WELLTOWER INC. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General and administrative expenses as a percentage of consolidated revenues for the three months ended March 31, 2021 and 2020 were 2.84% and 2.82% , 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. Other Non-GAAP Financial Measures We believe that net income and net income attributable to common stockholders (“NICS”), as defined by U.S. GAAP, are the most appropriate earnings measurements. However, we consider FFO, NOI, SSNOI, EBITDA and Adjusted EBITDA to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created funds from operations attributable to common stockholders (“FFO”) as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means NICS, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests. Consolidated net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. Same store NOI (“SSNOI”) is used to evaluate the operating performance of our properties using a consistent population which controls for changes in the composition of our portfolio. We believe the drivers of property level NOI for both consolidated properties and unconsolidated properties are generally the same and therefore, we evaluate SSNOI based on our ownership interest in each property ("Welltower Share"). To arrive at Welltower's Share, NOI is adjusted by adding our minority ownership share related to unconsolidated properties and by subtracting the minority partners' noncontrolling ownership interests for consolidated properties. We do not control investments in unconsolidated properties and while we consider disclosures at Welltower Share to be useful, they may not accurately depict the legal and economic implications of our joint venture arrangements and should be used with caution. 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. 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. 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. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties. EBITDA is defined as earnings (net income) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding unconsolidated entities and including adjustments for stock-based compensation expense, provision for loan losses, gains/losses on extinguishment of debt, gains/loss/impairments on properties, gains/losses on derivatives and financial instruments, other expense, additional other income and other impairment charges. We believe that EBITDA and Adjusted EBITDA, along with net income, are important supplemental measures because they provide additional information to assess and evaluate the performance of our operations. We primarily use these measures to determine our interest coverage ratio, which represents EBITDA and Adjusted EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA and Adjusted EBITDA divided by fixed charges. Fixed charges include total interest and secured debt principal amortization. Covenants in our unsecured senior notes and primary credit facility contain financial ratios based on a definition of EBITDA and Adjusted EBITDA that is specific to those agreements. Our leverage ratios are defined as the proportion of net debt to total capitalization and include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt, excluding operating lease 41 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations liabilities, less cash and cash equivalents and any IRC Section 1031 deposits), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. The table below reflects the reconciliation of FFO to NICS, the most directly comparable U.S. GAAP measure, for the periods presented. Noncontrolling interest and unconsolidated entity amounts represent adjustments to reflect our share of depreciation and amortization, gains/loss on real estate dispositions and impairment of assets. Amounts are in thousands except for per share data. March 31, December 31, September 30, June 30, March 31, FFO Reconciliation: 2021 2020 2020 2020 2020 Net income attributable to common stockholders $ 71,546 $ 163,729 $ 325,585 $ 179,246 $ 310,284 Depreciation and amortization 244,426 242,733 255,532 265,371 274,801 Impairment of assets 23,568 9,317 23,313 75,151 27,827 Loss (gain) on real estate dispositions, net (59,080) (185,464) (484,304) (155,863) (262,824) Noncontrolling interests (12,516) (20,579) 48,559 (42,539) (9,409) Unconsolidated entities 19,223 16,091 16,329 14,231 15,445 FFO $ 287,167 $ 225,827 $ 185,014 $ 335,597 $ 356,124 Average diluted shares outstanding 419,079 418,753 418,987 419,121 412,420 Per diluted share data: Net income attributable to common stockholders (1) $ 0.17 $ 0.39 $ 0.77 $ 0.42 $ 0.75 FFO $ 0.69 $ 0.54 $ 0.44 $ 0.80 $ 0.86 (1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders. 42 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, December 31, September 30, June 30, March 31, NOI Reconciliations: 2021 2020 2020 2020 2020 Net income (loss) $ 72,192 $ 155,278 $ 394,978 $ 159,216 $ 329,380 Loss (gain) on real estate dispositions, net (59,080) (185,464) (484,304) (155,863) (262,824) Loss (income) from unconsolidated entities (13,049) (258) 5,981 (1,332) 3,692 Income tax expense (benefit) 3,943 290 2,003 2,233 5,442 Other expenses 10,994 33,088 11,544 19,411 6,292 Impairment of assets 23,568 9,317 23,313 75,151 27,827 Provision for loan losses 1,383 83,085 2,857 1,422 7,072 Loss (gain) on extinguishment of debt, net (4,643) 13,796 33,004 249 — Loss (gain) on derivatives and financial instruments, net 1,934 569 1,395 1,434 7,651 General and administrative expenses 29,926 27,848 31,003 34,062 35,481 Depreciation and amortization 244,426 242,733 255,532 265,371 274,801 Interest expense 123,142 121,173 124,851 126,357 142,007 Consolidated net operating income (NOI) $ 434,736 $ 501,455 $ 402,157 $ 527,711 $ 576,821 NOI by segment: Seniors Housing Operating $ 170,434 $ 159,797 $ 174,361 $ 178,137 $ 243,257 Triple-net 155,641 225,277 108,361 220,056 194,427 Outpatient Medical 109,360 117,231 119,976 129,143 138,721 Non-segment/corporate (699) (850) (541) 375 416 Total NOI $ 434,736 $ 501,455 $ 402,157 $ 527,711 $ 576,821 QTD Pool SSNOI Property Reconciliations: Seniors Housing Operating Triple-net Outpatient Medical Total Consolidated properties 559 649 290 1,498 Unconsolidated properties 90 39 79 208 Total properties 649 688 369 1,706 Recent acquisitions/development conversions (1) (34) (26) (21) (81) Under development (28) (5) (3) (36) Under redevelopment (2) (11) (1) (2) (14) Current held for sale (9) (61) (1) (71) Land parcels, loans and subleases (12) (17) (8) (37) Transitions (3) (27) (23) — (50) Other (4) (2) (2) — (4) Same store properties 526 553 334 1,413 (1) Acquisitions and development conversions will enter the QTD Pool five full quarters after acquisition or certificate of occupancy, respectively. (2) Redevelopment properties will enter the QTD Pool five full quarters of operations post redevelopment completion, respectively. (3) Transitioned properties will enter the QTD Pool five full quarters of operations with the new operator in place or under the new structure, respectively. (4) Represents properties that are either closed or being closed. 43 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations QTD Pool Three Months Ended SSNOI Reconciliations: March 31, 2021 March 31, 2020 Seniors Housing Operating: Consolidated NOI $ 170,434 $ 243,257 NOI attributable to unconsolidated investments 11,904 14,954 NOI attributable to noncontrolling interests (10,278) (18,754) NOI attributable to non-same store properties (14,428) (22,515) Non-cash NOI attributable to same store properties (822) (879) Currency and ownership adjustments (1) (19) 3,693 SSNOI at Welltower Share 156,791 219,756 Triple-net: Consolidated NOI 155,641 194,427 NOI attributable to unconsolidated investments 4,888 5,133 NOI attributable to noncontrolling interests (8,037) (14,783) NOI attributable to non-same store properties (48,126) (26,394) Non-cash NOI attributable to same store properties 36,711 (12,257) Currency and ownership adjustments (1) 12 1,401 SSNOI at Welltower Share 141,089 147,527 Outpatient Medical: Consolidated NOI 109,360 138,721 NOI attributable to unconsolidated investments 4,724 1,063 NOI attributable to noncontrolling interests (4,686) (4,358) NOI attributable to non-same store properties (8,604) (20,235) Non-cash NOI attributable to same store properties (2,447) (3,762) Currency and ownership adjustments (1) (1,151) (17,221) SSNOI at Welltower Share 97,196 94,208 SSNOI at Welltower Share: Seniors Housing Operating 156,791 219,756 Triple-net 141,089 147,527 Outpatient Medical 97,196 94,208 Total $ 395,076 $ 461,491 (1) Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.2658 and to translate UK properties at a GBP/USD rate of 1.38. 44 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The tables below reflects the reconciliation of EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Dollars are in thousands. Three Months Ended March 31, December 31, September 30, June 30, March 31, EBITDA Reconciliations: 2021 2020 2020 2020 2020 Net income (loss) $ 72,192 $ 155,278 $ 394,978 $ 159,216 $ 329,380 Interest expense 123,142 121,173 124,851 126,357 142,007 Income tax expense (benefit) 3,943 290 2,003 2,233 5,442 Depreciation and amortization 244,426 242,733 255,532 265,371 274,801 EBITDA $ 443,703 $ 519,474 $ 777,364 $ 553,177 $ 751,630 Interest Coverage Ratio: Interest expense $ 123,142 $ 121,173 $ 124,851 $ 126,357 $ 142,007 Non-cash interest expense (2,991) (1,739) (3,973) (1,914) (8,125) Capitalized interest 4,496 4,238 3,947 4,541 4,746 Total interest 124,647 123,672 124,825 128,984 138,628 EBITDA $ 443,703 $ 519,474 $ 777,364 $ 553,177 $ 751,630 Interest coverage ratio 3.56 x 4.20 x 6.23 x 4.29 x 5.42 x Fixed Charge Coverage Ratio: Total interest $ 124,647 $ 123,672 $ 124,825 $ 128,984 $ 138,628 Secured debt principal payments 15,955 16,122 15,876 15,183 15,526 Total fixed charges 140,602 139,794 140,701 144,167 154,154 EBITDA $ 443,703 $ 519,474 $ 777,364 $ 553,177 $ 751,630 Fixed charge coverage ratio 3.16 x 3.72 x 5.52 x 3.84 x 4.88 x 45 Item 2. 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. GAAP measure, for the periods presented. Dollars are in thousands. Twelve Months Ended March 31, December 31, September 30, June 30, March 31, Adjusted EBITDA Reconciliations: 2021 2020 2020 2020 2020 Net income $ 781,664 $ 1,038,852 $ 1,123,710 $ 1,376,664 $ 1,367,488 Interest expense 495,523 514,388 524,863 537,355 552,334 Income tax expense (benefit) 8,469 9,968 4,846 6,811 6,177 Depreciation and amortization 1,008,062 1,038,437 1,058,348 1,075,261 1,057,942 EBITDA 2,293,718 2,601,645 2,711,767 2,996,091 2,983,941 Loss (income) from unconsolidated entities (8,658) 8,083 (49,079) (58,322) (47,941) Stock-based compensation expense (1) 26,811 28,318 25,485 24,229 24,601 Loss (gain) on extinguishment of debt, net 42,406 47,049 35,865 68,685 68,436 Loss (gain) on real estate dispositions, net (884,711) (1,088,455) (915,055) (1,001,001) (843,456) Impairment of assets 131,349 135,608 126,389 121,172 55,960 Provision for loan losses 88,747 94,436 11,351 8,494 7,072 Loss (gain) on derivatives and financial instruments, net 5,332 11,049 5,411 5,260 5,739 Other expenses (1) 68,939 64,171 52,630 46,971 48,327 Other impairment (2) 163,481 146,508 146,508 34,110 32,268 Adjusted EBITDA $ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689 $ 2,334,947 Adjusted Interest Coverage Ratio: Interest expense $ 495,523 $ 514,388 $ 524,863 $ 537,355 $ 552,334 Capitalized interest 17,222 17,472 18,102 18,303 17,691 Non-cash interest expense (10,617) (15,751) (14,746) (12,761) (11,599) Total interest 502,128 516,109 528,219 542,897 558,426 Adjusted EBITDA $ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689 $ 2,334,947 Adjusted interest coverage ratio 3.84 x 3.97 x 4.07 x 4.14 x 4.18 x Adjusted Fixed Charge Coverage Ratio: Total interest $ 502,128 $ 516,109 $ 528,219 $ 542,897 $ 558,426 Secured debt principal payments 63,136 62,707 60,562 57,807 56,308 Total fixed charges 565,264 578,816 588,781 600,704 614,734 Adjusted EBITDA $ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689 $ 2,334,947 Adjusted fixed charge coverage ratio 3.41 x 3.54 x 3.65 x 3.74 x 3.80 x (1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses. (2) Represents reserve for straight-line rent receivable balances relating to leases placed on cash recognition. Our leverage ratios include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt less cash and cash equivalents and any IRC Section 1031 deposits), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization. The table below reflects the reconciliation of our leverage ratios to our balance sheets for the periods presented. Amounts are in thousands, except share price. 46 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations As of March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Book capitalization: Unsecured credit facility and commercial paper $ — $ — $ — $ — $ 844,985 Long-term debt obligations (1) 14,618,713 13,905,822 13,889,030 14,543,485 13,228,433 Cash and cash equivalents (2) (2,513,156) (1,968,765) (2,096,571) (1,766,819) (303,423) Total net debt 12,105,557 11,937,057 11,792,459 12,776,666 13,769,995 Total equity and noncontrolling interests (3) 17,046,932 17,225,062 17,291,155 17,263,672 17,495,696 Book capitalization $ 29,152,489 $ 29,162,119 $ 29,083,614 $ 30,040,338 $ 31,265,691 Net debt to book capitalization ratio 42 % 41 % 41 % 43 % 44 % Undepreciated book capitalization: Total net debt $ 12,105,557 $ 11,937,057 $ 11,792,459 $ 12,776,666 $ 13,769,995 Accumulated depreciation and amortization 6,212,432 6,104,297 6,002,775 6,001,177 5,910,979 Total equity and noncontrolling interests (3) 17,046,932 17,225,062 17,291,155 17,263,672 17,495,696 Undepreciated book capitalization $ 35,364,921 $ 35,266,416 $ 35,086,389 $ 36,041,515 $ 37,176,670 Net debt to undepreciated book capitalization ratio 34 % 34 % 34 % 35 % 37 % Market capitalization: Common shares outstanding 417,520 417,401 417,305 417,302 417,391 Period end share price $ 71.63 $ 64.62 $ 55.09 $ 51.75 $ 45.78 Common equity market capitalization $ 29,906,958 $ 26,972,453 $ 22,989,332 $ 21,595,379 $ 19,108,160 Total net debt 12,105,557 11,937,057 11,792,459 12,776,666 13,769,995 Noncontrolling interests (3) 1,248,054 1,252,343 1,183,281 1,215,532 1,362,913 Market capitalization $ 43,260,569 $ 40,161,853 $ 35,965,072 $ 35,587,577 $ 34,241,068 Net debt to market capitalization ratio 28 % 30 % 33 % 36 % 40 % (1) Amounts include senior unsecured notes, secured debt and lease liabilities related to financing leases, as reflected on our Consolidated Balance Sheets. Operating lease liabilities related to the ASC 842 adoption are excluded. (2) Inclusive of IRC Section 1031 deposits, if any. (3) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests as reflected on our Consolidated Balance Sheets. Critical Accounting Policies Our unaudited consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers an accounting estimate or assumption critical if: • the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and • the impact of the estimates and assumptions on financial condition or operating performance is material. Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors. Management believes the current assumptions and other considerations used to estimate amounts reflected in our unaudited consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our unaudited consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for further information regarding significant accounting policies that impact us. There have been no material changes to these policies in 2021. 47 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When Welltower uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimate” or similar expressions that do not relate solely to historical matters, Welltower is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause Welltower’s actual results to differ materially from Welltower’s expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the duration and scope of the COVID-19 pandemic; uncertainty regarding the implementation and impact of the CARES Act and future stimulus or other COVID-19 relief legislation; the impact of the COVID-19 pandemic on occupancy rates and on the operations of Welltower and its operators/tenants; actions governments take in response to the COVID-19 pandemic, including the introduction of public health measures and other regulations affecting Welltower’s properties and the operations of Welltower and its operators/tenants; the effects of health and safety measures adopted by Welltower and its operators/tenants related to the COVID-19 pandemic; increased operational costs as a result of health and safety measures related to COVID-19; the impact of the COVID-19 pandemic on the business and financial condition of operators/tenants and their ability to make payments to Welltower; disruptions to Welltower's property acquisition and disposition activity due to economic uncertainty caused by COVID-19; general economic uncertainty in key markets as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth; the status of capital markets, including availability and cost of capital; uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmark; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; Welltower’s ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting Welltower’s properties; Welltower’s ability to re-lease space at similar rates as vacancies occur; Welltower’s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting Welltower’s properties; changes in rules or practices governing Welltower’s financial reporting; the movement of U.S. and foreign currency exchange rates; Welltower’s ability to maintain Welltower’s qualification as a REIT; key management personnel recruitment and retention; and other risks described in Welltower’s reports filed from time to time with the SEC. Other important factors are identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Finally, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates. We seek to mitigate the underlying foreign currency exposures with gains and losses on derivative contracts hedging these exposures. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. This section is presented to provide a discussion of the risks associated with potential fluctuations in interest rates and foreign currency exchange rates. We historically borrow on our unsecured revolving credit facility and commercial paper program to acquire, construct or make loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue equity or long-term fixed rate debt to repay the borrowings under our unsecured revolving credit facility and commercial paper program. We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. 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. 48