UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of ~~May 1,~~July 31, 2020, the registrant had ~~417,479,297 shares~~417,300,700 shares of common stock outstanding.

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)			3

Consolidated Balance Sheets			3

Consolidated Statements of Comprehensive Income			4

Consolidated Statements of Equity			6

Consolidated Statements of Cash Flows			7

Notes to Unaudited Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2528

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4651

Item 4. Controls and Procedures			4752

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			4853

Item 1A. Risk Factors			4853

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5053

Item 5. Other Information			5053

Item 6. Exhibits			5154

Signatures			5154

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

March 31, 2020 (Unaudited) December 31, 2019 (Note)
Assets:

Real estate investments:

Real property owned:
Land and land improvements $ 3,514,456
$ 3,486,620
Buildings and improvements 29,236,477
29,163,305
Acquired lease intangibles 1,629,662
1,617,051
Real property held for sale, net of accumulated depreciation 729,560
1,253,008
Construction in progress 431,497
507,931
Less accumulated depreciation and amortization (5,910,979 ) (5,715,459 )
Net real property owned 29,630,673
30,312,456
Right of use assets, net 523,217
536,433
Real estate loans receivable, net of credit allowance 221,228
270,382
Net real estate investments 30,375,118
31,119,271
Other assets:

Investments in unconsolidated entities 702,497
583,423
Goodwill 68,321
68,321
Cash and cash equivalents 303,423
284,917
Restricted cash 89,643
100,849
Straight-line rent receivable 449,075
466,222
Receivables and other assets 934,951
757,748
Total other assets 2,547,910
2,261,480
Total assets
$ 32,923,028
$ 33,380,751

Liabilities and equity

Liabilities:

Unsecured credit facility and commercial paper $ 844,985
$ 1,587,597
Senior unsecured notes 10,218,853
10,336,513
Secured debt 2,901,232
2,990,962
Lease liabilities 464,659
473,693
Accrued expenses and other liabilities 997,603
1,009,482
Total liabilities
15,427,332
16,398,247
Redeemable noncontrolling interests
429,359
475,877
Equity:

Common stock 418,226
411,005
Capital in excess of par value 20,818,230
20,190,107
Treasury stock (86,975 ) (78,955 )
Cumulative net income 7,659,038
7,353,966
Cumulative dividends (12,579,535 ) (12,223,534 )
Accumulated other comprehensive income (loss) (96,213 ) (112,157 )
Other equity 12
12
Total Welltower Inc. stockholders’ equity 16,132,783
15,540,444
Noncontrolling interests 933,554
966,183
Total equity
17,066,337
16,506,627
Total liabilities and equity
$ 32,923,028
$ 33,380,751


	June 30, 2020 (Unaudited)		December 31, 2019 (Note)
Assets:
Real estate investments:
Real property owned:
Land and land improvements	$	3,479,369	$	3,486,620
Buildings and improvements	28,589,269		29,163,305
Acquired lease intangibles	1,565,978		1,617,051
Real property held for sale, net of accumulated depreciation	382,580		1,253,008
Construction in progress	411,700		507,931
Less accumulated depreciation and amortization	(6,001,177)		(5,715,459)
Net real property owned	28,427,719		30,312,456
Right of use assets, net	502,604		536,433
Real estate loans receivable, net of credit allowance	224,871		270,382
Net real estate investments	29,155,194		31,119,271
Other assets:
Investments in unconsolidated entities	786,921		583,423
Goodwill	68,321		68,321
Cash and cash equivalents	1,678,770		284,917
Restricted cash	147,473		100,849
Straight-line rent receivable	464,716		466,222
Receivables and other assets	861,257		757,748
Total other assets	4,007,458		2,261,480
Total assets	$	33,162,652	$	33,380,751

Liabilities and equity
Liabilities:
Unsecured credit facility and commercial paper	$	—	$	1,587,597
Senior unsecured notes	11,815,972		10,336,513
Secured debt	2,619,678		2,990,962
Lease liabilities	447,424		473,693
Accrued expenses and other liabilities	1,015,906		1,009,482
Total liabilities	15,898,980		16,398,247
Redeemable noncontrolling interests	327,145		475,877
Equity:
Common stock	418,343		411,005
Capital in excess of par value	20,836,545		20,190,107
Treasury stock	(93,799)		(78,955)
Cumulative net income	7,838,284		7,353,966
Cumulative dividends	(12,834,381)		(12,223,534)
Accumulated other comprehensive income (loss)	(116,856)		(112,157)
Other equity	4		12
Total Welltower Inc. stockholders’ equity	16,048,140		15,540,444
Noncontrolling interests	888,387		966,183
Total equity	16,936,527		16,506,627
Total liabilities and equity	$	33,162,652	$	33,380,751

~~NOTE:~~Note: The consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended
March 31,
2020 2019
Revenues:
Resident fees and services $ 849,972
$ 868,285
Rental income 389,960
381,084
Interest income 15,241
15,119
Other income 3,429
7,757
Total revenues 1,258,602
1,272,245

Expenses:
Property operating expenses 681,781
670,807
Depreciation and amortization 274,801
243,932
Interest expense 142,007
145,232
General and administrative expenses 35,481
35,282
Loss (gain) on derivatives and financial instruments, net 7,651
(2,487 )
Loss (gain) on extinguishment of debt, net —
15,719
Provision for loan losses 7,072
18,690
Impairment of assets 27,827
—
Other expenses 6,292
8,756
Total expenses 1,182,912
1,135,931

Income (loss) from continuing operations before income taxes and other items 75,690
136,314
Income tax (expense) benefit (5,442 ) (2,222 )
Income (loss) from unconsolidated entities (3,692 ) (9,199 )
Gain (loss) on real estate dispositions, net 262,824
167,409
Income (loss) from continuing operations 329,380
292,302

Net income 329,380
292,302
Less: Net income (loss) attributable to noncontrolling interests⁽¹⁾
19,096
11,832
Net income (loss) attributable to common stockholders $ 310,284
$ 280,470

Average number of common shares outstanding:
Basic 410,306
391,474
Diluted 412,420
393,452

Earnings per share:
Basic:
Income (loss) from continuing operations $ 0.80
$ 0.75
Net income (loss) attributable to common stockholders $ 0.76
$ 0.72

Diluted:
Income (loss) from continuing operations $ 0.80
$ 0.74
Net income (loss) attributable to common stockholders $ 0.75
$ 0.71

Dividends declared and paid per common share $ 0.87
$ 0.87


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:
Resident fees and services	$	769,560	$	914,085	$	1,619,532	$	1,782,370
Rental income	396,305		385,586		786,265		766,670
Interest income	16,069		17,356		31,310		32,475
Other income	6,541		3,079		9,970		10,836
Total revenues	1,188,475		1,320,106		2,447,077		2,592,351

Expenses:
Property operating expenses	660,764		701,127		1,342,545		1,371,934
Depreciation and amortization	265,371		248,052		540,172		491,984
Interest expense	126,357		141,336		268,364		286,568
General and administrative expenses	34,062		33,741		69,543		69,023
Loss (gain) on derivatives and financial instruments, net	1,434		1,913		9,085		(574)
Loss (gain) on extinguishment of debt, net	249		—		249		15,719
Provision for loan losses	1,422		—		8,494		18,690
Impairment of assets	75,151		9,939		102,978		9,939
Other expenses	19,411		21,628		25,703		30,384
Total expenses	1,184,221		1,157,736		2,367,133		2,293,667

Income (loss) from continuing operations before income taxes and other items	4,254		162,370		79,944		298,684
Income tax (expense) benefit	(2,233)		(1,599)		(7,675)		(3,821)
Income (loss) from unconsolidated entities	1,332		(9,049)		(2,360)		(18,248)
Gain (loss) on real estate dispositions, net	155,863		(1,682)		418,687		165,727
Income (loss) from continuing operations	159,216		150,040		488,596		442,342

Net income	159,216		150,040		488,596		442,342
Less: Net income (loss) attributable to noncontrolling interests⁽¹⁾	(20,030)		12,278		(934)		24,110
Net income (loss) attributable to common stockholders	$	179,246	$	137,762	$	489,530	$	418,232

Average number of common shares outstanding:
Basic	417,084		404,607		413,696		398,073
Diluted	419,121		406,673		415,775		400,096

Earnings per share:
Basic:
Income (loss) from continuing operations	$	0.38	$	0.37	$	1.18	$	1.11
Net income (loss) attributable to common stockholders	$	0.43	$	0.34	$	1.18	$	1.05

Diluted:
Income (loss) from continuing operations	$	0.38	$	0.37	$	1.18	$	1.11
Net income (loss) attributable to common stockholders⁽²⁾	$	0.42	$	0.34	$	1.17	$	1.05

Dividends declared and paid per common share	$	0.61	$	0.87	$	1.48	$	1.74

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

⁽²⁾ Includes adjustment to the numerator for income (loss) attributable to OP unitholders.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended
March 31,
2020 2019
Net income $ 329,380
$ 292,302

Other comprehensive income (loss):
Foreign currency translation gain (loss) (265,577 ) 78,620

Derivative and financial instruments designated as hedges gain (loss)

259,112
(87,682 )
Total other comprehensive income (loss) (6,465 ) (9,062 )

Total comprehensive income (loss) 322,915
283,240

Less: Total comprehensive income (loss) attributable
to noncontrolling interests⁽¹⁾
(3,313 ) 17,619

Total comprehensive income (loss) attributable to common stockholders $ 326,228
$ 265,621

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net income	$	159,216	$	150,040	$	488,596	$	442,342

Other comprehensive income (loss):
Foreign currency translation gain (loss)	13,015		(54,024)		(252,562)		24,596
Derivative and financial instruments designated as hedges gain (loss)	(27,171)		100,407		231,941		12,725
Total other comprehensive income (loss)	(14,156)		46,383		(20,621)		37,321

Total comprehensive income (loss)	145,060		196,423		467,975		479,663
Less: Total comprehensive income (loss) attributable to noncontrolling interests⁽¹⁾	(13,543)		14,665		(16,856)		32,284
Total comprehensive income (loss) attributable to common stockholders	$	158,603	$	181,758	$	484,831	$	447,379

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


	Six Months Ended June 30, 2020
	Common Stock		Capital in Excess of Par Value		Treasury Stock		Cumulative Net Income		Cumulative Dividends		Accumulated Other Comprehensive Income (Loss)		Other Equity		Noncontrolling Interests		Total
Balances at January 1, 2020	$	411,005	$	20,190,107	$	(78,955)	$	7,353,966	$	(12,223,534)	$	(112,157)	$	12	$	966,183	$	16,506,627
Cumulative change in accounting principle (Note 2)							(5,212)										(5,212)
Balances at January 1, 2020 (as adjusted for change in accounting principle)	411,005		20,190,107		(78,955)		7,348,754		(12,223,534)		(112,157)		12		966,183		16,501,415
Comprehensive income:
Net income (loss)							310,284								18,988		329,272
Other comprehensive income (loss)											15,944				(21,955)		(6,011)
Total comprehensive income																	323,261
Net change in noncontrolling interests			37,625												(29,662)		7,963
Amounts related to stock incentive plans, net of forfeitures	246		6,608		(8,020)												(1,166)
Net proceeds from issuance of common stock	6,975		583,890														590,865
Dividends paid:
Common stock dividends									(356,001)								(356,001)
Balances at March 31, 2020	$	418,226	$	20,818,230	$	(86,975)	$	7,659,038	$	(12,579,535)	$	(96,213)	$	12	$	933,554	$	17,066,337
Comprehensive income:
Net income (loss)							179,246								18,659		197,905
Other comprehensive income (loss)											(20,643)				6,298		(14,345)
Total comprehensive income																	183,560
Net change in noncontrolling interests			7,299												(70,124)		(62,825)
Amounts related to stock incentive plans, net of forfeitures	28		7,412		832								(8)				8,264
Net proceeds from issuance of common stock	89		3,604														3,693
Repurchase of common stock					(7,656)												(7,656)
Dividends paid:
Common stock dividends									(254,846)								(254,846)
Balances at June 30, 2020	$	418,343	$	20,836,545	$	(93,799)	$	7,838,284	$	(12,834,381)	$	(116,856)	$	4	$	888,387	$	16,936,527


																												Six Months Ended June 30, 2019
	Three Months Ended March 31, 2020																											Preferred Stock		Common Stock		Capital in Excess of Par Value		Treasury Stock		Cumulative Net Income		Cumulative Dividends		Accumulated Other Comprehensive Income (Loss)		Other Equity		Noncontrolling Interests		Total
	Preferred Stock		Common Stock		Capital in Excess of Par Value		Treasury Stock			Cumulative Net Income			Cumulative Dividends			Accumulated Other Comprehensive Income (Loss)			Other Equity		Noncontrolling Interests			Total
Balances at January 1, 2020	$	—	$	411,005	$	20,190,107	$	(78,955	)	$	7,353,966		$	(12,223,534	)	$	(112,157	)	$	12	$	966,183		$	16,506,627
Cumulative change in accounting principle (Note 2)										(5,212		)												(5,212		)
Balances at January 1, 2020 (as adjusted for change in accounting principle)	—		411,005		20,190,107		(78,955		)	7,348,754			(12,223,534		)	(112,157		)	12		966,183			16,501,415
Balances at January 1, 2019																											Balances at January 1, 2019	$	718,498	$	384,465	$	18,424,368	$	(68,499)	$	6,121,534	$	(10,818,557)	$	(129,769)	$	294	$	954,265	$	15,586,599
Comprehensive income:																											Comprehensive income:
Net income (loss)																											Net income (loss)									280,470								10,785		291,255
Other comprehensive income (loss)																											Other comprehensive income (loss)													(14,849)				5,787		(9,062)
Total comprehensive income																											Total comprehensive income																			282,193
Net change in noncontrolling interests																											Net change in noncontrolling interests					(8,845)												(1,497)		(10,342)
Amounts related to stock incentive plans, net of forfeitures																											Amounts related to stock incentive plans, net of forfeitures			120		7,420		(5,993)								(26)				1,521
Net proceeds from issuance of common stock																											Net proceeds from issuance of common stock			7,212		525,408														532,620
Conversion of preferred stock																											Conversion of preferred stock	(718,498)		12,712		705,786														—
Dividends paid:																											Dividends paid:
Common stock dividends																											Common stock dividends											(344,760)								(344,760)
Balances at March 31, 2019																											Balances at March 31, 2019	$	—	$	404,509	$	19,654,137	$	(74,492)	$	6,402,004	$	(11,163,317)	$	(144,618)	$	268	$	969,340	$	16,047,831
Comprehensive income:																											Comprehensive income:
Net income (loss)										310,284											18,988			329,272			Net income (loss)									137,762								11,349		149,111
Other comprehensive income (loss)																15,944					(21,955		)	(6,011		)	Other comprehensive income (loss)													43,996				2,387		46,383
Total comprehensive income																								323,261			Total comprehensive income																			195,494
Net change in noncontrolling interests					37,625																(29,662		)	7,963			Net change in noncontrolling interests					(23,672)												(7,959)		(31,631)
Amounts related to stock incentive plans, net of forfeitures			246		6,608		(8,020		)															(1,166		)	Amounts related to stock incentive plans, net of forfeitures			18		7,959		450								(80)				8,347
Net proceeds from issuance of common stock			6,975		583,890																			590,865			Net proceeds from issuance of common stock			1,487		101,721														103,208
Dividends paid:																											Dividends paid:
Common stock dividends													(356,001		)									(356,001		)	Common stock dividends											(353,677)								(353,677)
Balances at March 31, 2020	$	—	$	418,226	$	20,818,230	$	(86,975	)	$	7,659,038		$	(12,579,535	)	$	(96,213	)	$	12	$	933,554		$	17,066,337
Balances at June 30, 2019																											Balances at June 30, 2019	$	—	$	406,014	$	19,740,145	$	(74,042)	$	6,539,766	$	(11,516,994)	$	(100,622)	$	188	$	975,117	$	15,969,572

Three Months Ended March 31, 2019
Preferred
Stock Common
Stock Capital in
Excess of
Par Value Treasury
Stock Cumulative
Net Income Cumulative
Dividends Accumulated Other
Comprehensive
Income (Loss) Other
Equity Noncontrolling
Interests Total
Balances at January 1, 2019 $ 718,498
$ 384,465
$ 18,424,368
$ (68,499 ) $ 6,121,534
$ (10,818,557 ) $ (129,769 ) $ 294
$ 954,265
$ 15,586,599
Comprehensive income:
Net income (loss)

280,470

10,785
291,255
Other comprehensive income (loss)

(14,849 )
5,787
(9,062 )
Total comprehensive income

282,193
Net change in noncontrolling interests
(8,845 )

(1,497 ) (10,342 )
Amounts related to stock incentive plans, net of forfeitures
120
7,420
(5,993 )

(26 )
1,521
Net proceeds from issuance of common stock
7,212
525,408

532,620
Conversion of preferred stock (718,498 ) 12,712
705,786

—
Dividends paid:
Common stock dividends

(344,760 )

(344,760 )
Balances at March 31, 2019 $ —
$ 404,509
$ 19,654,137
$ (74,492 ) $ 6,402,004
$ (11,163,317 ) $ (144,618 ) $ 268
$ 969,340
$ 16,047,831

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended
March 31,
2020 2019
Operating activities:

Net income $ 329,380
$ 292,302
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization 274,801
243,932
Other amortization expenses 3,220
5,878
Provision for loan losses 7,072
18,690
Impairment of assets 27,827
—
Stock-based compensation expense 7,083
7,529
Loss (gain) on derivatives and financial instruments, net 7,651
(2,487 )
Loss (gain) on extinguishment of debt, net —
15,719
Loss (income) from unconsolidated entities 3,692
9,199
Rental income less than (in excess of) cash received (2,119 ) (26,956 )
Amortization related to above (below) market leases, net (565 ) 114
Loss (gain) on real estate dispositions, net (262,824 ) (167,409 )
Distributions by unconsolidated entities 3,385
—
Increase (decrease) in accrued expenses and other liabilities (30,030 ) (27,368 )
Decrease (increase) in receivables and other assets 43,284
(25,248 )
Net cash provided from (used in) operating activities 411,857

343,895

Investing activities:
Cash disbursed for acquisitions, net of cash acquired (390,802 ) (237,610 )
Cash disbursed for capital improvements to existing properties (69,382 ) (56,935 )
Cash disbursed for construction in progress (48,775 ) (55,391 )
Capitalized interest (4,746 ) (2,327 )
Investment in loans receivable (10,441 ) (45,452 )
Principal collected on loans receivable 10,045
7,210
Other investments, net of payments (3,612 ) (7,829 )
Contributions to unconsolidated entities (137,129 ) (26,854 )
Distributions by unconsolidated entities 3,555
19,724
Proceeds from (payments on) derivatives (357 ) —
Proceeds from sales of real property 801,392
602,732
Net cash provided from (used in) investing activities 149,748

197,268

Financing activities:
Net increase (decrease) under unsecured credit facility and commercial paper (742,612 ) (727,707 )
Proceeds from issuance of senior unsecured notes —
1,036,964
Payments to extinguish senior unsecured notes —
(1,050,000 )
Net proceeds from the issuance of secured debt 44,921
247,163
Payments on secured debt (31,566 ) (128,113 )
Net proceeds from the issuance of common stock 591,001
533,543
Payments for deferred financing costs and prepayment penalties (722 ) (19,566 )
Contributions by noncontrolling interests⁽¹⁾
9,084
27,860
Distributions to noncontrolling interests⁽¹⁾
(50,124 ) (21,830 )
Cash distributions to stockholders (354,678 ) (342,803 )
Other financing activities (9,599 ) (7,716 )
Net cash provided from (used in) financing activities (544,295 )
(452,205 )
Effect of foreign currency translation on cash and cash equivalents and restricted cash (10,010 )
2,352
Increase (decrease) in cash, cash equivalents and restricted cash 7,300
91,310
Cash, cash equivalents and restricted cash at beginning of period 385,766

316,129
Cash, cash equivalents and restricted cash at end of period $ 393,066
$ 407,439

Supplemental cash flow information:
Interest paid $ 140,216
$ 148,487
Income taxes paid (received), net 471
(250 )

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.


	Six Months Ended
	June 30,
	2020		2019
Operating activities:
Net income	$	488,596	$	442,342
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization	540,172		491,984
Other amortization expenses	6,947		9,761
Provision for loan losses	8,494		18,690
Impairment of assets	102,978		9,939
Stock-based compensation expense	14,373		15,192
Loss (gain) on derivatives and financial instruments, net	9,085		(574)
Loss (gain) on extinguishment of debt, net	249		15,719
Loss (income) from unconsolidated entities	2,360		18,248
Rental income less than (in excess of) cash received	(25,959)		(53,234)
Amortization related to above (below) market leases, net	(1,008)		(2)
Loss (gain) on real estate dispositions, net	(418,687)		(165,727)
Distributions by unconsolidated entities	6,795		46
Increase (decrease) in accrued expenses and other liabilities	22,348		55,415
Decrease (increase) in receivables and other assets	54,873		(3,317)
Net cash provided from (used in) operating activities	811,616		854,482

Investing activities:
Cash disbursed for acquisitions, net of cash acquired	(390,802)		(2,718,808)
Cash disbursed for capital improvements to existing properties	(122,103)		(124,176)
Cash disbursed for construction in progress	(93,031)		(155,409)
Capitalized interest	(9,287)		(6,256)
Investment in loans receivable	(19,538)		(65,422)
Principal collected on loans receivable	12,796		8,660
Other investments, net of payments	(3,695)		(16,973)
Contributions to unconsolidated entities	(225,739)		(119,001)
Distributions by unconsolidated entities	8,811		70,844
Proceeds from (payments on) derivatives	(13,319)		(21,643)
Proceeds from sales of real property	1,998,087		616,820
Net cash provided from (used in) investing activities	1,142,180		(2,531,364)

Financing activities:
Net increase (decrease) under unsecured credit facility and commercial paper	(1,587,597)		722,188
Proceeds from issuance of senior unsecured notes	1,588,549		2,036,964
Payments to extinguish senior unsecured notes	—		(1,050,000)
Net proceeds from the issuance of secured debt	44,921		295,969
Payments on secured debt	(345,340)		(178,700)
Net proceeds from the issuance of common stock	595,313		647,156
Repurchase of common stock	(7,656)		—
Payments for deferred financing costs and prepayment penalties	(4,725)		(24,177)
Contributions by noncontrolling interests⁽¹⁾	13,764		39,122
Distributions to noncontrolling interests⁽¹⁾	(180,875)		(64,004)

Cash distributions to stockholders	(610,847)		(695,099)
Other financing activities	(9,816)		(8,615)
Net cash provided from (used in) financing activities	(504,309)		1,720,804
Effect of foreign currency translation on cash and cash equivalents and restricted cash	(9,010)		(333)
Increase (decrease) in cash, cash equivalents and restricted cash	1,440,477		43,589
Cash, cash equivalents and restricted cash at beginning of period	385,766		316,129
Cash, cash equivalents and restricted cash at end of period	$	1,826,243	$	359,718

Supplemental cash flow information:
Interest paid	$	227,632	$	252,714
Income taxes paid (received), net	(1,142)		2,040

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Welltower Inc. (the "Company"), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties.

2. Accounting Policies and Related Matters

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (such as normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~three~~six months ended ~~March 31,~~June 30, 2020 are not necessarily an indication of the results that may be expected for the year ending December 31, 2020. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Impact of COVID-19 Pandemic

The extent to which the COVID-19 pandemic impacts our operations and those of our operators and tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations and cash flows in the future, including but not limited to, the following:

•Our Seniors Housing Operating ~~revenues and our Triple-net operators'~~ revenues are dependent on occupancy. Declines in occupancy are expected due to heightened move-in criteria and screening, as well as increased mortality rates among seniors. ~~In addition, increased~~Occupancy within our total Seniors Housing Operating portfolio has declined as follows:


	February		March		April		May		June		July
Spot occupancy⁽¹⁾	85.8	%	85.0	%	82.8	%	81.0	%	80.1	%	79.4	%
Sequential occupancy change			(0.8)	%	(2.2)	%	(1.8)	%	(0.9)	%	(0.7)	%

⁽¹⁾ Spot occupancy represents approximate month end occupancy for properties in operation as of February 2020, including unconsolidated properties but excluding acquisitions, dispositions and development conversions since the start of the COVID-19 pandemic.

Increased Seniors Housing Operating expenses are expected to continue until the pandemic subsides. ~~Such~~We experienced incremental operational costs of $43,058,000 and $50,352,000 for the three and six months ended June 30, 2020, respectively, included in property operating expenses. These expenses were incurred as a result of the introduction of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and supplies, net of reimbursements. Certain new expenses incurred since the start of the pandemic may continue on an ongoing basis as part of new health and safety protocols.

•Our Triple-net operators are experiencing similar occupancy declines and expense increases, however, long-term/post-acute facilities are generally experiencing a higher degree of occupancy declines. These factors may impact our Triple-net operator's ability to pay rent and contractual obligations. ~~Furthermore, various~~Many of our Triple-net operators received funds under the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) and operators of long-term/post-acute facilities have also received funds under the CARES Act Provider Relief Fund. Accordingly, collection of Triple-net rent due during the COVID-19 pandemic to date (from March to July) has been consistent with historical collection rates and no significant rent concessions or deferrals have been made. Various local and state stay at home orders and the temporary closure of certain medical practices as a result may continue to impact our ~~medical office building~~Outpatient Medical tenants' ability to pay rent. ~~These factors may cause~~We have either collected or approved short term deferrals for over 99% of Outpatient Medical rent due in the second quarter, consisting of 87% cash collections and 12% of short term deferrals. In most cases, the

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

deferred rent respresents two months of rent with expected repayment by the end of the year. Approximately 98% of Outpatient Medical rent due in July was either collected or aproved for short term deferral, with cash collections accelerating to approximately 95%. Short term deferrals of July rent decreased to 3%, which primarily relates to tenants in local jurisdictions for which relief was mandated. Furthermore, collections of deferred rent due in June and July under executed deferrals were 96%. To the extent that deferred rent is not repaid as expected, or the prolonged impact of the COVID-19 pandemic causes operators or tenants to seek further modifications of ~~such obligations, resulting in~~their lease agreements, we may recognize reductions in revenue and increases in uncollectible receivables.

•Assessing properties for potential impairment involves subjectivity in determining if impairment indicators are present and in estimating the future undiscounted cash flows or estimated fair value of the asset. Key assumptions are made in ~~this assessment and drive conclusions include~~these assessments including the estimation of future rental revenues, occupancy, operating expenses, capitalization rates and the ability and intent to hold the respective asset. All of these assumptions are significantly affected by our expectations of future market or economic conditions and can be highly impacted by the uncertainty of the COVID-19 ~~pandemic, leading us~~pandemic. We will continue to ~~recognize increased impairment charges.~~evaluate the assumptions used in these analyses, changes to which may result in impairments in future periods.

•The determination of the allowance for credit losses is based on our evaluation of collectability of our loans receivable and includes review of factors such as delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and the value of the underlying collateral. Reduced economic activity severely impacts our borrowers' businesses, financial conditions and liquidity and may hinder their ability to make contractual payments to us, leading to an increase in loans deemed to have deteriorated credit which could result in an increase in the provision for loan losses.

New Accounting Standards

•On January 1, 2020, we adopted ASU 2016-13, “Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under the new leases standard from the scope of the new credit losses standard. ASU 2016-13 primarily impacts our measurement for credit losses related to our real estate and non-real estate loans receivable. In conjunction with our adoption of ASU 2016-13, we recorded a $5,212,000 increase to our allowance for credit losses on loans receivable (both real estate and non-real estate) with a corresponding adjustment to cumulative net income related to the change in accounting principle. See Note 7 for further details.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

•At the FASB's April 8, 2020 Board meeting, the staff acknowledged that the economics of lease concessions that result from a global pandemic may not be aligned with the underlying premise of the modification framework in ASC 842, under which the concession would be recognized over the remainder of the lease term. ~~The~~In a Q&A document, the FASB ~~thus determined that it would be appropriate for~~provided entities ~~to make a policy election regarding how to account for~~with COVID-19 related lease concessions ~~resulting directly from COVID-19. Rather than analyzing each lease contract individually, entities can elect~~an option to account for lease concessions "as though the enforceable rights and obligations for the concessions explicitly exist in the contract." Accordingly, entities that choose to apply the relief provided can either (1) apply the modification framework for these concessions in accordance with ASC 842 as applicable or (2) account for concessions as if they were made under the enforceable rights included in the original agreement as long as total cash flows resulting from the modified contract are substantially the same or less than cash flows in the original contract. AsDue to the continuing adverse economic conditions caused by the COVID-19 pandemic, a subset of ~~March 31, 2020,~~outpatient medical tenants have requested rent relief, most often in the form of a short-term rent deferral. Not all tenant requests result in modification of agreements, nor do we intend to forgo our contractual rights under our lease agreements. We evaluate each tenant's rent relief request on an individual basis. Generally we expect the majority of rent deferral agreements to result in two months of full or partial rent relief to repaid by the end of the year. We have ~~adopted~~elected to apply the accounting relief ~~put forth~~provided by the FASB to such short-term rent deferrals, and ~~intend to~~will account for ~~qualifying concessions~~such deferrals as if no change had been made to the original lease ~~modifications, but had not yet made significant lease concessions within our portfolio as a result of the COVID-19 pandemic.~~contract.

3. Real Property Acquisitions and Development

The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets and liabilities at cost on a relative fair value basis. Liabilities assumed and any associated noncontrolling interests are reflected at fair value. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. Transaction costs related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in other expenses on our Consolidated Statements of Comprehensive Income.

The following is a summary of our real property investment activity by segment for the periods presented (in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended																									Six Months Ended
	March 31, 2020												March 31, 2019													June 30, 2020														June 30, 2019
	Seniors Housing Operating			Triple-net			Outpatient Medical			Totals			Seniors Housing Operating			Triple-net			Outpatient Medical			Totals				Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$	15,758		$	—		$	40,847		$	56,605		$	6,831		$	7,427		$	29,304		$	43,562		Land and land improvements	$	15,758	$	—	$	40,847	$	56,605	$	103,743	$	8,099	$	132,154	$	243,996
Buildings and improvements	132,480			765			171,457			304,702			97,759			74,116			60,671			232,546			Buildings and improvements	132,480		765		171,457		304,702		1,109,966		96,244		1,198,608		2,404,818
Acquired lease intangibles	10,810			—			23,823			34,633			4,945			—			10,202			15,147			Acquired lease intangibles	10,810		—		23,823		34,633		58,773		—		85,492		144,265
Construction in progress																									Construction in progress	—		—		—		—		36,174		—		—		36,174

Right of use assets, net	—			—			—			—			—			—			2,012			2,012			Right of use assets, net	—		—		—		—		—		—		56,073		56,073

Receivables and other assets	257			—			139			396			264			—			—			264			Receivables and other assets	257		—		139		396		4,560		—		376		4,936
Total assets acquired ⁽¹⁾	159,305			765			236,266			396,336			109,799			81,543			102,189			293,531			Total assets acquired ⁽¹⁾	159,305		765		236,266		396,336		1,313,216		104,343		1,472,703		2,890,262
Secured debt	—			—			—			—			(43,209		)	—			—			(43,209		)	Secured debt	—		—		—		—		(43,209)		—		—		(43,209)
Lease liabilities	—			—			—			—			—			—			(961		)	(961		)	Lease liabilities	—		—		—		—		—		—		(45,287)		(45,287)
Accrued expenses and other liabilities	(671		)	—			(2,036		)	(2,707		)	(848		)	—			(1,952		)	(2,800		)	Accrued expenses and other liabilities	(671)		—		(2,036)		(2,707)		(8,677)		—		(22,506)		(31,183)
Total liabilities acquired	(671		)	—			(2,036		)	(2,707		)	(44,057		)	—			(2,913		)	(46,970		)	Total liabilities acquired	(671)		—		(2,036)		(2,707)		(51,886)		—		(67,793)		(119,679)
Noncontrolling interests ⁽²⁾	(2,827		)	—			—			(2,827		)	(7,895		)	(1,056		)	—			(8,951		)	Noncontrolling interests ⁽²⁾	(2,827)		—		—		(2,827)		(38,830)		(1,056)		—		(39,886)
Non-cash acquisition related activity⁽³⁾																									Non-cash acquisition related activity⁽³⁾	—		—		—		—		(11,889)		—		—		(11,889)
Cash disbursed for acquisitions	155,807			765			234,230			390,802			57,847			80,487			99,276			237,610			Cash disbursed for acquisitions	155,807		765		234,230		390,802		1,210,611		103,287		1,404,910		2,718,808
Construction in progress additions	29,841			13,929			13,645			57,415			35,756			7,442			14,475			57,673			Construction in progress additions	53,705		26,262		26,677		106,644		110,902		24,131		26,587		161,620
Less: Capitalized interest	(2,812		)	(941		)	(993		)	(4,746		)	(1,136		)	(390		)	(801		)	(2,327		)	Less: Capitalized interest	(5,470)		(1,826)		(1,991)		(9,287)		(3,560)		(908)		(1,788)		(6,256)
Accruals ⁽³⁾	(2,600		)	—			(1,294		)	(3,894		)	—			—			45			45
Accruals ⁽⁴⁾																									Accruals ⁽⁴⁾	(1,343)		—		(2,983)		(4,326)		—		—		45		45
Cash disbursed for construction in progress	24,429			12,988			11,358			48,775			34,620			7,052			13,719			55,391			Cash disbursed for construction in progress	46,892		24,436		21,703		93,031		107,342		23,223		24,844		155,409
Capital improvements to existing properties	52,503			3,248			13,631			69,382			43,300			3,768			9,867			56,935			Capital improvements to existing properties	87,002		4,700		30,401		122,103		97,867		7,423		18,886		124,176
Total cash invested in real property, net of cash acquired	$	232,739		$	17,001		$	259,219		$	508,959		$	135,767		$	91,307		$	122,862		$	349,936		Total cash invested in real property, net of cash acquired	$	289,701	$	29,901	$	286,334	$	605,936	$	1,415,820	$	133,933	$	1,448,640	$	2,998,393

⁽¹⁾ Excludes $580,000 and ~~$517,000~~$1,910,000 of unrestricted and restricted cash acquired during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.

⁽²⁾ Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests.

⁽³⁾ Relates to the acquisition of assets previously recognized as investments in unconsolidated entities.

⁽⁴⁾ Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Construction Activity

The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Development projects:
Seniors Housing Operating $ 93,188
$ —
Outpatient Medical 19,369
—
Total construction in progress conversions $ 112,557
$ —


	Six Months Ended
	June 30, 2020		June 30, 2019
Development projects:
Seniors Housing Operating	$	93,188	$	28,117
Triple-net	33,627		—
Outpatient Medical	43,493		—
Total development projects	170,308		28,117
Expansion projects	35,637		—
Total construction in progress conversions	$	205,945	$	28,117

4. Real Estate Intangibles

The following is a summary of our real estate intangibles, excluding those classified as held for sale, as of the dates indicated (dollars in thousands):

March 31, 2020 December 31, 2019
Assets:
In place lease intangibles $ 1,523,390
$ 1,513,836
Above market tenant leases 60,484
59,540
Lease commissions 45,788
43,675
Gross historical cost 1,629,662
1,617,051
Accumulated amortization (1,195,330 ) (1,181,158 )
Net book value $ 434,332
$ 435,893

Weighted-average amortization period in years 10.4
10.3

Liabilities:
Below market tenant leases $ 86,233
$ 99,035
Accumulated amortization (40,354 ) (49,390 )
Net book value $ 45,879
$ 49,645

Weighted-average amortization period in years 8.6
8.6

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	June 30, 2020		December 31, 2019
Assets:
In place lease intangibles	$	1,460,748	$	1,513,836
Above market tenant leases	58,780		59,540
Lease commissions	46,450		43,675
Gross historical cost	1,565,978		1,617,051
Accumulated amortization	(1,178,515)		(1,181,158)
Net book value	$	387,463	$	435,893

Weighted-average amortization period in years	10.8		10.3

Liabilities:
Below market tenant leases	$	83,037	$	99,035
Accumulated amortization	(40,886)		(49,390)
Net book value	$	42,151	$	49,645

Weighted-average amortization period in years	8.4		8.6

The following is a summary of real estate intangible amortization income (expense) for the periods presented (in thousands):

Three Months Ended March 31,
2020 2019
Rental income related to (above)/below market tenant leases, net $ 524
$ (155 )
Amortization related to in place lease intangibles and lease commissions (35,976 ) (24,905 )


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Rental income related to (above)/below market tenant leases, net	$	402	$	73	$	925	$	(82)
Amortization related to in place lease intangibles and lease commissions	(33,316)		(28,518)		(69,293)		(53,423)

The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):

Assets Liabilities
2020 $ 89,792
$ 6,817
2021 68,777
8,313
2022 44,647
7,607
2023 37,400
5,343
2024 29,529
3,215
Thereafter 164,187
14,584
Total $ 434,332
$ 45,879

~~WELLTOWER INC.~~


	Assets		Liabilities
2020	$	54,296	$	4,354
2021	66,013		8,162
2022	44,822		7,476
2023	36,282		5,238
2024	28,438		3,101
Thereafter	157,612		13,820
Total	$	387,463	$	42,151

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

5. Dispositions and Assets Held for Sale

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (i.e., property type, relationship or geography). At ~~March 31,~~June 30, 2020, 187 Seniors Housing Operating, 63 Triple-net, and 913 Outpatient Medical properties with an aggregate real estate balance of ~~$729,560,000~~$382,580,000 were classified as held for sale. In addition to the real property balances held for sale, secured debt of ~~$112,625,000~~$12,849,000 and net other assets and ~~liabilities~~(liabilities) of ~~$27,800,000~~$35,085,000 are included in the Consolidated Balance Sheet related to the held for sale properties. ~~Subsequent~~Expected gross sales proceeds related to ~~March 31,~~the held for sale properties is approximately $501,008,000.

During the three months ended June 30, 2020, the expected sale of a Seniors Housing Operating portfolio, which had previously met the held for sale criteria, ~~as of December 31, 2019,~~ was not ~~consummated as~~completed. As a result, ~~of the uncertainty of the COVID-19 pandemic on our business and industry and the~~ 11 properties with a carrying value of $386,744,000 ~~will be moved out of~~were reclassified to held for ~~sale during the second quarter. Expected gross sales proceeds related to the remaining held for sale properties is approximately $412,535,000.~~use.

During the three months ended March 31, 2020, we recorded ~~net~~ impairment charges of $27,827,000 related to certain held for use properties for which the carrying value exceeded the fair values. During the three months ended June 30, 2020, we entered into and subsequently closed a definitive purchase and sale agreement to sell 6 Seniors Housing Operating properties. In conjunction with this transaction, an impairment charge of $56,371,000 was recognized. During the three months ended June 30, 2020, we agreed to terms including pricing for the sale of a portfolio of 6 Seniors Housing Operating properties previously classified as held for sale resulting in an impairment charge of $18,780,000. The following is a summary of our real property disposition activity for the periods presented (in thousands):

Three Months Ended March 31,
2020 2019
Real estate dispositions:
Triple-net $ 33,445
$ 436,071
Outpatient Medical 495,003
—
Total dispositions 528,448
436,071
Gain (loss) on real estate dispositions, net 262,824
167,409
Net other assets/liabilities disposed 10,120
(748 )
Proceeds from real estate dispositions $ 801,392
$ 602,732

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Six Months Ended June 30,
	2020		2019
Real estate dispositions:
Seniors Housing Operating	$	706,964	$	8,726
Triple-net	33,445		442,865
Outpatient Medical	808,992		—
Total dispositions	1,549,401		451,591
Gain (loss) on real estate dispositions, net	418,687		165,727
Net other assets/liabilities disposed	29,999		(498)
Proceeds from real estate dispositions	$	1,998,087	$	616,820

Operating results attributable to properties sold ~~subsequent to~~ or classified as held for sale ~~and~~ which do not meet the definition of discontinued operations, are not reclassified on our Consolidated Statements of Comprehensive Income. The following represents the activity related to these properties for the periods presented (in thousands):

Three Months Ended March 31,
2020 2019
Revenues:
Total revenues $ 48,563
$ 159,048
Expenses:
Interest expense 876
1,547
Property operating expenses 27,793
96,143
Provision for depreciation —
22,739
Total expenses 28,669
120,429
Income (loss) from real estate dispositions, net $ 19,894
$ 38,619


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenues:
Total revenues	$	36,481	$	177,276	$	107,933	$	355,819
Expenses:
Interest expense	1,622		4,210		4,591		8,420
Property operating expenses	23,850		101,416		63,300		207,340
Provision for depreciation	7,637		29,488		18,254		58,692
Total expenses	33,109		135,114		86,145		274,452
Income (loss) from real estate dispositions, net	$	3,372	$	42,162	$	21,788	$	81,367

6. Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities.

The components of lease expense were as follows for the period presented (in thousands):


		Six Months Ended
	Classification	June 30, 2020		June 30, 2019
Operating lease cost: ⁽¹⁾
Real estate lease expense	Property operating expenses	$	12,516	$	14,679
Non-real estate investment lease expense	General and administrative expenses	2,549		770
Finance lease cost:
Amortization of leased assets	Property operating expenses	4,043		4,245
Interest on lease liabilities	Interest expense	2,695		2,169
Sublease income	Rental income	(2,087)		(2,087)
Total		$	19,716	$	19,776

⁽¹⁾ Includes short-term leases which are immaterial.

Supplemental balance sheet information related to leases is as follows (in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended
Classification March 31, 2020 March 31, 2019
Operating lease cost: ⁽¹⁾

Real estate lease expense Property operating expenses $ 6,492
$ 7,412
non-real estate investment lease expense General and administrative expenses 1,267
362
Finance lease cost:
Amortization of leased assets Property operating expenses 2,243
2,092
Interest on lease liabilities Interest expense 1,379
1,002
Sublease income Rental income (1,043 ) (1,886 )
Total $ 10,338
$ 8,982

⁽¹⁾ ~~Includes short-term leases which are immaterial.~~

~~Supplemental balance sheet information related to leases was as follows (in thousands):~~

Classification March 31, 2020 December 31, 2019
Right of use assets:
Operating leases - real estate Right of use assets, net $ 362,685
$ 374,217
Finance leases - real estate Right of use assets, net 160,532
162,216
Real estate right of use assets, net 523,217
536,433
Operating leases - non-real estate investments Receivables and other assets 11,753
12,474
Total right of use assets, net $ 534,970
$ 548,907

Lease liabilities:
Operating leases $ 356,311
$ 364,803
Financing leases 108,348
108,890
Total $ 464,659
$ 473,693


	Classification	June 30, 2020		December 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	344,011	$	374,217
Finance leases - real estate	Right of use assets, net	158,593		162,216
Real estate right of use assets, net		502,604		536,433
Operating leases - non-real estate investments	Receivables and other assets	11,063		12,474
Total right of use assets, net		$	513,667	$	548,907

Lease liabilities:
Operating leases		$	339,589	$	364,803
Financing leases		107,835		108,890
Total		$	447,424	$	473,693

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. During the three months ended March 31, 2020, we wrote off straight-line receivables of $32,268,000 in conjunction with the execution of a lease amendment. Additionally, during the three months ended June 30, 2020, we recorded a reserve of $1,842,000 on straight-line receivable balances deemed uncollectible.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, we recognized ~~$389,960,000~~$786,265,000 of rental ~~and other revenues~~income related to operating leases, of which ~~$55,754,000~~$104,605,000 was for variable lease payments which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the ~~three~~six months ended ~~March 31,~~June 30, 2019, we recognized ~~$381,084,000~~$766,670,000 of rental ~~and other revenues~~income related to operating leases, of which ~~$47,350,000~~$94,017,000 was for variable lease payments.

7. Loans Receivable

Loans receivable are recorded on our Consolidated Balance Sheets in real estate loans receivable, net of allowance for credit losses, or for non-real estate loans receivable, in receivables and other assets, net of allowance for credit losses. Real estate loans receivable consists of mortgage loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guarantees and/or personal guarantees. Non-real estate loans are generally corporate loans with no real estate backing. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of the risk of credit loss. Accrued interest receivable was ~~$7,868,000~~$10,171,000 and ~~$6,897,000~~$6,897,000 as of ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, and is included in receivables and other assets on the Consolidated Balance Sheets. The following is a summary of our loans receivable (in thousands):

March 31, 2020 December 31, 2019
Mortgage loans $ 97,896
$ 188,062
Other real estate loans 125,811
124,696
Allowance for credit losses on real estate loans receivable (2,479 ) (42,376 )
Real estate loans receivable, net of credit allowance $ 221,228
$ 270,382
Non-real estate loans 451,271
362,850
Allowance for credit losses on non-real estate loans receivable (78,092 ) (25,996 )
Non-real estate loans receivable, net of credit allowance ⁽¹⁾
373,179
336,854
Total loans receivable, net of credit allowance $ 594,407
$ 607,236

⁽¹⁾ ~~Included in receivables and other assets on the Consolidated Balance Sheets.~~


	June 30, 2020		December 31, 2019
Mortgage loans	$	102,275	$	188,062
Other real estate loans	126,448		124,696
Allowance for credit losses on real estate loans receivable	(3,852)		(42,376)
Real estate loans receivable, net of credit allowance	224,871		270,382
Non-real estate loans	451,968		362,850
Allowance for credit losses on non-real estate loans receivable	(78,133)		(25,996)
Non-real estate loans receivable, net of credit allowance	373,835		336,854
Total loans receivable, net of credit allowance	$	598,706	$	607,236

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, the real estate collateral associated with one loan was released, therefore, the principal balance of $86,411,000 and related allowance for credit losses of $42,376,000 was reclassified to a non-real estate loan.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of our loan activity for the periods presented (in thousands):

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Three Months Ended
March 31, 2020 March 31, 2019
Advances on loans receivable:
Investments in new loans $ —
$ 25,000
Draws on existing loans 10,441
20,452
Net cash advances on loans receivable 10,441
45,452

Receipts on loans receivable:
Loan payoffs —
4,384
Principal payments on loans 10,045
2,826
Net cash receipts on loans receivable 10,045
7,210
Net cash advances (receipts) on loans receivable $ 396
$ 38,242


	Six Months Ended
	June 30, 2020		June 30, 2019
Advances on loans receivable:
Investments in new loans	$	2,477	$	30,000
Draws on existing loans	17,061		35,422
Net cash advances on loans receivable	19,538		65,422

Receipts on loans receivable:
Loan payoffs	—		4,384
Principal payments on loans	12,796		4,276


Net cash receipts on loans receivable	12,796		8,660
Net cash advances (receipts) on loans receivable	$	6,742	$	56,762

The allowance for credit loss on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the credit allowance is based on a quarterly evaluation of each of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of credit quality indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral.

A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans we identified as having deteriorated credit quality we determine the amount of credit loss on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual are deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to income accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

For the remaining loans we assess credit loss on a collective pool basis and use our historical loss experience for similar loans to determine the reserve for credit losses. The following is a summary of our loans by credit loss category (in thousands):

March 31, 2020
Loan category Years of Origination Loan Carrying Value Allowance for Credit Loss Net Loan Balance No. of Loans
Deteriorated loans 2007 - 2018 $ 185,982
$ (75,372 ) $ 110,610
4
Collective loan pool 2007 - 2015 128,971
(1,873 ) 127,098
15
Collective loan pool ⁽¹⁾
2016 183,218
(1,534 ) 181,684
6
Collective loan pool 2017 117,156
(970 ) 116,186
7
Collective loan pool 2018 15,865
(229 ) 15,636
2
Collective loan pool 2019 43,786
(593 ) 43,193
6
Total loans $ 674,978
$ (80,571 ) $ 594,407
40

⁽¹⁾ Carrying value is exclusive of deferred gains of $62,819,000 recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets.


	June 30, 2020
Loan category	Years of Origination	Loan Carrying Value		Allowance for Credit Loss		Net Loan Balance		No. of Loans
Deteriorated loans	2007 - 2018	$	186,584	$	(76,695)	$	109,889	5
Collective loan pool	2007 - 2015	128,447		(1,866)		126,581		15
Collective loan pool ⁽¹⁾	2016	184,620		(1,572)		183,048		6
Collective loan pool	2017	119,662		(999)		118,663		7
Collective loan pool	2018	15,399		(224)		15,175		1
Collective loan pool	2019	45,979		(629)		45,350		7
Total loans		$	680,691	$	(81,985)	$	598,706	41

⁽¹⁾ Carrying value is exclusive of deferred gains of $62,819,000 recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets.

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain Triple-net real estate loans receivable that were no longer deemed collectible. During the quarter ended June 30, 2019, these loans were written off. ~~In March 31,~~During the six months ended June 30, 2020, we recognized a provision for ~~loan~~credit losses of $6,898,000 to fully reserve for one Triple-net non-real estate loan receivable and $1,303,000 to fully reserve for one Triple-net real estate loan receivable that ~~was~~were no longer deemed collectible. The following is a summary of the allowance for credit losses on loans receivable for the periods presented (in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Balance at beginning of period $ 68,372
$ 68,372
Adoption of ASU 2016-13 5,212
—
Provision for loan losses 7,072
18,690
Foreign currency translation (85 ) —
Balance at end of period $ 80,571
$ 87,062

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Six Months Ended
	June 30, 2020		June 30, 2019
Balance at beginning of period	$	68,372	$	68,372
Adoption of ASU 2016-13	5,212		—
Provision for loan losses	8,494		18,690
Loan write-offs	—		(18,690)
Foreign currency translation	(93)		—

Balance at end of period	$	81,985	$	68,372

The following is a summary of our deteriorated loans (in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Balance of deteriorated loans at end of period ⁽¹⁾
$ 185,982
$ 206,783
Allowance for credit losses (75,372 ) (87,062 )
Balance of deteriorated loans not reserved $ 110,610
$ 119,721
Interest recognized on deteriorated loans ⁽²⁾
$ 4,046
$ 3,971


	Six Months Ended
	June 30, 2020		June 30, 2019
Balance of deteriorated loans at end of period ⁽¹⁾	$	186,584	$	188,068
Allowance for credit losses	(76,695)		(68,372)
Balance of deteriorated loans not reserved	$	109,889	$	119,696
Interest recognized on deteriorated loans ⁽²⁾	$	7,912	$	7,964

⁽¹⁾Current year amounts include~~Includes two~~ $10,716,000 and $2,534,000 of loans ~~that are~~ on non-accrual as of ~~March~~June 30, 2020 and December 31, ~~2020, with a total carrying value~~2019, respectively. Prior year amounts include $2,534,000 and$2,567,000 as of ~~$9,534,000 at both the beginning~~June 30, 2019 and ~~the end of the first quarter of 2020.~~December 31, 2018, respectively.

⁽²⁾ Represents cash interest recognized in the period.

8. Investments in Unconsolidated Entities

We participate in a number of joint ventures, which generally invest in seniors housing and health care real estate. The results of operations for these properties have been included in our consolidated results of operations from the date of acquisition by the joint ventures and are reflected in our Consolidated Statements of Comprehensive Income as income or loss from unconsolidated entities. The following is a summary of our investments in unconsolidated entities (dollars in thousands):

Percentage Ownership ⁽¹⁾
March 31, 2020 December 31, 2019
Seniors Housing Operating 10% to 50% $ 511,645
$ 463,741
Triple-net 10% to 25% 7,438
7,740
Outpatient Medical 15% to 50% 183,414
111,942
Total $ 702,497
$ 583,423


	Percentage Ownership ⁽¹⁾	June 30, 2020		December 31, 2019
Seniors Housing Operating	10% to 50%	$	568,381	$	463,741
Triple-net	10% to 25%	7,172		7,740
Outpatient Medical	15% to 50%	211,368		111,942
Total		$	786,921	$	583,423

⁽¹⁾ Excludes ownership of in substance real estate.

At ~~March 31,~~June 30, 2020, the aggregate unamortized basis difference of our joint venture investments of ~~$112,258,000~~$112,486,000 is primarily attributable to the difference between the amount for which we purchase our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the joint venture. This difference is being amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.

We have made loans totaling ~~$210,994,000~~$250,215,000 related to 8 properties as of ~~March 31,~~June 30, 2020 for the development and construction of certain properties which are classified as in substance real estate investments. We believe that such borrowers typically represent variable interest entities ("VIE" or "VIEs") in accordance with ASC 810 Consolidation. VIEs are required to be consolidated by their primary beneficiary ("PB") which is the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impacts the entity's economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We have concluded that we are not the PB of such borrowers, therefore, the loan arrangements were assessed based on among other factors, the amount and timing of expected residual profits, the estimated fair value of the collateral and the significance of the borrower's equity in the project. Based on these assessments, the arrangements have been classified as in substance real estate investments. We expect to fund an additional ~~$251,495,000~~$212,306,000 related to these investments.

9. Credit Concentration

We use consolidated net operating income (“NOI”) as our credit concentration metric. See Note 18 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the ~~three~~six months ended ~~March 31,~~June 30, 2020, excluding our share of NOI in unconsolidated entities (dollars in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Concentration by relationship: ⁽¹⁾	Number of Properties	Total NOI		Percent of NOI ⁽²⁾	Concentration by relationship: ⁽¹⁾	Number of Properties	Total NOI		Percent of NOI ⁽²⁾
Sunrise Senior Living ⁽³⁾	165	$	81,577	14%	Sunrise Senior Living ⁽³⁾	165	$	134,872	12%
ProMedica	215	53,498		9%	ProMedica	215	106,530		10%
Genesis Healthcare					Genesis Healthcare	52	58,831		5%
Revera⁽³⁾	94	32,874		6%	Revera ⁽³⁾	94	57,268		5%
Genesis Healthcare	52	29,391		5%
Belmont Village	21	19,615		3%
Avery Healthcare					Avery Healthcare	59	37,298		3%
Remaining portfolio	1,016	359,866		63%	Remaining portfolio	941	709,733		65%
Totals	1,563	$	576,821	100%	Totals	1,526	$	1,104,532	100%

⁽¹⁾ Sunrise Senior Living and Revera are in our Seniors Housing Operating segment. Genesis Healthcare and ProMedica are in our Triple-net segment. ~~Sunrise Senior Living, Revera~~Avery Healthcare is in both the Triple-net and ~~Belmont Village are in our~~ Seniors Housing Operating ~~segment.~~segments.

⁽²⁾ NOI with our top five relationships comprised 37% of total NOI for the year ended December 31, 2019.

⁽³⁾ Revera owns a controlling interest in Sunrise Senior Living.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

10. Borrowings Under Credit Facilities and Commercial Paper Program

At ~~March 31,~~June 30, 2020, we had a primary unsecured credit facility with a consortium of 31 banks that includes a $3,000,000,000 unsecured revolving credit facility ~~($795,000,000~~(none outstanding at ~~March 31,~~June 30, 2020), a $500,000,000 unsecured term credit facility and a $250,000,000 Canadian-denominated unsecured term credit facility. We have an option, through an accordion feature, to upsize the unsecured revolving credit facility and the $500,000,000 unsecured term credit facility by up to an additional $1,000,000,000, in the aggregate, and the $250,000,000 Canadian-denominated unsecured term credit facility by up to an additional $250,000,000. The primary unsecured credit facility also allows us to borrow up to $1,000,000,000 in alternate currencies (NaN outstanding at ~~March 31,~~June 30, 2020). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest ~~rate (1.82% at March 31, 2020).~~rate. The applicable margin is based on our debt ratings and was 0.825% at ~~March 31,~~June 30, 2020. In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on our debt ratings and was 0.15% at ~~March 31,~~June 30, 2020. The term credit facilities mature on July 19, 2023. The revolving credit facility is scheduled to mature on July 19, 2022 and can be extended for 2 successive terms of six months each at our option.

In January 2019, we established an unsecured commercial paper program. Under the terms of the program, we may issue unsecured commercial paper notes with maturities that vary, but do not exceed 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time ~~of $1,000,000,000. As of March 31, 2020, there was a balance of $49,985,000~~of $1,000,000,000 (none outstanding on the commercial paper program ($50,000,000 in principal outstanding net of an unamortized discount of $15,000), which reduces the borrowing capacity on the unsecured revolving credit facility. The notes bear interest at ~~various floating rates with a weighted average of 1.55% as of March 31, 2020 and a weighted average maturity of seven days as of March 31, 2020.~~June 30, 2020).

The following information relates to aggregate borrowings under the unsecured revolving credit facility and commercial paper program for the periods presented (dollars in thousands):

Three Months Ended March 31,
2020 2019
Balance outstanding at quarter end $ 845,000
$ 419,293
Maximum amount outstanding at any month end $ 2,100,000
$ 1,150,000
Average amount outstanding (total of daily
principal balances divided by days in period) $ 1,593,816
$ 790,516
Weighted average interest rate (actual interest
expense divided by average borrowings outstanding) 2.21 % 3.22 %


	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			2020			2019
Balance outstanding at quarter end	$	—		$	1,870,000		$	—		$	1,870,000
Maximum amount outstanding at any month end	$	685,000		$	2,880,000		$	2,100,000		$	2,880,000
Average amount outstanding (total of daily
principal balances divided by days in period)	$	405,165		$	1,807,631		$	999,490		$	1,301,883
Weighted average interest rate (actual interest
expense divided by average borrowings outstanding)	1.57		%	3.08		%	2.08		%	3.11		%

11. Senior Unsecured Notes and Secured Debt

We may repurchase, redeem or refinance senior unsecured notes from time to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the early redemption of such securities pursuant to their terms. The senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the sum of: (i) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (ii) any “make-whole” amount due under the terms of the notes in connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. At ~~March 31,~~June 30, 2020, the annual principal payments due on these debt obligations were as follows (in thousands):

Senior
Unsecured Notes ^(1,2)

Secured
Debt ^(1,3)
Totals
2020 $ —
$ 275,279
$ 275,279
2021 —
424,952
424,952
2022 10,000
449,900
459,900
2023 ^(4,5)
1,777,054
473,564
2,250,618
2024 1,350,000
295,714
1,645,714
Thereafter ^(6,7,8)
7,169,819
985,229
8,155,048
Totals $ 10,306,873
$ 2,904,638
$ 13,211,511

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Senior Unsecured Notes ^(1,2)		Secured Debt ^(1,3)		Totals
2020	$	—	$	257,139	$	257,139
2021	—		427,969		427,969
2022 ⁽⁴⁾	1,010,000		444,119		1,454,119
2023 ^(5,6)	1,783,621		327,388		2,111,009
2024	1,350,000		176,366		1,526,366
Thereafter ^(7,8,9)	7,769,090		995,008		8,764,098
Totals	$	11,912,711	$	2,627,989	$	14,540,700

⁽¹⁾ Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the Consolidated Balance Sheet.

⁽²⁾ Annual interest rates range from ~~1.65%~~0.88% to 6.50%.

⁽³⁾ Annual interest rates range from ~~1.69%~~0.12% to 12.00%. Carrying value of the properties securing the debt totaled ~~$6,324,000~~$5,774,000 at ~~March 31,~~June 30, 2020.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

⁽⁴⁾ Includes a $1,000,000,000 unsecured term credit facility. The loan matures on April 1, 2022 and bears interest at LIBOR plus 1.20% (1.38% at June 30, 2020).

⁽⁵⁾ Includes a $250,000,000 Canadian-denominated unsecured term credit facility (approximately ~~$177,054,000~~$183,621,000 based on the Canadian/U.S. Dollar exchange rate on ~~March 31,~~June 30, 2020). The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.9% ~~(2.49%~~(1.42% at ~~March 31,~~June 30, 2020).

⁽⁵⁾⁽⁶⁾ Includes a $500,000,000 unsecured term credit facility. The loan matures on July 19, 2023 and bears interest at LIBOR plus 0.9% ~~(1.65%~~(1.09% at ~~March 31,~~June 30, 2020).

⁽⁶⁾⁽⁷⁾ Includes a $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 (approximately ~~$212,465,000~~$220,345,000 based on the Canadian/U.S. Dollar exchange rate on ~~March 31,~~June 30, 2020).

⁽⁷⁾⁽⁸⁾ Includes a £550,000,000 4.80% senior unsecured notes due 2028 (approximately ~~$684,804,000~~$680,295,000 based on the Sterling/U.S. Dollar exchange rate in effect on ~~March 31,~~June 30, 2020).

⁽⁸⁾⁽⁹⁾ Includes a ~~£500,000,000~~$500,000,000 4.50% senior unsecured notes due 2034 (approximately ~~$622,550,000~~$618,450,000 based on the Sterling/U.S. Dollar exchange rate in effect on ~~March 31,~~June 30, 2020).

On April 1, 2020, we closed on a $1,000,000,000 unsecured term credit facility that matures on April 1, 2022. The term loan carries a 60-day delayed draw and bears interest at a rate of LIBOR plus 1.20%.

The following is a summary of our senior unsecured notes principal activity during the periods presented (dollars in thousands):


	Six Months Ended
	June 30, 2020					June 30, 2019
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	10,427,562	4.03%	$	9,699,984	4.48%
Debt issued	1,600,000		1.89%	2,050,000		3.58%
Debt extinguished	—		—%	(1,050,000)		4.98%

Foreign currency	(114,851)		4.30%	11,572		3.52%
Ending balance	$	11,912,711	3.65%	$	10,711,556	4.24%

Three Months Ended
March 31, 2020 March 31, 2019
Weighted Avg. Weighted Avg.
Amount Interest Rate Amount Interest Rate
Beginning balance $ 10,427,562
4.03% $ 9,699,984
4.48%
Debt issued —
—% 1,050,000
3.89%
Debt extinguished —
—% (1,050,000 ) 4.98%
Foreign currency (120,689 ) 4.15% 37,553
4.33%
Ending balance $ 10,306,873
3.97% $ 9,737,537
4.35%

In April, we closed on our previously announced $1.0 billion two-year unsecured term loan due April 2022. The term loan bears interest at a rate of 1-month LIBOR + 1.20%, based on our credit rating. On June 30, 2020, we completed the issuance of $600 million senior unsecured notes bearing interest at 2.75% with a maturity date of January 2031. On July 1, 2020 net proceeds were used to extinguish $160,872,000 of our 3.75% senior unsecured notes due March 2023 and $265,376,000 of our 3.95% senior unsecured notes due September 2023. We recognized a loss on extinguishment of $31,940,000 in July in conjunction with the transaction. Additionally, on July 2, 2020 we repaid $140,000,000 on our unsecured term loan.


	Six Months Ended
	June 30, 2020					June 30, 2019
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	2,993,342	3.63%	$	2,485,711	3.90%

Debt issued	44,921		2.58%	295,969		3.52%
Debt assumed	—		—%	42,000		4.62%
Debt extinguished	(314,631)		2.94%	(151,473)		4.42%


Principal payments	(30,709)		3.55%	(27,227)		3.74%
Foreign currency	(64,934)		3.13%	45,002		3.37%
Ending balance	$	2,627,989	3.09%	$	2,689,982	3.84%

Three Months Ended
March 31, 2020 March 31, 2019
Weighted Avg. Weighted Avg.
Amount Interest Rate Amount Interest Rate
Beginning balance $ 2,993,342
3.63% $ 2,485,711
3.90%
Debt issued 44,921
2.58% 247,163
3.68%
Debt assumed —
—% 42,000
4.62%
Debt extinguished (16,040 ) 4.51% (114,570 ) 4.96%
Principal payments (15,526 ) 3.78% (13,543 ) 3.85%
Foreign currency (102,059 ) 3.27% 26,197
3.33%
Ending balance $ 2,904,638
3.63% $ 2,672,958
3.84%

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of ~~March 31,~~June 30, 2020, we were in compliance with all of the covenants under our debt agreements.

12. Derivative Instruments

We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to our capital structure. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contracts, interest rate swaps, interest rate locks and debt issued in foreign currencies to offset a portion of these risks.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

For instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is deferred as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings.

Cash Flow Hedges of Interest Rate Risk

We enter into interest rate swaps in order to maintain a capital structure containing targeted amounts of fixed and floating-rate debt and manage interest rate risk. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

a counterparty in exchange for our fixed-rate payments. These interest rate swap agreements were used to hedge the variable cash flows associated with variable-rate debt.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to the Consolidated Statements of Comprehensive Income.

Foreign Currency Forward Contracts and Cross Currency Swap Contracts Designated as Net Investment Hedges

We use foreign currency forward and cross currency forward swap contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to U.S. Dollar of the instrument is recorded as a cumulative translation adjustment component of OCI.

During the six months ended June 30, 2020 and 2019, we settled certain net investment hedges generating cash proceeds of $3,485,000 and $6,716,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.

Derivative Contracts Undesignated

We use foreign currency exchange contracts to manage existing exposures to foreign currency exchange risk. Gains and losses resulting from the changes in fair value of these instruments are recorded in interest expense on the Consolidated Statements of Comprehensive Income and are substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures. In addition, we have several interest rate cap contracts related to variable rate secured debt agreements. Gains and losses resulting from the changes in fair values of these instruments are also recorded in interest expense.

The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):

March 31, 2020 December 31, 2019
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars $ 700,000
$ 725,000
Denominated in Pounds Sterling £ 1,340,708
£ 1,340,708

Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars $ 250,000
$ 250,000
Denominated in Pounds Sterling £ 1,050,000
£ 1,050,000

Interest rate swaps designated as cash flow hedges:
Denominated in U.S Dollars ⁽¹⁾
$ 1,188,250
$ 1,188,250

Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars $ 405,819
$ 405,819
Forward sales contracts denominated in Canadian Dollars $ 80,000
$ —
Forward purchase contracts denominated in Pounds Sterling £ (125,000 ) £ (125,000 )
Forward sales contracts denominated in Pounds Sterling £ 125,000
£ 125,000

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	June 30, 2020		December 31, 2019
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	650,000	$	725,000
Denominated in Pounds Sterling	£	1,340,708	£	1,340,708

Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000	$	250,000
Denominated in Pounds Sterling	£	1,050,000	£	1,050,000

Interest rate swaps designated as cash flow hedges:
Denominated in U.S Dollars ⁽¹⁾	$	1,188,250	$	1,188,250

Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars	$	112,726	$	405,819

Forward sales contracts denominated in Canadian Dollars	$	80,000	$	—
Forward purchase contracts denominated in Pounds Sterling	£	—	£	(125,000)
Forward sales contracts denominated in Pounds Sterling	£	—	£	125,000

⁽¹⁾ At ~~March 31,~~June 30, 2020 the maximum maturity date was July 15, 2021.

The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):

Three Months Ended March 31,
Description Location 2020 2019
Gain (loss) on derivative instruments designated as hedges recognized in income Interest expense $ 6,644
$ 5,333
Gain (loss) on derivative instruments not designated as hedges recognized in income Interest expense $ (95 ) $ (1,538 )
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI OCI $ 259,112
$ (87,682 )

~~WELLTOWER INC.~~


		Three Months Ended June 30,						Six Months Ended June 30,
Description	Location	2020		2019		2020		2019
Gain (loss) on derivative instruments designated as hedges recognized in income	Interest expense	$	4,106	$	7,134	$	10,751	$	12,467
Gain (loss) on derivative instruments not designated as hedges recognized in income	Interest expense	$	(1,953)	$	(1,128)	$	(2,048)	$	(2,666)
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI	OCI	$	(27,171)	$	100,407	$	231,941	$	12,725

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

13. Commitments and Contingencies

At ~~March 31,~~June 30, 2020, we had 128 outstanding letter of credit obligations totaling ~~$42,219,000~~$37,014,000 and expiring between 2020 and 2024. At ~~March 31,~~June 30, 2020, we had outstanding construction in progress of ~~$431,497,000~~$411,700,000 and were committed to providing additional funds of approximately ~~$373,422,000~~$332,074,000 to complete construction. Additionally, at ~~March 31,~~June 30, 2020, we had outstanding investments classified as in substance real estate of ~~$210,994,000~~$250,215,000 and were committed to provide additional funds of ~~$251,495,000~~$212,306,000 (see Note 8 for additional information). Purchase obligations at ~~March 31,~~June 30, 2020 also include ~~$20,764,000~~$19,442,000 of contingent purchase obligations to fund capital improvements. Rents due from the tenant are increased to reflect the additional investment in the property.


	June 30, 2020	December 31, 2019
Preferred Stock:
Authorized shares	50,000,000	50,000,000
Issued shares	—	—
Outstanding shares	—	—

Common Stock, $1.00 par value:
Authorized shares	700,000,000	700,000,000
Issued shares	418,869,381	411,550,857
Outstanding shares	417,302,448	410,256,615

March 31, 2020 December 31, 2019
Preferred Stock:
Authorized shares 50,000,000
50,000,000
Issued shares —
—
Outstanding shares —
—

Common Stock, $1.00 par value:
Authorized shares 700,000,000
700,000,000
Issued shares 418,781,215
411,550,857
Outstanding shares 417,390,540
410,256,615

Preferred Stock The following is a summary of our preferred stock activity during the periods indicated:

Three Months Ended
March 31, 2020 March 31, 2019
Weighted Avg. Weighted Avg.
Shares Dividend Rate Shares Dividend Rate
Beginning balance —
—% 14,369,965
6.50%
Shares converted —
—% (14,369,965 ) 6.50%
Ending balance —
—% —
—%

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Six Months Ended
	June 30, 2020			June 30, 2019
		Weighted Avg.		Weighted Avg.
	Shares	Dividend Rate	Shares	Dividend Rate
Beginning balance	—	—%	14,369,965	6.50%

Shares converted	—	—%	(14,369,965)	6.50%
Ending balance	—	—%	—	—%

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, we converted all of the outstanding Series I Preferred Stock. Each share was converted into 0.8857 shares of common stock.

Common StockIn February 2019, we entered into ~~a separate~~an amended and restated equity distribution agreement whereby we can offer and sell up to $1,500,000,000 aggregate amount of our common stock ("Equity Shelf Program"). The Equity Shelf Program also allows us to enter into forward sale agreements. During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we physically settled all of our outstanding forward sales agreements for cash proceeds of $576,196,000. As of ~~March 31,~~June 30, 2020, we ~~had~~had $499,341,000 of remaining capacity under the Equity Shelf Program.

On May 1, 2020, our Board of Directors authorized a share repurchase program whereby we may repurchase up to $1 billion of common stock through December 31, 2021 (the "Repurchase Program"). Under this authorization, we are not required to purchase shares but may choose to do so in the open market or through private transactions at times and amounts based on our evaluation of market conditions and other factors. We expect to finance any share repurchases under the Repurchase Program using available cash and may use proceeds from borrowings or debt offerings. During the six months ended June 30, 2020, we repurchased 201,947 shares at an average price of $37.89 per share.

The following is a summary of our common stock issuances during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 (dollars in thousands, except shares and average price amounts):

Shares Issued Average Price Gross Proceeds Net Proceeds
2019 Dividend reinvestment plan issuances 4,148,667
$ 75.04
$ 311,301
$ 307,821
2019 Option exercises 2,505
53.89
135
135
2019 Equity shelf program issuances 3,060,865
74.22
227,180
225,587
2019 Preferred stock conversions 12,712,452
—
—
2019 Stock incentive plans, net of forfeitures 140,940
—
—
2019 Totals 20,065,429
$ 538,616
$ 533,543

2020 Dividend reinvestment plan issuances 175,129
$ 84.54
$ 14,805
$ 14,805
2020 Equity shelf program issuances 6,799,978
86.48
588,072
576,196
2020 Stock incentive plans, net of forfeitures 158,818
—
—
2020 Totals 7,133,925
$ 602,877
$ 591,001

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~


	Shares Issued	Average Price		Gross Proceeds		Net Proceeds
2019 Dividend reinvestment plan issuances	4,304,712	$	75.20	$	323,724	$	320,243
2019 Option exercises	10,736	51.32		551		551
2019 Equity shelf program issuances	4,384,045	74.97		328,665		326,362
2019 Preferred stock conversions	12,712,452			—		—

2019 Stock incentive plans, net of forfeitures	167,565			—		—
2019 Totals	21,579,510			$	652,940	$	647,156

2020 Dividend reinvestment plan issuances	264,153	$	72.33	$	19,105	$	19,105
2020 Option exercises	251	47.81		12		12
2020 Equity shelf program issuances	6,799,978	86.48		588,072		576,196

2020 Stock incentive plans, net of forfeitures	183,398			—		—
2020 Totals	7,247,780			$	607,189	$	595,313

Dividends The ~~increase~~decrease in dividends is attributable to ~~increases in our common shares outstanding.~~the declaration of a reduced cash dividend beginning with the quarter ending March 31, 2020. The following is a summary of our dividend payments (in thousands, except per share amounts):


	Six Months Ended
	June 30, 2020						June 30, 2019
	Per Share		Amount		Per Share		Amount
Common stock	$	1.48	$	610,847	$	1.74	$	698,437

Three Months Ended
March 31, 2020 March 31, 2019
Per Share Amount Per Share Amount
Common stock $ 0.8700
$ 356,001
$ 0.8700
$ 344,760

Accumulated Other Comprehensive Income The following is a summary of accumulated other comprehensive income (loss) for the periods presented (in thousands):


	June 30, 2020		December 31, 2019
Foreign currency translation	$	(956,454)	$	(719,814)
Derivative and financial instruments designated as hedges	839,598		607,657

Total accumulated other comprehensive income (loss)	$	(116,856)	$	(112,157)

March 31, 2020 December 31, 2019
Foreign currency translation $ (962,982 ) $ (719,814 )
Derivative and financial instruments designated as hedges 866,769
607,657
Total accumulated other comprehensive loss $ (96,213 ) $ (112,157 )

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15. Stock Incentive Plans

Our 2016 Long-Term Incentive Plan (“2016 Plan”) authorizes up to 10,000,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Our non-employee directors, officers and key employees are eligible to participate in the 2016 Plan. The 2016 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock, deferred stock units, performance units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three to five years. Options expire ten years from the date of grant. Stock-based compensation expense totaled ~~$7,083,000~~$7,290,000 and ~~$7,529,000~~$14,373,000 for the three and six months ended ~~March 31,~~June 30, 2020, respectfully, and ~~2019, respectfully.~~$7,662,000 and $15,192,000 for the same periods in 2019.

16. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Three Months Ended March 31,
2020 2019
Numerator for basic earnings per share - net income (loss) attributable to common stockholders $ 310,284
$ 280,470

Adjustment for net income (loss) attributable to OP units (1,388 ) 46
Numerator for diluted earnings per share $ 308,896
$ 280,516

Denominator for basic earnings per share - weighted average shares 410,306
391,474
Effect of dilutive securities:
Employee stock options —
1
Non-vested restricted shares 702
868
Redeemable shares 1,396
1,096
Employee stock purchase program 16
13
Dilutive potential common shares 2,114
1,978
Denominator for diluted earnings per share - adjusted weighted average shares 412,420
393,452

Basic earnings per share $ 0.76
$ 0.72
Diluted earnings per share $ 0.75
$ 0.71


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic earnings per share - net income (loss) attributable to common stockholders	$	179,246	$	137,762	$	489,530	$	418,232


Adjustment for net income (loss) attributable to OP units	(1,366)		35		(2,754)		88
Numerator for diluted earnings per share	$	177,880	$	137,797	$	486,776	$	418,320

Denominator for basic earnings per share - weighted average shares	417,084		404,607		413,696		398,073
Effect of dilutive securities:
Employee stock options	—		—		—		1
Non-vested restricted shares	619		955		661		911
Redeemable OP units	1,396		1,096		1,396		1,096
Employee stock purchase program	22		15		22		15
Dilutive potential common shares	2,037		2,066		2,079		2,023
Denominator for diluted earnings per share - adjusted weighted average shares	419,121		406,673		415,775		400,096

Basic earnings per share	$	0.43	$	0.34	$	1.18	$	1.05
Diluted earnings per share	$	0.42	$	0.34	$	1.17	$	1.05

17. Disclosure about Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy exists for disclosures of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for additional information. The three levels are defined below:

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Mortgage Loans, Other Real Estate Loans and Non-real Estate Loans Receivable — The fair value of mortgage loans, other real estate loans and non-real estate loans receivable is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Cash and Cash Equivalents and Restricted Cash — The carrying amount approximates fair value.

Equity Securities — Equity securities are recorded at their fair value based on Level 1 publicly available trading prices.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Borrowings Under Primary Unsecured Credit Facility and Commercial Paper Program — The carrying amount of the primary unsecured credit facility and commercial paper program approximates fair value because the borrowings are interest rate adjustable.

Senior Unsecured Notes — The fair value of the senior unsecured notes payable was estimated based on Level 1 publicly available trading prices. The carrying amount of the variable rate senior unsecured notes approximates fair value because they are interest rate adjustable.

Secured Debt — The fair value of fixed rate secured debt is estimated using Level 2 inputs by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities. The carrying amount of variable rate secured debt approximates fair value because the borrowings are interest rate adjustable.

Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps — Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2).

Redeemable OP Unitholder Interests — Our redeemable OP unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs unless the fair value is below the initial amount in which case the redeemable OP unitholder interests are recorded at the initial amount adjusted for ~~distribution~~distributions to the unitholders and income or loss attributable to the unitholders. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.

The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):

March 31, 2020 December 31, 2019
Carrying Amount Fair Value Carrying Amount Fair Value
Financial assets:
Mortgage loans receivable $ 96,480
$ 96,702
$ 145,686
$ 150,217
Other real estate loans receivable 124,748
123,101
124,696
128,512
Equity securities 8,034
8,034
15,685
15,685
Cash and cash equivalents 303,423
303,423
284,917
284,917
Restricted cash 89,643
89,643
100,849
100,849
Non-real estate loans receivable 373,179
418,221
336,854
379,239
Foreign currency forward contracts, interest rate swaps and cross currency swaps 210,837
210,837
18,554
18,554

Financial liabilities:
Borrowings under unsecured credit facility and commercial paper program $ 844,985
$ 844,985
$ 1,587,597
$ 1,587,597
Senior unsecured notes 10,218,853
10,565,256
10,336,513
11,400,571
Secured debt 2,901,232
3,032,376
2,990,962
3,041,893
Foreign currency forward contracts, interest rate swaps and cross currency swaps 87,557
87,557
53,601
53,601

Redeemable OP unitholder interests $ 94,048
$ 81,717
$ 121,440
$ 121,440

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~


	June 30, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Mortgage loans receivable	$	100,782	$	107,407	$	145,686	$	150,217
Other real estate loans receivable	124,089		124,291		124,696		128,512
Equity securities	6,600		6,600		15,685		15,685
Cash and cash equivalents	1,678,770		1,678,770		284,917		284,917
Restricted cash	147,473		147,473		100,849		100,849
Non-real estate loans receivable	373,835		419,325		336,854		379,239
Foreign currency forward contracts, interest rate swaps and cross currency swaps	165,968		165,968		18,554		18,554

Financial liabilities:
Borrowings under unsecured credit facility and commercial paper program	$	—	$	—	$	1,587,597	$	1,587,597
Senior unsecured notes	11,815,972		12,890,274		10,336,513		11,400,571
Secured debt	2,619,678		2,668,133		2,990,962		3,041,893
Foreign currency forward contracts, interest rate swaps and cross currency swaps	64,077		64,077		53,601		53,601

Redeemable OP unitholder interests	$	97,179	$	92,373	$	121,440	$	121,440

Items Measured at Fair Value on a Recurring Basis

The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair value on a recurring basis. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following summarizes items measured at fair value on a recurring basis (in thousands):


	Fair Value Measurements as of June 30, 2020
	Total		Level 1		Level 2		Level 3
Equity securities	$	6,600	$	6,600	$	—	$	—
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) ⁽¹⁾	101,891		—		101,891		—

Totals	$	108,491	$	6,600	$	101,891	$	—

Fair Value Measurements as of March 31, 2020
Total Level 1 Level 2 Level 3
Equity securities $ 8,034
$ 8,034
$ —
$ —
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) ⁽¹⁾
123,280
—
123,280
—
Totals $ 131,314
$ 8,034
$ 123,280
$ —

⁽¹⁾Please see Note 12 for additional information.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis that are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired or assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 7 for impairments of loans receivable) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally resides within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in asset acquisitions using current interest rates at which similar borrowings could be obtained on the transaction date.

18. Segment Reporting

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our 3 operating segments: Seniors Housing Operating, Triple-net and Outpatient Medical. Our Seniors Housing Operating properties include seniors apartments, assisted living, independent living/continuing care retirement communities, independent supportive living communities (Canada), care homes with and without nursing (U.K.) and combinations thereof that are owned and/or operated through RIDEA structures (see Note 19). Our Triple-net properties include the property types described above as well as long-term/post-acute care facilities. Under the Triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our Outpatient Medical properties are typically leased to multiple tenants and generally require a certain level of property management by us.

We evaluate performance based upon consolidated NOI of each segment. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

Non-segment revenue consists mainly of interest income on certain non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining NOI.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments. There are no intersegment sales or transfers.

2123

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Summary information for the reportable segments (which excludes unconsolidated entities) is as follows (in thousands):


Three Months Ended June 30, 2019:	Seniors Housing Operating		Triple-net		Outpatient Medical		Non-segment / Corporate		Total
Resident fees and services	$	914,085	$	—	$	—	$	—	$	914,085
Rental income	—		222,362		163,224		—		385,586
Interest income	—		17,118		238		—		17,356
Other income	1,444		1,278		(97)		454		3,079
Total revenues	915,529		240,758		163,365		454		1,320,106

Property operating expenses	637,317		12,823		50,987		—		701,127
Consolidated net operating income	278,212		227,935		112,378		454		618,979

Depreciation and amortization	136,551		56,056		55,445		—		248,052
Interest expense	17,572		3,225		3,386		117,153		141,336
General and administrative expenses	—		—		—		33,741		33,741
Loss (gain) on derivatives and financial instruments, net	—		1,913		—		—		1,913


Impairment of assets	—		(940)		10,879		—		9,939
Other expenses	11,857		5,560		(4)		4,215		21,628
Income (loss) from continuing operations before income taxes and other items	112,232		162,121		42,672		(154,655)		162,370
Income tax (expense) benefit	—		—		—		(1,599)		(1,599)
Income (loss) from unconsolidated entities	(17,453)		6,578		1,826		—		(9,049)
Gain (loss) on real estate dispositions, net	(550)		(1,130)		(2)		—		(1,682)
Income (loss) from continuing operations	94,229		167,569		44,496		(156,254)		150,040
Net income (loss)	$	94,229	$	167,569	$	44,496	$	(156,254)	$	150,040

Three Months Ended March 31, 2020:
Seniors Housing Operating
Triple-net Outpatient Medical
Non-segment / Corporate
Total
Resident fees and services
$ 849,972

$ —
$ —

$ —

$ 849,972
Rental income
—

191,385
⁽¹⁾
198,575

—

389,960
Interest income
104

14,671
466

—

15,241
Other income
1,052

1,673
288

416

3,429
Total revenues
851,128
207,729
199,329
416

1,258,602

Property operating expenses
607,871

13,302
60,608

—

681,781
Consolidated net operating income
243,257
194,427
138,721
416

576,821

Depreciation and amortization
146,774

57,694
70,333

—

274,801
Interest expense
16,434

2,852
4,808

117,913

142,007
General and administrative expenses
—

—
—

35,481

35,481
Loss (gain) on derivatives and financial instruments, net
—

7,651
—

—

7,651
Provision for loan losses —
7,072
—
—
7,072
Impairment of assets
3,495

24,332
—

—

27,827
Other expenses
2,989

513
1,007

1,783

6,292
Income (loss) from continuing operations before income taxes and other items
73,565
94,313
62,573
(154,761 )
75,690
Income tax (expense) benefit
—
—
—
(5,442 )
(5,442 )
Income (loss) from unconsolidated entities
(11,024 )
5,796
1,536

—

(3,692 )
Gain (loss) on real estate dispositions, net
(149 )
49,637
213,336

—

262,824
Income (loss) from continuing operations
62,392
149,746
277,445
(160,203 )
329,380
Net income (loss)
$ 62,392
$ 149,746
$ 277,445
$ (160,203 )
$ 329,380

Total assets
$ 15,691,090

$ 9,200,458
$ 7,722,679

$ 308,801

$ 32,923,028

⁽¹⁾ ~~During the three months ended March 31, 2020, we wrote off straight-line rent receivables of $32,268,000 recorded in rental income in conjunction with an amended lease.~~

Three Months Ended March 31, 2019: Seniors Housing Operating Triple-net Outpatient Medical Non-segment / Corporate Total
Resident fees and services $ 868,285
$ —
$ —
$ —
$ 868,285
Rental income —
232,032
149,052
—
381,084
Interest income —
14,946
173
—
15,119
Other income 4,101
1,263
236
2,157
7,757
Total revenues 872,386
248,241
149,461
2,157
1,272,245

Property operating expenses 607,686
14,955
48,166
—
670,807
Consolidated net operating income 264,700
233,286
101,295
2,157
601,438

Depreciation and amortization 131,575
61,348
51,009
—
243,932
Interest expense 18,251
3,440
3,348
120,193
145,232
General and administrative expenses —
—
—
35,282
35,282
Loss (gain) on derivatives and financial instruments, net —
(2,487 ) —
—
(2,487 )
Loss (gain) on extinguishment of debt, net —
—
—
15,719
15,719
Provision for loan losses —
18,690
—
—
18,690
Other expenses 2,946
3,029

754
2,027
8,756
Income (loss) from continuing operations before income taxes and other items 111,928
149,266
46,184
(171,064 ) 136,314
Income tax (expense) benefit —
—
—
(2,222 ) (2,222 )
Income (loss) from unconsolidated entities (16,580 ) 5,658
1,723
—
(9,199 )
Gain (loss) on real estate dispositions, net (160 ) 167,574
(5 ) —
167,409
Income (loss) from continuing operations 95,188
322,498
47,902
(173,286 ) 292,302
Net income (loss) $ 95,188
$ 322,498
$ 47,902
$ (173,286 ) $ 292,302

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Six Months Ended June 30, 2019	Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate		Total
Resident fees and services	$	1,782,370		$	—		$	—		$	—	$	1,782,370
Rental income	—			454,394			312,276			—		766,670
Interest income	—			32,064			411			—		32,475
Other income	5,545			2,541			139			2,611		10,836
Total revenues	1,787,915			488,999			312,826			2,611		2,592,351

Property operating expenses	1,245,003			27,778			99,153			—		1,371,934
Consolidated net operating income	542,912			461,221			213,673			2,611		1,220,417

Depreciation and amortization	268,126			117,404			106,454			—		491,984
Interest expense	35,823			6,665			6,734			237,346		286,568
General and administrative expenses	—			—			—			69,023		69,023
Loss (gain) on derivatives and financial instruments, net	—			(574)			—			—		(574)
Loss (gain) on extinguishment of debt, net	—			—			—			15,719		15,719
Provision for loan losses	—		18.69	18,690		—	—		18.69	—		18,690
Impairment of assets	—			(940)			10,879			—		9,939
Other expenses	14,803			8,589			750			6,242		30,384
Income (loss) from continuing operations before income taxes and other items	224,160			311,387			88,856			(325,719)		298,684
Income tax (expense) benefit	—			—			—			(3,821)		(3,821)
Income (loss) from unconsolidated entities	(34,033)			12,236			3,549			—		(18,248)
Gain (loss) on real estate dispositions, net	(710)			166,444			(7)			—		165,727
Income (loss) from continuing operations	189,417			490,067			92,398			(329,540)		442,342
Net income (loss)	$	189,417		$	490,067		$	92,398		$	(329,540)	$	442,342

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Our portfolio of properties and other investments are located in the United States, the United Kingdom and Canada. Revenues and assets are attributed to the country in which the property is physically located. The following is a summary of geographic information for the periods presented (dollars in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Revenues:
Amount⁽¹⁾
% Amount %
United States $ 1,027,781
81.6 % $ 1,043,667
82.1 %
United Kingdom 117,882
9.4 % 112,418
8.8 %
Canada 112,939
9.0 % 116,160
9.1 %
Total $ 1,258,602
100.0 % $ 1,272,245
100.0 %

As of
March 31, 2020 December 31, 2019
Assets: Amount % Amount %
United States $ 27,431,135
83.3 % $ 27,513,911
82.4 %
United Kingdom 3,216,727
9.8 % 3,405,388
10.2 %
Canada 2,275,166
6.9 % 2,461,452
7.4 %
Total $ 32,923,028
100.0 % $ 33,380,751
100.0 %


	Three Months Ended														Six Months Ended
	June 30, 2020						June 30, 2019						June 30, 2020				June 30, 2019
Revenues:	Amount⁽¹⁾		%		Amount		%		Amount⁽¹⁾		%		Amount		%
United States	$	973,772	81.9	%	$	1,092,376	82.8	%	$	2,001,553	81.8	%	$	2,136,042	82.4	%
United Kingdom	109,437		9.2	%	112,647		8.5	%	227,319		9.3	%	225,065		8.7	%
Canada	105,266		8.9	%	115,083		8.7	%	218,205		8.9	%	231,244		8.9	%
Total	$	1,188,475	100.0	%	$	1,320,106	100.0	%	$	2,447,077	100.0	%	$	2,592,351	100.0	%

	As of
	June 30, 2020						December 31, 2019
Assets:	Amount		%		Amount		%
United States	$	27,655,745	83.4	%	$	27,513,911	82.4	%
United Kingdom	3,175,033		9.6	%	3,405,388		10.2	%
Canada	2,331,874		7.0	%	2,461,452		7.4	%
Total	$	33,162,652	100.0	%	$	33,380,751	100.0	%

⁽¹⁾The United States, United Kingdom and Canada represent 77%, 10% and 13%, respectively, of our resident fees and services revenue stream for the three and six months ended ~~March 31,~~June 30, 2020.

We elected to be taxed as a REIT commencing with our first taxable year. To qualify as a REIT for federal income tax purposes, at least 90% of taxable income (excluding 100% of net capital gains) must be distributed to stockholders. REITs that do not distribute a certain amount of taxable income in the current year are also subject to a 4% federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, basis differences in acquisitions, recording of impairments, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, a REIT may lease “qualified health care properties” on an arm’s-length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such TRS by a person who qualifies as an “eligible independent contractor”. Generally, the rent received from the TRS will meet the related party rent exception and will be treated as “rents from real property”. A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients. We have entered into various joint ventures that were structured under RIDEA. Resident level rents and related operating expenses for these facilities are reported in the unaudited consolidated financial statements and are subject to federal and state income taxes as the operations of such facilities are included in TRS entities. Certain net operating loss carryforwards could be utilized to offset taxable income in future years.

Income taxes reflected in the financial statements primarily represents U.S. federal, state and local income taxes as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The provision for income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, was primarily due to operating income or losses, offset by certain discrete items at our TRS entities. In 2014, we established certain wholly-owned direct and indirect subsidiaries in Luxembourg and Jersey and transferred interests in certain foreign investments into this holding company structure. The structure includes a property holding company that is tax resident in the United Kingdom. No material adverse current tax consequences in Luxembourg, Jersey or the United Kingdom resulted from the creation of this holding company structure and most of the subsidiary entities in the structure are treated as disregarded entities of the company for U.S. federal income tax purposes. Subsequent to 2014 we transferred certain subsidiaries to the United Kingdom, while some wholly-owned direct and indirect subsidiaries remain in Luxembourg and Jersey. The company reflects current and deferred tax liabilities for any such withholding taxes incurred from this holding company structure in its consolidated financial statements. Generally, given current statutes of limitations, we are subject to audit by the foreign, federal, state and local taxing authorities under applicable local laws.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On March 27, 2020, the President of the United States signed the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act, among its economic stimulus provisions, includes a number of tax provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carrybacks, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Certain of these provisions may impact the provision for taxes in our consolidated financial statements, including in particular the provision allowing for the carryback of net operating losses which would be applicable to our TRSs. We have made a reasonable estimate of the tax impact to us of the CARES Act in our consolidated financial statements, and while we do not believe that there will be further material impacts to the consolidated financial statements related to the CARES Act tax provisions, we will continue to evaluate the impact of the CARES Act and any guidance provided by the U.S. Treasury and the IRS on our consolidated financial statements. It is possible our estimates could differ materially from the actual tax impact to us of the CARES Act.

We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be VIEs. We have concluded that we are the primary beneficiary of these VIEs based on a combination of operational control of the joint venture and the rights to receive residual returns or the obligation to absorb losses arising from the joint ventures. Except for capital contributions associated with the initial joint venture formations, the joint ventures have been and are expected to be funded from the ongoing operations of the underlying properties. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands):


	June 30, 2020		December 31, 2019
Assets:
Net real estate investments	$	457,107	$	960,093
Cash and cash equivalents	30,438		27,522
Receivables and other assets	12,596		14,586
Total assets ⁽¹⁾	$	500,141	$	1,002,201

Liabilities and equity:
Secured debt	$	166,567	$	460,117
Lease liabilities	1,326		1,326
Accrued expenses and other liabilities	14,810		22,215
Total equity	317,438		518,543
Total liabilities and equity	$	500,141	$	1,002,201

March 31, 2020 December 31, 2019
Assets:
Net real estate investments $ 956,254
$ 960,093
Cash and cash equivalents 23,539
27,522
Receivables and other assets 16,461
14,586
Total assets ⁽¹⁾
$ 996,254
$ 1,002,201

Liabilities and equity:
Secured debt $ 458,191
$ 460,117
Lease liabilities 1,326
1,326
Accrued expenses and other liabilities 20,569
22,215
Total equity 516,168
518,543
Total liabilities and equity $ 996,254
$ 1,002,201

⁽¹⁾ Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


		EXECUTIVE SUMMARY

		Company Overview	29
		Business Strategy	30
		Key Transactions	31
		Key Performance Indicators, Trends and Uncertainties	32
		Corporate Governance	34

		~~EXECUTIVE SUMMARY~~

~~Company Overview~~	26
~~Business Strategy~~	26
~~Key Transactions~~	28
~~Key Performance Indicators, Trends and Uncertainties~~	28
~~Corporate Governance~~	31

LIQUIDITY AND CAPITAL RESOURCES

		Sources and Uses of Cash	3134
		Off-Balance Sheet Arrangements	3235
		Contractual Obligations	3235
		Capital Structure	3236

		RESULTS OF OPERATIONS

		Summary	3336
		Seniors Housing Operating	3336
		Triple-net	3538
		Outpatient Medical	3740
		Non-Segment/Corporate	3942

		OTHER

		Non-GAAP Financial Measures	4043
		Critical Accounting Policies	4550
		Cautionary Statement Regarding Forward-Looking Statements	4651

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based primarily on the unaudited consolidated financial statements of Welltower Inc. for the periods presented and should be read together with the notes thereto contained in this Quarterly Report on Form 10-Q. Other important factors are identified in our Annual Report on Form 10-K for the year ended December 31, 2019, including factors identified under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References herein to “we,” “us,” “our,” or the “Company” refer to Welltower Inc. and its subsidiaries unless specifically noted otherwise.

Welltower Inc. (NYSE:WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (U.S.), Canada and the United Kingdom (U.K.), consisting of seniors housing and post-acute communities and outpatient medical properties.

The following table summarizes our consolidated portfolio for the three months ended ~~March 31,~~June 30, 2020 (dollars in thousands):

Percentage of Number of
Type of Property
NOI ⁽¹⁾
NOI Properties
Seniors Housing Operating $ 243,257
42.2 % 539
Triple-net 194,427
33.7 % 653
Outpatient Medical 138,721
24.1 % 371
Totals $ 576,405
100.0 % 1,563

⁽¹⁾ Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.


			Percentage of		Number of
Type of Property	NOI ⁽¹⁾		NOI		Properties
Seniors Housing Operating	$	178,137	33.8	%	526
Triple-net	220,056		41.7	%	653
Outpatient Medical	129,143		24.5	%	347
Totals	$	527,336	100.0	%	1,526


⁽¹⁾ Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

Our Seniors Housing Operating revenues are dependent on occupancy. ~~Declines~~While admission bans were lifted across our portfolio during the second quarter and in July, move-out activity continued to outpace move-ins, resulting in occupancy losses throughout the period. Further occupancy losses are expected ~~due~~in the third quarter as move-out activity continues to ~~increases~~exceed move-ins, but to a lesser degree than experienced in ~~mortality rates and decreases in move-in rates as~~the pandemic has prevented prospective occupants and their families from visiting our facilities and limited the ability of new occupants to move into our facilities due to heightened move-in criteria and screening. Occupancy rates remained relatively steady through March 31, 2020 but trended downward in April 2020.second quarter.

We have incurred increased operational costs as a result of the introduction of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and supplies. ~~These increased~~We expect total Seniors Housing Operating expenses ~~are expected~~ to ~~continue through~~remain elevated during the pandemic and potentially beyond as these additional health and safety measures become standard practice.

Our Triple-net operators are experiencing similar ~~impacts on~~ occupancy declines and operating costs as described above with respect to our Seniors Housing Operating ~~properties which~~properties. However, long-term/post-acute care facilities are generally experiencing a higher degree of occupancy declines. These factors may continue to impact the ability of our Triple-net operators to make contractual rent payments to us in the future. Many of our Triple-net operators received funds under the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) and operators of long-term/post-acute care facilities have also received funds under the CARES Act Provider Relief Fund. Accordingly, collection of Triple-net rent due during the COVID-19 pandemic to date (from March to July) has been consistent with historical collection rates and no significant rent concessions or deferrals have been made.

Our Outpatient Medical tenants are experiencing temporary medical practice closures or decreases in revenue due to government imposed restrictions on elective medical procedures, stay at home orders or decisions by patients to delay treatments which may continue to adversely ~~effect~~affect their ability to make contractual rent payments. ~~Accordingly, our medical office building tenants' ability to pay rent may be impacted.~~ These factors have and may continue to cause operators or tenants to seek modifications of such obligations, resulting in reductions in revenue and increases in uncollectible receivables. We will evaluate each request on a case-by-case basis and determine if a form of rent relief is warranted following an examination of the tenant’s financial health, rent coverage, current operating situation and other factors.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in NOI and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.

Substantially all of our revenues are derived from operating lease rentals, resident fees and services and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our obligors/partners experience operating difficulties and become unable to generate sufficient cash to make payments or operating distributions to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division manages and monitors the outpatient medical portfolio with a comprehensive process including review of tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs and market conditions among other things. We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we generally aim to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.

In addition to our asset management and research efforts, we also aim to structure our relevant investments to mitigate payment risk. Operating leases and loans are normally credit enhanced by guarantees and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.

For the ~~three~~six months ended ~~March 31,~~June 30, 2020, resident fees and services and rental income represented ~~68%~~66% and ~~31%~~32%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

Our primary sources of cash include resident fees and services, rent and interest receipts, borrowings under our unsecured revolving credit facility and commercial paper program, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our unsecured revolving credit facility and commercial paper program, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from NOI and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under our unsecured revolving credit facility and commercial paper program, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

new investment requirements exceed our available cash on-hand, we expect to borrow under our unsecured revolving credit facility and commercial paper program. At ~~March 31,~~June 30, 2020, we ~~had $303,423,000~~had $1,678,770,000 of cash and cash equivalents, ~~$89,643,000~~$147,473,000 of restricted cash and ~~$2,155,000,000~~$3,000,000,000 of available borrowing capacity under our unsecured revolving credit facility.

CapitalThe ~~following~~following summarizes key capital transaction that occurred during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and subsequent events:

•During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we extinguished ~~$16,040,000~~$314,631,000 of secured debt at a blended average interest rate of ~~4.51%~~2.94%.

•During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we sold ~~2,039,000~~2,128,000 shares of common stock under our ATM and DRIP programs, via both cash settle and forward sale agreements, generating gross proceeds of approximately ~~$171,183,000.~~$175,484,000. The sale of these shares and settlement of previously outstanding forward sales resulted in gross proceeds of approximately ~~$602,877,000~~$607,177,000 which were used to reduce borrowings under our unsecured revolving credit facility.

On•In April, ~~1, 2020,~~ we closed on aour previously announced $1.0 billion two-year unsecured term loan. The term loan ~~carries a 60-day delayed draw and~~ bears interest at a rate of 1-month LIBOR + 1.20%, based on our credit rating.

•On June 30, 2020, we completed the issuance of $600 million senior unsecured notes bearing interest at 2.75% with a maturity date of January 2031. Net proceeds were used to fund tender offers for $426,000,000 of our 3.75% senior unsecured notes due 2023 and our 3.95% senior unsecured notes due 2023 which settled on July 1, 2020. The remaining proceeds were used to reduce borrowings under our term loan by $140 million.

Investments The following summarizes our property acquisitions and joint venture investments completed during the ~~three~~six months ended ~~March 31,~~June 30, 2020 (dollars in thousands):

Investment Amount ⁽¹⁾

Capitalization Rates ⁽²⁾

Book Amount ⁽³⁾

Investment Amount ⁽¹⁾

Capitalization Rates ⁽²⁾

Book Amount ⁽³⁾

Triple-net ⁽⁴⁾

⁽¹⁾ Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.

⁽²⁾ Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts.

⁽³⁾ Represents amounts recorded in net real estate investments including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our unaudited consolidated financial statements for additional information.

⁽⁴⁾ Represents the acquisition of a condo unit at a previously acquired property.

Dispositions The following summarizes property dispositions completed during the ~~three~~six months ended ~~March 31,~~June 30, 2020 (dollars in thousands):

Properties
Proceeds ⁽¹⁾

Capitalization Rates ⁽²⁾

Book Amount ⁽³⁾
Triple-net 5
$ 70,439
5.0 % $ 33,445
Outpatient Medical 31
637,770
5.4 % 495,003
Totals 36
$ 708,209
5.4 % $ 528,448

⁽¹⁾ Represents pro rata proceeds received upon disposition including any seller financing.
⁽²⁾ Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
⁽³⁾ Represents carrying value of net real estate assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


	Properties	Proceeds ⁽¹⁾		Capitalization Rates ⁽²⁾		Book Amount ⁽³⁾
Seniors Housing Operating	13	$	498,510	5.6	%	$	706,964
Triple-net	5	70,439		5.0	%	33,445
Outpatient Medical	55	1,088,250		5.6	%	808,992
Totals	73	$	1,657,199	5.5	%	$	1,549,401

⁽¹⁾ Represents pro rata proceeds received upon disposition including any seller financing.
⁽²⁾ Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
⁽³⁾ Represents carrying value of net real estate assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.

Dividends Our Board of Directors declared a cash dividend for the quarter ended ~~March 31,~~June 30, 2020 of $0.61 per share. On ~~May 28,~~August 27, 2020, we will pay our ~~196~~ 197^th consecutive quarterly cash dividend to stockholders of record on ~~May 19,~~August 18, 2020.

We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, credit strength and concentration risk. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Operating PerformanceWe believe that net income and net income attributable to common stockholders (“NICS”) per the Consolidated Statements of Comprehensive Income are the most appropriate earnings measures. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”) and consolidated net operating income (“NOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations. These earnings measures are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands):

Credit Strength We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and Internal Revenue Code section 1031 deposits. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliation of these measures. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:


	Three Months Ended
	June 30,	March 31,	December 31,	September 30,	June 30,	March 31,
	2020	2020	2019	2019	2019	2019

Net debt to book capitalization ratio	43%	44%	46%	45%	48%	43%
Net debt to undepreciated book capitalization ratio	35%	37%	39%	38%	41%	36%
Net debt to market capitalization ratio	36%	40%	30%	26%	30%	28%

Interest coverage ratio	4.29x	5.42x	4.64x	7.61x	3.74x	4.80x
Fixed charge coverage ratio	3.84x	4.88x	4.20x	6.96x	3.42x	4.38x

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2020 2019 2019 2019 2019

Net debt to book capitalization ratio 44% 46% 45% 48% 43%
Net debt to undepreciated book capitalization ratio 37% 39% 38% 41% 36%
Net debt to market capitalization ratio 40% 30% 26% 30% 28%

Interest coverage ratio 5.42x 4.64x 7.61x 3.74x 4.80x
Fixed charge coverage ratio 4.88x 4.20x 6.96x 3.42x 4.38x

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Concentration Risk We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns. Property mix measures the portion of our NOI that relates to our various property types. Relationship mix measures the portion of our NOI that relates to our current top five relationships. Geographic mix measures the portion of our NOI that relates to our current top five states (or international equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Property mix:⁽¹⁾

Relationship mix: ⁽¹⁾

Geographic mix:⁽¹⁾

⁽¹⁾ Excludes our share of investments in unconsolidated entities and non-segment/corporate NOI. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.

⁽²⁾ Revera owns a controlling interest in Sunrise Senior Living.

Lease Expirations The following table sets forth information regarding lease expirations for certain portions of our portfolio as of ~~March 31,~~June 30, 2020 (dollars in thousands):

Expiration Year ⁽¹⁾
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Thereafter
Triple-net:
Properties 8
7
11
1
4
48
76
18
15
15
430
Base rent ⁽²⁾
$ 3,098
$ 12,511
$ 10,442
$ 840
$ 11,262
$ 53,997
$ 103,210
$ 35,381
$ 22,324
$ 33,042
$ 484,385
% of base rent 0.4 % 1.6 % 1.4 % 0.1 % 1.5 % 7.0 % 13.4 % 4.6 % 2.9 % 4.3 % 62.8 %
Units/beds 618
1,453
1,182
1,185
692
3,033
6,078
2,350
1,633
1,429
44,716
% of Units/beds 1.0 % 2.3 % 1.8 % 1.8 % 1.1 % 4.7 % 9.4 % 3.7 % 2.5 % 2.2 % 69.5 %

Outpatient Medical:

Square feet 1,750,908
1,705,507
2,009,981
2,048,945
2,076,707
1,149,292
1,320,925
1,039,589
1,086,659
951,687
6,015,269
Base rent ⁽²⁾
$ 45,383
$ 50,113
$ 56,393
$ 55,851
$ 61,655
$ 31,499
$ 36,434
$ 26,554
$ 28,463
$ 25,480
$ 140,354
% of base rent 8.1 % 9.0 % 10.1 % 10.0 % 11.0 % 5.6 % 6.5 % 4.8 % 5.1 % 4.6 % 25.2 %
Leases 464
391
405
416
342
219
157
141
127
109
220
% of Leases 15.5 % 13.1 % 13.5 % 13.9 % 11.4 % 7.3 % 5.2 % 4.7 % 4.2 % 3.6 % 7.6 %

(1) Excludes investments in unconsolidated entities, developments, land parcels, loans receivable and sub-leases. Investments classified as held for sale are included in the current year.
(2) The most recent monthly cash base rent annualized. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles or other non-cash income.

Expiration Year ⁽¹⁾

⁽¹⁾ Excludes investments in unconsolidated entities, developments, land parcels, loans receivable and sub-leases. Investments classified as held for sale are included in the current year.

⁽²⁾ The most recent monthly cash base rent annualized. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles or other non-cash income.

We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in “Cautionary Statement Regarding Forward-Looking Statements” and other sections of this Quarterly Report on Form 10-Q. Management

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Maintaining investor confidence and trust is important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.welltower.com/investors/governance. The information on our website is not incorporated by reference in this Quarterly Report on Form 10-Q, and our web address is included as an inactive textual reference only.

Our primary sources of cash include resident fees and services, rent and interest receipts, borrowings under our unsecured revolving credit facility and commercial paper program, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

Three Months Ended Change
March 31, 2020 March 31, 2019 $ %
Cash, cash equivalents and restricted cash at beginning of period $ 385,766
$ 316,129
$ 69,637
22 %
Cash provided from (used in) operating activities 411,857
343,895
67,962
20 %
Cash provided from (used in) investing activities 149,748
197,268
(47,520 ) -24 %
Cash provided from (used in) financing activities (544,295 ) (452,205 ) (92,090 ) -20 %
Effect of foreign currency translation (10,010 ) 2,352
(12,362 ) -526 %
Cash, cash equivalents and restricted cash at end of period $ 393,066
$ 407,439
$ (14,373 ) -4 %


	Six Months Ended						Change
	June 30, 2020		June 30, 2019		$		%
Cash, cash equivalents and restricted cash at beginning of period	$	385,766	$	316,129	$	69,637	22	%
Cash provided from (used in) operating activities	811,616		854,482		(42,866)		-5	%
Cash provided from (used in) investing activities	1,142,180		(2,531,364)		3,673,544		145	%
Cash provided from (used in) financing activities	(504,309)		1,720,804		(2,225,113)		-129	%
Effect of foreign currency translation	(9,010)		(333)		(8,677)		-2,606	%
Cash, cash equivalents and restricted cash at end of period	$	1,826,243	$	359,718	$	1,466,525	408	%

Operating Activities

The changes in net cash provided from operating activities are primarily attributable to ~~improvements~~declines in ~~net working capital.~~revenue and increases in property operating expenses, as well as the impact of short-term rent deferrals granted as a result of the COVID-19 pandemic in 2020. Please see “Results of Operations” for discussion of net income fluctuations. For the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, cash flows provided from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash provided from/used in investing activities are primarily attributable to net changes in real property investments and dispositions, loans receivable and investments in unconsolidated entities, which are summarized above in “Key Transactions” and Notes 3 and 5 of our unaudited consolidated financial statements. The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands):


	Six Months Ended						Change
	June 30, 2020		June 30, 2019		$
New development	$	93,031	$	155,409	$	(62,378)
Recurring capital expenditures, tenant improvements and lease commissions	40,939		49,925		(8,986)
Renovations, redevelopments and other capital improvements	81,164		74,251		6,913
Total	$	215,134	$	279,585	$	(64,451)

Three Months Ended Change
March 31, 2020 March 31, 2019 $ %
New development $ 48,775
$ 55,391
$ (6,616 ) -12 %
Recurring capital expenditures, tenant improvements and lease commissions 22,566
21,898
668
3 %
Renovations, redevelopments and other capital improvements 46,816
35,037
11,779
34 %
Total $ 118,157
$ 112,326
$ 5,831
5 %

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The change in new development is primarily due to the number and size of construction projects on-going during the relevant periods. Renovations, redevelopments and other capital improvements include expenditures to maximize property value, increase net operating income, maintain a market-competitive position and/or achieve property stabilization.

Financing Activities The changes in net cash provided from/used in financing activities are primarily attributable to changes related to our long-term debt arrangements, the issuances of common stock and dividend payments which are summarized above

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

in "Key Transactions". Please refer to Notes 10, 11 and 14 of our unaudited consolidated financial statements for additional information.

On April 1, 2020, in response to uncertain financial market conditions arising from the COVID-19 pandemic, we undertook steps to strengthen our balance sheet and to enhance our liquidity by entering into a $1.0 billion two-year unsecured term loan. Additionally, on June 30, 2020, we completed the issuance of $600 million senior unsecured notes with a maturity date of January 2031. Net proceeds were used to fund tender offers for $426 million of our 3.75% senior unsecured notes due 2023 and our 3.95% senior unsecured notes due 2023, which settled on July 1, 2020. The remaining proceeds were used to reduce borrowings under the term loan by $140 million. After consideration of ~~this unsecured term loan,~~these transactions, we have total near-term available liquidity of approximately ~~$3.5 billion.~~$4.2 billion at July 2, 2020. However, we are unable to accurately predict the full impact that the pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous factors discussed in Part II Item 1A. Risk Factors.

Off-Balance Sheet Arrangements

At ~~March 31,~~June 30, 2020, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 50%. We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. At ~~March 31,~~June 30, 2020, we had 128 outstanding letter of credit obligations. Please see Notes 8, 12 and 13 to our unaudited consolidated financial statements for additional information.

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of ~~March 31,~~June 30, 2020 (in thousands):


	Payments Due by Period
Contractual Obligations	Total		2020		2021-2022		2023-2024		Thereafter
Unsecured credit facility and commercial paper ^(1,2)	$	—	$	—	$	—	$	—	$	—
Senior unsecured notes and term credit facilities: ⁽²⁾
U.S. Dollar senior unsecured notes	8,700,000		—		—		2,450,000		6,250,000
Canadian Dollar senior unsecured notes ⁽³⁾	220,345		—		—		—		220,345
Pounds Sterling senior unsecured notes ⁽³⁾	1,298,745		—		—		—		1,298,745
U.S. Dollar term credit facility	1,510,000		—		1,010,000		500,000		—
Canadian Dollar term credit facility ⁽³⁾	183,621		—		—		183,621		—
Secured debt: ^(2,3)
Consolidated	2,627,989		257,139		872,088		503,754		995,008
Unconsolidated	929,033		33,470		83,834		111,479		700,250
Contractual interest obligations: ⁽⁴⁾
Unsecured credit facility and commercial paper	—		—		—		—		—
Senior unsecured notes and term loans ⁽³⁾	4,092,526		242,199		859,915		752,916		2,237,496
Consolidated secured debt ⁽³⁾	354,990		39,429		127,559		74,731		113,271
Unconsolidated secured debt ⁽³⁾	204,105		15,786		59,337		54,025		74,957
Financing lease liabilities ⁽⁵⁾	199,117		4,602		17,076		70,802		106,637
Operating lease liabilities ⁽⁵⁾	1,067,950		11,097		43,018		40,915		972,920
Purchase obligations ⁽⁶⁾	563,822		289,239		210,622		50,413		13,548

Total contractual obligations	$	21,952,243	$	892,961	$	3,283,449	$	4,792,656	$	12,983,177

⁽¹⁾ Relates to our unsecured credit facility and commercial paper with an aggregate commitment of $3,000,000,000. See Note 10 to our unaudited consolidated financial statements for additional information.
⁽²⁾ Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
⁽³⁾ Based on foreign currency exchange rates in effect as of balance sheet date.
⁽⁴⁾ Based on variable interest rates in effect as of balance sheet date.
⁽⁵⁾ See Note 6 to our unaudited consolidated financial statements for additional information.
⁽⁶⁾ See Note 13 to our unaudited consolidated financial statements for additional information.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Payments Due by Period
Contractual Obligations Total 2020 2021-2022 2023-2024 Thereafter
Unsecured credit facility and commercial paper ^(1,2)
$ 845,000
$ 50,000
$ —
$ 795,000
$ —
Senior unsecured notes and term credit facilities: ⁽²⁾

U.S. Dollar senior unsecured notes 8,100,000
—
—
2,450,000
5,650,000
Canadian Dollar senior unsecured notes ⁽³⁾
212,465
—
—
—
212,465
Pounds Sterling senior unsecured notes ⁽³⁾
1,307,354
—
—
—
1,307,354
U.S. Dollar term credit facility 510,000
—
10,000
500,000
—
Canadian Dollar term credit facility ⁽³⁾
177,054
—
—
177,054
—
Secured debt: ^(2,3)

Consolidated 2,904,638
275,279
874,852
769,278
985,229
Unconsolidated 874,113
18,019
80,948
114,264
660,882
Contractual interest obligations: ⁽⁴⁾

Unsecured credit facility and commercial paper 42,616
9,904
26,170
6,542
—
Senior unsecured notes and term loans ⁽³⁾
3,959,479
294,616
811,318
721,169
2,132,376
Consolidated secured debt ⁽³⁾
410,097
68,573
143,500
86,356
111,668
Unconsolidated secured debt ⁽³⁾
203,363
23,464
57,187
52,291
70,421
Financing lease liabilities ⁽⁵⁾
183,556
6,756
16,521
70,601
89,678
Operating lease liabilities ⁽⁵⁾
1,160,976
17,256
44,524
42,455
1,056,741
Purchase obligations ⁽⁶⁾
645,682
382,054
201,469
47,531
14,628
Total contractual obligations $ 21,536,393
$ 1,145,921
$ 2,266,489
$ 5,832,541
$ 12,291,442

⁽¹⁾ Relates to our unsecured credit facility and commercial paper with an aggregate commitment of $3,000,000,000. See Note 10 to our unaudited consolidated financial statements for additional information.
⁽²⁾ Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
⁽³⁾ Based on foreign currency exchange rates in effect as of balance sheet date.
⁽⁴⁾ Based on variable interest rates in effect as of balance sheet date.
⁽⁵⁾ See Note 6 to our unaudited consolidated financial statements for additional information.
⁽⁶⁾ See Note 13 to our unaudited consolidated financial statements for additional information.

Please refer to “Credit Strength” above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of ~~March 31,~~June 30, 2020, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged. We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

Our primary sources of revenue include resident fees and services, rent and interest income. Our primary expenses include property operating expenses, depreciation and amortization, interest expense, general and administrative expenses and other expenses. We evaluate our business and make resource allocations on our three business segments: Seniors Housing Operating, Triple-net and Outpatient Medical. The primary performance measures for our properties are NOI and same store NOI ("SSNOI"), and other supplemental measures include FFO and Adjusted EBITDA, which are further discussed below. Please see Non-GAAP Financial Measures for additional information and reconciliations. The following is a summary of our results of operations (dollars in thousands, except per share amounts):


	Three Months Ended									Change								Six Months Ended					Change
	June 30,			June 30,								June 30,			June 30,
	2020			2019			Amount			%		2020			2019			Amount			%
Net income	$	159,216		$	150,040		$	9,176		6	%	$	488,596		$	442,342		$	46,254		10	%
NICS	179,246			137,762			41,484			30	%	489,530			418,232			71,298			17	%
FFO	335,597			390,021			(54,424)			-14	%	691,721			748,404			(56,683)			-8	%
EBITDA	553,177			541,027			12,150			2	%	1,304,807			1,224,715			80,092			7	%
NOI	527,711			618,979			(91,268)			-15	%	1,104,532			1,220,417			(115,885)			-9	%
SSNOI	414,280			464,556			(50,276)			-11	%	832,325			886,723			(54,398)			-6	%
Per share data (fully diluted):
NICS	$	0.42		$	0.34		$	0.08		24	%	$	1.17		$	1.05		$	0.13		12	%
FFO	$	0.80		$	0.96		$	(0.16)		-17	%	$	1.66		$	1.87		$	(0.21)		-11	%

Interest coverage ratio	4.29		x	3.74		x	0.55		x	15	%	4.88		x	4.27		x	0.61		x	14	%
Fixed charge coverage ratio	3.84		x	3.42		x	0.42		x	12	%	4.37		x	3.90		x	0.47		x	12	%

Three Months Ended Change
March 31,
March 31,
2020
2019 Amount %
Net income $ 329,380
$ 292,302
$ 37,078
13 %
NICS 310,284
280,470
29,814
11 %
FFO 356,124
358,383
(2,259 ) -1 %
EBITDA 751,630
683,688
67,942
10 %
NOI 576,821
601,438
(24,617 ) -4 %
SSNOI 455,205
458,647
(3,442 ) -1 %
Per share data (fully diluted):
NICS $ 0.75
$ 0.71
$ 0.04
6 %
FFO $ 0.86
$ 0.91
$ (0.05 ) -5 %

Interest coverage ratio 4.64 x 4.80 x (0.16 )x -3 %
Fixed charge coverage ratio 4.20 x 4.38 x (0.18 )x -4 %

Seniors Housing Operating

The following is a summary of our SSNOI at Welltower's Share for the Seniors Housing Operating segment (dollars in thousands):

Three Months Ended Change
March 31, 2020 March 31, 2019 $ %
SSNOI ⁽¹⁾
$ 199,831
$ 210,753
$ (10,922 ) -5.2 %

⁽¹⁾ For the three months ended March 31, 2020 and 2019, amounts relate to 425 same store properties. The same store property pools exclude 73 properties that have undergone operator transitions or segment transitions during the relevant period. Please see Non-GAAP Financial Measures for additional information and reconciliations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


	QTD Pool														YTD Pool
	Three Months Ended						Change						Six Months Ended				Change
	June 30, 2020		June 30, 2019		$		%		June 30, 2020		June 30, 2019		$		%
SSNOI ⁽¹⁾	$	163,922	$	217,562	$	(53,640)	-24.7	%	$	336,658	$	401,141	$	(64,483)	-16.1	%

⁽¹⁾ For the three and six months ended June 30, 2020 and 2019, amounts relate to 497 and 416 same store properties, respectively. Please see Non-GAAP Financial Measures for additional information and reconciliations.

The following is a summary of our results of operations for the Seniors Housing Operating segment (dollars in thousands):


	Three Months Ended						Change						Six Months Ended				Change
	June 30,		June 30,						June 30,		June 30,
	2020		2019		$		%		2020		2019		$		%
Revenues:
Resident fees and services	$	769,560	$	914,085	$	(144,525)	-16	%	$	1,619,532	$	1,782,370	$	(162,838)	-9	%
Interest income	88		—		88		n/a		192		—		192		n/a
Other income	4,002		1,444		2,558		177	%	5,054		5,545		(491)		-9	%
Total revenues	773,650		915,529		(141,879)		-15	%	1,624,778		1,787,915		(163,137)		-9	%
Property operating expenses	595,513		637,317		(41,804)		-7	%	1,203,384		1,245,003		(41,619)		-3	%
NOI ⁽¹⁾	178,137		278,212		(100,075)		-36	%	421,394		542,912		(121,518)		-22	%
Other expenses:
Depreciation and amortization	139,163		136,551		2,612		2	%	285,937		268,126		17,811		7	%
Interest expense	14,029		17,572		(3,543)		-20	%	30,463		35,823		(5,360)		-15	%
Loss (gain) on extinguishment of debt, net	(492)		—		(492)		n/a		(492)		—		(492)		n/a
Impairment of assets	75,151		—		75,151		n/a		78,646		—		78,646		n/a
Other expenses	5,251		11,857		(6,606)		-56	%	8,240		14,803		(6,563)		-44	%
	233,102		165,980		67,122		40	%	402,794		318,752		84,042		26	%
Income (loss) from continuing operations before income taxes and other items	(54,965)		112,232		(167,197)		-149	%	18,600		224,160		(205,560)		-92	%

Income (loss) from unconsolidated entities	(6,787)		(17,453)		10,666		61	%	(17,811)		(34,033)		16,222		48	%
Gain (loss) on real estate dispositions, net	14,465		(550)		15,015		n/a		14,316		(710)		15,026		n/a
Income from continuing operations	(47,287)		94,229		(141,516)		-150	%	15,105		189,417		(174,312)		-92	%
Net income (loss)	(47,287)		94,229		(141,516)		-150	%	15,105		189,417		(174,312)		-92	%
Less: Net income (loss) attributable to noncontrolling interests	(26,156)		2,236		(28,392)		n/a		(28,088)		3,977		(32,065)		n/a
Net income (loss) attributable to common stockholders	$	(21,131)	$	91,993	$	(113,124)	-123	%	$	43,193	$	185,440	$	(142,247)	-77	%

⁽¹⁾ See Non-GAAP Financial Measures below.

Three Months Ended Change
March 31, March 31,
2020 2019 $ %
Revenues:
Resident fees and services $ 849,972
$ 868,285
$ (18,313 ) -2 %
Interest income 104
—
104
n/a

Other income 1,052
4,101
(3,049 ) -74 %
Total revenues 851,128
872,386
(21,258 ) -2 %
Property operating expenses 607,871
607,686
185
— %
NOI ⁽¹⁾
243,257
264,700
(21,443 ) -8 %
Other expenses:

Depreciation and amortization 146,774
131,575
15,199
12 %
Interest expense 16,434
18,251
(1,817 ) -10 %
Impairment of assets 3,495
—
3,495
n/a

Other expenses 2,989
2,946
43
1 %
169,692
152,772
16,920
11 %
Income (loss) from continuing operations before income taxes and other items 73,565
111,928
(38,363 ) -34 %
Income (loss) from unconsolidated entities (11,024 ) (16,580 ) 5,556
34 %
Gain (loss) on real estate dispositions, net (149 ) (160 ) 11
7 %
Income from continuing operations 62,392
95,188
(32,796 ) -34 %
Net income (loss) 62,392
95,188
(32,796 ) -34 %
Less: Net income (loss) attributable to noncontrolling interests (1,932 ) 1,741
(3,673 ) -211 %
Net income (loss) attributable to common stockholders $ 64,324
$ 93,447
$ (29,123 ) -31 %

⁽¹⁾ See Non-GAAP Financial Measures below.

~~Fluctuations~~Decreases in resident fees and services and property operating expenses are primarily a result of ~~acquisitions, segment transitions, offset by~~ dispositions and decreases in occupancy across the ~~movement of U.S. and foreign currency exchange rates. Despite~~portfolio due to the COVID-19 ~~pandemic,~~pandemic. Occupancy within our Seniors Housing Operating portfolio has declined as follows:


	February		March		April		May		June		July
Spot occupancy ⁽¹⁾	85.8	%	85.0	%	82.8	%	81.0	%	80.1	%	79.4	%
Sequential occupancy change			(0.8)	%	(2.2)	%	(1.8)	%	(0.9)	%	(0.7)	%

⁽¹⁾ Spot occupancy ~~rates remained relatively steady through March 31,~~represents approximate month end occupancy for properties in operation as of February 2020, ~~however,~~including unconsolidated properties but excluding acquisitions, dispositions and development conversions since the start of the COVID-19 pandemic.

In addition, we ~~incurred~~have experienced increased operational costs of ~~$7,294,000~~$43,058,000 and $50,352,000 during the three and six months ended June 30, 2020 included in property operating expenses as a result of the introduction of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and ~~supplies.~~supplies, net of reimbursements.

The fluctuations in depreciation and amortization are due to acquisitions and dispositions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

During the three months ended March 31, 2020, we recorded impairment charges on one held for use property as the carrying ~~values~~value exceeded the estimated fair value. During the three months ended June 30, 2020, we entered into and subsequently closed a definitive purchase and sale agreement to sell six properties. In conjunction with this transaction, an impairment charge of $56,371,000 was recognized. During the three months ended June 30, 2020, we agreed to terms including pricing for the sale of a portfolio of six properties previously classified as held for sale resulting in an impairment charge of $18,780,000. Transaction costs related to asset acquisitions are capitalized as a component of the purchase price. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices. The ~~increase~~decrease in other expenses is primarily due to ~~additional~~the decrease of noncapitalizable transaction costs associated with acquisitions and operator transitions.

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, we completed three Seniors Housing Operating construction projects representing $93,188,000 or $300,606 per unit. The following is a summary of our Seniors Housing Operating construction projects, excluding expansions, pending as of ~~March 31,~~June 30, 2020 (dollars in thousands):

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Location Units Commitment Balance Est. Completion
Potomac, MD 120
$ 56,720
$ 30,043
4Q20
Beckenham, UK 100
58,644
28,808
3Q21
Hendon, UK 102
69,477
34,519
4Q21
Barnet, UK 100
64,123
28,222
4Q21
422
$ 248,964
121,592

Toronto, ON Project in planning stage 40,918

Washington, DC Project in planning stage 20,165

Brookline, MA Project in planning stage 17,477

$ 200,152


Location	Units	Commitment		Balance		Est. Completion
Potomac, MD	120	$	56,720	$	38,794	4Q20
Beckenham, UK	100	58,258		31,054		3Q21
Barnet, UK	100	63,700		30,839		4Q21
Hendon, UK	102	69,019		36,298		1Q22
	422	$	247,697	136,985
Toronto, ON	Project in planning stage					42,866
Brookline, MA	Project in planning stage					21,011
Washington, DC	Project in planning stage					20,803
				$	221,665

Interest expense represents secured debt interest expense which fluctuates based on the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The following is a summary of our Seniors Housing Operating segment property secured debt principal activity (dollars in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Wtd. Avg. Wtd. Avg.
Amount Interest Rate Amount Interest Rate
Beginning balance $ 2,115,037
3.54 % $ 1,810,587
3.87 %
Debt issued 44,921
2.58 % 247,163
3.68 %
Debt assumed —
— % 42,000
4.62 %
Debt extinguished (16,040 ) 4.51 % (114,570 ) 4.96 %
Principal payments (12,174 ) 3.49 % (11,205 ) 3.58 %
Foreign currency (86,818 ) 3.25 % 21,368
3.34 %
Ending balance $ 2,044,926
3.56 % $ 1,995,343
3.79 %

Monthly averages $ 2,080,448
3.54 % $ 1,915,650
3.84 %


	Three Months Ended														Six Months Ended
	June 30, 2020						June 30, 2019						June 30, 2020				June 30, 2019
			Wtd. Avg.				Wtd. Avg.				Wtd. Avg.				Wtd. Avg.
	Amount		Interest Rate		Amount		Interest Rate		Amount		Interest Rate		Amount		Interest Rate
Beginning balance	$	2,044,926	3.56	%	$	1,995,343	3.79	%	$	2,115,037	3.54	%	$	1,810,587	3.87	%

Debt issued	—		—	%	48,806		2.94	%	44,921		2.58	%	295,969		3.52	%
Debt assumed	—		—	%	—		—	%	—		—	%	42,000		4.62	%
Debt extinguished	(290,198)		2.81	%	(36,903)		2.74	%	(306,238)		2.90	%	(151,473)		4.42	%


Principal payments	(11,603)		3.17	%	(11,225)		3.49	%	(23,776)		3.18	%	(22,430)		3.44	%
Foreign currency	36,500		3.01	%	22,159		3.31	%	(50,319)		3.19	%	43,527		3.33	%
Ending balance	$	1,779,625	2.91	%	$	2,018,180	3.80	%	$	1,779,625	2.91	%	$	2,018,180	3.80	%

Monthly averages	$	2,009,523	3.17	%	$	1,996,642	3.80	%	$	2,044,995	3.33	%	$	1,950,546	3.82	%

The majority of our Seniors Housing Operating properties are formed through partnership interests. Losses from unconsolidated entities are largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ~~ventures.~~ventures, as well as the disposal of an investment in an unconsolidated entity during the quarter ended June 30, 2019. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures. The decrease during the three months ended June 30, 2020 relates primarily to our partners' share of impairment charges recognized, offset by our partners' share of gains on dispositions.

Triple-net

The following is a summary of our SSNOI at Welltower's Share for the Triple-net segment (dollars in thousands):


	QTD Pool														YTD Pool
	Three Months Ended						Change						Six Months Ended				Change
	June 30, 2020		June 30, 2019		$		%		June 30, 2020		June 30, 2019		$		%
SSNOI ⁽¹⁾	$	170,783	$	169,784	$	999	0.6	%	$	340,770	$	334,928	$	5,842	1.7	%

Three Months Ended Change
March 31, 2020 March 31, 2019 $ %
SSNOI ⁽¹⁾
$ 171,716
$ 166,415
$ 5,301
3.2 %

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

⁽¹⁾ For the three and six months ended ~~March 31,~~June 30, 2020 and 2019, amounts relate to ~~632~~641 and 635 same store ~~properties. The same store property pools exclude 19~~ properties, ~~that have undergone operator transitions or segment transitions during the relevant period.~~respectively. Please see Non-GAAP Financial Measures for additional information and reconciliations.

The following is a summary of our results of operations for the Triple-net segment (dollars in thousands):

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

Three Months Ended Change
March 31, March 31,
2020 2019 $ %
Revenues:
Rental income $ 191,385
$ 232,032
$ (40,647 ) -18 %
Interest income 14,671
14,946
(275 ) -2 %
Other income 1,673
1,263
410
32 %
Total revenues 207,729
248,241
(40,512 ) -16 %
Property operating expenses 13,302
14,955
(1,653 ) -11 %
NOI ⁽¹⁾
194,427
233,286
(38,859 ) -17 %
Other expenses:

Depreciation and amortization 57,694
61,348
(3,654 ) -6 %
Interest expense 2,852
3,440
(588 ) -17 %
Loss (gain) on derivatives and financial instruments, net 7,651
(2,487 ) 10,138
408 %
Provision for loan losses 7,072
18,690
(11,618 ) -62 %
Impairment of assets 24,332
—
24,332
n/a

Other expenses 513
3,029
(2,516 ) -83 %
100,114
84,020
16,094
19 %
Income (loss) from continuing operations before income taxes and other items 94,313
149,266
(54,953 ) -37 %
Income (loss) from unconsolidated entities 5,796
5,658
138
2 %
Gain (loss) on real estate dispositions, net 49,637
167,574
(117,937 ) -70 %
Income from continuing operations 149,746
322,498
(172,752 ) -54 %
Net income 149,746
322,498
(172,752 ) -54 %
Less: Net income (loss) attributable to noncontrolling interests 18,575
9,096
9,479
104 %
Net income attributable to common stockholders $ 131,171
$ 313,402
$ (182,231 ) -58 %

⁽¹⁾ See Non-GAAP Financial Measures below.


	Three Months Ended						Change						Six Months Ended				Change
	June 30,		June 30,						June 30,		June 30,
	2020		2019		$		%		2020		2019		$		%
Revenues:
Rental income	$	217,492	$	222,362	$	(4,870)	-2	%	$	408,877	$	454,394	$	(45,517)	-10	%
Interest income	15,520		17,118		(1,598)		-9	%	30,191		32,064		(1,873)		-6	%
Other income	607		1,278		(671)		-53	%	2,280		2,541		(261)		-10	%
Total revenues	233,619		240,758		(7,139)		-3	%	441,348		488,999		(47,651)		-10	%
Property operating expenses	13,563		12,823		740		6	%	26,865		27,778		(913)		-3	%
NOI ⁽¹⁾	220,056		227,935		(7,879)		-3	%	414,483		461,221		(46,738)		-10	%
Other expenses:
Depreciation and amortization	58,138		56,056		2,082		4	%	115,832		117,404		(1,572)		-1	%
Interest expense	2,746		3,225		(479)		-15	%	5,598		6,665		(1,067)		-16	%
Loss (gain) on derivatives and financial instruments, net	1,434		1,913		(479)		-25	%	9,085		(574)		9,659		n/a

Provision for loan losses	1,451		—		1,451		n/a		8,523		18,690		(10,167)		-54	%
Impairment of assets	—		(940)		940		100		24,332		(940)		25,272		n/a
Other expenses	3,500		5,560		(2,060)		-37	%	4,013		8,589		(4,576)		-53	%
	67,269		65,814		1,455		2	%	167,383		149,834		17,549		12	%
Income (loss) from continuing operations before income taxes and other items	152,787		162,121		(9,334)		-6	%	247,100		311,387		(64,287)		-21	%

Income (loss) from unconsolidated entities	6,403		6,578		(175)		-3	%	12,199		12,236		(37)		—	%
Gain (loss) on real estate dispositions, net	2,148		(1,130)		3,278		290	%	51,785		166,444		(114,659)		-69	%
Income from continuing operations	161,338		167,569		(6,231)		-4	%	311,084		490,067		(178,983)		-37	%
Net income	161,338		167,569		(6,231)		-4	%	311,084		490,067		(178,983)		-37	%
Less: Net income (loss) attributable to noncontrolling interests	9,103		9,230		(127)		-1	%	27,678		18,326		9,352		51	%
Net income attributable to common stockholders	$	152,235	$	158,339	$	(6,104)	-4	%	$	283,406	$	471,741	$	(188,335)	-40	%

⁽¹⁾ See Non-GAAP Financial Measures below.

The decrease in rental income is primarily attributable to the write off of straight-line rent receivables of $32,268,000 recognized during the quarter ended March 31, 2020 in conjunction with a lease amendment, the establishment of a reserve for straight-line rent receivable deemed uncollectible of $1,842,000 during the quarter ended June 30, 2020, as well as property ~~dispositions.~~dispositions during 2019 and 2020. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. For the three months ended ~~March 31,~~June 30, 2020, we had 179 leases with rental rate increases ranging from ~~0.13%~~0.16% to ~~1.07%~~0.36% in our Triple-net portfolio. Our Triple-net operators are experiencing similar impacts on occupancy and operating costs due to the COVID-19 pandemic as described above with respect to our Seniors Housing Operating ~~properties~~properties. However, long-term/post-acute facilities are generally experiencing a higher degree of occupancy declines which may impact the ability of our Triple-net operators to make contractual rent payments to us in the future. ~~However,~~Many of our Triple-net operators received funds under the CARES Act and operators of long-term/post-acute facilities have also received funds under the CARES Act Provider Relief Fund. Accordingly, collection of rent ~~collections for~~due during the ~~three months ended~~COVID-19 pandemic to date (from March ~~31, 2020 were~~to July) have been consistent with ~~prior periods.~~historical collection rates and no significant rent concessions or deferrals have been made to date.

Depreciation and amortization fluctuates as a result of the acquisitions, dispositions and transitions of triple-net properties. To the extent we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain real estate loans receivable that ~~are~~were no longer deemed collectible. InDuring the three months ended March 31, 2020, we recognized a provision for loan losses of $6,898,000 to fully reserve for one non-real estate loan receivable that was no longer deemed collectible. During the three months ended June 30, 2020, we recognized a ~~non-real~~provision for loan losses of $1,303,00 to fully reserve for one real estate loan receivable that was no longer deemed collectible. During the three months ended March 31, 2020, we recorded impairment charges on certain held for use properties as the carrying values exceeded the estimated fair values. Changes in the

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

gain on sales of properties are related to the volume and timing of property sales and the sales prices. Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The fluctuation in other expenses is primarily due to noncapitalizable transaction costs from acquisitions and segment transitions.

During the six months ended June 30, 2020, we completed one Triple-net construction project representing $33,627,000 or $207,574 per unit. The following is a summary of Triple-net construction projects, excluding expansions, pending as of ~~March 31,~~June 30, 2020 (dollars in thousands):


Location	Units/Beds	Commitment		Balance		Est. Completion
Westerville, OH	102	$	27,200	$	25,092	3Q20
Thousand Oaks, CA	82	24,763		15,281		4Q20
Droitwich, UK	70	15,665		13,360		4Q20
Redhill, UK	76	19,667		9,428		2Q21
Wombourne, UK	66	14,843		3,341		2Q22
Leicester, UK	60	13,853		3,692		2Q22
	456	$	115,991	$	70,194

~~Item 2.~~ ~~Management's Discussion~~The fluctuation in loss (gain) on derivatives and ~~Analysis of Financial Condition and Results of Operations~~

Location Units/Beds Commitment Balance Est. Completion
Union, KY 162
$ 34,600
$ 28,823
2Q20
Westerville, OH 102
27,200
23,806
2Q20
Droitwich, UK 70
15,769
12,626
2Q20
Thousand Oaks, CA 82
24,763
12,100
4Q20
Redhill, UK 76
19,797
8,477
1Q21
Wombourne, UK 66
14,941
3,330
4Q21
Leicester, UK 60
13,945
3,320
4Q21
618
$ 151,015
$ 92,482

financial instruments, net is primarily attributable to the mark-to-market adjustment recorded on our Genesis Healthcare, Inc. available-for-sale investment. Interest expense represents secured debt interest expense and related fees. The change in secured debt interest expense is due to the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The fluctuation in loss (gain) on derivatives and financial instruments, net is primarily attributable to the mark-to-market adjustment recorded on our Genesis Healthcare, Inc. available-for-sale investment. The following is a summary of our Triple-net secured debt principal activity for the periods presented (dollars in thousands):

Three Months Ended
March 31, 2020 March 31, 2019
Wtd. Avg. Wtd. Avg.
Amount Interest Rate Amount Interest Rate
Beginning balance $ 306,038
3.60 % $ 288,386
3.63 %
Principal payments (1,059 ) 5.17 % (957 ) 5.24 %
Foreign currency (15,240 ) 3.40 % 4,829
3.30 %
Ending balance $ 289,739
3.55 % $ 292,258
3.62 %

Monthly averages $ 299,111
3.59 % $ 293,113
3.62 %


	Three Months Ended														Six Months Ended
	June 30, 2020						June 30, 2019						June 30, 2020				June 30, 2019
			Wtd. Avg.				Wtd. Avg.				Wtd. Avg.				Wtd. Avg.
	Amount		Interest Rate		Amount		Interest Rate		Amount		Interest Rate		Amount		Interest Rate
Beginning balance	$	289,739	3.55	%	$	292,258	3.62	%	$	306,038	3.60	%	$	288,386	3.63	%






Principal payments	(1,042)		5.16	%	(952)		5.25	%	(2,102)		5.16	%	(1,909)		5.25	%
Foreign currency	624		4.12	%	(3,354)		3.21	%	(14,615)		2.90	%	1,475		4.77	%
Ending balance	$	289,321	3.27	%	$	287,952	3.63	%	$	289,321	3.27	%	$	287,952	3.63	%
			0.0355003165979432
Monthly averages	$	286,599	3.36	%	$	289,328	3.62	%	$	293,300	3.47	%	$	291,073	3.62	%

A portion of our Triple-net properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner. The increase during the three months ended March 31, 2020, relates primarily to our partner's share of gains on disposal of properties.

Outpatient Medical

The following is a summary of our SSNOI at Welltower Share for the Outpatient Medical segment (dollars in thousands):

Three Months Ended Change
March 31, 2020 March 31, 2019 $ %
SSNOI ⁽¹⁾
$ 83,658
$ 81,479
$ 2,179
2.7 %


	QTD Pool														YTD Pool
	Three Months Ended						Change						Six Months Ended				Change
	June 30, 2020		June 30, 2019		$		%		June 30, 2020		June 30, 2019		$		%
SSNOI ⁽¹⁾	$	79,575	$	77,210	$	2,365	3.1	%	$	154,897	$	150,654	$	4,243	2.8	%

⁽¹⁾ For the three and six months ended ~~March 31,~~June 30, 2020 and 2019, amounts relate to ~~261~~246 and 237 same store properties, respectively. Please see Non-GAAP Financial Measures for additional information and reconciliations.

3740

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a summary of our results of operations for the Outpatient Medical segment for the periods presented (dollars in thousands):

Three Months Ended Change
March 31, March 31,
2020 2019 $ %
Revenues:
Rental income $ 198,575
$ 149,052
$ 49,523
33 %
Interest income 466
173
293
169 %
Other income 288
236
52
22 %
Total revenues 199,329
149,461
49,868
33 %
Property operating expenses 60,608
48,166
12,442
26 %
NOI ⁽¹⁾
138,721
101,295
37,426
37 %
Other expenses:

Depreciation and amortization 70,333
51,009
19,324
38 %
Interest expense 4,808
3,348
1,460
44 %
Other expenses 1,007
754
253
34 %
76,148
55,111
21,037
38 %
Income (loss) from continuing operations before income taxes and other items

62,573
46,184
16,389
35 %
Income (loss) from unconsolidated entities 1,536
1,723
(187 ) -11 %
Gain (loss) on real estate dispositions, net 213,336
(5 ) 213,341
n/a

Income from continuing operations 277,445
47,902
229,543
479 %
Net income (loss) 277,445
47,902
229,543
479 %
Less: Net income (loss) attributable to noncontrolling interests 2,453
995
1,458
147 %
Net income (loss) attributable to common stockholders $ 274,992
$ 46,907
$ 228,085
486 %

⁽¹⁾ See Non-GAAP Financial Measures.


	Three Months Ended						Change						Six Months Ended				Change
	June 30,		June 30,						June 30,		June 30,
	2020		2019		$		%		2020		2019		$		%
Revenues:
Rental income	$	178,813	$	163,224	$	15,589	10	%	$	377,388	$	312,276	$	65,112	21	%
Interest income	461		238		223		94	%	927		411		516		126	%
Other income	1,557		(97)		1,654		n/a		1,845		139		1,706		n/a
Total revenues	180,831		163,365		17,466		11	%	380,160		312,826		67,334		22	%
Property operating expenses	51,688		50,987		701		1	%	112,296		99,153		13,143		13	%
NOI ⁽¹⁾	129,143		112,378		16,765		15	%	267,864		213,673		54,191		25	%
Other expenses:
Depreciation and amortization	68,070		55,445		12,625		23	%	138,403		106,454		31,949		30	%
Interest expense	4,326		3,386		940		28	%	9,134		6,734		2,400		36	%
Loss (gain) on extinguishment of debt, net	741		—		741		n/a		741		—		741		n/a
Provision for loan losses	(29)		—		(29)		n/a		(29)		—		(29)		n/a
Impairment of assets	—		10,879		(10,879)		-100	%	—		10,879		(10,879)		-100	%
Other expenses	6,456		(4)		6,460		n/a		7,463		750		6,713		n/a
	79,564		69,706		9,858		14	%	155,712		124,817		30,895		25	%
Income (loss) from continuing operations before income taxes and other items	49,579		42,672		6,907		16	%	112,152		88,856		23,296		26	%

Income (loss) from unconsolidated entities	1,716		1,826		(110)		-6	%	3,252		3,549		(297)		-8	%
Gain (loss) on real estate dispositions, net	139,250		(2)		139,252		n/a		352,586		(7)		352,593		n/a
Income from continuing operations	190,545		44,496		146,049		328	%	467,990		92,398		375,592		406	%
Net income (loss)	190,545		44,496		146,049		328	%	467,990		92,398		375,592		406	%
Less: Net income (loss) attributable to noncontrolling interests	(2,977)		812		(3,789)		-467	%	(524)		1,807		(2,331)		-129	%
Net income (loss) attributable to common stockholders	$	193,522	$	43,684	$	149,838	343	%	$	468,514	$	90,591	$	377,923	417	%

⁽¹⁾ See Non-GAAP Financial Measures.

The increases in rental income are primarily attributable to acquisitions of new properties and the conversion of newly constructed outpatient medical properties, particularly the $1.25 billion CNL Healthcare Properties portfolio acquisition that closed in May 2019, partially offset by dispositions. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Our leases could renew above or below current rental rates, resulting in an increase or decrease in rental income. For the three months ended ~~March 31,~~June 30, 2020, our consolidated outpatient medical portfolio signed ~~144,185~~121,150 square feet of new leases and ~~210,308~~353,185 square feet of renewals. The weighted-average term of these leases was ~~seven~~six years, with a rate of ~~$36.71~~$36.45 per square foot and tenant improvement and lease commission costs of ~~$27.89~~$17.48 per square foot. Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.5% to ~~4.0%~~5.0%. Inaddition, our Outpatient Medical tenants are experiencing temporary medical practice closures or decreases in revenue due to government imposed restrictions on elective medical procedures or decisions by patients to delay treatments which may adversely effect their ability to make contractual rent payments. ~~However,~~We have either collected or approved short term deferrals for over 99% of rent due in the second quarter, consisting of 87% cash collections and 12% of short term deferrals. In most cases, the deferred rent respresents two months of rent with expected repayment by the end of the year. Approximately 98% of rent due in July was either collected or aproved for ~~the three months ended March 31, 2020~~short term deferral, with cash collections accelerating to approximately 95%. Short term deferrals of July rent decreased to 3%, which primarily relates to tenants in local jurisdictions for which relief was mandated. Furthermore, collections of deferred rent due in June and July under executed deferrals were ~~consistent with prior periods.~~96%.

The fluctuation in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions of outpatient medical facilities, offset by dispositions. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly. During the six months ended June 30, 2019, we recognized impairment charges related to certain held for sale properties as the carrying values exceeded the estimated fair values less costs to sell. Changes in gains/losses on sales of properties are related to volume of property sales and the sales prices.

~~During~~ The increase in other expense during the three months ended ~~March 31,~~June 30, 2020 is primarily due to noncapitalizable transaction costs from acquisitions no longer expected to be consummated.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

During the six months ended June 30, 2020, we completed ~~one~~three Outpatient Medical construction ~~project~~projects representing ~~$19,369,000~~$43,493,000 or ~~$352~~$306 per square foot. The following is a summary of the Outpatient Medical construction projects, excluding expansions, pending as of ~~March 31,~~June 30, 2020 (dollars in thousands):

Location Square Feet Commitment Balance Est. Completion
Lowell, MA 50,668
$ 12,300
$ 11,684
2Q20
Katy, TX 36,500
12,028
6,063
2Q20
Brooklyn, NY 140,955
105,306
86,990
3Q20
Total 228,123
$ 129,634
$ 104,737

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~


Location	Square Feet	Commitment		Balance		Est. Completion
Brooklyn, NY	140,955	$	105,306	$	93,646	4Q20




☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	March 31, 2020 (Unaudited)			December 31, 2019 (Note)
Assets:
Real estate investments:
Real property owned:
Land and land improvements	$	3,514,456		$	3,486,620
Buildings and improvements	29,236,477			29,163,305
Acquired lease intangibles	1,629,662			1,617,051
Real property held for sale, net of accumulated depreciation	729,560			1,253,008
Construction in progress	431,497			507,931
Less accumulated depreciation and amortization	(5,910,979		)	(5,715,459		)
Net real property owned	29,630,673			30,312,456
Right of use assets, net	523,217			536,433
Real estate loans receivable, net of credit allowance	221,228			270,382
Net real estate investments	30,375,118			31,119,271
Other assets:
Investments in unconsolidated entities	702,497			583,423
Goodwill	68,321			68,321
Cash and cash equivalents	303,423			284,917
Restricted cash	89,643			100,849
Straight-line rent receivable	449,075			466,222
Receivables and other assets	934,951			757,748
Total other assets	2,547,910			2,261,480
Total assets	$	32,923,028		$	33,380,751

Liabilities and equity
Liabilities:
Unsecured credit facility and commercial paper	$	844,985		$	1,587,597
Senior unsecured notes	10,218,853			10,336,513
Secured debt	2,901,232			2,990,962
Lease liabilities	464,659			473,693
Accrued expenses and other liabilities	997,603			1,009,482
Total liabilities	15,427,332			16,398,247
Redeemable noncontrolling interests	429,359			475,877
Equity:
Common stock	418,226			411,005
Capital in excess of par value	20,818,230			20,190,107
Treasury stock	(86,975		)	(78,955		)
Cumulative net income	7,659,038			7,353,966
Cumulative dividends	(12,579,535		)	(12,223,534		)
Accumulated other comprehensive income (loss)	(96,213		)	(112,157		)
Other equity	12			12
Total Welltower Inc. stockholders’ equity	16,132,783			15,540,444
Noncontrolling interests	933,554			966,183
Total equity	17,066,337			16,506,627
Total liabilities and equity	$	32,923,028		$	33,380,751



	Three Months Ended March 31, 2019
	Preferred Stock			Common Stock		Capital in Excess of Par Value			Treasury Stock			Cumulative Net Income		Cumulative Dividends			Accumulated Other Comprehensive Income (Loss)			Other Equity			Noncontrolling Interests			Total
Balances at January 1, 2019	$	718,498		$	384,465	$	18,424,368		$	(68,499	)	$	6,121,534	$	(10,818,557	)	$	(129,769	)	$	294		$	954,265		$	15,586,599
Comprehensive income:
Net income (loss)												280,470											10,785			291,255
Other comprehensive income (loss)																	(14,849		)				5,787			(9,062		)
Total comprehensive income																										282,193
Net change in noncontrolling interests						(8,845		)															(1,497		)	(10,342		)
Amounts related to stock incentive plans, net of forfeitures				120		7,420			(5,993		)									(26		)				1,521
Net proceeds from issuance of common stock				7,212		525,408																				532,620
Conversion of preferred stock	(718,498		)	12,712		705,786																				—
Dividends paid:
Common stock dividends														(344,760		)										(344,760		)
Balances at March 31, 2019	$	—		$	404,509	$	19,654,137		$	(74,492	)	$	6,402,004	$	(11,163,317	)	$	(144,618	)	$	268		$	969,340		$	16,047,831



	Three Months Ended March 31,
	2020			2019
Rental income related to (above)/below market tenant leases, net	$	524		$	(155	)
Amortization related to in place lease intangibles and lease commissions	(35,976		)	(24,905		)


Three Months Ended June 30, 2020:	Seniors Housing Operating		Triple-net		Outpatient Medical		Non-segment / Corporate		Total
Resident fees and services	$	769,560	$	—	$	—	$	—	$	769,560
Rental income	—		217,492		178,813		—		396,305
Interest income	88		15,520		461		—		16,069
Other income	4,002		607		1,557		375		6,541
Total revenues	773,650		233,619		180,831		375		1,188,475

Property operating expenses	595,513		13,563		51,688		—		660,764
Consolidated net operating income	178,137		220,056		129,143		375		527,711

Depreciation and amortization	139,163		58,138		68,070		—		265,371
Interest expense	14,029		2,746		4,326		105,256		126,357
General and administrative expenses	—		—		—		34,062		34,062
Loss (gain) on derivatives and financial instruments, net	—		1,434		—		—		1,434
Loss (gain) on extinguishment of debt, net	(492)		—		741		—		249
Provision for loan losses	—		1,451		(29)		—		1,422
Impairment of assets	75,151		—		—		—		75,151
Other expenses	5,251		3,500		6,456		4,204		19,411
Income (loss) from continuing operations before income taxes and other items	(54,965)		152,787		49,579		(143,147)		4,254
Income tax (expense) benefit	—		—		—		(2,233)		(2,233)
Income (loss) from unconsolidated entities	(6,787)		6,403		1,716		—		1,332
Gain (loss) on real estate dispositions, net	14,465		2,148		139,250		—		155,863
Income (loss) from continuing operations	(47,287)		161,338		190,545		(145,380)		159,216
Net income (loss)	$	(47,287)	$	161,338	$	190,545	$	(145,380)	$	159,216

Total assets	$	14,915,588	$	9,189,707	$	7,434,364	$	1,622,993	$	33,162,652



Three Months Ended March 31, 2020:	Seniors Housing Operating			Triple-net			Outpatient Medical		Non-segment / Corporate			Total
Resident fees and services	$	849,972		$	—		$	—	$	—		$	849,972
Rental income	—			191,385		⁽¹⁾	198,575		—			389,960
Interest income	104			14,671			466		—			15,241
Other income	1,052			1,673			288		416			3,429
Total revenues	851,128			207,729			199,329		416			1,258,602

Property operating expenses	607,871			13,302			60,608		—			681,781
Consolidated net operating income	243,257			194,427			138,721		416			576,821

Depreciation and amortization	146,774			57,694			70,333		—			274,801
Interest expense	16,434			2,852			4,808		117,913			142,007
General and administrative expenses	—			—			—		35,481			35,481
Loss (gain) on derivatives and financial instruments, net	—			7,651			—		—			7,651
Provision for loan losses	—			7,072			—		—			7,072
Impairment of assets	3,495			24,332			—		—			27,827
Other expenses	2,989			513			1,007		1,783			6,292
Income (loss) from continuing operations before income taxes and other items	73,565			94,313			62,573		(154,761		)	75,690
Income tax (expense) benefit	—			—			—		(5,442		)	(5,442		)
Income (loss) from unconsolidated entities	(11,024		)	5,796			1,536		—			(3,692		)
Gain (loss) on real estate dispositions, net	(149		)	49,637			213,336		—			262,824
Income (loss) from continuing operations	62,392			149,746			277,445		(160,203		)	329,380
Net income (loss)	$	62,392		$	149,746		$	277,445	$	(160,203	)	$	329,380

Total assets	$	15,691,090		$	9,200,458		$	7,722,679	$	308,801		$	32,923,028



Three Months Ended March 31, 2019:	Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate			Total
Resident fees and services	$	868,285		$	—		$	—		$	—		$	868,285
Rental income	—			232,032			149,052			—			381,084
Interest income	—			14,946			173			—			15,119
Other income	4,101			1,263			236			2,157			7,757
Total revenues	872,386			248,241			149,461			2,157			1,272,245

Property operating expenses	607,686			14,955			48,166			—			670,807
Consolidated net operating income	264,700			233,286			101,295			2,157			601,438

Depreciation and amortization	131,575			61,348			51,009			—			243,932
Interest expense	18,251			3,440			3,348			120,193			145,232
General and administrative expenses	—			—			—			35,282			35,282
Loss (gain) on derivatives and financial instruments, net	—			(2,487		)	—			—			(2,487		)
Loss (gain) on extinguishment of debt, net	—			—			—			15,719			15,719
Provision for loan losses	—			18,690			—			—			18,690
Other expenses	2,946			3,029			754			2,027			8,756
Income (loss) from continuing operations before income taxes and other items	111,928			149,266			46,184			(171,064		)	136,314
Income tax (expense) benefit	—			—			—			(2,222		)	(2,222		)
Income (loss) from unconsolidated entities	(16,580		)	5,658			1,723			—			(9,199		)
Gain (loss) on real estate dispositions, net	(160		)	167,574			(5		)	—			167,409
Income (loss) from continuing operations	95,188			322,498			47,902			(173,286		)	292,302
Net income (loss)	$	95,188		$	322,498		$	47,902		$	(173,286	)	$	292,302



	Three Months Ended
SSNOI Reconciliations:	March 31, 2020			March 31, 2019

Seniors Housing Operating:
Consolidated NOI	$	243,257		$	264,700
NOI attributable to unconsolidated investments	14,954			16,439
NOI attributable to noncontrolling interests	(18,754		)	(20,118		)
NOI attributable to non-same store properties	(40,059		)	(52,927		)
Non-cash NOI attributable to same store properties	(839		)	553
Currency and ownership adjustments ⁽¹⁾	1,272			2,106
SSNOI at Welltower Share	199,831			210,753

Triple-net:
Consolidated NOI	194,427			233,286
NOI attributable to unconsolidated investments	5,133			5,078
NOI attributable to noncontrolling interests	(14,783		)	(14,592		)
NOI attributable to non-same store properties	(25,838		)	(41,648		)
Non-cash NOI attributable to same store properties	12,432			(15,629		)
Currency and ownership adjustments ⁽¹⁾	345			(80		)
SSNOI at Welltower Share	171,716			166,415

Outpatient Medical:
Consolidated NOI	138,721			101,295
NOI attributable to unconsolidated investments	1,063			310
NOI attributable to noncontrolling interests	(4,358		)	(6,738		)
NOI attributable to non-same store properties	(43,599		)	(4,841		)
Non-cash NOI attributable to same store properties	(1,974		)	(2,505		)
Currency and ownership adjustments ⁽¹⁾	(6,195		)	(6,042		)
SSNOI at Welltower Share	83,658			81,479

SSNOI at Welltower Share:
Seniors Housing Operating	199,831			210,753
Triple-net	171,716			166,415
Outpatient Medical	83,658			81,479
Total	$	455,205		$	458,647

⁽¹⁾ Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.32 and to translate UK properties at a GBP/USD rate of 1.30.



	QTD Pool
SSNOI Property Reconciliations:	Seniors Housing Operating		Triple-net		Outpatient Medical		Total
Consolidated properties	539		653		371		1,563
Unconsolidated properties	81		39		29		149
Total properties	620		692		400		1,712
Recent acquisitions/development conversions⁽¹⁾	(69	)	(10	)	(124	)	(203	)
Under development	(24	)	(8	)	(3	)	(35	)
Under redevelopment⁽²⁾	(12	)	—		(2	)	(14	)
Current held for sale⁽³⁾	(7	)	(6	)	(2	)	(15	)
Land parcels, loans and subleases	(9	)	(17	)	(8	)	(34	)
Transitions⁽⁴⁾	(73	)	(19	)	—		(92	)
Other	(1	)	—		—		(1	)
Same store properties	425		632		261		1,318

⁽¹⁾ Acquisitions and development conversions will enter the QTD Pool 5 full quarters after acquisition or certificate of occupancy, respectively.

⁽²⁾ Redevelopment properties will enter the QTD Pool after 5 full quarters of operations post redevelopment completion.
⁽³⁾ Excludes 11 Seniors Housing Operating properties classified as held for sale which will transition back into held for use during the quarter ended June 30, 2020.

⁽⁴⁾ Transitioned properties will enter the QTD Pool after 5 full quarters of operations with the new operator in place or under the new structure.


	Twelve Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Adjusted EBITDA Reconciliations:	2020			2020			2019			2019			2019			2019
Net income	$	1,376,664		$	1,367,488		$	1,330,410		$	1,214,970		$	651,264		$	668,497
Interest expense	537,355			552,334			555,559			568,280			568,969			549,049
Income tax expense (benefit)	6,811			6,177			2,957			9,293			7,066			9,308
Depreciation and amortization	1,075,261			1,057,942			1,027,073			1,007,263			977,967			966,190
EBITDA	2,996,091			2,983,941			2,915,999			2,799,806			2,205,266			2,193,044
Loss (income) from unconsolidated entities	(58,322)			(47,941)			(42,434)			14,791			17,709			7,411
Stock-based compensation expense ⁽¹⁾	24,229			24,601			25,047			25,347			26,113			23,618
Loss (gain) on extinguishment of debt, net	68,685			68,436			84,155			81,596			19,810			20,109
Loss (gain) on real estate dispositions, net	(1,001,001)			(843,456)			(748,041)			(777,890)			(232,363)			(244,800)
Impairment of assets	121,172			55,960			28,133			104,057			92,701			87,394
Provision for loan losses	8,494			7,072			18,690			18,690			18,690			18,690
Loss (gain) on derivatives and financial instruments, net	5,260			5,739			(4,399)			2,296			10,043			670
Other expenses ⁽¹⁾	46,971			48,327			51,052			45,512			126,994			117,942
Other impairment ⁽²⁾	34,110			32,268			—			—			—			—
Additional other income	—			—			—			(4,027)			(4,027)			(14,832)
Adjusted EBITDA	$	2,245,689		$	2,334,947		$	2,328,202		$	2,310,178		$	2,280,936		$	2,209,246

Adjusted Interest Coverage Ratio:
Interest expense	$	537,355		$	552,334		$	555,559		$	568,280		$	568,969		$	549,049
Capitalized interest	18,303			17,691			15,272			11,952			9,725			7,896
Non-cash interest expense	(12,761)			(11,599)			(8,645)			(11,218)			(10,888)			(11,852)
Total interest	542,897			558,426			562,186			569,014			567,806			545,093
Adjusted EBITDA	$	2,245,689		$	2,334,947		$	2,328,202		$	2,310,178		$	2,280,936		$	2,209,246
Adjusted interest coverage ratio	4.14		x	4.18		x	4.14		x	4.06		x	4.02		x	4.05		x

Adjusted Fixed Charge Coverage Ratio:
Total interest	$	542,897		$	558,426		$	562,186		$	569,014		$	567,806		$	545,093
Secured debt principal payments	57,807			56,308			54,325			54,342			55,129			55,584
Preferred dividends	—			—			—			11,676			23,352			35,028
Total fixed charges	600,704			614,734			616,511			635,032			646,287			635,705
Adjusted EBITDA	$	2,245,689		$	2,334,947		$	2,328,202		$	2,310,178		$	2,280,936		$	2,209,246
Adjusted fixed charge coverage ratio	3.74		x	3.80		x	3.78		x	3.64		x	3.53		x	3.48		x

⁽¹⁾ Certain severance-related costs are included in stock-based compensation and excluded from other expenses.
⁽²⁾ Represents straight-line recent receivable deemed uncollectible.


•	~~Risks Related to Dividends~~ The impacts of COVID-19 pandemic on our results of operations, liquidity and financial condition could adversely affect our ability to pay dividend distributions at expected levels or at all. All distributions are



Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 through January 31, 2020	65,085	$	82.79
February 1, 2020 through February 29, 2020	31,142	89.24
March 1, 2020 through March 31, 2020	206	72.39
Totals	96,433	$	84.85


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Repurchase Program	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Repurchase Program
April 1, 2020 through April 30, 2020	286	$	49.01	—	$	—
May 1, 2020 through May 31, 2020	201,947	37.89		201,947	992,348,000
June 1, 2020 through June 30, 2020	—	—		—	—
Totals	202,233	$	37.91	201,947	$	992,348,000