographies? U.S. versus, you know, U.K. versus Canada. Yeah. I mean, each of those markets has a different risk profile. Each of them have a different, capital markets outlook. You know, Canadian yield curve is, you know, 1 point lower than the U.S. yield curve. On a risk-adjusted basis, you know, there should be a divergence in expected, you know, returns on top of risk-free returns in each of those markets. There is certainly a difference in all three. What's the most attractive right now for you? It's, it's opportunity dependent. You know, we're disciplined on how we look at transactions, which is, you know, unlevered IRRs relative to, you know, base rates in a market. We think, generally speaking, we're able to get the same risk premium in the three places we do business. I will tell you that, you know, flows change depending on time. If I just look at very short term, current flow has been very primarily focused on U.S. That could change next month. Yep. Right? It's hard to say. We like senior living in all three markets we do business in. It needs to be the right asset. product market fit is insanely important for us. I think the most common question that we receive on senior housing broadly is: When is supply gonna return, right? You're seeing this outsized growth. You see the demand side. Obviously, we had a lot of supply ahead of it pre-COVID. You know, what is holding it back today? When do you expect supply to start to pick back up? Well, I think, you know, construction, development, whatever you wanna call it, is a commercial activity. People should only do it to make money. When assets trade below replacement cost, and as a developer, you know, you should be targeting at least a 2x on your equity. So, you know, it's a $100 deal, you're putting up, you know, $40 of equity, you need to be able to sell the asset for $140. Right? That's the first and foremost thing. You know, so economics don't pencil, and that's why people are not doing it. Will they pencil at some point in the future? Of course, right? I mean, capital follows growth, and at some point, that'll change. The question becomes, are we talking about supply, or are we talking about excess supply? You know, what hurt the industry in the last cycle was that there was excess supply. For there to be excess supply, you know, three, four years out, which is how long, you know, it'll take if people decide today that it's a good idea to start building senior housing, which it isn't. Even if that were the case, the demand, that profile that we're talking about four years from now, five years from now, is 120,000-130,000 units that is needed for excess supply. Prior peak supply was 44,000-45,000 units in a year. We're talking about replacement costs being at least 2x, if not more. The quantum of capital that is needed for excess supply many years out, that doesn't exist in this industry. We're not sitting here today concerned about excess supply, and even supply just doesn't make pencil today. How far off are we from either rent growth or construction costs coming down that it would pencil? I know it's market specific, but, you know, if you can just frame it broadly. One thing I want to make it very clear that I've heard certain participants believe that construction cost is coming down. I do not believe that's the case. There is no evidence of construction cost in senior living is coming down. In fact, the evidence is exact opposite, right? Construction cost escalation is between 4% and 5%. To answer your question directly, you know, assuming construction cost doesn't change and stays flat, you know, in today's dollars, you need deal economics to be 30%, 40% better for development to pencil. That's the gap. ways away. Yes. Maybe just thinking about, some of the changes you've announced with, you know, the management compensation, and the RIDEA 6.0, you know, how has your thinking kind of evolved as you think about trying to align incentives with both operators for shareholders and, management with shareholders? We think it's an incredibly powerful thing if everyone has the same exact goal. Even with the RIDEA 6.0 contracts that we just announced recently, where, you know, the biggest change is operators or some of our operators have now chosen to get compensated for their incentives in Welltower stock. What you've instantly seen as soon as that happened, that those operators went from, they're in different geographic areas, but all of a sudden, the mindset shifted from, "I've got my secrets that I'm not gonna share with others," to now being, "Hey, I'm really good at this. I wanna make sure you learn from me, and you're also really good at this," because otherwise, you know, given that we're all getting paid in the same currency, your underperformance can tank my performance, right? That fundamentally changes the mindset, and that's the level of alignment we all want because we view our outcomes as what the entire portfolio produces. That's how the operators are thinking about it, and that's aligned with all of you shareholders. The buy-in from the operators, you know? What was that? The buy-in from the operators. Have they been pretty receptive to it? No one forced the operators to sign these contracts, right? The operators came to us and said, "We see the reflexivity. We see that our actions, you know, result in positive outcomes for you and your shareholders, and we want to be aligned, and we want to be compensated in the same... You know, we want to benefit on a exponential basis from on our efforts." That's what they're looking for. It's an invite-only club. The question is not whether there was a resistance to be in the club. Few people have been invited. Everybody who has been invited have been delighted to be part of the club. Really quick, quickly, rapid fire. Same store NOI growth for senior housing broadly, sector-wide next year in 2027. No idea. Higher or lower or the same than this year? No idea. More, fewer or the same number of, you won't like this, but healthcare REITs a year from now?