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

						Year Ended												Year Ended												Year Ended
						December 31, 2022												December 31, 2021												December 31, 2020
												Weighted Avg.												Weighted Avg.												Weighted Avg.
						Amount						Interest Rate						Amount						Interest Rate						Amount						Interest Rate
Beginning balance						$	72,536					4.57%						$	123,652					4.91%						$	306,038					3.60%
Debt assumed						39,574						16.68%						—						—%						—						—%
Debt extinguished						(39,574)						16.68%						(46,402)						5.43%						(176,875)						2.03%
Debt transferred out						(32,478)						4.79%						—						—%						—						—%
Principal payments						(879)						4.37%						(4,679)						5.14%						(4,376)						5.16%
Foreign currency						—						—%						(35)						5.43%						(1,135)						2.97%
Ending balance						$	39,179					4.39%						$	72,536					4.57%						$	123,652					4.91%
Monthly averages						$	39,584					4.39%						$	117,966					4.90%						$	215,796					3.85%

A portion of our Triple-net properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. The increase in income from unconsolidated entities during the year ended December 31, 2022 is primarily related to the write off of a right of use asset and related lease liability on an unconsolidated joint venture that was restructured during the year. Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner. The decrease in net income attributable to noncontrolling interests for the year ended December 31, 2022 compared to 2021 is related to the increase in ownership in existing Triple-net joint ventures.

Outpatient Medical

The following is a summary of our results of operations for the Outpatient Medical segment 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,
									2022						2021						$						%						2020						$						%						$						%
Revenues:
			Rental income						$	669,457					$	613,254					$	56,203					9		%				$	709,584					$	(96,330)					-14		%				$	(40,127)					-6		%
			Interest income						302						8,792						(8,490)						-97		%				5,913						2,879						49		%				(5,611)						-95		%
			Other income						8,998						13,243						(4,245)						-32		%				4,522						8,721						193		%				4,476						99		%
			Total revenues						678,757						635,289						43,468						7		%				720,019						(84,730)						-12		%				(41,262)						-6		%
Property operating expenses									205,997						186,939						19,058						10		%				214,948						(28,009)						-13		%				(8,951)						-4		%
			NOI(1)						472,760						448,350						24,410						5		%				505,071						(56,721)						-11		%				(32,311)						-6		%
Other expenses:
			Depreciation and amortization						239,681						223,302						16,379						7		%				261,371						(38,069)						-15		%				(21,690)						-8		%
			Interest expense						18,078						17,506						572						3		%				17,579						(73)						—		%				499						3		%
			Loss (gain) on extinguishment of debt, net						15						(4)						19						475		%				1,046						(1,050)						-100		%				(1,031)						-99		%
			Provision for loan losses, net						(8)						(3,463)						3,455						100		%				3,202						(6,665)						-208		%				(3,210)						-100		%
			Impairment of assets						761						2,211						(1,450)						-66		%				—						2,211						n/a						761						n/a
			Other expenses						2,537						2,523						14						1		%				8,218						(5,695)						-69		%				(5,681)						-69		%
									261,064						242,075						18,989						8		%				291,416						(49,341)						-17		%				(30,352)						-10		%
Income from continuing operations before income taxes and other item									211,696						206,275						5,421						3		%				213,655						(7,380)						-3		%				(1,959)						-1		%
Income (loss) from unconsolidated entities									(2,467)						(4,395)						1,928						44		%				7,312						(11,707)						-160		%				(9,779)						-134		%
Gain (loss) on real estate dispositions, net									(6,399)						93,348						(99,747)						-107		%				695,918						(602,570)						-87		%				(702,317)						-101		%
Income from continuing operations									202,830						295,228						(92,398)						-31		%				916,885						(621,657)						-68		%				(714,055)						-78		%
Net income (loss)									202,830						295,228						(92,398)						-31		%				916,885						(621,657)						-68		%				(714,055)						-78		%
Less: Net income (loss) attributable to noncontrolling interests									7,180						4,916						2,264						46		%				(278)						5,194						n/a						7,458						n/a
Net income (loss) attributable to common stockholders									$	195,650					$	290,312					$	(94,662)					-33		%				$	917,163					$	(626,851)					-68		%				$	(721,513)					-79		%

(1) See Non-GAAP Financial Measures below.

Rental income has increased due primarily to acquisitions and construction conversions that occurred during 2021 and 2022. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Our leases could renew above or below current rental rates, resulting in an increase or decrease in rental income. For the year ended December 31, 2022, our consolidated Outpatient Medical portfolio signed 435,000 square feet of new leases and 1,826,000 square feet of renewals. The weighted-average term of these leases was seven years, with a rate of $38.19 per square foot and tenant improvement and lease commission costs of $26.77 per square foot. Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.0% to 7.0%.

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

The decrease in interest income for the year ended December 31, 2022 is due primarily to a $178,207,000 first mortgage initiated in August 2020, which was subsequently repaid in full in June of 2021, resulting in the reversal of the previously established allowance for credit losses.

The fluctuation in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions that occurred during 2021 and 2022. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

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

						QTD Pool																								YTD Pool
						Three Months Ended												Change												Year Ended												Change
						December 31, 2022						December 31, 2021						$						%						December 31, 2022						December 31, 2021						$						%
SSNOI(1)						$	107,867					$	105,260					$	2,607					2.5		%				$	403,520					$	395,379					$	8,141					2.1		%

(1) Relates to 361 properties for the QTD Pool and 349 properties for the YTD Pool. Please see Non-GAAP Financial Measures for additional information and reconciliations.

During the year ended December 31, 2022, we recognized an impairment charge of $761,000 related to one held for use property. During the year ended December 31, 2021, we recognized an impairment charge of $2,211,000 related to one held for sale property. Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The fluctuation in other expenses is primarily due to noncapitalizable transaction costs. Changes in gains/losses on sales of properties are related to volume of property sales and the sales prices.

During the year ended December 31, 2022, we completed two Outpatient Medical construction projects representing $44,778,000 or $383 per square foot. The following is a summary of our consolidated Outpatient Medical construction projects, excluding expansions, pending as of December 31, 2022 (dollars in thousands):

Location						Square Feet						Commitment						Balance						Est. Completion
Houston						16,835						$	9,935					$	5,796					1Q23
Beaumont-Port Arthur, TX						33,000						11,822						5,525						2Q23
Houston						16,830						9,077						4,328						2Q23
						66,665						$	30,834					15,649
Charlotte, NC(1)																		33,376
																		$	49,025
(1) Final square feet, commitment amount and expected conversion date not yet known.

Total interest expense represents secured debt interest expense. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. The following is a summary of our Outpatient Medical secured debt principal activity for the periods presented (dollars in thousands):

						Year Ended												Year Ended												Year Ended
						December 31, 2022												December 31, 2021												December 31, 2020
												Weighted Avg.												Weighted Avg.												Weighted Avg.
						Amount						Interest Rate						Amount						Interest Rate						Amount						Interest Rate
Beginning balance						$	530,254					3.49%						$	548,229					3.55%						$	572,267					3.97%
Debt extinguished						(131,582)						4.26%						(7,670)						5.64%						(14,205)						5.34%
Principal payments						(9,836)						4.45%						(10,305)						4.43%						(9,833)						4.60%
Ending balance						$	388,836					4.38%						$	530,254					3.49%						$	548,229					3.55%
Monthly averages						$	485,161					3.89%						$	540,947					3.52%						$	562,017					3.72%

A portion of our Outpatient Medical properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income or loss relating to those partnerships where we are the controlling partner.

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

Non-Segment/Corporate

The following is a summary of our results of operations for the Non-Segment/Corporate activities for the periods presented (dollars in thousands):

									Year Ended												One Year Change												Year Ended						One Year Change												Two Year Change
									December 31,						December 31,																		December 31,
									2022						2021						$						%						2020						$						%						$						%
Revenues:
			Other income						$	4,934					$	2,992					$	1,942					65		%				$	2,781					$	211					8		%				$	2,153					77		%
			Total revenues						4,934						2,992						1,942						65		%				2,781						211						8		%				2,153						77		%
Property operating expenses									16,245						8,817						7,428						84		%				3,381						5,436						161		%				12,864						380		%
			NOI(1)						(11,311)						(5,825)						(5,486)						-94		%				(600)						(5,225)						-871		%				(10,711)						n/a
Other expenses:
			Interest expense						475,645						426,644						49,001						11		%				432,431						(5,787)						-1		%				43,214						10		%
			General and administrative expenses						150,390						126,727						23,663						19		%				128,394						(1,667)						-1		%				21,996						17		%
			Loss (gain) on extinguishments of debt, net						199						52,506						(52,307)						-100		%				33,344						19,162						57		%				(33,145)						-99		%
			Other expenses						20,064						7,895						12,169						154		%				24,929						(17,034)						-68		%				(4,865)						-20		%
			Total expenses						646,298						613,772						32,526						5		%				619,098						(5,326)						-1		%				27,200						4		%
Loss from continuing operations before income taxes and other items									(657,609)						(619,597)						(38,012)						-6		%				(619,698)						101						—		%				(37,911)						-6		%
Income tax (expense) benefit									(7,247)						(8,713)						1,466						17		%				(9,968)						1,255						13		%				2,721						27		%
Loss from continuing operations									(664,856)						(628,310)						(36,546)						-6		%				(629,666)						1,356						—		%				(35,190)						-6		%
Net loss attributable to common stockholders									$	(664,856)					$	(628,310)					$	(36,546)					-6		%				$	(629,666)					$	1,356					—		%				$	(35,190)					-6		%

(1) See Non-GAAP Financial Measures below.

Property operating expenses represent insurance costs related to our captive insurance company formed as of July 1, 2020, which acts as a direct insurer of property level insurance coverage for our portfolio.

The following is a summary of our Non-Segment/Corporate interest expense 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,
						2022						2021						$						%						2020						$						%						$						%
Senior unsecured notes						$	436,185					$	401,247					$	34,938					9		%				$	400,014					$	1,233					—		%				$	36,171					9		%
Unsecured credit facility and commercial paper program						19,576						6,759						12,817						190		%				15,313						(8,554)						-56		%				4,263						28		%
Loan expense						19,884						18,638						1,246						7		%				17,104						1,534						9		%				2,780						16		%
Totals						$	475,645					$	426,644					$	49,001					11		%				$	432,431					$	(5,787)					-1		%				$	43,214					10		%

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, as well as the movement in foreign exchange rates and related hedge activity. Please refer to Note 11 to the consolidated financial statements for additional information. The change in interest expense on our unsecured revolving credit facility and commercial paper program is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes. Please refer to Note 10 of our consolidated financial statements for additional information. Loan expenses represent the amortization of costs incurred in connection with senior unsecured notes issuances. The loss on extinguishment recognized during the year ended December 31, 2021 is due primarily to the early extinguishment of $339,128,000 of our 3.75% senior unsecured notes due March 2023 and $334,624,000 of our 3.95% senior unsecured notes due September 2023.

General and administrative expenses as a percentage of consolidated revenues for the years ended December 31, 2022, 2021 and 2020 were 2.57%, 2.67% and 2.79%, respectively. Other expenses includes non-capitalizable legal expenses, including related to our umbrella partnership REIT reorganization during 2022. The provision for income taxes primarily relates to state taxes, foreign taxes and taxes based on income generated by entities that are structured as TRSs.

Other

Non-GAAP Financial Measures

We believe that net income and net income attributable to common stockholders, as defined by U.S. GAAP, are the most appropriate earnings measurements. However, we consider FFO, NOI, SSNOI, EBITDA and Adjusted EBITDA to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created funds from operations attributable to common stockholders (“FFO”) as a supplemental measure of operating performance for REITs that

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

excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means NICS, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests.

NOI is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent general overhead costs that are unrelated to property operations and unallocable to the properties. These expenses include, but are not limited to, payroll and benefits related to corporate employees, professional services, office expenses and depreciation of corporate fixed assets. Same store NOI (“SSNOI”) is used to evaluate the operating performance of our properties using a consistent population which controls for changes in the composition of our portfolio. We believe the drivers of property level NOI for both consolidated properties and unconsolidated properties are generally the same and therefore, we evaluate SSNOI based on our ownership interest in each property ("Welltower Share"). To arrive at Welltower's Share, NOI is adjusted by adding our minority ownership share related to unconsolidated properties and by subtracting the minority partners' noncontrolling ownership interests for consolidated properties. We do not control investments in unconsolidated properties and while we consider disclosures at Welltower Share to be useful, they may not accurately depict the legal and economic implications of our joint venture arrangements and should be used with caution. As used herein, same store is generally defined as those revenue-generating properties in the portfolio for the relevant year-over-year reporting periods. Acquisitions and development conversions are included in SSNOI five full quarters or eight full quarters after acquisition or being placed into service for the QTD Pool and the YTD Pool, respectively. Land parcels, loans and sub-leases, as well as any properties sold or classified as held for sale during the respective periods are excluded from SSNOI. Redeveloped properties (including major refurbishments of a Seniors Housing Operating property where 20% or more of units are simultaneously taken out of commission for 30 days or more or Outpatient Medical properties undergoing a change in intended use) are excluded from SSNOI until five full quarters or eight full quarters post completion of the redevelopment for the QTD Pool and YTD Pool, respectively. Properties undergoing operator transitions and/or segment transitions are also excluded from SSNOI until five full quarters or eight full quarters post completion of the transition for the QTD Pool and YTD Pool, respectively. In addition, properties significantly impacted by force majeure, acts of God, or other extraordinary adverse events are excluded from SSNOI until five full quarters or eight full quarters after the properties are placed back into service for the QTD Pool and YTD Pool, respectively. SSNOI excludes non-cash NOI and includes adjustments to present consistent ownership percentages and to translate Canadian properties and U.K. properties using a consistent exchange rate. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties.

EBITDA is defined as earnings (net income) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding unconsolidated entities and including adjustments for stock-based compensation expense, provision for loan losses, gains/losses on extinguishment of debt, gains/loss/impairments on properties, gains/losses on derivatives and financial instruments, other expenses, other impairment charges and other adjustments as deemed appropriate. We believe that EBITDA and Adjusted EBITDA, along with net income, are important supplemental measures because they provide additional information to assess and evaluate the performance of our operations. We primarily use these measures to determine our interest coverage ratio, which represents EBITDA and Adjusted EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA and Adjusted EBITDA divided by fixed charges. Fixed charges include total interest and secured debt principal amortization. Covenants in our unsecured senior notes and primary credit facility contain financial ratios based on a definition of EBITDA and Adjusted EBITDA that is specific to those agreements. Our leverage ratios are defined as the proportion of net debt to total capitalization and include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt, excluding operating lease liabilities, less cash and cash equivalents and restricted cash), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock.

Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.

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

The table below reflects the reconciliation of FFO to NICS, the most directly comparable U.S. GAAP measure, for the periods presented. Noncontrolling interest and unconsolidated entity amounts represent adjustments to reflect our share of depreciation and amortization, gains/loss on real estate dispositions and impairment of assets. Amounts are in thousands except for per share data.

						Year Ended December 31,
FFO Reconciliation:						2022						2021						2020
Net income attributable to common stockholders						$	141,214					$	336,138					$	978,844
Depreciation and amortization						1,310,368						1,037,566						1,038,437
Impairment of assets						17,502						51,107						135,608
Loss (gain) on real estate dispositions, net						(16,043)						(235,375)						(1,088,455)
Noncontrolling interests						(56,529)						(54,190)						(23,968)
Unconsolidated entities						81,560						85,476						62,096
Funds from operations attributable to common stockholders						$	1,478,072					$	1,220,722					$	1,102,562
Average diluted shares outstanding:						465,158						426,841						417,387
Per diluted share data:
Net income attributable to common stockholders(1)						$	0.30					$	0.78					$	2.33
Funds from operations attributable to common stockholders						$	3.18					$	2.86					$	2.64
(1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders.

The following tables reflect the reconciliation of consolidated NOI to net income, the most directly comparable U.S. GAAP measure, for the years presented. Dollar amounts are in thousands.

						Year Ended December 31,
NOI Reconciliation:						2022						2021						2020
Net income (loss)						$	160,568					$	374,479					$	1,038,852
Loss (gain) on real estate dispositions, net						(16,043)						(235,375)						(1,088,455)
Loss (income) from unconsolidated entities						21,290						22,933						8,083
Income tax expense (benefit)						7,247						8,713						9,968
Other expenses						101,670						41,739						70,335
Impairment of assets						17,502						51,107						135,608
Provision for loan losses, net						10,320						7,270						94,436
Loss (gain) on extinguishment of debt, net						680						49,874						47,049
Loss (gain) on derivatives and financial instruments, net						8,334						(7,333)						11,049
General and administrative expenses						150,390						126,727						128,394
Depreciation and amortization						1,310,368						1,037,566						1,038,437
Interest expense						529,519						489,853						514,388
Consolidated net operating income (NOI)						$	2,301,845					$	1,967,553					$	2,008,144
NOI by segment:
Seniors Housing Operating						$	953,372					$	683,906					$	755,552
Triple-net						887,024						841,122						748,121
Outpatient Medical						472,760						448,350						505,071
Non-segment/corporate						(11,311)						(5,825)						(600)
Total NOI						$	2,301,845					$	1,967,553					$	2,008,144

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

Quarterly NOI by Segment:
(in thousands)			Three Months Ended																																																Year Ended
			March 31,												June 30,												September 30,												December 31,												December 31,
			2022						2021						2022						2021						2022						2021						2022						2021						2022						2021
Seniors Housing Operating:
Total revenues			$	996,612					$	726,402					$	1,071,210					$	742,549					$	1,072,600					$	839,519					$	1,104,995					$	904,780					$	4,245,417					$	3,213,250
Property operating expenses			789,928						555,968						789,299						582,361						841,914						666,610						870,904						724,405						3,292,045						2,529,344
Consolidated NOI			$	206,684					$	170,434					$	281,911					$	160,188					$	230,686					$	172,909					$	234,091					$	180,375					$	953,372					$	683,906
Triple-net:
Total revenues			$	235,163					$	168,482					$	234,360					$	238,941					$	228,819					$	239,985					$	233,165					$	243,176					$	931,507					$	890,584
Property operating expenses			11,211						12,841						11,491						12,627						11,495						11,664						10,286						12,330						44,483						49,462
Consolidated NOI			$	223,952					$	155,641					$	222,869					$	226,314					$	217,324					$	228,321					$	222,879					$	230,846					$	887,024					$	841,122
Outpatient Medical:
Total revenues			$	163,323					$	156,223					$	166,322					$	159,072					$	172,178					$	159,503					$	176,934					$	160,491					$	678,757					$	635,289
Property operating expenses			49,915						46,863						50,648						45,495						52,921						48,072						52,513						46,509						205,997						186,939
Consolidated NOI			$	113,408					$	109,360					$	115,674					$	113,577					$	119,257					$	111,431					$	124,421					$	113,982					$	472,760					$	448,350
Corporate:
Total revenues			$	606					$	955					$	644					$	430					$	247					$	790					$	3,437					$	817					$	4,934					$	2,992
Property operating expenses			2,615						1,654						2,645						2,174						5,850						3,054						5,135						1,935						16,245						8,817
Consolidated NOI			$	(2,009)					$	(699)					$	(2,001)					$	(1,744)					$	(5,603)					$	(2,264)					$	(1,698)					$	(1,118)					$	(11,311)					$	(5,825)

The following is a reconciliation of the properties included in our QTD Pool and YTD Pool for SSNOI:

						QTD Pool																								YTD Pool
SSNOI Property Reconciliations:						Seniors Housing Operating						Triple-net						Outpatient Medical						Total						Seniors Housing Operating						Triple-net						Outpatient Medical						Total
Consolidated properties						850						570						323						1,743						850						570						323						1,743
Unconsolidated properties						104						39						79						222						104						39						79						222
Total properties						954						609						402						1,965						954						609						402						1,965
Recent acquisitions/development conversions(1)						(114)						(11)						(24)						(149)						(254)						(40)						(36)						(330)
Under development						(40)						—						(5)						(45)						(40)						—						(5)						(45)
Under redevelopment(2)						(4)						(3)						(4)						(11)						(4)						(3)						(4)						(11)
Current held for sale						(3)						(7)						(1)						(11)						(3)						(7)						(1)						(11)
Land parcels, loans and subleases						(24)						(8)						(7)						(39)						(24)						(8)						(7)						(39)
Transitions(3)						(108)						(150)						—						(258)						(108)						(150)						—						(258)
Other(4)						(7)						(3)						—						(10)						(7)						(3)						—						(10)
Same store properties						654						427						361						1,442						514						398						349						1,261
(1) Acquisitions and development conversions will enter the QTD Pool and YTD Pool five full quarters and eight full quarters after acquisition or certificate of occupancy, respectively.
(2) Redevelopment properties will enter the QTD Pool and YTD Pool after five full quarters and eight full quarters of operations post redevelopment completion, respectively.
(3) Transitioned properties will enter the QTD Pool and YTD Pool after five full quarters and eight full quarters of operations with the new operator in place or under the new structure, respectively.
(4) Represents properties that are either closed or being closed.

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

The following is a reconciliation of our consolidated NOI to same store NOI for the periods presented for the respective pools. Dollar amounts are in thousands.

						QTD Pool												YTD Pool
						Three Months Ended												Twelve Months Ended
SSNOI Reconciliations:						December 31, 2022						December 31, 2021						December 31, 2022						December 31, 2021
Seniors Housing Operating:
Consolidated NOI						$	234,091					$	180,375					$	953,372					$	683,906
NOI attributable to unconsolidated investments						11,291						10,713						47,190						44,470
NOI attributable to noncontrolling interests						(16,718)						(12,125)						(122,874)						(65,747)
Non-cash NOI attributable to same store properties						(196)						(662)						(747)						10,878
NOI attributable to non-same store properties						(46,511)						(22,024)						(270,363)						(121,779)
Currency and ownership adjustments (1)						2,759						(669)						4,146						(2,856)
SSNOI at Welltower Share						184,716						155,608						610,724						548,872
Triple-net:
Consolidated NOI						222,879						230,846						887,024						841,122
NOI attributable to unconsolidated investments						8,947						4,893						29,516						19,559
NOI attributable to noncontrolling interests						(9,555)						(13,600)						(41,099)						(48,892)
Non-cash NOI attributable to same store properties						(11,592)						(8,310)						(37,190)						(27,000)
NOI attributable to non-same store properties						(86,076)						(92,708)						(389,905)						(352,792)
Currency and ownership adjustments (1)						2,693						938						7,477						1,829
SSNOI at Welltower Share						127,296						122,059						455,823						433,826
Outpatient Medical:
Consolidated NOI						124,421						113,982						472,760						448,350
NOI attributable to unconsolidated investments						4,712						4,682						19,233						18,998
NOI attributable to noncontrolling interests						(5,576)						(4,896)						(22,089)						(18,645)
Non-cash NOI attributable to same store properties						(4,287)						(3,523)						(10,323)						(10,384)
NOI attributable to non-same store properties						(11,250)						(5,298)						(56,001)						(42,089)
Currency and ownership adjustments (1)						(153)						313						(60)						(851)
SSNOI at Welltower Share						107,867						105,260						403,520						395,379
SSNOI at Welltower Share:
Seniors Housing Operating						184,716						155,608						610,724						548,872
Triple-net						127,296						122,059						455,823						433,826
Outpatient Medical						107,867						105,260						403,520						395,379
Total						$	419,879					$	382,927					$	1,470,067					$	1,378,077
(1) Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.2738 and to translate U.K. properties at a GBP/USD rate of 1.3501.

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

The table below reflects the reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Dollars are in thousands.

						Year Ended December 31,
Adjusted EBITDA Reconciliation:						2022						2021						2020
Net income (loss)						$	160,568					$	374,479					$	1,038,852
Interest expense						529,519						489,853						514,388
Income tax expense (benefit)						7,247						8,713						9,968
Depreciation and amortization						1,310,368						1,037,566						1,038,437
EBITDA						2,007,702						1,910,611						2,601,645
Loss (income) from unconsolidated entities						21,290						22,933						8,083
Stock-based compensation expense						26,027						16,933						22,154
Loss (gain) on extinguishment of debt, net						680						49,874						47,049
Loss (gain) on real estate dispositions, net						(16,043)						(235,375)						(1,088,455)
Impairment of assets						17,502						51,107						135,608
Provision for loan losses, net						10,320						7,270						94,436
Loss (gain) on derivatives and financial instruments, net						8,334						(7,333)						11,049
Other expenses						101,670						41,739						70,335
Lease termination and leasehold interest adjustment (1)						(64,854)						760						—
Casualty losses, net of recoveries						10,391						5,786						—
Other impairment, net (2)						(620)						49,241						146,508
Adjusted EBITDA						$	2,122,399					$	1,913,546					$	2,048,412
Adjusted Interest Coverage Ratio:
Interest expense						$	529,519					$	489,853					$	514,388
Capitalized interest						30,491						19,352						17,472
Non-cash interest expense						(21,754)						(17,506)						(15,751)
Total interest						538,256						491,699						516,109
EBITDA						$	2,007,702					$	1,910,611					$	2,601,645
Interest coverage ratio						3.73x						3.89x						5.04x
Adjusted EBITDA						$	2,122,399					$	1,913,546					$	2,048,412
Adjusted interest coverage ratio						3.94x						3.89x						3.97x
Adjusted Fixed Charge Coverage Ratio:
Total interest						$	538,256					$	491,699					$	516,109
Secured debt principal payments						58,114						65,587						62,707
Total fixed charges						596,370						557,286						578,816
EBITDA						$	2,007,702					$	1,910,611					$	2,601,645
Fixed charge coverage ratio						3.37x						3.43x						4.49x
Adjusted EBITDA						$	2,122,399					$	1,913,546					$	2,048,412
Adjusted fixed charge coverage ratio						3.56x						3.43x						3.54x

(1) Represents revenues and property operating expenses associated with a leasehold portfolio interest relating to 26 properties assumed by a wholly-owned affiliate in conjunction with the Holiday Retirement transaction. Subsequent to the initial transaction, we purchased eight of the leased properties and one of the properties was sold by the landlord and removed from the lease. No rent was paid in excess of net cash flow relating to the leasehold properties and therefore, the net impact has been excluded from Adjusted EBITDA. Additionally, in conjunction with the lease termination, during the year ended December 31, 2022, we recognized $58,621,000 in other income from the derecognition of the right of use asset and related lease liability which has also been excluded from Adjusted EBITDA.

(2) Represents the changes in the reserve for straight-line rent receivables balances relating to leases placed on cash recognition.

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

Our leverage ratios include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt less cash and cash equivalents and restricted cash), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization. The table below reflects the reconciliation of our leverage ratios to our balance sheets for the periods presented. Amounts are in thousands, except share price.

			Year Ended December 31,
			2022						2021						2020
Book capitalization:
Unsecured credit facility and commercial paper			$	—					$	324,935					$	—
Long-term debt obligations(1)			14,661,552						13,917,702						13,905,822
Cash and cash equivalents and restricted cash			(722,292)						(346,755)						(2,021,043)
Total net debt			13,939,260						13,895,882						11,884,779
Total equity and noncontrolling interests(2)			21,393,996						18,997,873						17,225,062
Book capitalization			$	35,333,256					$	32,893,755					$	29,109,841
Net debt to book capitalization ratio			39.5		%				42.2		%				40.8		%
Undepreciated book capitalization:
Total net debt			$	13,939,260					$	13,895,882					$	11,884,779
Accumulated depreciation and amortization			8,075,733						6,910,114						6,104,297
Total equity and noncontrolling interests(2)			21,393,996						18,997,873						17,225,062
Undepreciated book capitalization			$	43,408,989					$	39,803,869					$	35,214,138
Net debt to undepreciated book capitalization ratio			32.1		%				34.9		%				33.8		%
Market capitalization:
Common shares outstanding			490,509						447,239						417,401
Period end share price			$	65.55					$	85.77					$	64.62
Common equity market capitalization			$	32,152,865					$	38,359,689					$	26,972,453
Total net debt			13,939,260						13,895,882						11,884,779
Noncontrolling interests(2)			1,099,182						1,361,872						1,252,343
Market capitalization:			$	47,191,307					$	53,617,443					$	40,109,575
Net debt to market capitalization ratio			29.5		%				25.9		%				29.6		%

(1) Amounts include senior unsecured notes, secured debt and lease liabilities related to finance leases, as reflected on our Consolidated Balance Sheets. Operating lease liabilities related to the ASC 842 adoption are excluded.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests as reflected on our Consolidated Balance Sheets.

Critical Accounting Policies & Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers an accounting estimate or assumption critical if:

• the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and

• the impact of the estimates and assumptions on financial condition or operating performance is material.

Management has discussed the development and selection of its critical accounting policies and estimates with the Audit Committee of the Board of Directors. Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 2 to our consolidated financial statements for further information on significant accounting policies that impact us and for the impact of new accounting standards, including accounting pronouncements that were issued but not yet adopted by us.

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

The following table presents information about our critical accounting policies and estimates:

Nature of Critical Accounting Estimate			Assumptions/Approach Used
Impairment of Real Property Assessing impairment of real property involves subjectivity in determining if indicators of impairment are present and in estimating the future undiscounted cash flows or estimated fair value of an asset. In estimating the undiscounted cash flows or fair value, key assumptions that would be made are the estimation of future rental revenues, operating expenses, capitalization rates and the ability and intent to hold the respective asset, all of which are affected by our expectations of future market or economic conditions. These estimates can have a significant impact on the undiscounted cash flows or estimated fair value of an asset.			Quarterly, we evaluate our real estate investments on a property by property basis to determine if there are indicators of impairment. These indicators may include expected operational performance, the tenant's ability to make rent payments, a decision to dispose of an asset before the end of its estimated useful life and changes in the market that may permanently reduce the value of the property. If indicators of impairment exist, an undiscounted cash flow analysis will be prepared to determine if the value of the real property will be recoverable. If the real property will not be recoverable, the carrying value of the property is reduce to its estimated fair value and an impairment charge is recognized for the difference between the carrying value and the fair value. This analysis requires us to use judgment in determining whether indicators of impairment exist and to estimate the expected future undiscounted cash flows or estimated fair values of the property. Properties that meet the held for sale criteria are recorded at the lesser of the fair value less costs to sell or carrying value. At December 31, 2022, our net real property owned was approximately $32,925,033,000. During the year ended December 31, 2022, we recorded impairment charges of $13,146,000 related to one Seniors Housing Operating property which was classified as held for sale for which the carrying values exceeded the fair values less costs to sell. Additionally, we recorded $4,356,000 of impairment charges related to two Triple-net properties and one Outpatient Medical property that were held for use in which the carrying values exceeded the estimated fair values.
Real Estate Acquisitions We believe that substantially all of our real estate acquisitions are considered asset acquisitions for which we record the related real estate acquired (tangible assets and identifiable intangible assets and liabilities) at cost on a relative fair value basis. Liabilities assumed and any associated noncontrolling interests are reflected at fair value. Tangible assets consist primarily of land, building and improvements. Identifiable intangible assets and liabilities primarily consist of the above or below market component of in-place leases and the value of in-place leases. The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management's evaluation of the specific characteristics of each tenant's lease and our overall relationship with respect to that tenant.			The allocation of the purchase price to the related real estate acquired (tangible assets and intangible assets and liabilities) involves subjectivity as such allocations are based on a relative fair value analysis. In determining the fair values that drive such analysis, we estimate the fair value of each component of the real estate acquired which generally includes land, buildings and improvements, the above or below market component of in-place leases and the value of in-place leases. Significant assumptions used to determine such fair values include comparable land sales, capitalization rates, discount rates, market rental rates and property operating data, all of which can be impacted by expectations about future market or economic conditions. Our estimates of the values of these components affect the amount of depreciation and amortization we record over the estimated useful life of the property or the term of the lease. During the year ended December 31, 2022, we completed $2,306,020,000 of real estate acquisitions. These transactions were accounted for as asset acquisitions and the purchase price of each was allocated based on the relative fair values of the assets acquired and liabilities assumed.

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

Nature of Critical Accounting Estimate			Assumptions/Approach Used
Principles of Consolidation The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries, and the accounts of joint venture entities in which we own a majority voting interest with the ability to control operations and where no substantive participating rights or substantive kick out rights have been granted to the noncontrolling interests. In addition, we consolidate those entities deemed to be variable interest entities (“VIEs”) in which we are determined to be the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.			We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We make judgments with respect to our level of influence or control of an entity and whether we are (or are not) the primary beneficiary of a VIE. Consideration of various factors include, but is not limited to, our ability to direct the activities that most significantly impact the entity's economic performance, our form of ownership interest, our representation on the entity's governing body, the size and seniority of our investment, our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity, if applicable. Our ability to correctly assess our influence or control over an entity at inception of our involvement or on a continuous basis when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. If we perform a primary beneficiary analysis at a date other than at inception of the VIE, our assumptions may be different and may result in the identification of a different primary beneficiary.
Allowance for Credit Losses on Loans Receivable The allowance for credit losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the credit allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments.			The determination of the allowance for credit losses is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent and value of the underlying collateral. A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans we identified as having deteriorated credit quality, we determine the amount of credit loss on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual are deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, we may return these loans to income accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance. For the remaining loans, we assess credit loss on a collective pool basis and use our historical loss experience for similar loans to determine the reserve for credit losses. During the year ended December 31, 2022, we recognized provision for loan losses of $10,320,000, which includes a specific reserve for a Triple-net held to maturity debt security, offset by changes in the reserve based on our historical loss experience.