Welltower CEO Shankh Mitra says the health care REIT has taken the right steps to position itself for growth over the next decade.
As a recreational mathematician, Shankh Mitra likes to do a lot of puzzles. Being able to find solutions to complex questions—for fun—is one of the strengths Mitra brings to his role as CEO and chief investment officer of Welltower Inc. (NYSE: WELL).
Taking over as CEO during a global pandemic certainly utilized Mitra’s talents in problem solving and validated his tendency to “think about what can go wrong, not what will go wrong.”
As he looks ahead, Mitra says Welltower has the right talent as well as operating platforms and relationships in place to bolster growth over the coming decade. Favorable demographic trends and constrained supply are additional benefits for the years ahead.
Mitra started at the Toledo, Ohio-based health care REIT in 2016 and worked his way through the ranks to become chief investment officer in 2018, a role he still holds. Welltower, one of the older REITs that was founded in 1970 as Health Care REIT, owns senior housing and outpatient medical properties in the United States, Canada, and the United Kingdom.
REIT magazine spoke with Mitra on a range of topics including being a crisis leader, the importance of social and cognitive interaction for seniors, advice for young professionals, and ways to ensure that employees are heard.
You took over as Welltower CEO during the pandemic. Tell us about that.
We had a long transition plan in place, although the timing changed a little bit and it just happened to coincide with a pandemic.
When I took the top job, Tom (Thomas DeRosa, who stepped down as chairman and CEO in October 2020) was, and has continued to be, a mentor. I didn’t change anything about what we were doing, but having said that, your track record starts on the day you take over. I’m a huge believer in track records. There is no denying the fact that that’s the day my track record started, and it was a very tough time.
Friends and colleagues will tell you that I’m a crisis leader. I almost do better when things are not good than when things are great. I just can’t help but think about what can go wrong, not what will go wrong. While it is not fun going through a pandemic, I knew that for investors, opportunities always arise when you have massive stress in the market. It was a period of tremendous hardship and unique opportunity.
Prior to the pandemic, we were prepared for a down cycle. If you go back and look at what we have done—not just what we’ve talked about—you will see that this company prepared for a recession, which everybody should have been preparing for, right? I told my board in the summer and fall of 2019 that we’re going to have a down cycle, most likely next year.
We pushed out maturities, sold a lot of assets, and raised a lot of equity. So we were prepared for a recession. We just weren’t prepared for a pandemic that would tax our senior population. We made a significant pivot from defense to offense—as much as you could during a tough time.
What lessons do you think you learned during the pandemic?
First, to state the obvious, that resident and employee safety is absolutely critical. This has never been an issue for our operators. We have always had a tremendous focus on quality. We have a team that works with our operators on quality of care and that became the front-and-center component of resident and employee safety during the pandemic.
We all sort of became personal protective equipment (PPE) coordinators; how could we get our hands on PPE and testing and get it to our operators? At the end of the day, we provide a lot of things to our operators: procurement, thought leadership, capital, but ultimately, it is up to them to execute on the ground.
Finding the right partners, standing shoulder to shoulder with them is critical. You’ll see that if you look back over this industry during this pandemic, the majority of capital providers just gave up and left their operating partners stranded. We did the opposite. People have long memories in this business.
Another thing that we realized is that COVID was not the only issue for our seniors. Social and cognitive interaction is so important, and we saw a significant deterioration as people were not getting exercise and interacting with one another. This impacted their quality of health and cognitive abilities. Social isolation is a big issue. Loneliness is a big issue for seniors, for everyone. We all got a taste of it when we had to stay home for months and months and couldn’t see friends and loved ones. This soon became as serious an issue as COVID for our operators.
What would you do differently for your seniors in another pandemic?
I think we’ve done a pretty good job on the key things I’ve mentioned. We also created a partnership with pharmacies and academic institutions before the pandemic and we leveraged those relationships to really help get our operators through the pandemic. Welltower has been a big proponent that the housing of seniors should be seen as a part of the healthcare continuum. We have been at the forefront of that, and we will continue to promote that.
What do you think your company is doing right and what might need to change?
What we have done right is have a strategy that’s very focused on having the right operating partners. Our operating partners are the ones who are on the ground level, so finding the right partners and creating the right incentives is critical. You can’t overstate the importance of these relationships.
Another thing we have done well is that we have created the right alignment with our operating partners. This business is fraught with a misalignment of interests of how capital gets paid, how the operator gets paid, and what they should focus on. This needs to be corrected, and we have done a lot of that. Frankly, that’s been a focus of the last five or six years that I’ve been here.
One of the things that we have done exceedingly well is that we were the first ones to make a significant investment in data analytics before it became a buzzword. We started this program in 2016-2017, when no one talked about predictive analytics and AI. Today, we’re years and years ahead of everyone else. What I like to say is that we have a doctorate in data analytics compared to our real estate peers, but we’re still in middle school relative to what technology companies, retail, insurance, and financial services have done. We have a long way to go.
As for improvement, we need to really engage more with our public and private peers in the health care real estate industry and, frankly, senior housing and the housing industry in general, to have a broader view. We have started that, and we’re going to continue to make a lot of improvements there as well.
Is the labor shortage affecting you?
We have actually acquired a tremendous amount of talent. While others were focused on trimming headcount, we went the other way. We hired 40-plus new colleagues last year, and so far this year we have hired about 60. We have gone on an acquisition spree of assets, new relationships, and new colleagues—new talent to really bolster this company for the next decade. As a result, we’ve emerged as a partner of choice, an employer of choice, and an investor of choice in this very large opportunity set in which we find ourselves.
Where do you see Welltower in the next three to five years?
I don’t just think about the here and now, but where we are in the business cycle and what lies ahead. I call myself a through-market cycle thinker. I am a passionate student of business cycle thinking and always have been.
We have laid down a very solid foundation through acquiring this talent and these partnerships. We have the most comprehensive end-to-end operating platform in the three countries where we do business. We have laid out the framework of operating and developing new relationships. In three-to-five years, they will bear fruit. The foundations are there for meaningful growth and we will work hard to try and deliver. In addition, we have the tailwinds of rising demographics and constrained supply, so I’m very excited about the next three-to-five years.
We are developing a wellness housing business focusing on the younger 55-plus population and plan to grow that business significantly. We are also excited about our medical office business, which continues to grow very significantly through development. We continue to be the partner of choice, the employer of choice, and the investor of choice in the broad scope of health care and wellness-oriented infrastructure in the space.
What advice would you offer to students considering a career in commercial real estate?
My advice to somebody coming out of college or business school is to find the right place and, most importantly, the right mentor. I’ve been very, very fortunate to have had terrific mentors who taught me the business and spent a lot of time with me.
I think that today people focus too much on ‘what firm do I work for?’, ‘how attractive is the brand recognition?’, or ‘how much will I get paid?’ when considering their first job. These are important things, but a lot more important is the person you work for or the team you work with. That’s where you learn how to think about the business, how to create relationships. I personally think that should be what colleges and graduate schools focus on.
Ultimately with a 30-40 year career in front of you, the training and the relationships you make from the very beginning will have a big impact. I’m incredibly grateful for the people who spent time with me. My mentors continue to mentor me today for no other reason than we forged a close working relationship, developed mutual respect, and have remained friends for a long period of time.
My first boss coming out of business school taught me how to think about modeling, restructuring, and investing. That was a long time ago, but I still think about how he taught me to think about the business. I’m very fortunate that I did not go for the company that would have paid me the most, I went for the person that I thought would teach me the most. That has been the winning decision of my career.
What can be done to improve diversity in this industry?
It’s a concerted effort. The reason you want diversity is to have a variety of opinions and differing approaches to issues. Our main focus is very simply that we hire competent people from all walks of life, and that’s what we have done to come up with, in my opinion, the most diverse and talented team in the industry. We’ve created an organization that is extraordinarily focused on results and competence and is tremendously diverse.
I’d like to highlight another aspect of diversity. When Welltower selects candidates, I actually interview them, from analysts to EVPs. Pretty much everybody who works at Welltower has gone through me. One of the not-so-obvious aspects of diversity I think about is introverts versus extroverts.
People who are like me, extroverts, tend to like people who are extroverts and, soon enough, your organization becomes a bunch of extroverts. Half of our colleagues are introverts. You have to focus on how to bring people in who might not know how to sell themselves in a half hour conversation, but that doesn’t mean they can contribute any less. You have to be attuned, you have to be focused, you have to be reaching out and then you will find that there’s a lot of talent, raw talent, regardless of the exterior.
You also need to create an environment where people feel they have a voice and an equal voice. It’s not only important that you have a very diverse group of leaders and employees, but you also need to know how to keep them. We know how to create a culture where everybody’s voice matters.
No individual is smarter than an eclectic group of people who can think differently, come from different backgrounds, and can see a problem in different ways. What we do is complex and all of us have different skill sets, but none of us have all the skill sets. Everybody comes from different life experiences, different walks of life and different expertise. You can bring these folks together and put them in a room and get amazing results.
We might be the only company where the investment committee process is open to the whole company. Every week, we run an investment meeting. Everybody can ask questions and everybody can learn from each other. People raise their voices and say, ‘have you thought about this?’ Diversity is worth nothing unless you can create a culture where we can bring everyone together, where everybody can raise their voice—and their voice is heard.