Executives at Welltower (NYSE: WELL) expressed a bullish long-term outlook on skilled nursing and reaffirmed their commitment to including nursing homes in the portfolio mix.

“Our post-acute segment plays an extraordinarily important role as we think about portfolio construction,” CEO Shankh Mitra said during Welltower’s quarterly earnings call on Wednesday. “We are thinking about how we create long term, sustainable earnings and cash flow growth on a partial basis over decades, and we’re extraordinarily excited about those businesses.” 

Welltower owns 286 long-term care and post-acute facilities, with a total of 36,358 beds as of the end of the fourth quarter.

Mitra noted Welltower’s strategy to allocate capital in different parts of the business, depending where the company was slated to achieve the best risk adjusted return on a long-term basis. 

“I want to see where long-term inflation lands before I firm up my mind on how to further allocate capital in a significant way or not,” he said. “We’re a debt player, a great player in the skilled nursing business.”

In the near term, Welltower has in the last 45 days closed or is under contract on a pipeline of $2 billion, representing 27 transactions, mostly in senior living – a pace that Mitra said he’s never seen in his almost decade with the company.

The transaction volume underscores the company’s position as “the preferred counterparty for those seeking certainty and rapid execution in the current challenging capital markets environment,” Mitra noted.

“Our ability to close such a significant volume of transactions, and in a short time frame, demonstrates our strong market position and efficient dealmaking capabilities,” Mitra said. “Our transaction model is simple: Acquire communities in our targeted micro markets, continue to build on our regional density with our aligned operating partners in those markets and treat our counterparties with fairness and respect.”

Mitra and the executive team at Welltower are optimistic about the road ahead given that senior housing demand is surging while the rate at which new communities are opening is at a near-record low.

During the fourth quarter, Welltower posted FFO of $1.13, beating analyst estimates by $0.01, and revenue of $2.25 billion surpassing estimates by $60 million.

Welltower’s shares closed Wednesday at 146.50, up $3.10, or 2.16%.

New development outlook ‘even worse,’ impacted by tariffs

Mitra added the outlook for new development has “gotten even worse in recent months” due to tariffs, immigration policies and higher interest rates will continue to dampen the economics needed for new development. And he even sees some aspirant senior living developers as having a “fundamental misunderstanding” of profiting from new development, likening them to South Park’s underpants gnomes in that they can visualize demand and profit, but not what’s required to get there.

“[Step] one is there is a lot of demand coming … step number three is, we should be able to make profit from that by developing more,” Mitra said. “The step number two, in the middle, is missing.”

Those conditions have spurred the Toledo, Ohio-based real estate investment trust (REIT) to upsize its holdings and launch new ventures to accelerate its purchasing power. Late last month, the REIT launched a new private funds management business, which is acquiring NorthStar Healthcare Income and its 40 senior housing communities in a $900 million transaction.

An investor note from BMO Capital Markets states, “fundamentals remain robust with Welltower’s balance sheet [being] a powerful differentiator,” and shares are expected to perform well at this time.

Welltower’s senior housing holdings include 1,085 communities in its SHOP segment and 306 communities under triple-net leases.