Item 6. [Reserved]

The selected financial data previously required by Item 301 of Regulation S-K has been omitted in reliance on SEC Release No. 33-10890.

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

EXECUTIVE SUMMARY
Company Overview			46
Business Strategy			47
Key Transactions			48
Key Performance Indicators, Trends and Uncertainties			48
Corporate Governance			50
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash			50
Off-Balance Sheet Arrangements			51
Contractual Obligations			51
Capital Structure			52
RESULTS OF OPERATIONS
Summary			53
Seniors Housing Operating			54
Triple-net			57
Outpatient Medical			59
Non-Segment/Corporate			61
OTHER
Non-GAAP Financial Measures			61
Critical Accounting Policies and Estimates			67

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, 2021 (dollars in thousands):

												Percentage of						Number of
Type of Property						NOI(1)						NOI						Properties
Seniors Housing Operating						$	683,906					34.7		%				721
Triple-net						841,122						42.6		%				624
Outpatient Medical						448,350						22.7		%				306
Totals						$	1,973,378					100.0		%				1,651

(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 of vaccines, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, the overall pace of recovery, among others.

Our Seniors Housing Operating revenues are dependent on occupancy. Spot occupancy has steadily increased in recent months, with 94% of communities open for new admissions and nearly all communities allowing visitors, in-person tours and communal dining and activities as of December 31, 2021. Rapid distribution and a high acceptance rate of COVID-19 vaccinations by residents within assisted living and memory care facilities in the U.S. and U.K. have resulted in a significant decrease in total resident case counts across the portfolio from peak levels in mid-January 2021, however, resident case counts have increased in December 2021 as a result of highly transmissible variants.

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 trends related to occupancy 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 and Provider Relief Fund.

During the year ended December 31, 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 during the year ended December 31, 2021. We evaluate leases individually and recognize rent on a cash basis if collectibility of substantially all contractual rent payments is not probable. To the extent 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.

During the early stages of the pandemic in 2020, our Outpatient Medical tenants 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. In some instances, these factors caused tenants to seek modifications of contractual

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

rent obligations. We evaluated each request on a case-by-case basis to determine if a form of rent relief was warranted following an examination of the tenant's financial health, rent coverage, current operating situation and other factors. Virtually all deferred rent related to 2020 deferrals has been paid. During the year ended December 31, 2021, we have continued to collect virtually all rent due from tenants in our Outpatient Medical portfolio, with uncollected amounts primarily attributable to local jurisdictions with COVID-19 related ordinances providing temporary rent relief to tenants.

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, 2021, resident fees and services and rental income represented 67% and 29%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

Our primary sources of cash include resident fees and services, rent and interest receipts, borrowings under our unsecured revolving credit facility and commercial paper program, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses, 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. At December 31, 2021, we had $269,265,000 of cash and cash equivalents, $77,490,000 of restricted cash and $3,675,000,000 of available borrowing capacity under our unsecured revolving credit facility.

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

Key Transactions

Capital The following summarizes key capital transactions that occurred during the year ended December 31, 2021:

• In March 2021, we completed the issuance of $750,000,000 senior unsecured notes bearing interest at 2.80% with a maturity date of June 2031.

• In April 2021, we repaid our $339,128,000 of our 3.75% senior unsecured notes due March 2023, $334,624,000 of our 3.95% senior unsecured notes due September 2023, and $15,000,000 of our term loan due April 2022.

*•*In June 2021, we closed on a new $4,700,000,000 unsecured credit facility with improved pricing across our line of credit and terminated the existing unsecured credit facility. The credit facility includes $4,000,000,000 of revolving credit capacity at a borrowing rate of 77.5 basis points ("bps") over LIBOR, $500,000,000 of USD term loan capacity at a borrowing rate of 90.0 bps over LIBOR and $250,000,000 CAD term loan capacity at 90.0 bps over CDOR.

• In June 2021, we repaid the remaining $845,000,000 of our term loan due April 2022.

• In June 2021, we completed the issuance of $500,000,000 senior unsecured notes bearing interest at 2.05% with a maturity date of January 2029.

*•*In July 2021, we entered into an amended and restated ATM Program (as defined below) pursuant to which we may offer and sell up to $2,500,000,000 of common stock from time to time. During 2021, we sold 34,854,598 shares of common stock under our current and previous ATM Programs via forward sale agreements which are expected to generate gross proceeds of approximately $2,820,855,000, of which 29,667,348 shares have been settled resulting in $2,385,683,000 of gross proceeds during the year ended December 31, 2021.

• In November 2021, we completed the issuance of $500,000,000 senior unsecured notes bearing interest at 2.75% with a maturity date of January 2032.

• We extinguished $132,031,000 of secured debt at a blended average interest rate of 5.86% throughout 2021.

Inve**stments The following summarizes property acquisitions and joint venture investments completed during the year ended December 31, 2021 (dollars in thousands):

						Properties						Book Amount(1)						Capitalization Rates(2)
Seniors Housing Operating						151						$	3,138,988					5.1%
Triple-net						35						898,167						6.1%
Outpatient Medical						19						403,458						5.5%
Totals						205						$	4,440,613					5.2%

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

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

Dispositions The following summarizes property dispositions completed during the year ended December 31, 2021 (dollars in thousands):

						Properties						Proceeds(1)						Book Amount(2)						Capitalization Rates(3)
Seniors Housing Operating						12						$	118,590					$	112,837					4.8%
Triple-net						51						625,478						486,369						7.2%
Outpatient Medical						11						326,254						229,660						5.3%
Totals						74						$	1,070,322					$	828,866					6.4%

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

(2) Represents carrying value of net real estate assets at time of disposition. See Note 5 to our consolidated financial statements for additional information.

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

Dividends Our Board of Directors declared a cash dividend for the quarter ended December 31, 2021 of $0.61 per share. On March 8, 2022, we will pay our 203rd consecutive quarterly dividend payment to stockholders of record on March 1, 2022.

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.

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

Operating Performance We believe that net income and net income attributable to common stockholders (“NICS”) per the Consolidated Statements of Comprehensive Income are the most appropriate earnings measures. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”) and consolidated net operating income (“NOI”); however, these supplemental measures are not defined by U.S. 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,
						2021						2020						2019
Net income						$	374,479					$	1,038,852					$	1,330,410
Net income attributable to common stockholders						336,138						978,844						1,232,432
Funds from operations attributable to common stockholders						1,220,722						1,102,562						1,577,080
Consolidated net operating income						1,967,553						2,008,144						2,431,264

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 restricted cash. The coverage ratios indicate our ability to service interest and fixed charges (interest and secured debt principal amortization). 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,
						2021						2020						2019
Net debt to book capitalization ratio						42.2%						40.8%						46.3%
Net debt to undepreciated book capitalization ratio						34.9%						33.8%						39.2%
Net debt to market capitalization ratio						25.9%						29.6%						29.5%
Adjusted interest coverage ratio						3.89x						3.97x						4.14x
Adjusted fixed charge coverage ratio						3.43x						3.54x						3.78x

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:

									December 31,(1)
									2021						2020						2019
Property mix:
			Seniors Housing Operating						35%						38%						43%
			Triple-net						43%						37%						38%
			Outpatient Medical						22%						25%						19%
Relationship mix:
			ProMedica						12%						11%						9%
			Sunrise Senior Living(2)						10%						13%						14%
			Revera(2)						5%						5%						6%
			Avery Healthcare						4%						4%						3%
			HC-One Group						3%						—%						—%
			Remaining						66%						67%						68%
Geographic mix:
			California						13%						14%						13%
			United Kingdom						13%						10%						8%
			Texas						8%						9%						8%
			Canada						6%						6%						7%
			New Jersey						6%						5%						7%
			Remaining						54%						56%						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.

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

(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):

						Year Ended												One Year Change												Year Ended						One Year Change												Two Year Change
						December 31,						December 31,																		December 31,
						2021						2020						$						%						2019						$						%						$						%
Cash, cash equivalents and restricted cash at beginning of period						$	2,021,043					$	385,766					$	1,635,277					424		%				$	316,129					$	69,637					22		%				$	1,704,914					539		%
Net cash provided from (used in):
Operating activities						1,275,325						1,364,756						(89,431)						-7		%				1,535,968						(171,212)						-11		%				(260,643)						-17		%
Investing activities						(4,516,268)						2,347,928						(6,864,196)						n/a						(2,048,791)						4,396,719						n/a						(2,467,477)						120		%
Financing activities						1,567,664						(2,080,858)						3,648,522						n/a						577,150						(2,658,008)						n/a						990,514						172		%
Effect of foreign currency translation						(1,009)						3,451						(4,460)						n/a						5,310						(1,859)						-35		%				(6,319)						n/a
Cash, cash equivalents and restricted cash at end of period						$	346,755					$	2,021,043					$	(1,674,288)					-83		%				$	385,766					$	1,635,277					424		%				$	(39,011)					-10		%

Operating Activities The changes in net cash provided from operating activities are primarily attributable to declines in revenue as a result of decreased occupancy at our Seniors Housing Operating properties, straight-line receivable reserves related to Triple-net leases during the year ended December 31, 2021 and dispositions. Please see “Results of Operations” for discussion of net income fluctuations. For the years ended December 31, 2021, 2020 and 2019, cash flows from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash provided from/used in investing activities are primarily attributable to net changes in real property investments and dispositions, loans receivable and investments in unconsolidated entities which are summarized above in “Key Transactions.” 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):

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,
						2021						2020						$						%						2019						$						%						$						%
New development						$	417,963					$	201,336					$	216,627					108		%				$	323,488					$	(122,152)					-38		%				$	94,475					29		%
Recurring capital expenditures, tenant improvements and lease commissions						99,994						83,146						16,848						20		%				136,535						(53,389)						-39		%				(36,541)						-27		%
Renovations, redevelopments and other capital improvements						182,594						161,843						20,751						13		%				192,289						(30,446)						-16		%				(9,695)						-5		%
Total						$	700,551					$	446,325					$	254,226					57		%				$	652,312					$	(205,987)					-32		%				$	48,239					7		%

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.

In March 2021, we completed the issuance of $750,000,000 senior unsecured notes with a maturity date of June 2031. In June 2021, we completed the issuance of $500,000,000 senior unsecured notes with a maturity date of January 2029. Net proceeds from these debt issuances were used to redeem the remaining $339,128,000 of our 3.75% senior unsecured notes due 2023, $334,624,000 of our 3.95% senior unsecured notes due 2023, and $860,000,000 remaining on our term loan due April 2022. In June 2021, we closed on a new $4,700,000,000 unsecured credit facility. The credit facility includes $4,000,000,000 of revolving credit capacity. In November 2021, we completed the issuance of $500,000,000 senior unsecured notes with a maturity date of January 2032. As of December 31, 2021, we have total near-term available liquidity of approximately $4.0 billion.

Off-Balance Sheet Arrangements

At December 31, 2021, 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, 2021, we had 15 outstanding letter of credit obligations. Please see Notes 8, 12 and 13 to our consolidated financial statements for additional information.

Contractual Obligations

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

The following table summarizes our payment requirements under contractual obligations as of December 31, 2021 (in thousands):

						Payments Due by Period
Contractual Obligations						Total						2022						2023-2024						2025-2026						Thereafter
Unsecured credit facility and commercial paper(1)						$	325,000					$	325,000					$	—					$	—					$	—
Senior unsecured notes and term credit facilities:(1)
U.S. Dollar senior unsecured notes						9,350,000						—						1,350,000						1,950,000						6,050,000
Canadian Dollar senior unsecured notes(2)						234,797						—						—						—						234,797
Pounds Sterling senior unsecured notes(2)						1,417,500						—						—						—						1,417,500
U.S. Dollar term credit facility						510,000						—						500,000						10,000						—
Canadian Dollar term credit facility(2)						195,664						—						195,664						—						—
Secured debt:(1,2)
Consolidated						2,202,312						582,884						733,426						267,754						618,248
Unconsolidated						1,247,746						149,218						291,969						546,525						260,034
Contractual interest obligations:(3)
Unsecured credit facility and commercial paper						65						65						—						—						—
Senior unsecured notes and term loans(2)						3,815,957						427,904						826,167						648,580						1,913,306
Consolidated secured debt(2)						245,383						61,444						78,218						48,135						57,586
Unconsolidated secured debt(2)						188,244						40,244						68,709						26,931						52,360
Finance lease liabilities(4)						210,857						8,698						71,634						3,354						127,171
Operating lease liabilities(4)						1,383,350						45,151						91,850						87,301						1,159,048
Purchase obligations(5)						1,378,920						826,122						534,849						5,533						12,416
Total contractual obligations						$	22,705,795					$	2,466,730					$	4,742,486					$	3,594,113					$	11,902,466

(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, 2021.

(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, 2021, we were in compliance in all material respects with 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 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 February 4, 2022, 15,000,000 shares of common stock remained available for issuance under the DRIP registration statement. On July 30, 2021, we entered into (i) an amended and restated equity distribution agreement (the “EDA”) with each of Robert W. Baird & Co. 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

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

Capital Markets LLC, Mizuho Securities USA LLC, Morgan Stanley & 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, 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 ATM Program also allows us to enter into forward sale agreements. As of February 4, 2022, we had $1,876,085,000 of remaining capacity under the ATM Program, which excludes forward sales agreements outstanding for the sale of 10,924,956 shares or approximately $930,610,000 with maturity dates in 2022. We expect to physically settle the forward sales for cash proceeds. 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.

In connection with the filing of the new “universal” shelf registration statement, the Company also filed with the SEC two prospectus supplements that will continue offerings that were previously covered by prospectus supplements and the accompanying prospectus to the prior registration statement relating to: (i) the registration and possible issuance of up to 620,731 shares of the Company’s common stock (the “DownREIT Shares”), that may be issued from time to time if, and to the extent that, certain holders of Class A units (the “DownREIT Units”) of HCN G&L DownREIT, LLC, a Delaware limited liability company (the “DownREIT”), tender such DownREIT Units for redemption by the DownREIT, and HCN DownREIT Member, LLC, a majority-owned indirect subsidiary of the Company (including its permitted successors and assigns, the “Managing Member”), or a designated affiliate of the Managing Member, elects to assume the redemption obligations of the DownREIT and to satisfy all or a portion of the redemption consideration by issuing DownREIT Shares to the holders instead of or in addition to paying a cash amount; and (ii) the registration and possible issuance of up to 475,327 shares common stock (the “DownREIT II Shares”), that may be issued from time to time if, and to the extent that, certain holders of Class A units (the “DownREIT II Units,” and collectively with the DownREIT Units, the “Units”) of HCN G&L DownREIT II LLC, a Delaware limited liability company (the “DownREIT II”), tender such DownREIT II Units for redemption by the DownREIT II, and the Managing Member, or a designated affiliate of the Managing Member, elects to assume the redemption obligations of the DownREIT II and to satisfy all or a portion of the redemption consideration by issuing DownREIT II Shares to the holders instead of or in addition to paying a cash amount.

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 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 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, 2020.

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

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,
						2021						2020						Amount						%						2019						Amount						%						Amount						%
Net income						$	374,479					$	1,038,852					$	(664,373)					-64		%				$	1,330,410					$	(291,558)					-22		%				$	(955,931)					-72		%
NICS						336,138						978,844						(642,706)						-66		%				1,232,432						(253,588)						-21		%				(896,294)						-73		%
FFO						1,220,722						1,102,562						118,160						11		%				1,577,080						(474,518)						-30		%				(356,358)						-23		%
Adjusted EBITDA						1,913,546						2,048,412						(134,866)						-7		%				2,328,202						(279,790)						-12		%				(414,656)						-18		%
Consolidated NOI						1,967,553						2,008,144						(40,591)						-2		%				2,431,264						(423,120)						-17		%				(463,711)						-19		%
Per share data (fully diluted):
Net income attributable to common stockholders (1)						$	0.78					$	2.33					$	(1.55)					-67		%				$	3.05					$	(0.72)					-24		%				$	(2.27)					-74		%
Funds from operations attributable to common stockholders						$	2.86					$	2.64					$	0.22					8		%				$	3.91					$	(1.27)					-32		%				$	(1.05)					-27		%
Adjusted interest coverage ratio						3.89x						3.97x						-0.08x						-2		%				4.14x						-0.17x						-4		%				-0.25x						-6		%
Adjusted fixed charge coverage ratio						3.43x						3.54x						-0.11x						-3		%				3.78x						-0.24x						-6		%				-0.35x						-9		%
(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, 2019 to December 31, 2021 (in thousands):

						Year Ended
						December 31, 2021						December 31, 2020						December 31, 2019						Totals
Beginning balance						$	417,401					$	410,257					$	383,675					$	383,675
Dividend reinvestment plan issuances						—						264						5,799						6,063
Preferred stock conversions						—						—						12,712						12,712
Option exercises						338						—						11						11
ATM Program issuances						29,667						6,800						7,856						44,323
Repurchase of common stock						—						(202)						—						(202)
Other, net						171						282						204						657
Ending balance						$	447,239					$	417,401					$	410,257					$	447,239
Weighted average number of shares outstanding:
Basic						424,976						415,451						401,845
Diluted						426,841						417,387						403,808

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.

Seniors Housing Operating

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

						QTD Pool																								YTD Pool
						Three Months Ended												Change												Year Ended												Change
						December 31, 2021						December 31, 2020						$						%						December 31, 2021						December 31, 2020						$						%
SSNOI(1)						$	136,344					$	144,197					$	(7,853)					-5.4		%				$	543,755					$	652,823					$	(109,068)					-16.7		%

(1) Relates to 489 properties for the QTD Pool and 477 properties for the YTD Pool. Please see Non-GAAP Financial Measures for additional information and reconciliations.

The following is a summary of our results of operations for the Seniors Housing Operating segment for the years 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,
												2021						2020						$						%						2019						$						%						$						%
Revenues:
						Resident fees and services						$	3,197,223					$	3,074,022					$	123,201					4		%				$	3,448,175					$	(374,153)					-11		%				$	(250,952)					-7		%
						Interest income						4,231						618						3,613						585		%				36						582						n/a						4,195						n/a
						Other income						11,796						7,223						4,573						63		%				8,658						(1,435)						-17		%				3,138						36		%
						Total revenues						3,213,250						3,081,863						131,387						4		%				3,456,869						(375,006)						-11		%				(243,619)						-7		%
Property operating expenses												2,529,344						2,326,311						203,033						9		%				2,417,349						(91,038)						-4		%				111,995						5		%
						NOI(1)						683,906						755,552						(71,646)						-9		%				1,039,520						(283,968)						-27		%				(355,614)						-34		%
Other expenses:																																																												n/a
						Depreciation and amortization						593,565						544,462						49,103						9		%				553,189						(8,727)						-2		%				40,376						7		%
						Interest expense						39,327						54,901						(15,574)						-28		%				67,983						(13,082)						-19		%				(28,656)						-42		%
						Loss (gain) on extinguishment of debt, net						(2,628)						12,659						(15,287)						-121		%				1,614						11,045						684		%				(4,242)						-263		%
						Provision for loan losses, net						394						671						(277)						-41		%				—						671						n/a						394						n/a
						Impairment of assets						22,317						100,741						(78,424)						-78		%				2,145						98,596						n/a						20,172						940		%
						Other expenses						27,132						14,265						12,867						90		%				26,348						(12,083)						-46		%				784						3		%
												680,107						727,699						(47,592)						-7		%				651,279						76,420						12		%				28,828						4		%
Income (loss) from continuing operations before income taxes and other items												3,799						27,853						(24,054)						-86		%				388,241						(360,388)						-93		%				(384,442)						-99		%
Income (loss) from unconsolidated entities												(39,225)						(33,857)						(5,368)						-16		%				12,388						(46,245)						-373		%				(51,613)						-417		%
Gain (loss) on real estate dispositions, net												6,146						328,249						(322,103)						-98		%				528,747						(200,498)						-38		%				(522,601)						-99		%
Income from continuing operations												(29,280)						322,245						(351,525)						-109		%				929,376						(607,131)						-65		%				(958,656)						-103		%
Net income (loss)												(29,280)						322,245						(351,525)						-109		%				929,376						(607,131)						-65		%				(958,656)						-103		%
Less: Net income (loss) attributable to noncontrolling interests												(2,224)						20,301						(22,525)						-111		%				56,513						(36,212)						-64		%				(58,737)						-104		%
Net income (loss) attributable to common stockholders												$	(27,056)					$	301,944					$	(329,000)					-109		%				$	872,863					$	(570,919)					-65		%				$	(899,919)					-103		%

(1) See Non-GAAP Financial Measures below.

Resident fees and services and property operating expenses for the year ended December 31, 2021 increased compared to 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. The increases were partially offset by decreases in spot occupancy across the portfolio due to the COVID-19 pandemic and property dispositions. Spot occupancy remains below pre-pandemic levels but has steadily increased in recent months, with 94% of communities open for new admissions and nearly all communities allowing visitors, in-person tours and communal dining and activities as of December 31, 2021. Rapid distribution and a high acceptance rate of COVID-19 vaccinations by residents within assisted living and memory care facilities in the U.S. and U.K. have resulted in a significant decrease in total resident case counts across the portfolio from peak levels in mid-January 2021, however, resident case counts have increased in December 2021 as a result of highly transmissible variants. As of December 31, 2021, occupancy has increased approximately 510 bps to 77.7% since the pandemic-low of 72.6% on March 12, 2021. Quarterly spot occupancy rates through December 31, 2021 are as follows:

						December 31, 2020						March 31, 2021						June 30, 2021						September 30, 2021						December 31, 2021
Spot occupancy (1)						74.9		%				72.9		%				74.8		%				76.9		%				77.7		%
Sequential occupancy change(2)												(1.9)		%				1.9		%				2.1		%				0.7		%

(1) Spot occupancy represents approximate month end occupancy at our share for 546 properties in operation as of December 31, 2020, including unconsolidated properties but excluding acquisitions, executed dispositions, development conversions and one property closed for redevelopment.

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

During the year ended December 31, 2021, the U.S. and U.K. portfolios reported spot occupancy gains of approximately 490 bps and 80 bps, respectively. Canada reported a spot occupancy decline of approximately 290 bps.

On March 27, 2020, the federal government enacted CARES Act to provide financial aid to individuals, businesses, and state and local governments. During the years ended December 31, 2021 and 2020, we received government grants under the CARES Act primarily to cover increased expenses and lost revenue during the COVID-19 pandemic, as well as under similar programs in the U.K. and Canada. Grant income is recognized when there is reasonable assurance that the grant will be received and the Company will comply with all conditions attached to the grant. Additionally, grants are recognized over the periods in which the Company recognizes the increased expenses and lost revenue the grants are intended to defray. For the years ended December 31, 2021 and 2020 we recognized $97,933,000 and $31,927,000, respectively, of government grant income as a reduction to property operating expenses in our Consolidated Statements of Comprehensive Income. Additionally, for the years ended December 31, 2021 and 2020, we recognized $4,642,000 and $3,014,000, respectively, of government grant income in other income. The amount of qualifying expenditures and lost revenue exceeded grant income recognized and the Company believes it has complied and will continue to comply with all grant conditions.

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

Property-level operating expenses associated with the COVID-19 pandemic relating to our Seniors Housing Operating portfolio totaled $63,681,000 and $110,719,000 for the years ended December 31, 2021 and 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. Specifically in 2021, we incurred elevated labor expenses resulting from the increased utilization of contract labor due to the rise in occupancy and a challenging labor market.

During the year ended December 31, 2021, we recorded impairment charges of $22,317,000 related to two held for use properties in which the carrying value exceeded the estimated fair value. During the year ended December 31, 2020, we recorded impairment charges of $100,741,000 related to 15 held for sale or sold properties and six held for use properties. Transaction costs related to asset acquisitions are capitalized as a component of the purchase price. The fluctuation in other expenses is primarily due to the timing of noncapitalizable transaction costs associated with acquisitions and operator transitions. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices. During the year ended December 31, 2020, we recognized a gain on real estate disposition of $312,249,000 related to an 11 property U.S. portfolio.

Depreciation and amortization fluctuates as a result of acquisitions, disposition and transitions. To the extent we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

During the year ended December 31, 2021, we completed two Seniors Housing Operating construction projects representing $117,386,000 or $553,573 per unit. The following is a summary of our consolidated Seniors Housing Operating construction projects, excluding expansions, pending as of December 31, 2021 (dollars in thousands):

Location						Units/Beds						Commitment						Balance						Est. Completion
Hendon, UK						102						$	74,925					$	68,823					1Q22
Barnet, UK						100						69,930						60,722						1Q22
Georgetown, TX						188						36,215						14,082						2Q22
New Rochelle, NY						72						42,669						13,186						3Q22
Sachse, TX						193						38,054						12,693						3Q22
Princeton, NJ						80						29,780						25,167						3Q22
Pflugerville, TX						196						39,500						10,543						4Q22
Denton, TX						65						20,194						5,245						4Q22
Berea, OH						120						14,934						10,714						4Q22
Painesville, OH						119						14,462						8,912						4Q22
Beaver, PA						116						14,184						7,706						4Q22
Lake Jackson, TX						130						32,020						3,726						2Q23
White Marsh, MD						188						78,610						7,620						3Q23
Weymouth, MA						165						77,545						10,188						3Q23
Miami Twp, OH						122						18,206						2,071						4Q23
Charlotte, NC						328						96,416						31,520						1Q24
Gaithersburg, MD						302						173,548						25,986						2Q24
Temple, TX						245						65,569						5,290						4Q24
Kyle, TX						225						62,700						4,457						1Q25
						3,056						$	999,461					328,651
Boise, ID(1)																		33,216
Brookhaven, GA(1)																		10,439
Brookline, MA(1)																		30,732
Columbus, OH(1)																		13,170
Raleigh, NC(1)																		3,508
Toronto, ON(1)																		49,901
Washington, DC(1)																		31,276
Wellesley, MA(1)																		9,132
																		$	510,025
(1) Final units/beds, commitment amount and expected conversion date not yet known.

Interest expense represents secured debt interest expense, which fluctuates based on the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The fluctuations in loss (gain) on extinguishment of debt is primarily attributable to the volume of extinguishments and terms of the related secured debt. The following is a summary of our Seniors Housing Operating segment property secured debt principal activity (dollars in thousands):