In short: Suggested add for senior-housing / healthcare exposure, named alongside Ventas as the fix for an overweight in residential and industrial.
Welltower is the other senior-housing/healthcare landlord he named as the fix for a portfolio overweight in residential and industrial property.
27:41Maybe like a ventas or a well tower or even consider self storage as a complement to the residential holdings and maybe something like an extra space EXR or a public storage PSA. But for individual holdings, you're getting everything there. Monthly income, geographic exposure, coast to coast, you're operating in a lot of different sectors.
In short: Baron (Opportunity Fund): added to, on a deliberate re-categorisation. "While Welltower screens as a real estate business, we view it as the intersection of hardware, real estate, and software — its proprietary operating platform and data analytics capabilities." That software layer "creates meaningful structural upside to both operating margins and occupancy through enhanced asset management, proprietary analytics, and new initiatives such as amenity-based pricing," and they came away from hosting the executive team "more encouraged by… the early monetization of its proprietary data analytics platform and the continued rollout of the Welltower Business System." The industry backdrop is "among the most favorable in years": the 80-plus population growing at a 4% to 5% CAGR over five years against a post-GFC 2%, "while supply remains structurally constrained by declining construction starts, unattractive developer economics, and a five-plus year entitlement and build timeline." The conclusion: "a path for earnings to more than double over the next five years."
Welltower owns and runs senior-housing communities. Baron's central move is to stop thinking of it as a landlord: they describe it as a mixture of property, hardware and software, because the company has built its own operating platform and data analytics for running the buildings.
That matters because of how the economics work. A landlord who merely collects rent gets a fixed payment however well the business inside performs. Welltower operates the communities itself, so higher occupancy and better pricing flow straight to it — and the software is what raises occupancy and lets it charge for individual amenities rather than a single blended rate.
The backdrop is the strongest part. The population over eighty is growing 4-5% a year, more than double the rate after the financial crisis, while new supply is stuck: construction starts have collapsed, the economics do not work for developers at current costs, and it takes over five years to get a new community permitted and built. Baron sees a path to earnings more than doubling in five years.
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