Welltower’s $821M CEO Payday Sparks Backlash Despite Big Run

Welltower’s pandemic gamble on senior housing turned one of commercial real estate’s most battered asset classes into one of its biggest success stories. The company’s outsized reward for the executive behind that turnaround, however, is drawing heat.

Chief Executive Officer Shankh Mitra received an $821 million long-term compensation package last year, the second-largest CEO pay award in the U.S. behind Elon Musk’s, the Wall Street Journal reported. The deal came after Welltower spent more than $40 billion acquiring senior housing properties while much of the industry was retreating from the sector during Covid.

The bet transformed the Toledo, Ohio-based health care real estate investment trust. Since Mitra became CEO in 2020, Welltower’s market capitalization has climbed nearly sevenfold to roughly $160 billion, making it the world’s largest publicly traded real estate company. Its portfolio has grown to more than 2,500 senior living communities, cementing its dominance just as demographic demand accelerates.

The compensation package, however, has become almost as notable as the turnaround itself.

Proxy adviser Institutional Shareholder Services urged investors to reject the award, calling it an “extraordinary” package. Roughly 80 percent of shareholders ultimately voted against Welltower’s advisory say-on-pay resolution, one of the strongest rebukes of executive compensation in recent years.

Critics, including activist investor Jonathan Litt of Land & Buildings, argue the package rewards market cap growth fueled as much by favorable demographics as management execution and encourages acquisitions simply to get bigger. Others have criticized the award because roughly half of it vests based primarily on time rather than long-term performance targets.

Welltower defended the package as necessary to retain the leadership team that repositioned the company at precisely the moment the senior housing sector staged one of real estate’s most dramatic recoveries.

The timing of the turnaround is difficult to ignore. The oldest baby boomers are moving into the age bracket that increasingly requires independent living, assisted living and memory care, helping occupancy rebound well beyond pandemic lows. Senior housing occupancy hit 89.9 percent in the first quarter and there were a record 1.05 million occupied units nationwide, according to NIC MAP.

Mitra’s strategy extended beyond buying assets. Welltower restructured relationships with operators including Sunrise Senior Living and Atria Senior Living, giving the operators greater access to data while rewriting contracts so the REIT shared more directly in revenue growth tied to higher occupancy and rent gains.

The company also shed slower-growth health care assets, including medical office buildings, while concentrating acquisitions in affluent markets such as South Florida, Southern California and the Toronto region.

— Holden Walter-Warner