What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-07-30 · 150 added, 131 removed, 629 unchanged (31% of the section changed)

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

On May 4, 2021, we filed with the Securities and Exchange Commission (the “SEC”) (1) an open-ended automatic or “universal” shelf registration statement on Form S-3 covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units to replace our existing “universal” shelf registration statement filed with the SEC on May 17, 2018, and (2) a registration statement in connection with our enhanced dividend reinve stment plan (“DRIP”) under which we may issue up to 15,000,000 shares of common stock to replace our existing DRIP registration statement on Form S-3 filed with the SEC on May 17, 2018.

As of July 23, 2021, 15,000,000 shares of common stock remained available for issuance under the DRIP registration statement.

On May 4, 2021, we entered into (i) an equity distribution agreement (the “EDA”) with each of Robert W.

Incorporated, Barclays Capital Inc., BMO Capital Markets Corp., BN Y Mellon Capital Markets, LLC, BofA Securities, Inc., BOK Financial Securities, Inc., Citigroup Global Markets Inc., Comerica Securities, Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Fifth Third Securities, Inc., Goldman Sachs & Co.

LLC, Jefferies LLC, J.P.

On May 4, 2021, we filed with the Securities and Exchange Commission (the “SEC”) (1) an open-ended automatic or “universal” shelf registration statement on Form S-3 covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units to replace our existing “universal” shelf registration statement filed with the SEC on May 17, 2018, 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 to replace our existing DRIP registration statement on Form S-3 filed with the SEC on May 17, 2018.

As of October 29, 2021, 15,000,000 shares of common stock remained available for issuance under the DRIP registration stateme nt.

On July 30, 2021, we entered into (i) an amended and restated equity distribution agreement (the “EDA”) with each of Robert W.

Incorporated, Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., BNY Mellon Capital Markets, LLC, BofA Securities, Inc., BOK Financial Securities, Inc., Capital One Securities Inc., Citigroup Global Markets Inc., Comerica Securities, Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Fifth Third Securities, Inc., Goldman Sachs & Co.

LLC, Hancock Whitney Investment Services, Inc., Jefferies LLC, J.P.

Morgan Securities LLC, KeyBanc Capital Markets Inc., Loop Capital Markets LLC, Mizuho Securities USA LLC, Morgan Stanley & Co.

LLC, MUFG Securities Americas Inc., Raymond James & Associates, Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., Stifel, Nicolaus & Company, Incorporated, TD Securities (USA) LLC, Truist Securities, Inc., UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to $2,000,000,000 aggregate amount of our common stock and (ii) separate master forward sale confirmations with each of Bank of America, N.A., Bank of Montreal, The Bank of New York Mellon, Barclays Bank PLC, Citibank, N.A., Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG, London Branch, Goldman Sachs & Co.

LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, Regions Securities LLC, Scotia Capital (USA) Inc., SMBC Nikko Securities America, Inc., Stifel, Nicolaus & Company, Incorporated, Synovus Securities, Inc., TD Securities (USA) LLC, Truist Securities, Inc.

and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to $2,500,000,000 aggregate amount of our common stock and (ii) separate master forward sale confirmations with each of Bank of America, N.A., Bank of Montreal, The Bank of New York Mellon, Barclays Bank PLC, BNP Paribas, Citibank, N.A., Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG, London Branch, Goldman Sachs & Co.

LLC, Jefferies LLC, JPMorgan Chase Bank, National Association, KeyBanc Capital Markets Inc., Mizuho Markets Americas LLC, Morgan Stanley & Co.

LLC, MUFG Securities EMEA plc, Raymond James & Associates, Inc., Royal Bank of Canada, The Bank of Nova Scotia, The Toronto-Dominion Bank, Truist Bank, UBS AG, London Branch and Wells Fargo Bank, National Association (together with the EDA, the “ATM Program”), replacing the ATM Program entered into on February 25, 2019.

The ATM Program also allows us to enter into forward sale agreements.

As of July 23, 2021, we had $1,905,854,000 of remaining capacity unde r the ATM Program, which excludes forward sales agreements outstanding for the sale of 17,295,369 shares or approximately $1,389,830,000 with maturity dates in 2022.

LLC, MUFG Securities EMEA plc, Royal Bank of Canada, The Bank of Nova Scotia, The Toronto-Dominion Bank, Truist Bank, London Branch and Wells Fargo Bank, National Association (together with the EDA, the “ATM Program”), amending and restating the ATM Program entered into on May 4, 2021 to, among other amendments, increase the total amount of shares of common stock that may be offered and sold under the ATM Program from $2,000,000,000 to $2,500,000,000, which amount excludes shares the Company has previously sold pursuant to the prior program.

The A TM Program also allows us to enter into forward sale agreements.

As of October 29, 2021, we had $2,491,418,000 of remaining capacity under the ATM Program, which excludes forward sales agreements outstanding for the sale of 11,798,154 shares or approximately $993,881,000 with maturity dates in 2022.

We expect to physically settle the forward sales for cash proceeds.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Change Six Months Ended Change

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

Three Months Ended Change Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 Amount % 2021 2020 Amount %

13 unchanged sentences

QTD Pool YTD Pool

Three Months Ended Change Six Months Ended Change

June 30, 2021 June 30, 2020 $ % June 30, 2021 June 30, 2020 $ %

Three Months Ended Change Nine Months Ended Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

$ 144,044 $ 166,145 $ (22,101) (13.3) % $ 445,953 $ 546,853 $ (100,900) (18.5) %

2 unchanged sentences

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,

Three Months Ended Change Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 $ % 2021 2020 $ %

8 unchanged sentences

Interest expense 9,360 12,728 (3,368) (26) % 31,331 43,191 (11,860) (27) %

Loss (gain) on extinguishment of debt, net 3,106 (492) 3,598 731 % (1,537) (492) (1,045) (212) %

Provision for loan losses (181) — (181) n/a 70 — 70 n/a

Loss (gain) on extinguishment of debt, net — — — n/a (1,537) (492) (1,045) (212) %

Provision for loan losses, net 152 86 66 77 % 222 86 136 158 %

Impairment of assets — 12,778 (12,778) (100) % 22,317 91,424 (69,107) (76) %

10 unchanged sentences

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

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

Spot occupancy has declined since the beginning of the pandemic, reaching a low of 72.3% on March 12, 2021 before beginning to recover resulting in occupancy of 74.6% as of June 30, 2021.

Spot occupancy rates through June 30, 2021 are as follows:

December 2020 January 2021 February 2021 March 2021 April 2021 May 2021 June 2021

Resident fees and services and property operating expenses increased for the three month period ended September 30, 2021 compared to the same period in the prior year primarily due to acquisitions, including the acquisition of the Holiday Retirement portfolio on July 30, 2021 for a total purchase price of $1.6 billion.

These increases were partially offset by decreases in occupancy across the portfolio due to the COVID-19 pandemic and property dispositions.

Spot occupancy remains below pre-pandemic levels, reaching a low of 72.3% on March 12, 2021 before making meaningful recovery in recent months resulting in occupancy of 76.7% as of September 30, 2021.

Spot occupancy rates through September 30, 2021 are as follows:

December 2020 January 2021 February 2021 March 2021 April 2021 May 2021 June 2021 July 2021 August 2021 September 2021

Spot occupancy (1)

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(1.4) % (0.8) % 0.2 % 0.5 % 0.5 % 0.9 % 0.6 % 0.8 % 0.8 %

(1) Spot occupancy represents approximate month end occupancy at our share for 592 properties in operation as of December 31, 2020, including unconsolidated properties but excluding acquisitions, dispositions and development conversions since this date.

(1) Spot occupancy represents approximate month end occupancy at our share for 591 properties in operation as of December 31, 2020, including unconsolidated properties but excluding acquisitions, executed dispositions, development conversions since this date as well as one property closed for redevelopment.

(2) Sequential occupancy changes are based on actual spot occupancy and may not recalculate due to rounding.

On a month-to-date basis, as of July 23, 2021, Seniors Housing Operating occupancy has increased approximately 40 basis points.

Occupancy continued to strengthen in the U.S.

with gains of approximately 60 basis points and 30 basis points, respectively while occupancy in Canada remained flat over the same period.

During the quarter ended September 30, 2021, the U.S.

portfolios reported spot occupancy gains of approximately 260 bps and 300 bps, respectively.

Canada reported a spot occupancy gain of approximately 70 bps.

Property-level operating expenses associated with the COVID-19 pandemic relating to our Seniors Housing Operating portfolio, net of reimbursements including Provider Relief Funds and similar programs in the U.K.

and Canada, resulted in a net benefit of approximately $1,535,000 and $22,792,000 during the three and six months ended June 30, 2021, respectively, as compared to a net expense of $40,127,000 and $47,421,000 during the three and six months ended June 30, 2020, respectively.

These costs included higher labor expenses, coupled with expenditures related to procurement of personal protective equipment and other supplies, net of any reimbursements.

and Canada, resulted in a net benefit of approximately $2,092,000 and $24,883,000 for the three and nine months ended September 30, 2021, respectively, as compared to a net expense of $18,193,000 and $65,614,000 during the three and nine months ended September 30, 2020, respectively.

These expenses were incurred as a result of the introduction of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure personal protective equipment ("PPE") and supplies, net of reimbursements.

In 2020 applications were made for amounts under Phase 2 and Phase 3 of the Provider Relief Fund related to our Seniors Housing Operating portfolio.

During the six months ended June 30, 2021, we received total Provider Relief Funds of approximately $40,976,000, which was recognized as a reduction to COVID-19 costs within property operating expenses.

During the nine months ended September 30, 2021, we received total Provider Relief Funds of approximately $40,975,000, which was recognized as a reduction to COVID-19 costs within property operating expenses.

The fluctuations in depreciation and amortization are due to acquisitions, dispositions and transitions.

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, 2021, we recorded impairment charges of $22,317,000 related to two held for use properties in which the carrying values exceeded the estimated fair value.

During the six months ended June 30, 2020, we recorded impairment charges of $78,646,000 related to 12 held for sale properties and one held for use property.

During the nine months ended September 30, 2021, we recorded impairment charges of $22,317,000 related to two held for use properties in which the carrying values exceeded the estimated fair value.

During the nine months ended September 30, 2020, we recorded impairment charges of $91,424,000 related to 13 held for sale properties and four held for use properties.

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

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

During the six months ended June 30, 2021, we completed one Seniors Housing Operating construction project representing $58,844,000 or 490,367 per unit.

The following is a summary of our Seniors Housing Operating construction projects, excluding expansions, pending as of June 30, 2021 (dollars in thousands):

During the nine months ended September 30, 2021, we completed one Seniors Housing Operating construction project representing $58,844,000 or 490,367 per unit.

The following is a summary of our Seniors Housing Operating construction projects, excluding expansions, pending as of September 30, 2021 (dollars in thousands):

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

Location Units Commitment Balance Est.

Beckenham, UK 100 $ 63,444 $ 56,657 4Q21

Hendon, UK 102 74,759 64,138 1Q22

Barnet, UK 100 69,775 56,182 1Q22

Beckenham, UK 100 65,026 55,712 4Q21

Georgetown, TX 188 36,215 8,158 2Q22

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Sachse, TX 193 38,054 7,221 3Q22

Lake Jackson, TX 130 32,020 3,154 3Q22

Princeton, NJ 80 29,780 23,602 3Q22

2 unchanged sentences

Beaver, PA 116 14,184 4,754 4Q22

Weymouth, MA 165 77,545 9,125 3Q23

Charlotte, NC 328 96,416 23,696 1Q24

Gaithersburg, MD 302 173,500 20,525 2Q24

2,311 $ 817,257 308,593

3 unchanged sentences

Columbus, OH Project in planning stage 12,629

Raleigh, NC Project in planning stage 3,441

Brookhaven, GA Project in planning stage 9,385

Raleigh, NC Project in planning stage 3,476

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.

1 unchanged sentence

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, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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

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

Income from unconsolidated entities recognized during the six months ended June 30, 2021 includes a gain on sale recognized from the sale of a home health business owned by one of our unconsolidated entities, offset by losses from unconsolidated entities largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures.

Income from unconsolidated entities recognized during the nine months ended September 30, 2021 includes a gain on sale recognized from the sale of a home health business owned by one of our unconsolidated entities, offset by losses from unconsolidated entities largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures.

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

The decrease during the three and six month periods ended June 30, 2020 relates primarily to our partners' share of impairment charges recognized, offset by our partners' share of gains on real estate dispositions.

The decrease during the three and nine month periods ended September 30, 2020 relates primarily to our partners' share of gains on real estate dispositions partially offset by impairment charges recognized.

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, 2021 June 30, 2020 $ % June 30, 2021 June 30, 2020 $ %

Three Months Ended Change Nine Months Ended Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

$ 142,690 $ 142,697 $ (7) — % $ 425,014 $ 429,651 $ (4,637) (1.1) %

1 unchanged sentence

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

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

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

Three Months Ended Change Six Months Ended Change

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

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

Three Months Ended Change Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 $ % 2021 2020 $ %

9 unchanged sentences

Loss (gain) on derivatives and financial instruments, net (8,078) 1,395 (9,473) (679) % (6,503) 10,480 (16,983) (162) %

Provision for loan losses 10,019 1,451 8,568 590 % 10,872 8,523 2,349 28 %

Impairment of assets 3,768 — 3,768 n/a 22,732 24,332 (1,600) (7) %

Provision for loan losses, net (323) 372 (695) (187) % 10,549 8,895 1,654 19 %

Impairment of assets 1,490 10,535 (9,045) (86) % 24,222 34,867 (10,645) (31) %

Other expenses (4,248) 2,805 (7,053) (251) % 4,845 6,818 (1,973) (29) %

1 unchanged sentence

Income (loss) from continuing operations before income taxes and other items 183,706 33,027 150,679 456 % 406,730 280,127 126,603 45 %

Income (loss) from unconsolidated entities 4,877 6,403 (1,526) (24) % 9,784 12,199 (2,415) (20) %

Income (loss) from unconsolidated entities 5,038 (423) 5,461 n/a 14,822 11,776 3,046 26 %

Gain (loss) on real estate dispositions, net 81,712 (619) 82,331 n/a 126,463 51,166 75,297 147 %

2 unchanged sentences

Net income (loss) attributable to noncontrolling interests 11,917 8,597 3,320 39 % 26,722 36,275 (9,553) (26) %

Net income attributable to common stockholders $ 188,847 $ 152,235 $ 36,612 24 % $ 262,754 $ 283,406 $ (20,652) (7) %

Net income attributable to common stockholders $ 258,539 $ 23,388 $ 235,151 n/a $ 521,293 $ 306,794 $ 214,499 70 %

(1) See Non-GAAP Financial Measures below.

Continued decreases in rental income are primarily attributable to an increased number of leases on a cash basis of recognition due to substantially all contractual lease payments no longer deemed to be probable.

Additionally, we recorded reserves for straight-line rent receivables balances of $49,241,000 and $34,110,000 during the six month periods ended June 30, 2021 and 2020, respectively.

Rental income has increased primarily due to the timing of the establishment of reserves for straight-line rent receivable balances relating to leases for which collection of substantially all contractual lease payments is no longer deemed probable.

During the three and nine months ended September 30, 2021, we recorded reserves for previously recognized straight-line receivables of $0 and $49,241,000, respectively.

During the three and nine month periods ended September 30, 2020, we recorded $112,398,000 and $146,508,000, respectively, which included $91,025,000 related to Genesis Healthcare whom noted substantial doubt as to their ability to continue as a going concern.

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.

2 unchanged sentences

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, 2021, we had 15 leases with rental rate increases ranging from 0.98% to 11.31% in our Triple-net portfolio.

For the three months ended September 30, 2021, we had 16 leases with rental rate increases ranging from 1.75% to 7.34% 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 Paycheck Protection Program.

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

However, many of our Triple-net operators received funds under the CARES Act Paycheck Protection Program.

In addition, operators of long-term/post-acute facilities have generally received funds from Phase 1 of the Provider Relief Fund and operators of assisted living facilities have received funds from Phase 2 and Phase 3 of the Provider Relief Fund.

During the six months ended June 30, 2021, we collected approximately 95% of rent due from operators under Triple-net lease agreements (primarily seniors housing and post-acute care facilities).

During the nine months ended September 30, 2021, we collected approximately 94% of rent due from operators under Triple-net lease agreements (primarily seniors housing and post-acute care facilities).

No significant rent deferrals or rent concessions have been made.

We evaluate leases individually and recognize rent on a cash basis if collectibility of substantially all contractual rent payments is not probable.

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

We evaluate leases individually and recognize rent on a cash basis if collectability of substantially all contractual rent payments is not probable.

Depreciation and amortization fluctuate 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.

During the six months ended June 30, 2021, we recognized a provision for loan losses under the current expected credit losses accounting standard, primarily related to the initial recognition of the £540 million of senior loan financing to affiliates of Safanad as part of the recapitalization of its investment in HC-One Group during the second quarter.

The increase in interest income for the three and six month periods ended June 30, 2021 is due to the increased loan receivable balance driven primarily by the £540 million of senior loan financing to affiliates of Safanad.

During the nine months ended September 30, 2021, we recognized a provision for loan losses under the current expected credit losses accounting standard, primarily related to the initial recognition of the £540 million of senior loan financing to affiliates of Safanad as part of the recapitalization of its investment in HC-One Group during the second quarter.

The increase in interest income for the three and nine month periods ended September 30, 2021 is primarily driven by interest recognized on this loan funding.

Additionally, during March 2020, we recognized a provision for loan losses of $6,898,000 to fully reserve for a non-real estate loans receivable that was no longer deemed collectible.

During the six months ended June 30, 2021, we recorded impairment charges of $22,732,000 related to three held for sale properties and two held for use properties.

During the six months ended June 30, 2020, we recorded impairment charges of $24,332,000 related to one held for use property.

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

Transaction costs related to asset acquisitions are capitalized as a component

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

of purchase price.

During the nine months ended September 30, 2021, we recorded impairment charges of $24,222,000 related to four held for sale properties and two held for use properties.

During the nine months ended September 30, 2020, we recorded impairment charges of $34,867,000 related to one held for sale and four held for use properties.

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

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

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

During the six months ended June 30, 2021, we completed one Triple-net construction project representing $22,990,000 or $280,366 per unit.

The following is a summary of Triple-net construction projects, excluding expansions, pending as of June 30, 2021 (dollars in thousands):

During the nine months ended September 30, 2021, we completed one Triple-net construction project representing $22,990,000 or $280,366 per unit.

The following is a summary of Triple-net construction projects, excluding expansions, pending as of September 30, 2021 (dollars in thousands):

Location Units/Beds Commitment Balance Est.

Redhill, UK 76 $ 21,417 $ 17,794 1Q22

Leicester, UK 60 15,463 7,457 1Q22

London, UK 82 43,462 22,691 2Q22

Wombourne, UK 66 16,164 9,394 2Q22

Leicester, UK 60 15,086 8,296 2Q22

Rugby, UK 76 20,627 6,868 4Q22

1 unchanged sentence

551 $ 271,012 $ 100,172

Loss (gain) on derivatives and financial instruments, net is primarily attributable to the mark-to-market adjustment recorded on our Genesis Healthcare available for sale investment.

During the three months ended September 30, 2021, loss (gain) on derivatives and financial instruments, net is primarily attributable to the mark-to-market of the equity warrants received as part of the Safanad/HC-One transaction that closed in the second quarter.

In addition, the mark-to-market adjustment on our Genesis Healthcare available-for-sale investment is reflected in all periods.

Interest expense represents secured debt interest expense and related fees.

1 unchanged sentence

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, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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

Beginning balance $ 122,566 4.91 % $ 289,321 3.27 % $ 123,652 4.91 % $ 306,038 3.60 %

Debt extinguished — — % (176,875) 2.03 % — — % (176,875) 2.03 %

Principal payments (1,241) 5.16 % (1,101) 5.16 % (3,708) 5.16 % (3,203) 5.16 %

4 unchanged sentences

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

The increase in income from unconsolidated entities during the three months ended September 30, 2021 is primarily related to the reserves established on straight-line receivable balances at unconsolidated Genesis Healthcare entities in the prior year.

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

The decrease during the six months ended June 30, 2021, relates primarily to our partner's share of a gain on sale of certain properties in the prior year.

The decrease during the nine months ended September 30, 2021, relates primarily to our partner's share of a gain on sale of certain properties in the prior year.

Outpatient Medical

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

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

QTD Pool YTD Pool

Three Months Ended Change Six Months Ended Change

June 30, 2021 June 30, 2020 $ % June 30, 2021 June 30, 2020 $ %

Three Months Ended Change Nine Months Ended Change

September 30, 2021 September 30, 2020 $ % September 30, 2021 September 30, 2020 $ %

$ 100,988 $ 96,258 $ 4,730 4.9 % $ 288,908 $ 278,882 $ 10,026 3.6 %

1 unchanged sentence

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

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

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

Three Months Ended Change Six Months Ended Change

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

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 Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 $ % 2021 2020 $ %

8 unchanged sentences

Interest expense 4,811 4,287 524 12 % 12,733 13,421 (688) (5) %

Loss (gain) on extinguishment of debt, net — 741 (741) (100) % — 741 (741) (100) %

Provision for loan losses (3,641) (29) (3,612) n/a (3,362) (29) (3,333) n/a

Loss (gain) on extinguishment of debt, net (5) — (5) n/a (5) 741 (746) (101) %

Provision for loan losses, net (100) 2,399 (2,499) (104) % (3,462) 2,370 (5,832) (246) %

Impairment of assets — — — n/a 2,211 — 2,211 n/a

6 unchanged sentences

Net income (loss) 83,530 222,082 (138,552) (62) % 244,092 690,072 (445,980) (65) %

Net income (loss) attributable to noncontrolling interests 629 (2,977) 3,606 121 % 2,799 (524) 3,323 634 %

Net income (loss) attributable to noncontrolling interests 934 154 780 506 % 3,733 (370) 4,103 n/a

Net income (loss) attributable to common stockholders $ 82,596 $ 221,928 $ (139,332) (63) % $ 240,359 $ 690,442 $ (450,083) (65) %

(1) See Non-GAAP Financial Measures.

Rental income has decreased due primarily to significant dispositions that have closed during 2020.

Rental income has decreased due primarily to significant dispositions that closed during 2020.

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

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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, 2021, our consolidated outpatient medical portfolio signed 117,954 square feet of new leases and 286,868 square feet of renewals.

For the three months ended September 30, 2021, our consolidated outpatient medical portfolio signed 55,028 square feet of new leases and 326,222 square feet of renewals.

The weighted-average term of these leases was seven years, with a rate of $42.91 per square foot and tenant improvement and lease commission costs of $22.4 per square foot.

Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.0% to 3.5%.

We have collected virtually all rent due through the six months ended June 30, 2021, with uncollected amounts primarily attributable to local jurisdictions with COVID-19 related ordinances providing temporary rent relief to tenants.

We evaluate leases individually and recognize rent on a cash basis if collectibility of substantially all contractual rent payments is not probable.

The increase in interest income for the three and six months ended June 30, 2021 is due primarily to a $178,207,000 first mortgage loan initiated in August 2020 which was subsequently repaid in full in June of 2021.

We have collected virtually all rent due through the nine months ended September 30, 2021, with uncollected amounts primarily attributable to local jurisdictions with COVID-19 related ordinances providing temporary rent relief to tenants.

We evaluate leases individually and recognize rent on a cash basis if collectability of substantially all contractual rent payments is not probable.

The increase in interest income for the nine months ended September 30, 2021 is due primarily to a $178,207,000 first mortgage loan initiated in August 2020 which was subsequently repaid in full in June of 2021, resulting in the reversal of the previously established allowance for credit losses.

The fluctuation in property operating expenses and depreciation and amortization are primarily attributable to the significant dispositions that occurred in 2020.

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

During the three months ended June 30, 2021, we recognized an impairment charge of $2,211,000 related to one held for sale property.

During the nine months ended September 30, 2021, we recognized an impairment charge of $2,211,000 related to one held for sale property.

Changes in gains/losses on sales of properties are related to volume 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 recognized during the three months ended June 30, 2020 from acquisitions no longer expected to be consummated.

During the six months ended June 30, 2021, we completed one Outpatient Medical construction project representing $ 101,867,000 or $722 per square foot.

The following is a summary of the Outpatient Medical construction projects, excluding expansions, pending as of June 30, 2021 (dollars in thousands):

The fluctuation in other expenses is primarily due to noncapitalizable transaction costs.

During the nine months ended September 30, 2021, we completed two Outpatient Medical construction project representing $ 116,612,000 or $642 per square foot.

The following is a summary of the Outpatient Medical construction projects, excluding expansions, pending as of September 30, 2021 (dollars in thousands):

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

Location Square Feet Commitment Balance Est.

Kalamazoo, MI 40,607 $ 14,267 $ 9,709 3Q21

College Station, TX 25,200 $ 9,025 $ 5,581 4Q21

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

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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

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

During the three months ended September 30, 2021, the loss from unconsolidated entities is largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures.

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

1 unchanged sentence

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,

Three Months Ended Change Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

790 1,177 (387) (33) % 2,175 1,968 207 11 %

Property operating expenses 2,174 — 2,174 n/a 3,828 — 3,828 n/a

(1,744) 375 (2,119) (565) % (2,443) 791 (3,234) (409) %

Property operating expenses 3,054 1,718 1,336 78 % 6,882 1,718 5,164 301 %

(2,264) (541) (1,723) (318) % (4,707) 250 (4,957) n/a

Interest expense

3 unchanged sentences

Loss (gain) on extinguishment of debt, net

52,506 — 52,506 n/a 52,506 — 52,506 n/a

— 33,004 (33,004) (100) % 52,506 33,004 19,502 59 %

Other expenses

9 unchanged sentences

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

Three Months Ended Change Six Months Ended Change

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

Three Months Ended Change Nine Months Ended Change

September 30, September 30, September 30, September 30,

2021 2020 $ % 2021 2020 $ %

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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, 2021 is due primarily to the early extinguishment of $339,128,000 of our 3.75% senior unsecured notes due March 2023 and $334,624,000 of our 3.95% senior unsecured notes due September 2023.

General and administrative expenses as a percentage of consolidated revenues for the three months ended June 30, 2021 and 2020 were 2.76% and 2.87%, respectively.

The loss on extinguishment recognized during the nine months ended September 30, 2021 is due primarily to the early extinguishment of $339,128,000 of our 3.75% senior unsecured notes due March 2023 and $334,624,000 of our 3.95% senior unsecured notes due September 2023.

The loss on extinguishment recognized during the nine months ended September 30, 2020 is due primarily to the early extinguishment of $160,872,000 of our 3.75% senior unsecured notes due March 2023 and $265,376,000 of of our 3.95% senior unsecured notes due September 2023.

General and administrative expenses as a percentage of consolidated revenues for the three months ended September 30, 2021 and 2020 were 2.60% and 2.99%, 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.

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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 or six full quarter after acquisition or being placed into service for the QTD Pool and YTD Pool, respectively.

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

Redeveloped properties (including major refurbishments of a Seniors Housing Operating property where 20% or more of units are simultaneously taken out of

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

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.

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 seven 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 seven 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 seven 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 U.K.

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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.

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, other impairment charges and other adjustments deemed appropriate.

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.

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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.

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

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

3 unchanged sentences

Three Months Ended

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

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

FFO Reconciliation:

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(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,

Nine Months Ended

September 30, September 30,

FFO Reconciliations:

13 unchanged sentences

(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

Three Months Ended

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

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

NOI Reconciliations:

6 unchanged sentences

Impairment of assets 1,490 23,692 23,568 9,317 23,313 75,151 27,827

Provision for loan losses 6,197 1,383 83,085 2,857 1,422 7,072

Provision for loan losses, net (271) 6,197 1,383 83,085 2,857 1,422 7,072

Loss (gain) on extinguishment of debt, net (5) 55,612 (4,643) 13,796 33,004 249 —

10 unchanged sentences

Total NOI $ 510,397 $ 498,335 $ 434,736 $ 501,455 $ 402,157 $ 527,711 $ 576,821

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

Six Months Ended

June 30, 2021 June 30, 2020

Nine Months Ended

September 30, 2021 September 30, 2020

NOI Reconciliations:

5 unchanged sentences

Impairment of assets 48,750 126,291

Provision for loan losses 7,580 8,494

Provision for loan losses, net 7,309 11,351

Loss (gain) on extinguishment of debt, net 50,964 33,253

10 unchanged sentences

Total NOI $ 1,443,468 $ 1,506,689

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

QTD Pool YTD Pool

22 unchanged sentences

527 548 350 1,425 515 547 331 1,393

(1) Acquisitions and development conversions will enter the QTD Pool and YTD Pool after 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 quarters of operations with the new operator in place or under the new structure, respectively.

(1) Acquisitions and development conversions will enter the QTD Pool and YTD Pool after five full quarters and seven 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 seven full quarters of operations post redevelopment completion, respectively.

(3) Transitioned properties will enter the QTD Pool and YTD Pool after five full quarters and seven 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.

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

QTD Pool YTD Pool

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

SSNOI Reconciliations:

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Seniors Housing Operating:

46 unchanged sentences

properties at a GBP/USD rate of 1.38.

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.

1 unchanged sentence

Dollars are in thousands.

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

Three Months Ended

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

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

EBITDA Reconciliations:

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Interest coverage ratio

3.30 x 3.56 x 4.20 x 6.23 x 4.29 x 5.42 x

4.81 x 3.30 x 3.56 x 4.20 x 6.23 x 4.29 x 5.42 x

Fixed Charge Coverage Ratio:

5 unchanged sentences

Fixed charge coverage ratio

2.93 x 3.16 x 3.72 x 5.52 x 3.84 x 4.88 x

Six Months Ended

June 30, June 30,

4.22 x 2.93 x 3.16 x 3.72 x 5.52 x 3.84 x 4.88 x

Nine Months Ended

September 30, September 30,

EBITDA Reconciliations:

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Twelve Months Ended

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

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

Adjusted EBITDA Reconciliations:

11 unchanged sentences

Impairment of assets 58,067 79,890 131,349 135,608 126,389 121,172 55,960

Provision for loan losses 93,522 88,747 94,436 11,351 8,494 7,072

Provision for loan losses, net 90,394 93,522 88,747 94,436 11,351 8,494 7,072

Loss (gain) on derivatives and financial instruments, net (5,934) 3,539 5,332 11,049 5,411 5,260 5,739

1 unchanged sentence

52,960 60,985 68,939 64,171 52,630 46,971 48,327

Leasehold interest adjustment (2)

(640) — — — — — —

Casualty losses, net of recoveries (3)

998 — — — — — —

Other impairment (4)

9 unchanged sentences

Adjusted interest coverage ratio

3.82 x 3.84 x 3.97 x 4.07 x 4.14 x 4.18 x

3.83 x 3.82 x 3.84 x 3.97 x 4.07 x 4.14 x 4.18 x

Adjusted Fixed Charge Coverage Ratio:

5 unchanged sentences

Adjusted fixed charge coverage ratio

3.39 x 3.41 x 3.54 x 3.65 x 3.74 x 3.80 x

3.38 x 3.39 x 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 $13,214,000 of revenues and $12,574,000 of property operating expenses associated with a leasehold portfolio interest relating to 26 properties assumed by a wholly-owned affiliate in conjunction with the Holiday Retirement transaction.

Subsequent to the initial transaction, we purchased eight of the leased properties and one of the properties was sold by the landlord and removed from the lease.

No rent will be paid in excess of net cash flow relating to the leasehold properties and therefore, the net impact has been excluded from Adjusted EBITDA.

(3) Represents casualty losses net of any insurance recoveries.

(4) Represents reserve for straight-line rent receivable balances relating to leases placed on cash recognition.

7 unchanged sentences

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

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

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

2021 2021 2021 2020 2020 2020 2020

96 unchanged sentences

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