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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-07 · 791 added, 29 removed, 268 unchanged (75% of the section changed)

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

ended March 31, 2019 is due to the early extinguishment of the $600,000,000 of 4.125% senior unsecured notes due 2019 and the $450,000,000 of 6.125% senior unsecured notes due 2020.

General and administrative expenses as a percentage of consolidated revenues for the three months ended March 31, 2020 and 2019 were 2.82% and 2.77% , respectively.

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 June 30, 2020 (dollars in thousands):

Percentage of Number of

Type of Property NOI (1)

NOI Properties

Seniors Housing Operating $ 178,137 33.8 % 526

Triple-net 220,056 41.7 % 653

Outpatient Medical 129,143 24.5 % 347

Totals $ 527,336 100.0 % 1,526

(1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities.

Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.

See Non-GAAP Financial Measures for additional information and reconciliation.

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.

While admission bans were lifted across our portfolio during the second quarter and in July, move-out activity continued to outpace move-ins, resulting in occupancy losses throughout the period.

Further occupancy losses are expected in the third quarter as move-out activity continues to exceed move-ins, but to a lesser degree than experienced in the second quarter.

We have incurred increased operational costs as a result of the introduction of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure PPE and supplies.

We expect total Seniors Housing Operating expenses to remain elevated during the pandemic and potentially beyond as these additional health and safety measures become standard practice.

Our Triple-net operators are experiencing similar occupancy declines and operating costs as described above with respect to our Seniors Housing Operating properties.

However, long-term/post-acute care facilities are generally experiencing a higher degree of occupancy declines.

These factors may continue to impact the ability of our Triple-net operators to make contractual rent payments to us in the future.

Many of our Triple-net operators received funds under the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) and operators of long-term/post-acute care facilities have also received funds under the CARES Act Provider Relief Fund.

Accordingly, collection of Triple-net rent due during the COVID-19 pandemic to date (from March to July) has been consistent with historical collection rates and no significant rent concessions or deferrals have been made.

Our Outpatient Medical tenants are experiencing temporary medical practice closures or decreases in revenue due to government imposed restrictions on elective medical procedures, stay at home orders or decisions by patients to delay treatments which may continue to adversely affect their ability to make contractual rent payments.

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

We will evaluate each request on a case-by-case basis and determine if a form of rent relief is warranted following an examination of the tenant’s financial health, rent coverage, current operating situation and other factors.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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.

We have a significant development portfolio as of June 30, 2020.

To date we have only experienced minor construction and licensing delays with respect to our development portfolio, but may experience more significant delays 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 six months ended June 30, 2020, resident fees and services and rental income represented 66% and 32%, respectively, of total revenues.

Substantially all of our operating leases are designed with escalating rent structures.

Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment.

Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.

Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

Our primary sources of cash include resident fees and services, rent and interest receipts, borrowings under our unsecured revolving credit facility and commercial paper program, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable.

Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses.

Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

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

We also continuously evaluate opportunities to finance future investments.

New investments are generally funded from temporary borrowings under our unsecured revolving credit facility and commercial paper program, internally generated cash and the proceeds from investment dispositions.

Our investments generate cash from NOI and principal payments on loans receivable.

Permanent financing for future investments, which replaces funds drawn under our unsecured revolving credit facility and commercial paper program, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.

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 new investment requirements exceed our available cash on-hand, we expect to borrow under our unsecured revolving credit facility and commercial paper program.

At June 30, 2020, we h ad $1,678,770,000 of cash and cash equivalents, $147,473,000 of restricted cash and $3,000,000,000 of available borrowing capacity under our unsecured revolving credit facility.

Key Transactions

Capital The foll owing summarizes key capital transaction that occurred during the six months ended June 30, 2020 and subsequent events:

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

• During the six months ended June 30, 2020, we sold 2,128,000 shares of common stock under our ATM and DRIP programs, via both cash settle and forward sale agreements, generating gross proceeds of approximately $175,484,000.

The sale of these shares and settlement of previously outstanding forward sales resulted in gross proceeds of approximately $607,177,000 which were used to reduce borrowings under our unsecured revolving credit facility.

• In April, we closed on our previously announced $1.0 billion two-year unsecured term loan.

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.

Net proceeds were used to fund tender offers for $426,000,000 of our 3.75% senior unsecured notes due 2023 and our 3.95% senior unsecured notes due 2023 which settled on July 1, 2020.

The remaining proceeds were used to reduce borrowings under our term loan by $140 million.

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

Properties Investment Amount (1)

Capitalization Rates (2)

Book Amount (3)

Seniors Housing Operating 6 $ 168,725 4.9 % $ 159,048

Triple-net (4)

Outpatient Medical 16 235,387 6.1 % 236,127

Totals 22 $ 404,112 5.6 % $ 395,940

(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 six months ended June 30, 2020 (dollars in thousands):

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

Properties Proceeds (1)

Capitalization Rates (2)

Book Amount (3)

Seniors Housing Operating 13 $ 498,510 5.6 % $ 706,964

Triple-net 5 70,439 5.0 % 33,445

Outpatient Medical 55 1,088,250 5.6 % 808,992

Totals 73 $ 1,657,199 5.5 % $ 1,549,401

(1) Represents pro rata proceeds received upon disposition including any seller financing.

(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.

(3) Represents carrying value of net real estate assets at time of disposition.

See Note 5 to our unaudited consolidated financial statements for additional information.

Dividends Our Board of Directors declared a cash dividend for the quarter ended June 30, 2020 of $0.61 per share.

On August 27, 2020, we will pay our 197 th consecutive quarterly cash dividend to stockholders of record on August 18, 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.

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

June 30, March 31, December 31, September 30, June 30, March 31,

2020 2020 2019 2019 2019 2019

Net income (loss) $ 159,216 $ 329,380 $ 240,136 $ 647,932 $ 150,040 $ 292,302

NICS 179,246 310,284 224,324 589,876 137,762 280,470

FFO 335,597 356,124 476,298 352,378 390,021 358,383

NOI 527,711 576,821 600,302 610,545 618,979 601,438

Credit Strength We measure our credit strength both in terms of leverage ratios and coverage ratios.

The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and Internal Revenue Code section 1031 deposits.

The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends).

We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile.

The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”).

Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliation of these measures.

Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies.

The following table reflects the recent historical trends for our credit strength measures for the periods presented:

Three Months Ended

June 30, March 31, December 31, September 30, June 30, March 31,

2020 2020 2019 2019 2019 2019

Net debt to book capitalization ratio 43% 44% 46% 45% 48% 43%

Net debt to undepreciated book capitalization ratio 35% 37% 39% 38% 41% 36%

Net debt to market capitalization ratio 36% 40% 30% 26% 30% 28%

Interest coverage ratio 4.29x 5.42x 4.64x 7.61x 3.74x 4.80x

Fixed charge coverage ratio 3.84x 4.88x 4.20x 6.96x 3.42x 4.38x

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

Concentration Risk We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix.

Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns.

Property mix measures the portion of our NOI that relates to our various property types.

Relationship mix measures the portion of our NOI that relates to our current top five relationships.

Geographic mix measures the portion of our NOI that relates to our current top five states (or international equivalents).

The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:

Three Months Ended

June 30, March 31, December 31, September 30, June 30, March 31,

2020 2020 2019 2019 2019 2019

Property mix:

Seniors Housing Operating 34% 42% 40% 42% 45% 44%

Triple-net 42% 34% 38% 38% 37% 39%

Outpatient Medical 24% 24% 22% 20% 18% 17%

Relationship mix:

Sunrise Senior Living (2)

10% 14% 14% 14% 14% 15%

ProMedica 10% 9% 9% 9% 9% 9%

Genesis Healthcare 6% 5% 5% 5% 5% 5%

5% 6% 6% 6% 6% 6%

Avery Healthcare 3% 3% 3% 3% 3% 3%

Remaining relationships 66% 63% 63% 63% 63% 62%

Geographic mix:

California 14% 15% 13% 14% 13% 13%

Texas 10% 7% 9% 8% 8% 8%

United Kingdom 8% 9% 9% 8% 8% 9%

New Jersey 7% 8% 8% 7% 7% 7%

Pennsylvania 6% 6% 6% 6% 6% 6%

Remaining geographic areas 55% 55% 55% 57% 58% 57%

(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 June 30, 2020 (dollars in thousands):

Expiration Year (1)

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Thereafter

Properties 3 7 6 2 4 48 76 18 15 15 440

Base rent (2)

$ 52 $ 12,511 $ 6,407 $ 840 $ 11,262 $ 54,270 $ 104,023 $ 35,406 $ 22,446 $ 30,479 $ 495,098

% of base rent — % 1.6 % 0.8 % 0.1 % 1.5 % 7.0 % 13.5 % 4.6 % 2.9 % 3.9 % 64.1 %

Units/beds 220 1,316 757 1,337 692 3,033 6,078 2,350 1,633 1,429 45,632

% of Units/beds 0.3 % 2.0 % 1.2 % 2.1 % 1.1 % 4.7 % 9.4 % 3.6 % 2.5 % 2.2 % 70.9 %

Outpatient Medical:

Square feet 1,454,125 1,562,375 1,975,098 2,018,860 2,059,566 1,180,994 1,147,542 1,069,560 907,508 807,202 5,700,539

Base rent (2)

$ 39,595 $ 45,979 $ 55,886 $ 54,605 $ 61,819 $ 32,382 $ 32,063 $ 27,593 $ 24,511 $ 22,241 $ 133,024

% of base rent 7.5 % 8.7 % 10.6 % 10.3 % 11.7 % 6.1 % 6.1 % 5.2 % 4.6 % 4.2 % 25.0 %

Leases 318 377 399 411 341 235 155 144 114 88 199

% of Leases 11.4 % 13.6 % 14.3 % 14.8 % 12.3 % 8.5 % 5.6 % 5.2 % 4.1 % 3.2 % 7.0 %

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

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.

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):

Six Months Ended Change

June 30, 2020 June 30, 2019 $ %

Cash, cash equivalents and restricted cash at beginning of period $ 385,766 $ 316,129 $ 69,637 22 %

Cash provided from (used in) operating activities 811,616 854,482 (42,866) -5 %

Cash provided from (used in) investing activities 1,142,180 (2,531,364) 3,673,544 145 %

Cash provided from (used in) financing activities (504,309) 1,720,804 (2,225,113) -129 %

Effect of foreign currency translation (9,010) (333) (8,677) -2,606 %

Cash, cash equivalents and restricted cash at end of period $ 1,826,243 $ 359,718 $ 1,466,525 408 %

Operating Activities The changes in net cash provided from operating activities are primarily attributable to declines in revenue and increases in property operating expenses, as well as the impact of short-term rent deferrals granted as a result of the COVID-19 pandemic in 2020.

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

For the six months ended June 30, 2020 and 2019 , cash flows provided from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash provided from/used in investing activities are primarily attributable to net changes in real property investments and dispositions, loans receivable and investments in unconsolidated entities, which are summarized above in “Key Transactions” and Notes 3 and 5 of our unaudited consolidated financial statements.

The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands):

Six Months Ended Change

June 30, 2020 June 30, 2019 $

New development $ 93,031 $ 155,409 $ (62,378)

Recurring capital expenditures, tenant improvements and lease commissions 40,939 49,925 (8,986)

Renovations, redevelopments and other capital improvements 81,164 74,251 6,913

Total $ 215,134 $ 279,585 $ (64,451)

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

The change in new development is primarily due to the number and size of construction projects on-going during the relevant periods.

Renovations, redevelopments and other capital improvements include expenditures to maximize property value, increase net operating income, maintain a market-competitive position and/or achieve property stabilization.

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

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

On April 1, 2020, in response to uncertain financial market conditions arising from the COVID-19 pandemic, we undertook steps to strengthen our balance sheet and to enhance our liquidity by entering into a $1.0 billion two-year unsecured term loan.

Additionally, on June 30, 2020, we completed the issuance of $600 million senior unsecured notes with a maturity date of January 2031.

Net proceeds were used to fund tender offers for $426 million of our 3.75% senior unsecured notes due 2023 and our 3.95% senior unsecured notes due 2023, which settled on July 1, 2020.

The remaining proceeds were used to reduce borrowings under the term loan by $140 million.

After consideration of these transactions, we have total near-term available liquidity of approximately $4.2 billion at July 2, 2020.

However, we are unable to accurately predict the full impact that the pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous factors discussed in Part II Item 1A.

Risk Factors.

Off-Balance Sheet Arrangements

At June 30, 2020, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 50%.

We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure.

At June 30, 2020, we had 8 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 June 30, 2020 (in thousands):

Payments Due by Period

Contractual Obligations Total 2020 2021-2022 2023-2024 Thereafter

Unsecured credit facility and commercial paper (1,2)

$ — $ — $ — $ — $ —

Senior unsecured notes and term credit facilities:

Dollar senior unsecured notes 8,700,000 — — 2,450,000 6,250,000

Canadian Dollar senior unsecured notes (3)

220,345 — — — 220,345

Pounds Sterling senior unsecured notes (3)

1,298,745 — — — 1,298,745

Dollar term credit facility 1,510,000 — 1,010,000 500,000 —

Canadian Dollar term credit facility (3)

183,621 — — 183,621 —

Secured debt:

Consolidated 2,627,989 257,139 872,088 503,754 995,008

Unconsolidated 929,033 33,470 83,834 111,479 700,250

Contractual interest obligations:

Unsecured credit facility and commercial paper — — — — —

Senior unsecured notes and term loans (3)

4,092,526 242,199 859,915 752,916 2,237,496

Consolidated secured debt (3)

354,990 39,429 127,559 74,731 113,271

Unconsolidated secured debt (3)

204,105 15,786 59,337 54,025 74,957

Financing lease liabilities (5)

199,117 4,602 17,076 70,802 106,637

Operating lease liabilities (5)

1,067,950 11,097 43,018 40,915 972,920

Purchase obligations (6)

563,822 289,239 210,622 50,413 13,548

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

(1) Relates to our unsecured credit facility and commercial paper with an aggregate commitment of $3,000,000,000.

See Note 10 to our unaudited consolidated financial statements for additional information.

(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.

(3) Based on foreign currency exchange rates in effect as of balance sheet date.

(4) Based on variable interest rates in effect as of balance sheet date.

(5) See Note 6 to our unaudited consolidated financial statements for additional information.

(6) See Note 13 to our unaudited consolidated financial statements for additional information.

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

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

None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings.

However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged.

We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile.

Any downgrades in 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 o f July 31, 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 July 31, 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 Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 Amount % 2020 2019 Amount %

Net income $ 159,216 $ 150,040 $ 9,176 6 % $ 488,596 $ 442,342 $ 46,254 10 %

NICS 179,246 137,762 41,484 30 % 489,530 418,232 71,298 17 %

FFO 335,597 390,021 (54,424) -14 % 691,721 748,404 (56,683) -8 %

EBITDA 553,177 541,027 12,150 2 % 1,304,807 1,224,715 80,092 7 %

NOI 527,711 618,979 (91,268) -15 % 1,104,532 1,220,417 (115,885) -9 %

SSNOI 414,280 464,556 (50,276) -11 % 832,325 886,723 (54,398) -6 %

Per share data (fully diluted):

NICS $ 0.42 $ 0.34 $ 0.08 24 % $ 1.17 $ 1.05 $ 0.13 12 %

FFO $ 0.80 $ 0.96 $ (0.16) -17 % $ 1.66 $ 1.87 $ (0.21) -11 %

Interest coverage ratio 4.29 x 3.74 x 0.55 x 15 % 4.88 x 4.27 x 0.61 x 14 %

Fixed charge coverage ratio 3.84 x 3.42 x 0.42 x 12 % 4.37 x 3.90 x 0.47 x 12 %

Seniors Housing Operating

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

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

QTD Pool YTD Pool

Three Months Ended Change Six Months Ended Change

June 30, 2020 June 30, 2019 $ % June 30, 2020 June 30, 2019 $ %

$ 163,922 $ 217,562 $ (53,640) -24.7 % $ 336,658 $ 401,141 $ (64,483) -16.1 %

(1) For the three and six months ended June 30, 2020 and 2019, amounts relate to 497 and 416 same store properties, respectively.

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

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

Three Months Ended Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 $ % 2020 2019 $ %

Resident fees and services

$ 769,560 $ 914,085 $ (144,525) -16 % $ 1,619,532 $ 1,782,370 $ (162,838) -9 %

Interest income

88 — 88 n/a 192 — 192 n/a

4,002 1,444 2,558 177 % 5,054 5,545 (491) -9 %

Total revenues

773,650 915,529 (141,879) -15 % 1,624,778 1,787,915 (163,137) -9 %

Property operating expenses 595,513 637,317 (41,804) -7 % 1,203,384 1,245,003 (41,619) -3 %

178,137 278,212 (100,075) -36 % 421,394 542,912 (121,518) -22 %

Other expenses:

Depreciation and amortization

139,163 136,551 2,612 2 % 285,937 268,126 17,811 7 %

Interest expense

14,029 17,572 (3,543) -20 % 30,463 35,823 (5,360) -15 %

Loss (gain) on extinguishment of debt, net

(492) — (492) n/a (492) — (492) n/a

Impairment of assets

75,151 — 75,151 n/a 78,646 — 78,646 n/a

Other expenses

5,251 11,857 (6,606) -56 % 8,240 14,803 (6,563) -44 %

233,102 165,980 67,122 40 % 402,794 318,752 84,042 26 %

Income (loss) from continuing operations before income taxes and other items (54,965) 112,232 (167,197) -149 % 18,600 224,160 (205,560) -92 %

Income (loss) from unconsolidated entities (6,787) (17,453) 10,666 61 % (17,811) (34,033) 16,222 48 %

Gain (loss) on real estate dispositions, net 14,465 (550) 15,015 n/a 14,316 (710) 15,026 n/a

Income from continuing operations (47,287) 94,229 (141,516) -150 % 15,105 189,417 (174,312) -92 %

Net income (loss) (47,287) 94,229 (141,516) -150 % 15,105 189,417 (174,312) -92 %

Net income (loss) attributable to noncontrolling interests (26,156) 2,236 (28,392) n/a (28,088) 3,977 (32,065) n/a

Net income (loss) attributable to common stockholders $ (21,131) $ 91,993 $ (113,124) -123 % $ 43,193 $ 185,440 $ (142,247) -77 %

(1) See Non-GAAP Financial Measures below.

Decreases in resident fees and services and property operating expenses are primarily a result of dispositions and decreases in occupancy across the portfolio due to the COVID-19 pandemic.

Occupancy within our Seniors Housing Operating portfolio has declined as follows:

February March April May June July

Spot occupancy (1)

85.8 % 85.0 % 82.8 % 81.0 % 80.1 % 79.4 %

Sequential occupancy change (0.8) % (2.2) % (1.8) % (0.9) % (0.7) %

(1) Spot occupancy 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.

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

The fluctuations in depreciation and amortization are due to acquisitions and dispositions and variations in amortization of short-lived intangible assets.

To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

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

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

During the three months ended June 30, 2020, we entered into and subsequently closed a definitive purchase and sale agreement to sell six properties.

In conjunction with this transaction, an impairment charge of $56,371,000 was recognized.

During the three months ended June 30, 2020, we agreed to terms including pricing for the sale of a portfolio of six properties previously classified as held for sale resulting in an impairment charge of $18,780,000.

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

Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices.

The decrease in other expenses is primarily due to the decrease of noncapitalizable transaction costs associated with acquisitions and operator transitions.

During the six months ended June 30, 2020, we completed three Seniors Housing Operating construction projects representing $93,188,000 or $300,606 per unit.

The following is a summary of our Seniors Housing Operating construction projects, excluding expansions, pending as of June 30, 2020 (dollars in thousands):

Location Units Commitment Balance Est.

Potomac, MD 120 $ 56,720 $ 38,794 4Q20

Beckenham, UK 100 58,258 31,054 3Q21

Barnet, UK 100 63,700 30,839 4Q21

Hendon, UK 102 69,019 36,298 1Q22

422 $ 247,697 136,985

Toronto, ON Project in planning stage 42,866

Brookline, MA Project in planning stage 21,011

Washington, DC Project in planning stage 20,803

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 Six Months Ended

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

Amount Interest Rate Amount Interest Rate Amount Interest Rate Amount Interest Rate

Beginning balance $ 2,044,926 3.56 % $ 1,995,343 3.79 % $ 2,115,037 3.54 % $ 1,810,587 3.87 %

Debt issued — — % 48,806 2.94 % 44,921 2.58 % 295,969 3.52 %

Debt assumed — — % — — % — — % 42,000 4.62 %

Debt extinguished (290,198) 2.81 % (36,903) 2.74 % (306,238) 2.90 % (151,473) 4.42 %

Principal payments (11,603) 3.17 % (11,225) 3.49 % (23,776) 3.18 % (22,430) 3.44 %

Foreign currency 36,500 3.01 % 22,159 3.31 % (50,319) 3.19 % 43,527 3.33 %

Ending balance $ 1,779,625 2.91 % $ 2,018,180 3.80 % $ 1,779,625 2.91 % $ 2,018,180 3.80 %

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

The majority of our Seniors Housing Operating properties are formed through partnership interests.

Losses from unconsolidated entities are largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures, as well as the disposal of an investment in an unconsolidated entity during the quarter ended June 30, 2019.

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

The decrease during the three months ended June 30, 2020 relates primarily to our partners' share of impairment charges recognized, offset by our partners' share of gains on dispositions.

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

QTD Pool YTD Pool

Three Months Ended Change Six Months Ended Change

June 30, 2020 June 30, 2019 $ % June 30, 2020 June 30, 2019 $ %

$ 170,783 $ 169,784 $ 999 0.6 % $ 340,770 $ 334,928 $ 5,842 1.7 %

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

(1) For the three and six months ended June 30, 2020 and 2019, amounts relate to 641 and 635 same store properties, respectively.

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

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

Three Months Ended Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 $ % 2020 2019 $ %

Rental income

$ 217,492 $ 222,362 $ (4,870) -2 % $ 408,877 $ 454,394 $ (45,517) -10 %

Interest income

15,520 17,118 (1,598) -9 % 30,191 32,064 (1,873) -6 %

607 1,278 (671) -53 % 2,280 2,541 (261) -10 %

Total revenues

233,619 240,758 (7,139) -3 % 441,348 488,999 (47,651) -10 %

Property operating expenses 13,563 12,823 740 6 % 26,865 27,778 (913) -3 %

220,056 227,935 (7,879) -3 % 414,483 461,221 (46,738) -10 %

Other expenses:

Depreciation and amortization

58,138 56,056 2,082 4 % 115,832 117,404 (1,572) -1 %

Interest expense

2,746 3,225 (479) -15 % 5,598 6,665 (1,067) -16 %

Loss (gain) on derivatives and financial instruments, net

1,434 1,913 (479) -25 % 9,085 (574) 9,659 n/a

Provision for loan losses

1,451 — 1,451 n/a 8,523 18,690 (10,167) -54 %

Impairment of assets

— (940) 940 100 24,332 (940) 25,272 n/a

Other expenses

3,500 5,560 (2,060) -37 % 4,013 8,589 (4,576) -53 %

67,269 65,814 1,455 2 % 167,383 149,834 17,549 12 %

Income (loss) from continuing operations before income taxes and other items 152,787 162,121 (9,334) -6 % 247,100 311,387 (64,287) -21 %

Income (loss) from unconsolidated entities 6,403 6,578 (175) -3 % 12,199 12,236 (37) — %

Gain (loss) on real estate dispositions, net 2,148 (1,130) 3,278 290 % 51,785 166,444 (114,659) -69 %

Income from continuing operations 161,338 167,569 (6,231) -4 % 311,084 490,067 (178,983) -37 %

Net income 161,338 167,569 (6,231) -4 % 311,084 490,067 (178,983) -37 %

Net income (loss) attributable to noncontrolling interests 9,103 9,230 (127) -1 % 27,678 18,326 9,352 51 %

Net income attributable to common stockholders $ 152,235 $ 158,339 $ (6,104) -4 % $ 283,406 $ 471,741 $ (188,335) -40 %

(1) See Non-GAAP Financial Measures below.

The decrease in rental income is primarily attributable to the write off of straight-line rent receivables of $32,268,000 recognized during the quarter ended March 31, 2020 in conjunction with a lease amendment, the establishment of a reserve for straight-line rent receivable deemed uncollectible of $1,842,000 during the quarter ended June 30, 2020, as well as property dispositions during 2019 and 2020.

Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties.

These escalators are not fixed, so no straight-line rent is recorded;

however, rental income is recorded based on the contractual cash rental payments due for the period.

If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase.

For the three months ended June 30, 2020, we had 9 leases with rental rate increases ranging from 0.16% to 0.36% in our Triple-net portfolio.

Our Triple-net operators are experiencing similar impacts on occupancy and operating costs due to the COVID-19 pandemic as described above with respect to our Seniors Housing Operating properties.

However, long-term/post-acute facilities are generally experiencing a higher degree of occupancy declines which may impact the ability of our Triple-net operators to make contractual rent payments to us in the future.

Many of our Triple-net operators received funds under the CARES Act and operators of long-term/post-acute facilities have also received funds under the CARES Act Provider Relief Fund.

Accordingly, collection of rent due during the COVID-19 pandemic to date (from March to July) have been consistent with historical collection rates and no significant rent concessions or deferrals have been made to date.

Depreciation and amortization fluctuates as a result of the acquisitions, dispositions and transitions of triple-net properties.

To the extent we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain real estate loans receivable that were no longer deemed collectible.

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

During the three months ended June 30, 2020, we recognized a provision for loan losses of $1,303,00 to fully reserve for one real estate loan receivable that was no longer deemed collectible.

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

Changes in the

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

gain on sales of properties are related to the volume and timing of property sales and the sales prices.

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

The fluctuation in other expenses is primarily due to noncapitalizable transaction costs from acquisitions and segment transitions.

During the six months ended June 30, 2020, we completed one Triple-net construction project representing $33,627,000 or $207,574 per unit.

The following is a summary of Triple-net construction projects, excluding expansions, pending as of June 30, 2020 (dollars in thousands):

Location Units/Beds Commitment Balance Est.

Westerville, OH 102 $ 27,200 $ 25,092 3Q20

Thousand Oaks, CA 82 24,763 15,281 4Q20

Droitwich, UK 70 15,665 13,360 4Q20

Redhill, UK 76 19,667 9,428 2Q21

Wombourne, UK 66 14,843 3,341 2Q22

Leicester, UK 60 13,853 3,692 2Q22

456 $ 115,991 $ 70,194

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.

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

Three Months Ended Six Months Ended

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

Amount Interest Rate Amount Interest Rate Amount Interest Rate Amount Interest Rate

Beginning balance $ 289,739 3.55 % $ 292,258 3.62 % $ 306,038 3.60 % $ 288,386 3.63 %

Principal payments (1,042) 5.16 % (952) 5.25 % (2,102) 5.16 % (1,909) 5.25 %

Foreign currency 624 4.12 % (3,354) 3.21 % (14,615) 2.90 % 1,475 4.77 %

Ending balance $ 289,321 3.27 % $ 287,952 3.63 % $ 289,321 3.27 % $ 287,952 3.63 %

0.0355003165979432

Monthly averages $ 286,599 3.36 % $ 289,328 3.62 % $ 293,300 3.47 % $ 291,073 3.62 %

A portion of our Triple-net properties were formed through partnerships.

Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner.

Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner.

The increase during the three months ended March 31, 2020, relates primarily to our partner's share of gains on disposal of properties.

Outpatient Medical

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

QTD Pool YTD Pool

Three Months Ended Change Six Months Ended Change

June 30, 2020 June 30, 2019 $ % June 30, 2020 June 30, 2019 $ %

$ 79,575 $ 77,210 $ 2,365 3.1 % $ 154,897 $ 150,654 $ 4,243 2.8 %

(1) For the three and six months ended June 30, 2020 and 2019, amounts relate to 246 and 237 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 Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 $ % 2020 2019 $ %

Rental income $ 178,813 $ 163,224 $ 15,589 10 % $ 377,388 $ 312,276 $ 65,112 21 %

Interest income 461 238 223 94 % 927 411 516 126 %

Other income 1,557 (97) 1,654 n/a 1,845 139 1,706 n/a

Total revenues 180,831 163,365 17,466 11 % 380,160 312,826 67,334 22 %

Property operating expenses 51,688 50,987 701 1 % 112,296 99,153 13,143 13 %

129,143 112,378 16,765 15 % 267,864 213,673 54,191 25 %

Other expenses:

Depreciation and amortization 68,070 55,445 12,625 23 % 138,403 106,454 31,949 30 %

Interest expense 4,326 3,386 940 28 % 9,134 6,734 2,400 36 %

Loss (gain) on extinguishment of debt, net 741 — 741 n/a 741 — 741 n/a

Provision for loan losses (29) — (29) n/a (29) — (29) n/a

Impairment of assets — 10,879 (10,879) -100 % — 10,879 (10,879) -100 %

Other expenses 6,456 (4) 6,460 n/a 7,463 750 6,713 n/a

79,564 69,706 9,858 14 % 155,712 124,817 30,895 25 %

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

49,579 42,672 6,907 16 % 112,152 88,856 23,296 26 %

Income (loss) from unconsolidated entities 1,716 1,826 (110) -6 % 3,252 3,549 (297) -8 %

Gain (loss) on real estate dispositions, net 139,250 (2) 139,252 n/a 352,586 (7) 352,593 n/a

Income from continuing operations 190,545 44,496 146,049 328 % 467,990 92,398 375,592 406 %

Net income (loss) 190,545 44,496 146,049 328 % 467,990 92,398 375,592 406 %

Net income (loss) attributable to noncontrolling interests (2,977) 812 (3,789) -467 % (524) 1,807 (2,331) -129 %

Net income (loss) attributable to common stockholders $ 193,522 $ 43,684 $ 149,838 343 % $ 468,514 $ 90,591 $ 377,923 417 %

(1) See Non-GAAP Financial Measures.

The increases in rental income are primarily attributable to acquisitions of new properties and the conversion of newly constructed outpatient medical properties, particularly the $1.25 billion CNL Healthcare Properties portfolio acquisition that closed in May 2019, partially offset by dispositions.

Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index.

These escalators are not fixed, so no straight-line rent is recorded;

however, rental income is recorded based on the contractual cash rental payments due for the period.

If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase.

Our leases could renew above or below current rental rates, resulting in an increase or decrease in rental income.

For the three months ended June 30, 2020, our consolidated outpatient medical portfolio signed 121,150 square feet of new leases and 353,185 square feet of renewals.

The weighted-average term of these leases was six years, with a rate of $36.45 per square foot and tenant improvement and lease commission costs of $17.48 per square foot.

Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.5% to 5.0%.

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.

We have either collected or approved short term deferrals for over 99 % of rent due in the second quarter, consisting of 87% cash collections and 12 % of short term deferrals.

In most cases, the deferred rent respresents two months of rent with expected repayment by the end of the year.

Approximately 98% of rent due in July was either collected or aproved for 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 %.

The fluctuation in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions of outpatient medical facilities, offset by dispositions.

To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

During the six months ended June 30, 2019, we recognized impairment charges related to certain held for sale properties as the carrying values exceeded the estimated fair values less costs to sell.

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

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

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

During the six months ended June 30, 2020, we completed three Outpatient Medical construction projects representing $ 43,493,000 or $306 per square foot.

The following is a summary of the Outpatient Medical construction projects, excluding expansions, pending as of June 30, 2020 (dollars in thousands):

Location Square Feet Commitment Balance Est.

Brooklyn, NY 140,955 $ 105,306 $ 93,646 4Q20

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 Six Months Ended

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

Amount Interest Rate Amount Interest Rate Amount Interest Rate Amount Interest Rate

Beginning balance $ 569,974 3.94 % $ 385,357 4.25 % $ 572,267 3.97 % $ 386,738 4.20 %

Debt extinguished (8,393) 4.40 % — — % (8,393) 4.40 % — — %

Principal payments (2,538) 4.61 % (1,507) 5.02 % (4,831) 4.63 % (2,888) 5.06 %

Ending balance $ 559,043 3.59 % $ 383,850 4.22 % $ 559,043 3.59 % $ 383,850 4.22 %

Monthly averages $ 566,608 3.75 % $ 384,603 4.24 % $ 568,751 3.85 % $ 386,088 4.24 %

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 Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 $ % 2020 2019 $ %

$ 375 $ 454 $ (79) -17 % $ 791 $ 2,611 $ (1,820) -70 %

Total revenue

375 454 (79) -17 % 791 2,611 (1,820) -70 %

Interest expense

105,256 117,153 (11,897) -10 % 223,169 237,346 (14,177) -6 %

General and administrative expenses

34,062 33,741 321 1 % 69,543 69,023 520 1 %

Loss (gain) on extinguishment of debt, net

— — — n/a — 15,719 (15,719) -100 %

Other expenses

4,204 4,215 (11) — % 5,987 6,242 (255) -4 %

143,522 155,109 (11,587) -7 % 298,699 328,330 (29,631) -9 %

Loss from continuing operations before

income taxes and other items (143,147) (154,655) 11,508 7 % (297,908) (325,719) 27,811 9 %

Income tax (expense) benefit (2,233) (1,599) (634) -40 % (7,675) (3,821) (3,854) -101 %

Loss from continuing operations (145,380) (156,254) 10,874 7 % (305,583) (329,540) 23,957 7 %

Net loss attributable to common stockholders $ (145,380) $ (156,254) $ 10,874 7 % $ (305,583) $ (329,540) $ 23,957 7 %

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

Three Months Ended Change Six Months Ended Change

June 30, June 30, June 30, June 30,

2020 2019 $ % 2020 2019 $ %

Senior unsecured notes $ 98,141 $ 98,475 $ (334) — % $ 201,675 $ 207,231 $ (5,556) -3 %

Unsecured credit facility and commercial paper program 2,816 15,160 (12,344) -81 % 12,984 22,678 (9,694) -43 %

Loan expense 4,299 3,518 781 22 % 8,510 7,437 1,073 14 %

Totals $ 105,256 $ 117,153 $ (11,897) -10 % $ 223,169 $ 237,346 $ (14,177) -6 %

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

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 six months ended June 30, 2019 is due to the early extinguishment of the $600,000,000 of 4.125% senior unsecured notes due 2019 and the $450,000,000 of 6.125% senior unsecured notes due 2020.

General and administrative expenses as a percentage of consolidated revenues for the three months ended June 30, 2020 and 2019 were 2.87% and 2.56%, respectively.

The provision for income taxes primarily relates to state taxes, foreign taxes and taxes based on income generated by entities that are structured as TRSs.

20 unchanged sentences

As used herein, same store is generally defined as those revenue-generating properties in the portfolio for the relevant year-over-year reporting periods.

Acquisitions and development conversions are included in SSNOI five full quarters after acquisition or being placed into service for the QTD Pool.

Acquisitions and development conversions are included in SSNOI five full quarters or six full quarters after acquisition or being placed into service for the QTD Pool and the YTD Pool, respectively.

Land parcels, loans and sub-leases, as well as any properties sold or classified as held for sale during the respective periods are excluded from SSNOI.

Redeveloped properties (including major refurbishments of a Seniors Housing Operating property where 20% or more of units are simultaneously taken out of commission for 30 days or more or Outpatient Medical properties undergoing a change in intended use) are excluded from SSNOI until five full quarters post completion of the redevelopment for the QTD Pool.

Properties undergoing operator transitions and/or segment transitions are also excluded from SSNOI until five full quarters post completion of the transition for the QTD Pool.

In addition, properties significantly impacted by force majeure, acts of God, or other extraordinary adverse events are excluded from SSNOI until five full quarters after the properties are placed back into service for the QTD Pool.

Redeveloped properties (including major refurbishments of a Seniors Housing Operating property where 20% or more of units are simultaneously taken out of commission for 30 days or more or Outpatient Medical properties undergoing a change in intended use) are excluded from SSNOI until five full quarters or six full quarters post completion of the redevelopment for the QTD Pool and YTD Pool, respectively.

Properties undergoing operator transitions and/or segment transitions are also excluded from SSNOI until five full quarters or six full quarters post completion of the transition for the QTD Pool and YTD Pool, respectively.

In addition, properties significantly impacted by force majeure, acts of God, or other extraordinary adverse events are excluded from SSNOI until five full quarters or six full quarters after the properties are placed back into service for the QTD Pool and YTD Pool, respectively.

SSNOI excludes non-cash NOI and includes adjustments to present consistent ownership percentages and to translate Canadian properties and UK properties using a consistent exchange rate.

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We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations.

We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges.

We primarily utilize EBITDA to

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

measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges.

Fixed charges include total interest and secured debt principal amortization.

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Due to the materiality of these debt agreements and the financial covenants, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above excluding unconsolidated entities and adjusted for items per our covenant.

We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents

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

Adjusted EBITDA divided by fixed charges on a trailing twelve months basis.

We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis.

Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends.

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Three Months Ended

September 30,

June 30, March 31, December 31, September 30, June 30, March 31,

NOI Reconciliations:

2020 2020 2019 2019 2019 2019

Net income (loss) $ 159,216 $ 329,380 $ 240,136 $ 647,932 $ 150,040 $ 292,302

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Seniors Housing Operating $ 178,137 $ 243,257 $ 242,453 $ 254,155 $ 278,212 $ 264,700

Triple-net 220,056 194,427 226,837 230,685 227,935 233,286

Outpatient Medical 129,143 138,721 130,498 124,864 112,378 101,295

Non-segment/corporate 375 416 514 841 454 2,157

Total NOI $ 527,711 $ 576,821 $ 600,302 $ 610,545 $ 618,979 $ 601,438

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

Three Months Ended

Six Months Ended

June 30, 2020 June 30, 2019

NOI Reconciliations:

Net income (loss) $ 488,596 $ 442,342

Loss (gain) on real estate dispositions, net (418,687) (165,727)

Loss (income) from unconsolidated entities 2,360 18,248

Income tax expense (benefit) 7,675 3,821

Other expenses 25,703 30,384

Impairment of assets 102,978 9,939

Provision for loan losses 8,494 18,690

Loss (gain) on extinguishment of debt, net 249 15,719

Loss (gain) on derivatives and financial instruments, net 9,085 (574)

General and administrative expenses 69,543 69,023

Depreciation and amortization 540,172 491,984

Interest expense 268,364 286,568

Consolidated net operating income (NOI) $ 1,104,532 $ 1,220,417

NOI by segment:

Seniors Housing Operating $ 421,394 $ 542,912

Triple-net 414,483 461,221

Outpatient Medical 267,864 213,673

Non-segment/corporate 791 2,611

Total NOI $ 1,104,532 $ 1,220,417

QTD Pool YTD Pool

Three Months Ended Six Months Ended

SSNOI Reconciliations:

March 31, 2020

March 31, 2019

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

Seniors Housing Operating:

Consolidated NOI

$ 178,137 $ 278,212 $ 421,394 $ 542,912

NOI attributable to unconsolidated investments

14,954 16,439 28,231 32,462

NOI attributable to noncontrolling interests

(13,547) (22,167) (30,624) (41,869)

NOI attributable to non-same store properties

(15,796) (53,994) (79,900) (131,368)

Non-cash NOI attributable to same store properties

(959) (82) (1,834) 457

Currency and ownership adjustments (1)

1,133 (846) (609) (1,453)

SSNOI at Welltower Share 163,922 217,562 336,658 401,141

Consolidated NOI

220,056 227,935 414,483 461,221

NOI attributable to unconsolidated investments

5,133 5,078 10,266 10,266

NOI attributable to noncontrolling interests

(14,613) (14,435) (29,396) (29,136)

NOI attributable to non-same store properties

(28,722) (32,954) (56,524) (76,160)

Non-cash NOI attributable to same store properties

(12,132) (16,074) 789 (31,347)

Currency and ownership adjustments (1)

1,061 234 1,152 84

SSNOI at Welltower Share 170,783 169,784 340,770 334,928

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Consolidated NOI

129,143 112,378 267,864 213,673

NOI attributable to unconsolidated investments

1,063 310 3,524 617

NOI attributable to noncontrolling interests

(2,366) (6,139) (8,366) (13,128)

NOI attributable to non-same store properties

(47,581) (21,077) (97,787) (32,485)

Non-cash NOI attributable to same store properties

(1,057) (1,903) (2,791) (3,892)

Currency and ownership adjustments (1)

373 (6,359) (7,547) (14,131)

SSNOI at Welltower Share 79,575 77,210 154,897 150,654

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Seniors Housing Operating

163,922 217,562 336,658 401,141

170,783 169,784 340,770 334,928

Outpatient Medical

79,575 77,210 154,897 150,654

Total $ 414,280 $ 464,556 $ 832,325 $ 886,723

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

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

QTD Pool YTD Pool

SSNOI Property Reconciliations:

Seniors Housing Operating

Outpatient Medical

Seniors Housing Operating Triple-net Outpatient Medical Total Seniors Housing Operating Triple-net Outpatient Medical Total

Consolidated properties

526 653 347 1,526 526 653 347 1,526

Unconsolidated properties

86 39 36 161 86 39 36 161

Total properties

612 692 383 1,687 612 692 383 1,687

Recent acquisitions/development conversions (1)

(34) (8) (113) (155) (71) (11) (122) (204)

Under development

(23) (6) (1) (30) (23) (6) (1) (30)

Under redevelopment (2)

(10) (1) (2) (13) (11) (1) (2) (14)

Current held for sale

(7) (3) (13) (23) (7) (3) (13) (23)

Land parcels, loans and subleases

(10) (17) (8) (35) (10) (17) (8) (35)

Transitions (3)

(31) (16) — (47) (73) (19) — (92)

— — — — (1) — — (1)

Same store properties

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

(2) Redevelopment properties will enter the QTD Pool after 5 full quarters of operations post redevelopment completion.

(3) Excludes 11 Seniors Housing Operating properties classified as held for sale which will transition back into held for use during the quarter ended June 30, 2020.

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

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

497 641 246 1,384 416 635 237 1,288

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

(2) Redevelopment properties will enter the QTD Pool and YTD Pool after five full quarters and six full quarters of operations post redevelopment completion, respectively.

(3) Transitioned properties will enter the QTD Pool and YTD Pool after five full quarters and six full quarter of operations with the new operator in place or under the new structure, respectively.

The table below reflects the reconciliation of FFO to NICS, the most directly comparable U.S.

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Three Months Ended

September 30,

June 30, March 31, December 31, September 30, June 30, March 31,

FFO Reconciliation:

2020 2020 2019 2019 2019 2019

Net income attributable to common stockholders $ 179,246 $ 310,284 $ 224,324 $ 589,876 $ 137,762 $ 280,470

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Unconsolidated entities 14,231 15,445 16,191 10,864 11,475 19,150

FFO $ 335,597 $ 356,124 $ 476,298 $ 352,378 $ 390,021 $ 358,383

Average diluted shares outstanding 419,121 412,420 407,904 406,891 406,673 393,452

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Net income attributable to common stockholders (1)

$ 0.42 $ 0.75 $ 0.55 $ 1.45 $ 0.34 $ 0.71

$ 0.80 $ 0.86 $ 1.17 $ 0.87 $ 0.96 $ 0.91

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

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

Six Months Ended

June 30, June 30,

FFO Reconciliations:

Net income attributable to common stockholders $ 489,530 $ 418,232

Depreciation and amortization 540,172 491,984

Impairment of assets 102,978 9,939

Loss (gain) on real estate dispositions, net (418,687) (165,727)

Noncontrolling interests (51,948) (36,649)

Unconsolidated entities 29,676 30,625

FFO $ 691,721 $ 748,404

Average diluted common shares outstanding:

415,775 400,096

Per diluted share data:

Net income attributable to common stockholders (1)

$ 1.17 $ 1.05

$ 1.66 $ 1.87

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

The tables below reflects the reconciliation of EBITDA to net income, the most directly comparable U.S.

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Three Months Ended

September 30,

June 30, March 31, December 31, September 30, June 30, March 31,

EBITDA Reconciliations:

2020 2020 2019 2019 2019 2019

Net income (loss) $ 159,216 $ 329,380 $ 240,136 $ 647,932 $ 150,040 $ 292,302

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Depreciation and amortization 265,371 274,801 262,644 272,445 248,052 243,932

EBITDA $ 553,177 $ 751,630 $ 629,596 $ 1,061,688 $ 541,027 $ 683,688

Interest Coverage Ratio:

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Total interest

128,984 138,628 135,782 139,503 144,513 142,388

EBITDA $ 553,177 $ 751,630 $ 629,596 $ 1,061,688 $ 541,027 $ 683,688

Interest coverage ratio

4.29 x 5.42 x 4.64 x 7.61 x 3.74 x 4.80 x

Fixed Charge Coverage Ratio:

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Total fixed charges

144,167 154,154 149,759 152,624 158,197 155,931

EBITDA $ 553,177 $ 751,630 $ 629,596 $ 1,061,688 $ 541,027 $ 683,688

Fixed charge coverage ratio

3.84 x 4.88 x 4.20 x 6.96 x 3.42 x 4.38 x

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

Six Months Ended

June 30, June 30,

EBITDA Reconciliations:

Net income (loss) $ 488,596 $ 442,342

Interest expense 268,364 286,568

Income tax expense (benefit) 7,675 3,821

Depreciation and amortization 540,172 491,984

EBITDA $ 1,304,807 $ 1,224,715

Interest Coverage Ratio:

Interest expense $ 268,364 $ 286,568

Non-cash interest expense (10,039) (5,923)

Capitalized interest 9,287 6,256

Total interest

267,612 286,901

EBITDA $ 1,304,807 $ 1,224,715

Interest coverage ratio

4.88 x 4.27 x

Fixed Charge Coverage Ratio:

Total interest $ 267,612 $ 286,901

Secured debt principal payments 30,709 27,227

Total fixed charges

298,321 314,128

EBITDA $ 1,304,807 $ 1,224,715

Fixed charge coverage ratio

4.37 x 3.90 x

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

The table below reflects the reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S.

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Twelve Months Ended

September 30,

June 30, March 31, December 31, September 30, June 30, March 31,

Adjusted EBITDA Reconciliations:

2020 2020 2019 2019 2019 2019

Net income $ 1,376,664 $ 1,367,488 $ 1,330,410 $ 1,214,970 $ 651,264 $ 668,497

Interest expense 537,355 552,334 555,559 568,280 568,969 549,049

1 unchanged sentence

Depreciation and amortization 1,075,261 1,057,942 1,027,073 1,007,263 977,967 966,190

2,996,091 2,983,941 2,915,999 2,799,806 2,205,266 2,193,044

Loss (income) from unconsolidated entities (58,322) (47,941) (42,434) 14,791 17,709 7,411

Stock-based compensation expense (1)

24,229 24,601 25,047 25,347 26,113 23,618

Loss (gain) on extinguishment of debt, net 68,685 68,436 84,155 81,596 19,810 20,109

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Other expenses (1)

46,971 48,327 51,052 45,512 126,994 117,942

Other impairment (2)

34,110 32,268 — — — —

Additional other income — — — (4,027) (4,027) (14,832)

5 unchanged sentences

Total interest

542,897 558,426 562,186 569,014 567,806 545,093

Adjusted EBITDA $ 2,245,689 $ 2,334,947 $ 2,328,202 $ 2,310,178 $ 2,280,936 $ 2,209,246

Adjusted interest coverage ratio

4.14 x 4.18 x 4.14 x 4.06 x 4.02 x 4.05 x

Adjusted Fixed Charge Coverage Ratio:

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Total fixed charges

600,704 614,734 616,511 635,032 646,287 635,705

Adjusted EBITDA $ 2,245,689 $ 2,334,947 $ 2,328,202 $ 2,310,178 $ 2,280,936 $ 2,209,246

Adjusted fixed charge coverage ratio

3.74 x 3.80 x 3.78 x 3.64 x 3.53 x 3.48 x

(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses.

(2) Represents a write off of straight-line rent receivables recorded in rental income in conjunction with an amended lease.

(2) Represents straight-line recent receivable deemed uncollectible.

Our leverage ratios include book capitalization, undepreciated book capitalization and market capitalization.

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

September 30,

June 30, March 31, December 31, September 30, June 30, March 31,

2020 2020 2019 2019 2019 2019

Book capitalization:

1 unchanged sentence

Long-term debt obligations (1)

14,543,485 13,228,433 13,436,365 12,463,680 13,390,344 12,371,729

Cash and cash equivalents (2)

(1,766,819) (303,423) (284,917) (265,788) (268,666) (249,127)

Total net debt 12,776,666 13,769,995 14,739,045 13,532,478 14,990,866 12,541,895

Total equity and noncontrolling interests (3)

17,263,672 17,495,696 16,982,504 16,696,070 16,452,806 16,498,376

Book capitalization $ 30,040,338 $ 31,265,691 $ 31,721,549 $ 30,228,548 $ 31,443,672 $ 29,040,271

Net debt to book capitalization ratio

43 % 44 % 46 % 45 % 48 % 43 %

Undepreciated book capitalization:

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Total equity and noncontrolling interests (3)

17,263,672 17,495,696 16,982,504 16,696,070 16,452,806 16,498,376

Undepreciated book capitalization $ 36,041,515 $ 37,176,670 $ 37,437,008 $ 35,998,391 $ 36,983,107 $ 34,710,382

1 unchanged sentence

capitalization ratio

35 % 37 % 39 % 38 % 41 % 36 %

Market capitalization:

4 unchanged sentences

Noncontrolling interests (3)

1,215,532 1,362,913 1,442,060 1,430,005 1,458,351 1,419,885

Market capitalization $ 35,587,577 $ 34,241,068 $ 49,731,922 $ 51,744,446 $ 49,489,576 $ 45,292,004

Net debt to market capitalization ratio

36 % 40 % 30 % 26 % 30 % 28 %

(1) Amounts include senior unsecured notes, secured debt and lease liabilities related to financing leases, as reflected on our Consolidated Balance Sheet.

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Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.

A change in interest rates will not affect the interest expense associated with our fixed rate debt.

Interest rate changes, however, will affect the fair value of our fixed rate debt.

Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable

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 2. Management’s Discussion and Analysis