What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 492 added, 712 removed, 686 unchanged (64% of the section changed)

4 unchanged sentences

(In thousands)

March 31, 2020 (Unaudited)

December 31, 2019 (Note)

June 30, 2020 (Unaudited) December 31, 2019 (Note)

Real estate investments:

1 unchanged sentence

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

3 unchanged sentences

Investments in unconsolidated entities

786,921 583,423

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

$ 33,162,652 $ 33,380,751

Liabilities and equity

Unsecured credit facility and commercial paper

$ — $ 1,587,597

Senior unsecured notes

11,815,972 10,336,513

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

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 )

Total Welltower Inc.

stockholders’ equity

16,048,140 15,540,444

Noncontrolling interests

888,387 966,183

16,936,527 16,506,627

Total liabilities and equity

$ 33,162,652 $ 33,380,751

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.

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

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

6,541 3,079 9,970 10,836

Total revenues

1,188,475 1,320,106 2,447,077 2,592,351

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

3 unchanged sentences

Income (loss) from continuing operations 159,216 150,040 488,596 442,342

Net income 159,216 150,040 488,596 442,342

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:

417,084 404,607 413,696 398,073

419,121 406,673 415,775 400,096

Earnings per share:

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

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)

2 unchanged sentences

(In thousands)

Three Months Ended

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):

5 unchanged sentences

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

4 unchanged sentences

(In thousands)

Three Months Ended March 31, 2020

Accumulated Other

Six Months Ended June 30, 2020

Stock Capital in

Par Value Treasury

Stock Cumulative

Net Income Cumulative

Dividends Accumulated Other

Comprehensive

Income (Loss)

Noncontrolling

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

3 unchanged sentences

Net income (loss)

310,284 18,988 329,272

Other comprehensive income (loss)

15,944 ( 21,955 ) ( 6,011 )

Total comprehensive income 323,261

4 unchanged sentences

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

Three Months Ended March 31, 2019

Accumulated Other

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

Stock Capital in

Par Value Treasury

Stock Cumulative

Net Income Cumulative

Dividends Accumulated Other

Comprehensive

Income (Loss)

Noncontrolling

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

1 unchanged sentence

Net income (loss)

280,470 10,785 291,255

Other comprehensive income (loss)

( 14,849 ) 5,787 ( 9,062 )

Total comprehensive income 282,193

5 unchanged sentences

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

Comprehensive income:

Net income (loss)

137,762 11,349 149,111

Other comprehensive income (loss)

43,996 2,387 46,383

Total comprehensive income 195,494

Net change in noncontrolling interests ( 23,672 ) ( 7,959 ) ( 31,631 )

Amounts related to stock incentive plans, net of forfeitures 18 7,959 450 ( 80 ) 8,347

Net proceeds from issuance of common stock 1,487 101,721 103,208

Dividends paid:

Common stock dividends

( 353,677 ) ( 353,677 )

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

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

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

1 unchanged sentence

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

1 unchanged sentence

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

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

1 unchanged sentence

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

Other investments, net of payments

( 3,695 ) ( 16,973 )

Contributions to unconsolidated entities

( 225,739 ) ( 119,001 )

Distributions by unconsolidated entities

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 )

1 unchanged sentence

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

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

21 unchanged sentences

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 months ended March 31, 2020 are not necessarily an indication of the results that may be expected for the year ending December 31, 2020 .

Operating results for the six months ended 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.

2 unchanged sentences

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.

• Our Seniors Housing Operating 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 expenses are expected to continue until the pandemic subsides.

Such factors may impact our Triple-net operator's ability to pay rent and contractual obligations.

Furthermore, various local and state stay at home orders and the temporary closure of certain medical practices as a result may impact our medical office building tenants' ability to pay rent.

These factors may cause operators or tenants to seek modifications of such obligations, resulting in reductions in revenue and increases in uncollectible receivables.

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.

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.

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 Outpatient Medical tenants' ability to pay rent.

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 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 the estimation of future rental revenues, 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 to recognize increased impairment charges.

Key assumptions are made in 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.

We will continue to 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.

7 unchanged sentences

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 FASB thus determined that it would be appropriate for entities to make a policy election regarding how to account for lease concessions resulting directly from COVID-19.

Rather than analyzing each lease contract individually, entities can elect 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.

As of March 31, 2020, we have adopted the relief put forth by the FASB and intend to account for qualifying concessions as lease modifications, but had not yet made significant lease concessions within our portfolio as a result of the COVID-19 pandemic.

In a Q&A document, the FASB provided entities with COVID-19 related lease concessions an option to 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.

Due to the continuing adverse economic conditions caused by the COVID-19 pandemic, a subset of 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 elected to apply the accounting relief provided by the FASB to such short-term rent deferrals, and will account for such deferrals as if no change had been made to the original lease contract.

Real Property Acquisitions and Development

5 unchanged sentences

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

Three Months Ended

March 31, 2020

March 31, 2019

Seniors Housing Operating

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended

June 30, 2020 June 30, 2019

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 $ 103,743 $ 8,099 $ 132,154 $ 243,996

1 unchanged sentence

Acquired lease intangibles 10,810 — 23,823 34,633 58,773 — 85,492 144,265

Construction in progress — — — — 36,174 — — 36,174

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

1 unchanged sentence

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 )

Lease liabilities — — — — — — ( 45,287 ) ( 45,287 )

2 unchanged sentences

Noncontrolling interests (2)

( 2,827 ) — — ( 2,827 ) ( 38,830 ) ( 1,056 ) — ( 39,886 )

Non-cash acquisition related activity (3)

— — — — ( 11,889 ) — — ( 11,889 )

Cash disbursed for acquisitions 155,807 765 234,230 390,802 1,210,611 103,287 1,404,910 2,718,808

1 unchanged sentence

Capitalized interest ( 5,470 ) ( 1,826 ) ( 1,991 ) ( 9,287 ) ( 3,560 ) ( 908 ) ( 1,788 ) ( 6,256 )

( 1,343 ) — ( 2,983 ) ( 4,326 ) — — 45 45

Cash disbursed for construction in progress 46,892 24,436 21,703 93,031 107,342 23,223 24,844 155,409

1 unchanged sentence

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 of unrestricted and restricted cash acquired during the three months ended March 31, 2020 and 2019 , respectively.

(1) Excludes $ 580,000 and $ 1,910,000 of unrestricted and restricted cash acquired during the six months ended 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

Six Months Ended

June 30, 2020 June 30, 2019

Development projects:

Seniors Housing Operating

$ 93,188 $ 28,117

Outpatient Medical

Total development projects

170,308 28,117

Expansion projects

Total construction in progress conversions $ 205,945 $ 28,117

1 unchanged sentence

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020 December 31, 2019

In place lease intangibles $ 1,460,748 $ 1,513,836

10 unchanged sentences

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

Three Months Ended March 31,

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 )

1 unchanged sentence

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2020 , 18 Seniors Housing Operating, six Triple-net, and nine Outpatient Medical properties with an aggregate real estate balance of $ 729,560,000 were classified as held for sale.

At June 30, 2020, seven Seniors Housing Operating, three Triple-net, and 13 Outpatient Medical properties with an aggregate real estate balance of $ 382,580,000 were classified as held for sale.

In addition to the real property balances held for sale, secured debt of $ 12,849,000 and net other assets and (liabilities) of $ 35,085,000 are included in the Consolidated Balance Sheet related to the held for sale properties.

Subsequent to March 31, 2020 , the expected sale of a Seniors Housing Operating portfolio, which met the held for sale criteria as of December 31, 2019 , was not consummated 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 held for sale during the second quarter.

Expected gross sales proceeds related to the remaining held for sale properties is approximately $ 412,535,000 .

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.

Expected gross sales proceeds related to the held for sale properties is approxi mately $ 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, was not completed.

As a result, 11 properties with a carrying value of $ 386,744,000 were reclassified to held for use.

During the three months ended March 31, 2020, we recorded 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 six 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 six 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,

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Real estate dispositions:

Seniors Housing Operating

$ 706,964 $ 8,726

33,445 442,865

Outpatient Medical

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.

Operating results attributable to properties sold or classified as held for sale 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,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Total revenues

$ 36,481 $ 177,276 $ 107,933 $ 355,819

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

3 unchanged sentences

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

Classification

March 31, 2020

March 31, 2019

Six Months Ended

Classification June 30, 2020 June 30, 2019

Operating lease cost:

Real estate lease expense

Property operating expenses

non-real estate investment lease expense

General and administrative expenses

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

Interest on lease liabilities

Interest expense

Sublease income

Rental income

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 was as follows (in thousands):

Classification

March 31, 2020

December 31, 2019

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Classification June 30, 2020 December 31, 2019

Right of use assets:

Operating leases - real estate

Right of use assets, net

Finance leases - real estate

Right of use assets, net

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

Operating leases - non-real estate investments Receivables and other assets 11,063 12,474

Total right of use assets, net $ 513,667 $ 548,907

2 unchanged sentences

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.

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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 months ended March 31, 2020 , we recognized $ 389,960,000 of rental and other revenues related to operating leases, of which $ 55,754,000 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 months ended March 31, 2019 , we recognized $ 381,084,000 of rental and other revenues related to operating leases, of which $ 47,350,000 was for variable lease payments.

For the six months ended June 30, 2020, we recognized $ 786,265,000 of rental income related to operating leases, of which $ 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 six months ended June 30, 2019, we recognized $ 766,670,000 of rental income related to operating leases, of which $ 94,017,000 was for variable lease payments.

Loans Receivable

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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 and $ 6,897,000 as of March 31, 2020 and December 31, 2019 , respectively, and is included in receivables and other assets on the Consolidated Balance Sheets.

Accrued interest receivable was $ 10,171,000 and $ 6,897,000 as of 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

June 30, 2020 December 31, 2019

Mortgage loans $ 102,275 $ 188,062

6 unchanged sentences

Total loans receivable, net of credit allowance $ 598,706 $ 607,236

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

During the three months ended March 31, 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.

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

During the six months ended 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

Three Months Ended

March 31, 2020

March 31, 2019

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

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:

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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

June 30, 2020

Loan category Years of Origination Loan Carrying Value Allowance for Credit Loss Net Loan Balance No.

Deteriorated loans 2007 - 2018 $ 186,584 $ ( 76,695 ) $ 109,889 5

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Collective loan pool (1)

2016 184,620 ( 1,572 ) 183,048 6

Collective loan pool 2017 119,662 ( 999 ) 118,663 7

1 unchanged sentence

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.

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During the quarter ended June 30, 2019, these loans were written off.

In March 31, 2020 , we recognized a provision for loan losses of $ 6,898,000 to fully reserve for one Triple-net non-real estate loan receivable that was no longer deemed collectible.

During the six months ended June 30, 2020, we recognized a provision for 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 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

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

1 unchanged sentence

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended

March 31, 2020

March 31, 2019

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 )

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Interest recognized on deteriorated loans (2)

(1) Includes two loans that are on non-accrual as of March 31, 2020, with a total carrying value of $ 9,534,000 at both the beginning and the end of the first quarter of 2020.

$ 7,912 $ 7,964

(1) Current year amounts include $ 10,716,000 and $ 2,534,000 of loans on non-accrual as of June 30, 2020 and December 31, 2019, respectively.

Prior year amounts include $ 2,534,000 and$ 2,567,000 as of June 30, 2019 and December 31, 2018, respectively.

(2) Represents cash interest recognized in the period.

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Percentage Ownership (1)

March 31, 2020

December 31, 2019

Seniors Housing Operating

Outpatient Medical

June 30, 2020 December 31, 2019

Seniors Housing Operating 10 % to 50 %

$ 568,381 $ 463,741

Triple-net 10 % to 25 %

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, 2020 , the aggregate unamortized basis difference of our joint venture investments of $ 112,258,000 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.

At June 30, 2020, the aggregate unamortized basis difference of our joint venture investments of $ 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 related to eight properties as of March 31, 2020 for the development and construction of certain properties which are classified as in substance real estate investments.

We have made loans totaling $ 250,215,000 related to eight properties as of 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.

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See Note 18 for additional information and reconciliation.

The following table summarizes certain information about our credit concentration for the three months ended March 31, 2020 , excluding our share of NOI in unconsolidated entities (dollars in thousands):

The following table summarizes certain information about our credit concentration for the six months ended 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:

Number of Properties

Percent of NOI (2)

Number of Properties Total NOI Percent of NOI (2)

Sunrise Senior Living (3)

165 $ 134,872 12 %

ProMedica 215 106,530 10 %

Genesis Healthcare 52 58,831 5 %

Belmont Village

94 57,268 5 %

Avery Healthcare 59 37,298 3 %

Remaining portfolio 941 709,733 65 %

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 and Belmont Village are in our Seniors Housing Operating segment.

Avery Healthcare is in both the Triple-net and Seniors Housing Operating 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

Borrowings Under Credit Facilities and Commercial Paper Program

At March 31, 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 outstanding at March 31, 2020 ), a $ 500,000,000 unsecured term credit facility and a $ 250,000,000 Canadian-denominated unsecured term credit facility.

At 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 (none outstanding at 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 ( none outstanding at March 31, 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 ).

The applicable margin is based on our debt ratings and was 0.825 % at March 31, 2020 .

The primary unsecured credit facility also allows us to borrow up to $ 1,000,000,000 in alternate currencies ( none outstanding at June 30, 2020).

Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate.

The applicable margin is based on our debt ratings and was 0.825 % at 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, 2020 .

The facility fee depends on our debt ratings and was 0.15 % at June 30, 2020.

The term credit facilities mature on July 19, 2023.

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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 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 .

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,

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

2 unchanged sentences

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 %

Senior Unsecured Notes and Secured Debt

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Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

At March 31, 2020 , the annual principal payments due on these debt obligations were as follows (in thousands):

At June 30, 2020, the annual principal payments due on these debt obligations were as follows (in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Unsecured Notes (1,2)

2020 $ — $ 257,139 $ 257,139

2021 — 427,969 427,969

1,010,000 444,119 1,454,119

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.

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(3) Annual interest rates range from 0.12 % to 12.00 %.

Carrying value of the properties securing the debt totaled $ 6,324,000 at March 31, 2020 .

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Carrying value of the properties securing the debt totaled $ 5,774,000 at June 30, 2020.

(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 $ 183,621,000 based on the Canadian/U.S.

Dollar exchange rate on March 31, 2020 ).

The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.9 % ( 2.49 % at March 31, 2020 ).

Dollar exchange rate on June 30, 2020).

The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.9 % ( 1.42 % at June 30, 2020).

(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 % at March 31, 2020 ).

The loan matures on July 19, 2023 and bears interest at LIBOR plus 0.9 % ( 1.09 % at June 30, 2020).

(7) Includes a $ 300,000,000 Canadian-denominated 2.95 % senior unsecured notes due 2027 (approximately $ 220,345,000 based on the Canadian/U.S.

Dollar exchange rate on March 31, 2020 ).

Dollar exchange rate on June 30, 2020).

(8) Includes a £ 550,000,000 4.80 % senior unsecured notes due 2028 (approximately $ 680,295,000 based on the Sterling/U.S.

Dollar exchange rate in effect on March 31, 2020 ).

Dollar exchange rate in effect on June 30, 2020).

(9) Includes a $ 500,000,000 4.50 % senior unsecured notes due 2034 (approximately $ 618,450,000 based on the Sterling/U.S.

Dollar exchange rate in effect on March 31, 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 % .

Dollar exchange rate in effect on June 30, 2020).

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

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

Weighted Avg.

Interest Rate

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 %

1 unchanged sentence

Ending balance $ 11,912,711 3.65 % $ 10,711,556 4.24 %

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.

The following is a summary of our secured debt principal activity for the periods presented (dollars in thousands):

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020 June 30, 2019

Weighted Avg.

Interest Rate

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 %

2 unchanged sentences

Ending balance $ 2,627,989 3.09 % $ 2,689,982 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, 2020 , we were in compliance with all of the covenants under our debt agreements.

As of June 30, 2020, we were in compliance with all of the covenants under our debt agreements.

Derivative Instruments

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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.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from 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.

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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.

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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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020 December 31, 2019

Derivatives designated as net investment hedges:

6 unchanged sentences

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 $ —

1 unchanged sentence

Forward sales contracts denominated in Pounds Sterling £ — £ 125,000

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

(1) At 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,

Gain (loss) on derivative instruments designated as hedges recognized in income

Interest expense

Gain (loss) on derivative instruments not designated as hedges recognized in income

Interest expense

Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Commitments and Contingencies

At March 31, 2020 , we had 12 outstanding letter of credit obligations totaling $ 42,219,000 and expiring between 2020 and 2024 .

At March 31, 2020 , we had outstanding construction in progress of $ 431,497,000 and were committed to providing additional funds of approximately $ 373,422,000 to complete construction.

Additionally, at March 31, 2020, we had outstanding investments classified as in substance real estate of $ 210,994,000 and were committed to provide additional funds of $ 251,495,000 (see Note 8 for additional information).

Purchase obligations at March 31, 2020 also include $ 20,764,000 of contingent purchase obligations to fund capital improvements.

At June 30, 2020, we had 8 outstanding letter of credit obligations totaling $ 37,014,000 and expiring between 2020 and 2024.

At June 30, 2020, we had outstanding construction in progress of $ 411,700,000 and were committed to providing additional funds of approximately $ 332,074,000 to complete construction.

Additionally, at June 30, 2020, we had outstanding investments classified as in substance real estate of $ 250,215,000 and were committed to provide additional funds of $ 212,306,000 (see Note 8 for additional information).

Purchase obligations at June 30, 2020 also include $ 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.

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The following is a summary of our stockholders’ equity capital accounts as of the dates indicated:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Preferred Stock:

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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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended

June 30, 2020 June 30, 2019

Weighted Avg.

Dividend Rate

Shares Dividend Rate Shares Dividend Rate

Beginning balance — — % 14,369,965 6.50 %

1 unchanged sentence

Ending balance — — % — — %

During the three months ended March 31, 2019 , we converted all of the outstanding Series I Preferred Stock.

During the six months ended 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 Stock In February 2019, we entered into a separate 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").

Common Stock In February 2019, we entered into 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 months ended March 31, 2020 , we physically settled all of our outstanding forward sales agreements for cash proceeds of $ 576,196,000 .

As of March 31, 2020 , we had $ 499,341,000 of remaining capacity under the Equity Shelf Program.

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

Shares Issued

Average Price

Gross Proceeds

During the six months ended June 30, 2020, we physically settled all of our outstanding forward sales agreements for cash proceeds of $ 576,196,000 .

As of June 30, 2020, we h ad $ 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 averag e price of $ 37.89 per share.

The following is a summary of our common stock issuances during the six months ended 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 4,304,712 $ 75.20 $ 323,724 $ 320,243

3 unchanged sentences

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 — —

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Dividends The increase in dividends is attributable to increases in our common shares outstanding.

2020 Totals 7,247,780 $ 607,189 $ 595,313

Dividends The decrease in dividends is attributable to 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):

Three Months Ended

March 31, 2020

March 31, 2019

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

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

March 31, 2020

December 31, 2019

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 loss

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Stock Incentive Plans

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Options expire ten years from the date of grant.

Stock-based compensation expense totaled $ 7,083,000 and $ 7,529,000 for the three months ended March 31, 2020 and 2019 , respectfully.

Stock-based compensation expense totaled $ 7,290,000 and $ 14,373,000 for the three and six months ended June 30, 2020, respectfully, and $ 7,662,000 and $ 15,192,000 for the same periods in 2019.

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,

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

2 unchanged sentences

Non-vested restricted shares

Redeemable shares

619 955 661 911

Redeemable OP units

1,396 1,096 1,396 1,096

Employee stock purchase program

1 unchanged sentence

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

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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.

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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.

4 unchanged sentences

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 to the unitholders and income or loss attributable to the unitholders.

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 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

June 30, 2020 December 31, 2019

Carrying Amount Fair Value Carrying Amount Fair Value

Financial assets:

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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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Items Measured at Fair Value on a Recurring Basis

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The following summarizes items measured at fair value on a recurring basis (in thousands):

Fair Value Measurements as of March 31, 2020

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 $ —

(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

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

Three Months Ended March 31, 2020:

Seniors Housing Operating

Outpatient Medical

Non-segment / Corporate

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

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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

5 unchanged sentences

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

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Net income (loss) $ ( 47,287 ) $ 161,338 $ 190,545 $ ( 145,380 ) $ 159,216

(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

Outpatient Medical

Non-segment / Corporate

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

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

1 unchanged sentence

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

5 unchanged sentences

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2020 Seniors Housing Operating Triple-net Outpatient Medical Non-segment / Corporate Total

Resident fees and services $ 1,619,532 $ — $ — $ — $ 1,619,532

Rental income — 408,877 377,388 — 786,265

Interest income 192 30,191 927 — 31,310

Other income 5,054 2,280 1,845 791 9,970

Total revenues 1,624,778 441,348 380,160 791 2,447,077

Property operating expenses 1,203,384 26,865 112,296 — 1,342,545

Consolidated net operating income 421,394 414,483 267,864 791 1,104,532

Depreciation and amortization 285,937 115,832 138,403 — 540,172

Interest expense 30,463 5,598 9,134 223,169 268,364

General and administrative expenses — — — 69,543 69,543

Loss (gain) on derivatives and financial instruments, net — 9,085 — — 9,085

Loss (gain) on extinguishment of debt, net ( 492 ) — 741 — 249

Provision for loan losses — 8,523 ( 29 ) — 8,494

Impairment of assets 78,646 24,332 — — 102,978

Other expenses 8,240 4,013 7,463 5,987 25,703

5 unchanged sentences

Net income (loss) $ 15,105 $ 311,084 $ 467,990 $ ( 305,583 ) $ 488,596

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.

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The following is a summary of geographic information for the periods presented (dollars in thousands):

Three Months Ended

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

% Amount % Amount (1)

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 %

March 31, 2020

December 31, 2019

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 %

June 30, 2020 December 31, 2019

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 %

(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 months ended March 31, 2020 .

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 June 30, 2020.

Income Taxes and Distributions

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income based or withholding taxes on certain investments located in jurisdictions outside the U.S.

The provision for income taxes for the three months ended March 31, 2020 and 2019 , was primarily due to operating income or losses, offset by certain discrete items at our TRS entities.

The provision for income taxes for the six months ended 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.

18 unchanged sentences

Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands):

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Net real estate investments $ 457,107 $ 960,093

2 unchanged sentences

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

15 unchanged sentences

Seniors Housing Operating 36

Triple-net 38

Outpatient Medical 40

3 unchanged sentences

Cautionary Statement Regarding Forward-Looking Statements 51

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.

Executive Summary

Company Overview

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, 2020 (dollars in thousands):

Percentage of

Type of Property

Seniors Housing Operating

Outpatient Medical

(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.

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.

Our Seniors Housing Operating revenues are dependent on occupancy.

Declines in occupancy are expected due to increases 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.

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 expenses are expected to continue through 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 and operating costs as described above with respect to our Seniors Housing Operating properties which may impact the ability of our Triple-net operators to make contractual rent payments to us in the future.

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 adversely effect their ability to make contractual rent payments.

Accordingly, our medical office building tenants' ability to pay rent may be impacted.

These factors may 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.

Management's Discussion and Analysis of Financial Condition and Results of Operations

As a result of uncertainty regarding the length and severity of the COVID-19 pandemic and the impact of the pandemic on our business and related industries, our investments in and acquisitions of senior housing and health care properties, as well as our ability to transition or sell properties with profitable results, may be limited.

During April 2020, a planned disposition of a portfolio of 11 Seniors Housing Operating properties was not consummated as a result of the uncertainty of the COVID-19 pandemic on our business and industry.

We have a significant development portfolio and as of March 31, 2020, have not experience significant delays or disruptions, but may in the future.

Such disruptions to acquisition, disposition and development activity may negatively impact our long-term competitive position.

Business Strategy

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 months ended March 31, 2020 , resident fees and services and rental income represented 68% and 31% , 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.

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.

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders.

It is also likely that investment dispositions may occur in the future.

To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected.

We expect to reinvest the proceeds from any investment dispositions in new investments.

To the extent that

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, 2020 , we had $303,423,000 of cash and cash equivalents, $89,643,000 of restricted cash and $ 2,155,000,000 of available borrowing capacity under our unsecured revolving credit facility.

Key Transactions

Capital The following summarizes key capital transaction that occurred during the three months ended March 31, 2020 and subsequent events:

During the three months ended March 31, 2020 , we extinguished $16,040,000 of secured debt at a blended average interest rate of 4.51% .

During the three months ended March 31, 2020 , we sold 2,039 ,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.

The sale of these shares and settlement of previously outstanding forward sales resulted in gross proceeds of approximately $602,877 ,000 which were used to reduce borrowings under our unsecured revolving credit facility.

On April 1, 2020, we closed on a 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.

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

Investment Amount (1)

Capitalization Rates (2)

Book Amount (3)

Seniors Housing Operating

Triple-net (4)

Outpatient Medical

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

(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.

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 months ended March 31, 2020 (dollars in thousands):

Capitalization Rates (2)

Book Amount (3)

Outpatient Medical

(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, 2020 of $0.61 per share.

On May 28, 2020, we will pay our 196 th consecutive quarterly cash dividend to stockholders of record on May 19, 2020.

Key Performance Indicators, Trends and Uncertainties

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.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Operating Performance We 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.

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):

Three Months Ended

September 30,

Net income (loss)

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

September 30,

Net debt to book capitalization ratio

Net debt to undepreciated book capitalization ratio

Net debt to market capitalization ratio

Interest coverage ratio

Fixed charge coverage ratio

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:

Management's Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended

September 30,

Property mix:

Seniors Housing Operating

Outpatient Medical

Relationship mix:

Sunrise Senior Living (2)

Genesis Healthcare

Belmont Village

Remaining relationships

Geographic mix:

United Kingdom

Remaining geographic areas

(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, 2020 (dollars in thousands):

Expiration Year (1)

Base rent (2)

% of base rent

% of Units/beds

Outpatient Medical:

Base rent (2)

% of base rent

(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 regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position.

Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2019 , under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these risk factors.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Corporate Governance

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.

Liquidity and Capital Resources

Sources and Uses of Cash

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

March 31, 2020

March 31, 2019

Cash, cash equivalents and restricted cash at beginning of period

Cash provided from (used in) operating activities

Cash provided from (used in) investing activities

Cash provided from (used in) financing activities

Effect of foreign currency translation

Cash, cash equivalents and restricted cash at end of period

Operating Activities

The changes in net cash provided from operating activities are primarily attributable to improvements in net working capital.

Please see “Results of Operations” for discussion of net income fluctuations.

For the three months ended March 31, 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):

Three Months Ended

March 31, 2020

March 31, 2019

New development

Recurring capital expenditures, tenant improvements and lease commissions

Renovations, redevelopments and other capital improvements

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

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.

After consideration of this unsecured term loan, we have total near-term available liquidity of approximately $3.5 billion.

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, 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, 2020 , we had 12 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, 2020 (in thousands):

Payments Due by Period

Contractual Obligations

Unsecured credit facility and commercial paper (1,2)

Senior unsecured notes and term credit facilities:

Dollar senior unsecured notes

Canadian Dollar senior unsecured notes (3)

Pounds Sterling senior unsecured notes (3)

Dollar term credit facility

Canadian Dollar term credit facility (3)

Secured debt:

Unconsolidated

Contractual interest obligations:

Unsecured credit facility and commercial paper

Senior unsecured notes and term loans (3)

Consolidated secured debt (3)

Unconsolidated secured debt (3)

Financing lease liabilities (5)

Operating lease liabilities (5)

Purchase obligations (6)

Total contractual obligations

(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.

Capital Structure

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, 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

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.

On May 17, 2018, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan (“DRIP”) under which we may issue up to 15,000,000 shares of common stock.

As of May 1, 2020 , 2,541,750 shares of common stock remained available for issuance under the DRIP registration statement.

On February 25, 2019, we entered into separate amended and restated equity distribution agreements with each of Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co.

Morgan Securities LLC, KeyBanc Capital Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.

LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of 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.

As of May 1, 2020 , we had $ 499,341,000 of remaining capacity under the Equity Shelf Program and there were no outstanding forward sales agreements.

Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured revolving credit facility and commercial paper program.

Results of Operations

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

Per share data (fully diluted):

Interest coverage ratio

Fixed charge coverage ratio

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

March 31, 2020

March 31, 2019

(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.

Management's Discussion and Analysis of Financial Condition and Results of Operations

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

Three Months Ended

Resident fees and services

Interest income

Total revenues

Property operating expenses

Other expenses:

Depreciation and amortization

Interest expense

Impairment of assets

Other expenses

Income (loss) from continuing operations before income taxes and other items

Income (loss) from unconsolidated entities

Gain (loss) on real estate dispositions, net

Income from continuing operations

Net income (loss)

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to common stockholders

(1) See Non-GAAP Financial Measures below.

Fluctuations in resident fees and services and property operating expenses are primarily a result of acquisitions, segment transitions, offset by dispositions, and the movement of U.S.

and foreign currency exchange rates.

Despite the COVID-19 pandemic, occupancy rates remained relatively steady through March 31, 2020, however, we incurred increased operational costs of $7,294,000 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.

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.

During the three months ended March 31, 2020 , we recorded impairment charges on one held for use property as the carrying values exceeded the estimated fair value.

Transaction costs related to asset acquisitions are capitalized as a component of the purchase price.

The increase in other expenses is primarily due to additional noncapitalizable transaction costs associated with acquisitions and operator transitions.

During the three months ended March 31, 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, 2020 (dollars in thousands):

Management's Discussion and Analysis of Financial Condition and Results of Operations

Beckenham, UK

Project in planning stage

Washington, DC

Project in planning stage

Brookline, MA

Project in planning stage

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

Interest Rate

Beginning balance

Debt extinguished

Principal payments

Foreign currency

Ending balance

Monthly averages

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.

Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures.

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

Three Months Ended

March 31, 2020

March 31, 2019

(1) For the three months ended March 31, 2020 and 2019 , amounts relate to 632 same store properties.

The same store property pools exclude 19 properties that have undergone operator transitions or segment transitions during the relevant period.

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):

Management's Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended

Rental income

Interest income

Total revenues

Property operating expenses

Other expenses:

Depreciation and amortization

Interest expense

Loss (gain) on derivatives and financial instruments, net

Provision for loan losses

Impairment of assets

Other expenses

Income (loss) from continuing operations before income taxes and other items

Income (loss) from unconsolidated entities

Gain (loss) on real estate dispositions, net

Income from continuing operations

Net income (loss) attributable to noncontrolling interests

Net income attributable to common stockholders

(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, as well as property dispositions.

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, 2020 , we had 17 leases with rental rate increases ranging from 0.13% to 1.07% in our Triple-net portfolio.

However, rent collections for the three months ended March 31, 2020 were consistent with prior periods.

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 no longer deemed collectible.

In March 2020, we recognized a provision for loan losses of $6,898,000 to fully reserve for a non-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 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.

The following is a summary of Triple-net construction projects, excluding expansions, pending as of March 31, 2020 (dollars in thousands):

Management's Discussion and Analysis of Financial Condition and Results of Operations

Westerville, OH

Droitwich, UK

Thousand Oaks, CA

Wombourne, UK

Leicester, UK

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

Interest Rate

Beginning balance

Principal payments

Foreign currency

Ending balance

Monthly averages

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.

Outpatient Medical

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

Three Months Ended

March 31, 2020

March 31, 2019

(1) For the three months ended March 31, 2020 and 2019 , amounts relate to 261 same store properties, respectively.

Please see Non-GAAP Financial Measures for additional information and reconciliations.

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

Rental income

Interest income

Total revenues

Property operating expenses

Other expenses:

Depreciation and amortization

Interest expense

Other expenses

Income (loss) from continuing operations before income taxes and other items

Income (loss) from unconsolidated entities

Gain (loss) on real estate dispositions, net

Income from continuing operations

Net income (loss)

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to common stockholders

(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, 2020 , our consolidated outpatient medical portfolio signed 144,185 square feet of new leases and 210,308 square feet of renewals.

The weighted-average term of these leases was seven years, with a rate of $36.71 per square foot and tenant improvement and lease commission costs of $27.89 per square foot.

Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.5% to 4.0%.

In addition, 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, rent collections for the three months ended March 31, 2020 were consistent with prior periods.

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.

Changes in gains/losses on sales of properties are related to volume of property sales and the sales prices.

During the three months ended March 31, 2020, we completed one Outpatient Medical construction project representing $19,369,000 or $352 per square foot.

The following is a summary of the Outpatient Medical construction projects, excluding expansions, pending as of March 31, 2020 (dollars in thousands):

Management's Discussion and Analysis of Financial Condition and Results of Operations

Total interest expense represents secured debt interest expense.

The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations.

The following is a summary of our outpatient medical secured debt principal activity (dollars in thousands):

Three Months Ended

March 31, 2020

March 31, 2019

Interest Rate

Beginning balance

Principal payments

Ending balance

Monthly averages

A portion of our Outpatient Medical 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 or loss relating to those partnerships where we are the controlling partner.

Non-Segment/Corporate

The following is a summary of our results of operations for the Non-Segment/Corporate activities for the periods presented (dollars in thousands):

Three Months Ended

Total revenue

Interest expense

General and administrative expenses

Loss (gain) on extinguishment of debt, net

Other expenses

Loss from continuing operations before

income taxes and other items

Income tax (expense) benefit

Loss from continuing operations

Net loss attributable to common stockholders

The following is a summary of our Non-Segment/Corporate interest expense or the periods presented (dollars in thousands):

Three Months Ended

Senior unsecured notes

Unsecured credit facility and commercial paper program

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, as well as the movement in foreign exchange rates and related hedge activity.

Please refer to Note 11 for additional information.

The change in interest expense on our unsecured revolving credit facility and commercial paper program is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes.

Please refer to Note 10 for additional information regarding our unsecured revolving credit facility and commercial paper program.

The loss on extinguishment recognized during the three months

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements