Mizuho doubles down on top REIT pick as senior housing growth gains momentum

Mizuho has reiterated its top pick in the real estate investment trust sector, arguing that strong senior housing demand, improving margins and an expanding acquisition pipeline could support double-digit growth through 2027 and beyond.

Welltower's third-quarter funds from operations (FFO) reached $1.67 per share, beating Mizuho's $1.65 estimate and the $1.63 analyst consensus. The result implied 25% year-on-year growth, prompting the company to raise its full-year guidance by 10 cents at the midpoint to $6.47-$6.53 per share, 1.5% above Street expectations.

Welltower, Inc

Mizuho maintained its "outperform" rating and $260 price target, highlighting the company's ability to deliver growth despite elevated interest rates and a challenging economic backdrop.

Adjusted funds from operations grew 21% year on year, while implied fourth-quarter FFO of $1.76 per share points to a stronger earnings run rate entering 2027. The broker expects fourth-quarter and 2027 consensus estimates to move higher.

Senior housing remains the key differentiator. Same-store senior housing operating portfolio (SHOP) occupancy rose 120 basis points quarter on quarter and 320 basis points year on year, reaching more than 90%.

Mizuho believes this gives management greater scope to focus on raising rental rates and expanding margins rather than relying primarily on occupancy gains. Full-year SHOP NOI guidance was also raised by 100 basis points at the midpoint.

Investment activity provides another growth engine. Year-to-date investments totalled $21 billion, including $7.7 billion closed or under contract in the fourth quarter. Recent SHOP acquisitions worth $2.7 billion averaged roughly four years of asset vintage and 66% occupancy, offering scope for operational improvements and higher returns as occupancy recovers.

Welltower is also expanding in skilled nursing, acquiring $860 million of assets during the quarter as tighter financing conditions create opportunities to purchase properties and improve operations. A further $1 billion of post-quarter activity involved UK expansion, where SHOP occupancy stood at 85%.

Mizuho expects the company to continue recycling capital, selling lower-growth assets to fund higher-growth opportunities. Welltower disposed of $144 million in SHOP assets during the quarter, reinforcing its focus on portfolio quality and long-term earnings growth.