Item 6. Selected Financial Data

The following selected financial data for the five years ended December 31, 2020 are derived from our audited consolidated financial statements (in thousands, except per share data):

						Year Ended December 31,
						2016						2017						2018						2019						2020
Operating Data
Total revenues						$	4,281,160					$	4,316,641					$	4,700,499					$	5,121,306					$	4,605,967
Total expenses						3,571,907						4,017,025						4,277,009						4,578,414						4,637,519
Income from continuing operations before income taxes and other items						709,253						299,616						423,490						542,892						(31,552)
Income tax (expense) benefit						19,128						(20,128)						(8,674)						(2,957)						(9,968)
Income (loss) from unconsolidated entities						(10,357)						(83,125)						(641)						42,434						(8,083)
Gain (loss) on real estate dispositions, net						364,046						344,250						415,575						748,041						1,088,455
Income from continuing operations						1,082,070						540,613						829,750						1,330,410						1,038,852
Net income						1,082,070						540,613						829,750						1,330,410						1,038,852
Preferred stock dividends						65,406						49,410						46,704						—						—
Preferred stock redemption charge						—						9,769						—						—						—
Net income (loss) attributable to noncontrolling interests						4,267						17,839						24,796						97,978						60,008
Net income attributable to common stockholders						$	1,012,397					$	463,595					$	758,250					$	1,232,432					$	978,844
Other Data
Average number of common shares outstanding:
Basic						358,275						367,237						373,620						401,845						415,451
Diluted						360,227						369,001						375,250						403,808						417,387
Per Share Data
Basic:
Income from continuing operations						$	3.02					$	1.47					$	2.22					$	3.31					$	2.50
Net income attributable to common stockholders						$	2.83					$	1.26					$	2.03					$	3.07					$	2.36
Diluted:
Income from continuing operations						$	3.00					$	1.47					$	2.21					$	3.29					$	2.49
Net income attributable to common stockholders (1)						$	2.81					$	1.26					$	2.02					$	3.05					$	2.33
Cash distributions per common share						$	3.44					$	3.48					$	3.48					$	3.48					$	2.70
						December 31,
Balance Sheet Data						2016						2017						2018						2019						2020
Net real estate investments(2)						$	26,563,629					$	26,171,077					$	28,420,769					$	31,119,271					$	28,474,947
Total assets						28,865,184						27,944,445						30,342,072						33,380,751						32,483,642
Total debt and lease obligations(2)						12,358,245						11,731,936						13,297,144						15,388,765						14,216,986
Total liabilities						13,185,279						12,643,799						14,331,427						16,398,247						15,258,580
Total preferred stock						1,006,250						718,503						718,498						—						—
Total equity						15,281,472						14,925,452						15,586,599						16,506,627						16,881,572
(1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders.
(2) Effective January 1, 2019, we adopted new guidance on leases using the prospective method.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE SUMMARY
Company Overview			45
Business Strategy			46
Key Transactions			47
Key Performance Indicators, Trends and Uncertainties			48
Corporate Governance			49
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash			49
Off-Balance Sheet Arrangements			50
Contractual Obligations			51
Capital Structure			51
RESULTS OF OPERATIONS
Summary			52
Seniors Housing Operating			53
Triple-net			55
Outpatient Medical			57
Non-Segment/Corporate			59
OTHER
Non-GAAP Financial Measures			60
Critical Accounting Policies			65

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based primarily on the consolidated financial statements of Welltower Inc. presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1 — Business” and “Item 1A — Risk Factors” above.

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 year ended December 31, 2020 (dollars in thousands):

												Percentage of						Number of
Type of Property						NOI(1)						NOI						Properties
Seniors Housing Operating						$	755,552					37.6		%				556
Triple-net						748,121						37.2		%				641
Outpatient Medical						505,071						25.2		%				296
Totals						$	2,008,744					100.0		%				1,493

(1) Represents consolidated net operating income ("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 COVID-19 pandemic has had and may continue to have material and adverse effects on our financial condition, results of operations and cash flows in the future. 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 effectiveness and availability of vaccines and the success of ongoing vaccination deployment efforts in our facilities and the geographic areas in which we operate, 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.

Our Seniors Housing Operating revenues are dependent on occupancy. While admission bans were lifted across our portfolio during the second and third quarter, with the ramp up of COVID-19 cases in the general community in the fourth quarter, admissions bans, both government-imposed and voluntary bans adopted by operators, have been reinstated in many locations which have significantly affected occupancy rates. Occupancy has consistently declined since the beginning of the pandemic to 76.2% as of December 31, 2020. Through February 5, 2021, total occupancy declined an additional 180 basis points to 74.4%. Occupancy metrics represents approximate spot occupancy as reported by our operators for properties in operation as of February 29, 2020, including unconsolidated properties but excluding acquisitions, executed dispositions and development conversions since such date.

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, personal protective equipment and sanitation. 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”) Paycheck Protection Program. In addition, operators of long-term/post-acute care facilities have generally received funds from Phase 1 of the Provider Relief Fund and operators of assisted living facilities have or are expected to receive funds from Phase 2 of the Provider Relief Fund. Accordingly, collection of Triple-net rent due during the COVID-19 pandemic to date (from March to December) has generally been consistent with historical collection rates and no significant rent concessions or deferrals have been made.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Outpatient Medical tenants have experienced 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 continue to 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.

Outpatient Medical rent collections through March were generally consistent with pre COVID-19 levels. During the second quarter we executed short term rent deferrals with certain Outpatient Medical tenants which in most cases were required to be repaid by year end. Since then we have collected approximately 99% of Outpatient Medical rent due in the second half of the year, with uncollected amounts primarily attributable to local jurisdictions with COVID-19 related ordinances providing temporary rent relief to tenants. Furthermore, collections of deferred rent due under executed deferrals was over 99%. 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 seniors housing and health care properties, as well as our ability to transition or sell properties with profitable results in the future, may be limited. In response to the COVID-19 pandemic, acquisitions during the year ended December 31, 2020 declined compared to recent years. Additionally, we undertook certain opportunistic disposals to enhance near-term liquidity. We have a significant development portfolio as of December 31, 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 year ended December 31, 2020, resident fees and services and rental income represented 67% and 31%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

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

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses, general and administrative expenses and other expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

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

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also likely that investment dispositions may occur in the future. To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any investment dispositions in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our unsecured revolving credit facility and commercial paper program. During 2020, in response to the COVID-19 pandemic, we were strategic and opportunistic in disposing of certain real estate which provided significant near term liquidity. At December 31, 2020, we had $1,545,046,000 of cash and cash equivalents, $475,997,000 of restricted cash and $3,000,000,000 of available borrowing capacity under our unsecured revolving credit facility.

Key Transactions

Capital The following summarizes key capital transactions that occurred during the year ended December 31, 2020:

• In April 2020, we closed on a $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.

• In June 2020, we completed the issuance of $600,000,000 senior unsecured notes bearing interest at 2.75% with a maturity date of January 2031. Net proceeds were used to fund tender offers for $426,248,000 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 $140,000,000.

• We sold 2,128,000 shares of common stock under our ATM and DRIP programs, primarily in the first quarter, 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.

• We extinguished $632,288,000 of secured debt at a blended average interest rate of 2.21% throughout 2020.

Inve**stments The following summarizes property acquisitions and joint venture investments completed during the year ended December 31, 2020 (dollars in thousands):

						Properties						Investment Amount(1)						Capitalization Rates(2)						Book Amount(3)
Seniors Housing Operating						26						$	574,793					3.5%						$	610,857
Triple-net						11						88,908						6.5%						90,731
Outpatient Medical						17						246,516						6.1%						249,312
Totals						54						$	910,217					4.5%						$	950,900

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

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

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

Dispositions The following summarizes property dispositions completed during the year ended December 31, 2020 (dollars in thousands):

						Properties						Proceeds(1)						Capitalization Rates(2)						Book Amount(3)
Seniors Housing Operating						31						$	1,282,439					4.8%						$	1,289,769
Triple-net						8						109,439						7.9%						51,666
Outpatient Medical						108						2,324,062						5.6%						1,755,864
Totals						147						$	3,715,940					5.4%						$	3,097,299

(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 consolidated financial statements for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Dividends On February 9, 2021, the Board of Directors declared a cash dividend for the quarter ended December 31, 2020 of $0.61 per share, consistent with the cash dividends for the quarters ended September 30, June 30 and March 31, 2020, representing a 30% decrease from the $0.87 per share dividend for the quarter ended December 31, 2019. The dividend declaration represents the 199th consecutive quarterly dividend payment.

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 Statement 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. GAAP. Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations. These earnings measures are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands):

						Year Ended December 31,
						2020						2019						2018
Net income						$	1,038,852					$	1,330,410					$	829,750
Net income attributable to common stockholders						978,844						1,232,432						758,250
Funds from operations attributable to common stockholders						1,102,562						1,577,080						1,392,183
Consolidated net operating income						2,008,144						2,431,264						2,267,482

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 (“IRC”) 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 adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted 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:

						Year Ended December 31,
						2020						2019						2018
Net debt to book capitalization ratio						40.9%						46.5%						45.0%
Net debt to undepreciated book capitalization ratio						33.8%						39.4%						37.8%
Net debt to market capitalization ratio						29.7%						29.6%						31.3%
Adjusted interest coverage ratio						3.97x						4.14x						4.11x
Adjusted fixed charge coverage ratio						3.54x						3.78x						3.44x

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 years indicated below:

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

									December 31,(1)
									2020						2019						2018
Property mix:
			Seniors Housing Operating						38%						43%						43%
			Triple-net						37%						38%						40%
			Outpatient Medical						25%						19%						17%
Relationship mix:
			Sunrise Senior Living(2)						13%						14%						15%
			ProMedica						11%						9%						4%
			Revera(2)						5%						6%						7%
			Avery Healthcare						4%						3%						3%
			Sagora Senior Living						3%						3%						3%
			Remaining						64%						65%						68%
Geographic mix:
			California						14%						13%						14%
			United Kingdom						10%						8%						9%
			Texas						9%						8%						8%
			Canada						6%						7%						7%
			Pennsylvania						6%						6%						5%
			Remaining						55%						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.

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 “Item 1 — Business — Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A — Risk Factors” and other sections of this Annual Report on Form 10-K. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to “Item 1 — Business,” “Item 1A — Risk Factors” in this Annual Report on Form 10-K 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 Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.

Liquidity and Capital Resources

Sources and Uses of Cash

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, general and administrative expenses and other expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

						Year Ended												One Year Change												Year Ended						One Year Change												Two Year Change
						December 31,						December 31,																		December 31,
						2020						2019						$						%						2018						$						%						$						%
Cash, cash equivalents and restricted cash at beginning of period						$	385,766					$	316,129					$	69,637					22		%				$	309,303					$	6,826					2		%				$	76,463					25		%
Net cash provided from (used in):
Operating activities						1,364,756						1,535,968						(171,212)						-11		%				1,583,944						(47,976)						-3		%				(219,188)						-14		%
Investing activities						2,347,928						(2,048,791)						4,396,719						n/a						(2,386,471)						337,680						-14		%				4,734,399						n/a
Financing activities						(2,080,858)						577,150						(2,658,008)						n/a						818,368						(241,218)						-29		%				(2,899,226)						n/a
Effect of foreign currency translation						3,451						5,310						(1,859)						-35		%				(9,015)						14,325						n/a						12,466						n/a
Cash, cash equivalents and restricted cash at end of period						$	2,021,043					$	385,766					$	1,635,277					424		%				$	316,129					$	69,637					22		%				$	1,704,914					539		%

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 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 years ended December 31, 2020, 2019 and 2018, cash flows from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash 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.” Please refer to Notes 3 and 5 of our consolidated financial statements for additional information. The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands):

						Year Ended												One Year Change												Year Ended						One Year Change												Two Year Change
						December 31,						December 31,																		December 31,
						2020						2019						$						%						2018						$						%						$						%
New development						$	201,336					$	323,488					$	(122,152)					-38		%				$	160,706					$	162,782					101		%				$	40,630					25		%
Recurring capital expenditures, tenant improvements and lease commissions						83,146						136,535						(53,389)						-39		%				90,190						46,345						51		%				(7,044)						-8		%
Renovations, redevelopments and other capital improvements						161,843						192,289						(30,446)						-16		%				175,993						16,296						9		%				(14,150)						-8		%
Total						$	446,325					$	652,312					$	(205,987)					-32		%				$	426,889					$	225,423					53		%				$	19,436					5		%

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 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 $600,000,000 senior unsecured notes with a maturity date of January 2031. Net proceeds were used to fund tender offers for $426,248,000 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 the term loan by $140,000,000. As of December 31, 2020, we have total near-term available liquidity of approximately $4.5 billion. However, we are unable to accurately predict the full impact that the pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous factors discussed in Part I Item 1A. Risk Factors.

Off-Balance Sheet Arrangements

At December 31, 2020, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 65%. We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. At December 31, 2020, we had nine outstanding letter of credit obligations. Please see Notes 8, 12 and 13 to our consolidated financial statements for additional information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Contractual Obligations

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

						Payments Due by Period
Contractual Obligations						Total						2021						2022-2023						2024-2025						Thereafter
Senior unsecured notes and term credit facilities:(1)
U.S. Dollar senior unsecured notes						$	8,273,752					$	—					$	673,752					$	2,600,000					$	5,000,000
Canadian Dollar senior unsecured notes(2)						235,239						—						—						—						235,239
Pounds Sterling senior unsecured notes(2)						1,434,510						—						—						—						1,434,510
U.S. Dollar term credit facility						1,370,000						—						1,370,000						—						—
Canadian Dollar term credit facility(2)						196,032						—						196,032						—						—
Secured debt:(1,2)
Consolidated						2,378,073						451,038						833,433						397,785						695,817
Unconsolidated						1,064,949						54,073						206,924						557,508						246,444
Contractual interest obligations:(3)
Senior unsecured notes and term loans(2)						3,872,398						423,475						816,492						651,101						1,981,330
Consolidated secured debt(2)						309,885						72,990						101,412						58,755						76,728
Unconsolidated secured debt(2)						200,426						35,099						65,011						42,031						58,285
Financing lease liabilities(4)						197,427						8,777						78,026						2,950						107,674
Operating lease obligations(4)						1,002,538						20,316						38,133						33,955						910,134
Purchase obligations(5)						784,797						399,771						309,660						65,920						9,446
Total contractual obligations						$	21,320,026					$	1,465,539					$	4,688,875					$	4,410,005					$	10,755,607

(1) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the Consolidated Balance Sheets.

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

(3) Based on variable interest rates in effect as of December 31, 2020.

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

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

Capital Structure

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

On May 17, 2018, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan (“DRIP”) under which we may issue up to 15,000,000 shares of common stock. As of January 29, 2021, 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. LLC, J.P. 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 January 29, 2021, 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.

On May 1, 2020, our Board of Directors authorized a share repurchase program whereby we may repurchase up to $1 billion of common stock through December 31, 2021 (the "Repurchase Program"). Under this authorization, we are not required to purchase shares but may choose to do so in the open market or through private transactions at times and amounts based on our

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

evaluation of market conditions and other factors. We expect to finance any share repurchases under the Repurchase Program using available cash and may use proceeds from borrowings or debt offerings.

Results of Operations

Summary

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 related to these supplemental measures.

This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The following is a summary of our results of operations for the periods presented (dollars in thousands, except per share amounts):

						Year Ended												One Year Change												Year Ended						One Year Change												Two Year Change
						December 31,						December 31,																		December 31,
						2020						2019						Amount						%						2018						Amount						%						Amount						%
Net income						$	1,038,852					$	1,330,410					$	(291,558)					-22		%				$	829,750					$	500,660					60		%				$	209,102					25		%
NICS						978,844						1,232,432						(253,588)						-21		%				758,250						474,182						63		%				220,594						29		%
FFO						1,102,562						1,577,080						(474,518)						-30		%				1,392,183						184,897						13		%				(289,621)						-21		%
Adjusted EBITDA						2,048,412						2,328,202						(279,790)						-12		%				2,153,005						175,197						8		%				(104,593)						-5		%
Consolidated NOI						2,008,144						2,431,264						(423,120)						-17		%				2,267,482						163,782						7		%				(259,338)						-11		%
Per share data (fully diluted):
Net income attributable to common stockholders (1)						$	2.33					$	3.05					$	(0.72)					-24		%				$	2.02					$	1.03					51		%				$	0.31					15		%
Funds from operations attributable to common stockholders						$	2.64					$	3.91					$	(1.27)					-32		%				$	3.71					$	0.20					5		%				$	(1.07)					-29		%
Adjusted interest coverage ratio						3.97x						4.14x						-0.17x						-4		%				4.11x						0.03x						1		%				-0.14x						-3		%
Adjusted fixed charge coverage ratio						3.54x						3.78x						-0.24x						-6		%				3.44x						0.34x						10		%				0.10x						3		%
(1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders.

The following table represents the changes in outstanding common stock for the period from January 1, 2018 to December 31, 2020 (in thousands):

						Year Ended
						December 31, 2020						December 31, 2019						December 31, 2018						Totals
Beginning balance						410,257						383,675						371,732						371,732
Dividend reinvestment plan issuances						264						5,799						6,529						12,592
Preferred stock conversions						—						12,712						—						12,712
Option exercises						—						11						57						68
Equity Shelf Program issuances						6,800						7,856						5,241						19,897
Repurchase of common stock						(202)						—						—						(202)
Other, net						282						204						116						602
Ending balance						417,401						410,257						383,675						417,401
Average number of shares outstanding:
Basic						415,451						401,845						373,620
Diluted						417,387						403,808						375,250

During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, a portion of our earnings are derived primarily from long-term investments with predictable rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes, secured debt and borrowings under our primary unsecured credit facility. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.