Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Welltower Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Welltower Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 15, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Real Property and Investments in Unconsolidated Entities

Description of the Matter The Company, on a periodic basis, assesses whether there are indicators that (i) the carrying value of real property owned may not be recoverable or (ii) investments in unconsolidated entities may be other than temporarily impaired. At December 31, 2023, the Company’s consolidated net real property owned totaled $37.1 billion and its investments in unconsolidated entities totaled $1.6 billion. During 2023, the Company recorded impairment losses of $36.1 million related to real property owned and $35.3 million related to investments in unconsolidated entities.

As discussed in Note 2 to the consolidated financial statements, the Company reviews real property owned on a property by property basis to determine if facts and circumstances suggest the property may be impaired. This evaluation of indicators of impairment of a property is dependent on a number of factors, including when there is an event or adverse change in the operating performance of the property or a change in management's intent to hold and operate the property. If an indicator of impairment of the property is identified, management estimates whether the carrying value is recoverable using observable and unobservable inputs such as historical and forecasted cash flows and estimated capitalization rates. If the estimated undiscounted cash flows indicate that the carrying value of the property will not be recoverable, the carrying value of the property is reduced to its estimated fair value and an impairment charge is recognized for the difference between the carrying value and the fair value.

The Company also evaluates investments in unconsolidated entities for indicators of impairment and, when present, records impairment charges based upon a comparison of the estimated fair value of the equity method investment to its carrying value, if the decline in the estimated fair value of such an investment below its carrying value is other than temporary. This evaluation of indicators of impairment of investments in unconsolidated entities is dependent on a number of factors including the performance of each investment, a change in market conditions or a change in management's investment strategy. When required, the Company estimates the fair value of an investment and assesses whether any impairment is other than temporary using observable and unobservable inputs such as historical and forecasted cash flows and estimated capitalization rates.

Auditing management's evaluation of impairment of real property owned and investments in unconsolidated entities was complex due to (i) the significant judgment employed by management in identifying whether indicators of impairment were present and (ii) the estimation uncertainty in determining the undiscounted cash flows of real property owned and, when necessary, the fair value of real property owned or investment in an unconsolidated entity. In particular, the evaluation was sensitive to significant assumptions such as forecasted cash flows, including leasing prospects and occupancy projections, and estimated capitalization rates, all of which can be affected by expectations about future market or economic conditions, demand and competition.

How We Addressed the
Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process for evaluating impairment of real property owned and investments in unconsolidated entities, including controls over management's review of the significant assumptions described above.

To test the Company's evaluation of impairment of real property owned and investments in unconsolidated entities, we performed audit procedures that included, among others, assessing the methodologies applied, evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by management in its analysis. We evaluated the appropriateness of indicators of impairment and the identification by management of real property owned and investments in unconsolidated entities where such indicators are present. We further assessed the progression of properties with impairment indicators identified in historical periods.

In addition, we compared the significant assumptions used by management to current industry and economic trends and other relevant market information, and as needed, involved a valuation specialist to assist in evaluating certain assumptions. We performed sensitivity analyses of significant assumptions used to determine recoverability and/or fair value (each where applicable) of the related real property owned or investments in unconsolidated entities and evaluated significant variances between the forecasted cash flows and historical actual results. We also assessed whether any declines in investments in unconsolidated entities were other-than-temporary.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1970.

Toledo, Ohio

February 15, 2024

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(in thousands)

						December 31, 2023						December 31, 2022
Assets
Real estate investments:
Real property owned:
Land and land improvements						$	4,697,824					$	4,249,834
Buildings and improvements						37,796,553						33,651,336
Acquired lease intangibles						2,166,470						1,945,458
Real property held for sale, net of accumulated depreciation						372,883						133,058
Construction in progress						1,304,441						1,021,080
Less accumulated depreciation and amortization						(9,274,814)						(8,075,733)
Net real property owned						37,063,357						32,925,033
Right of use assets, net						350,969						323,942
Real estate loans receivable, net of credit allowance						1,361,587						890,844
Net real estate investments						38,775,913						34,139,819
Other assets:
Investments in unconsolidated entities						1,636,531						1,499,790
Goodwill						68,321						68,321
Cash and cash equivalents						1,993,646						631,681
Restricted cash						82,437						90,611
Straight-line rent receivable						443,800						322,173
Receivables and other assets						1,011,518						1,140,838
Total other assets						5,236,253						3,753,414
Total assets						$	44,012,166					$	37,893,233
Liabilities and equity
Liabilities:
Unsecured credit facility and commercial paper						$	—					$	—
Senior unsecured notes						13,552,222						12,437,273
Secured debt						2,183,327						2,110,815
Lease liabilities						383,230						415,824
Accrued expenses and other liabilities						1,521,660						1,535,325
Total liabilities						17,640,439						16,499,237
Redeemable noncontrolling interests						290,605						384,443
Equity:
Common stock						565,894						491,919
Capital in excess of par value						32,741,949						26,742,750
Treasury stock						(111,578)						(111,001)
Cumulative net income						9,145,044						8,804,950
Cumulative dividends						(16,773,773)						(15,514,097)
Accumulated other comprehensive income (loss)						(163,160)						(119,707)
Total Welltower Inc. stockholders’ equity						25,404,376						20,294,814
Noncontrolling interests						676,746						714,739
Total equity						26,081,122						21,009,553
Total liabilities and equity						$	44,012,166					$	37,893,233

See accompanying notes

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)

						Year Ended December 31,
						2023						2022						2021
Revenues:
Resident fees and services						$	4,753,804					$	4,173,711					$	3,197,223
Rental income						1,556,073						1,451,786						1,374,695
Interest income						168,354						150,571						137,563
Other income						159,764						84,547						32,634
Total revenues						6,637,995						5,860,615						4,742,115
Expenses:
Property operating expenses						3,947,776						3,558,770						2,774,562
Depreciation and amortization						1,401,101						1,310,368						1,037,566
Interest expense						607,846						529,519						489,853
General and administrative expenses						179,091						150,390						126,727
Loss (gain) on derivatives and financial instruments, net						(2,120)						8,334						(7,333)
Loss (gain) on extinguishment of debt, net						7						680						49,874
Provision for loan losses, net						9,809						10,320						7,270
Impairment of assets						36,097						17,502						51,107
Other expenses						108,341						101,670						41,739
Total expenses						6,287,948						5,687,553						4,571,365
Income (loss) from continuing operations before income taxes and other items						350,047						173,062						170,750
Income tax (expense) benefit						(6,364)						(7,247)						(8,713)
Income (loss) from unconsolidated entities						(53,442)						(21,290)						(22,933)
Gain (loss) on real estate dispositions, net						67,898						16,043						235,375
Income (loss) from continuing operations						358,139						160,568						374,479
Net income						358,139						160,568						374,479
Less: Net income (loss) attributable to noncontrolling interests(1)						18,045						19,354						38,341
Net income (loss) attributable to common stockholders						$	340,094					$	141,214					$	336,138
Weighted average number of common shares outstanding:
Basic						515,629						462,185						424,976
Diluted						518,701						465,158						426,841
Earnings per share:
Basic:
Income (loss) from continuing operations						$	0.69					$	0.35					$	0.88
Net income (loss) attributable to common stockholders						$	0.66					$	0.31					$	0.79
Diluted:
Income (loss) from continuing operations						$	0.69					$	0.35					$	0.88
Net income (loss) attributable to common stockholders(2)						$	0.66					$	0.30					$	0.78

(1) Includes amounts attributable to redeemable noncontrolling interests

(2) Includes adjustment to the numerator for income (loss) attributable to OP Units and DownREIT Units.

See accompanying notes

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

						Year Ended December 31,
						2023						2022						2021
Net income						$	358,139					$	160,568					$	374,479
Other comprehensive income (loss):
Foreign currency translation gain (loss)						223,920						(466,910)						(52,826)
Derivative and financial instruments designated as hedges gain (loss)						(245,095)						442,620						79,702
Total other comprehensive income (loss)						(21,175)						(24,290)						26,876
Total comprehensive income (loss)						336,964						136,278						401,355
Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)						27,637						(6,545)						38,029
Total comprehensive income (loss) attributable to common stockholders						$	309,327					$	142,823					$	363,326

(1) Includes amounts attributable to redeemable noncontrolling interests.

See accompanying notes

CONSOLIDATED STATEMENTS OF EQUITY

WELLTOWER INC. AND SUBSIDIARIES

(in thousands)						Common Stock						Capital in Excess of Par Value						Treasury Stock						Cumulative Net Income						Cumulative Dividends						Accumulated Other Comprehensive Income (Loss)						Noncontrolling Interests						Total
Balances at December 31, 2020						$	418,691					$	20,823,145					$	(104,490)					$	8,327,598					$	(13,343,721)					$	(148,504)					$	908,853					$	16,881,572
Comprehensive income:
Net income (loss)																								336,138																		36,795						372,933
Other comprehensive income (loss)																																				27,188						(366)						26,822
Total comprehensive income																																																399,755
Net change in noncontrolling interests												(23,743)																														15,296						(8,447)
Amounts related to stock incentive plans, net of forfeitures						246						18,087						(3,260)																														15,073
Net proceeds from issuance of common stock						29,668						2,316,152																																				2,345,820
Dividends paid:
Common stock dividends																														(1,037,194)																		(1,037,194)
Balances at December 31, 2021						448,605						23,133,641						(107,750)						8,663,736						(14,380,915)						(121,316)						960,578						18,596,579
Comprehensive income:
Net income (loss)																								141,214																		36,151						177,365
Other comprehensive income (loss)																																				1,609						(24,161)						(22,552)
Total comprehensive income																																																154,813
Net change in noncontrolling interests												(88,756)																														(210,974)						(299,730)
Adjustment to members' interest from change in ownership in Welltower OP												46,649																														(46,649)						—
Redemption of OP Units and DownREIT Units						5						1,464																														(206)						1,263
Amounts related to stock incentive plans, net of forfeitures						214						27,018						(3,251)																														23,981
Net proceeds from issuance of common stock						43,095						3,622,734																																				3,665,829
Dividends paid:
Common stock dividends																														(1,133,182)																		(1,133,182)
Balances at December 31, 2022						491,919						26,742,750						(111,001)						8,804,950						(15,514,097)						(119,707)						714,739						21,009,553
Comprehensive income:
Net income (loss)																								340,094																		17,819						357,913
Other comprehensive income (loss)																																				(30,767)						8,839						(21,928)
Total comprehensive income																																																335,985
Net change in noncontrolling interests												25,571																								(12,686)						(80,009)						(67,124)
Adjustment to members' interest from change in ownership in Welltower OP												(18,399)																														18,399						—
Redemption of OP Units and DownREIT Units						336						20,061																														(3,041)						17,356
Amounts related to stock incentive plans, net of forfeitures						210						38,026						(577)																														37,659
Net proceeds from issuance of common stock						73,429						5,933,940																																				6,007,369
Dividends paid:
Common stock dividends																														(1,259,676)																		(1,259,676)
Balances at December 31, 2023						$	565,894					$	32,741,949					$	(111,578)					$	9,145,044					$	(16,773,773)					$	(163,160)					$	676,746					$	26,081,122

See accompanying notes

CONSOLIDATED STATEMENTS OF CASH FLOWS

WELLTOWER INC. AND SUBSIDIARIES

(in thousands)

						Year Ended December 31,
						2023						2022						2021
Operating activities:
Net income						$	358,139					$	160,568					$	374,479
Adjustments to reconcile net income to net cash provided from (used in) operating
activities:
Depreciation and amortization						1,401,101						1,310,368						1,037,566
Other amortization expenses						42,645						28,234						19,148
Provision for loan losses						9,809						10,320						7,270
Impairment of assets						36,097						17,502						51,107
Stock-based compensation expense						37,199						26,149						17,812
Loss (gain) on derivatives and financial instruments, net						(2,120)						8,334						(7,333)
Loss (gain) on extinguishment of debt, net						7						680						49,874
Loss (income) from unconsolidated entities						53,442						21,290						22,933
Rental income less than (in excess of) cash received						(135,758)						(108,883)						(30,820)
Amortization related to above (below) market leases, net						(529)						(1,693)						(3,536)
Loss (gain) on real estate dispositions, net						(67,898)						(16,043)						(235,375)
Loss (gain) on loss of control of subsidiary						(65,485)						—						—
Distributions by unconsolidated entities						11,623						12,462						16,763
Increase (decrease) in accrued expenses and other liabilities						(79,801)						50,857						77,554
Decrease (increase) in receivables and other assets						3,390						(191,437)						(122,117)
Net cash provided from (used in) operating activities						1,601,861						1,328,708						1,275,325
Investing activities:
Cash disbursed for acquisitions, net of cash acquired						(3,558,266)						(2,306,020)						(4,084,174)
Cash disbursed for capital improvements to existing properties						(517,682)						(476,016)						(282,588)
Cash disbursed for construction in progress						(1,014,935)						(631,737)						(417,963)
Capitalized interest						(50,699)						(30,491)						(19,352)
Investment in loans receivable						(490,736)						(156,045)						(997,449)
Principal collected on loans receivable						90,215						196,310						343,260
Other investments, net of payments						(100,128)						(98,459)						(26,595)
Contributions to unconsolidated entities						(343,498)						(502,171)						(396,020)
Distributions by unconsolidated entities						149,753						37,571						286,772
Proceeds from (payments on) derivatives						31,493						63,747						7,519
Proceeds from sales of real property						96,741						199,496						1,070,322
Net cash provided from (used in) investing activities						(5,707,742)						(3,703,815)						(4,516,268)
Financing activities:
Net increase (decrease) under unsecured credit facility and commercial paper						—						(324,935)						324,935
Proceeds from issuance of senior unsecured notes						1,011,780						1,040,232						1,703,626
Payments to extinguish senior unsecured notes						—						—						(1,533,752)
Net proceeds from the issuance of secured debt						385,115						113,183						23,569
Payments on secured debt						(741,856)						(457,180)						(197,618)
Net proceeds from the issuance of common stock						6,010,129						3,667,854						2,348,201
Payments for deferred financing costs and prepayment penalties						(7,220)						(5,062)						(73,735)
Contributions by noncontrolling interests(1)						280,678						138,656						156,318
Distributions to noncontrolling interests(1)						(216,273)						(272,414)						(138,756)
Cash distributions to stockholders						(1,260,578)						(1,131,527)						(1,035,906)
Other financing activities						(13,128)						(7,530)						(9,218)
Net cash provided from (used in) financing activities						5,448,647						2,761,277						1,567,664
Effect of foreign currency translation on cash and cash equivalents and restricted cash						11,025						(10,633)						(1,009)
Increase (decrease) in cash, cash equivalents and restricted cash						1,353,791						375,537						(1,674,288)
Cash, cash equivalents and restricted cash at beginning of period						722,292						346,755						2,021,043
Cash, cash equivalents and restricted cash at end of period						$	2,076,083					$	722,292					$	346,755
Supplemental cash flow information:
Interest paid						$	628,582					$	531,672					$	492,742
Income taxes paid (received)						7,682						3,435						(4,812)

(1) Includes amounts attributable to redeemable noncontrolling interests.

See accompanying notes.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Welltower Inc., an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. We invest 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 Inc., 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.

As of May 24, 2022, we are structured as an umbrella partnership REIT under which substantially all of our business is conducted through Welltower OP LLC, the day-to-day management of which is exclusively controlled by Welltower Inc. Unless stated otherwise or the context otherwise requires, references to "Welltower" mean Welltower Inc. and references to "Welltower OP" mean Welltower OP LLC. References to "we," "us" and "our" mean collectively Welltower, Welltower OP and those entities/subsidiaries owned or controlled by Welltower and/or Welltower OP. Welltower's weighted average ownership in Welltower OP was 99.740% during the year ended December 31, 2023. As of December 31, 2023, Welltower owned 99.765% of the issued and outstanding units of Welltower OP, with other investors owning the remaining 0.235% of outstanding units. We adjust the noncontrolling members' interest at the end of each period to reflect their interest in the net assets of Welltower OP.

2. Accounting Policies and Related Matters

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of our wholly owned subsidiaries and joint venture entities that we control, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation. At inception of transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) substantially all of an entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity's economic performance, (b) the obligation to absorb the expected losses of an entity or (c) the right to receive the expected residual returns of an entity. Criterion (iii) is generally applied to limited partnerships and similarly structured entities by assessing whether a simple majority of the limited partners hold substantive rights to participate in significant decisions of the entity or have the ability to remove the decision maker or liquidate the entity without cause. If neither of those criteria are met, the entity is a VIE.

We consolidate investments in VIEs when we are determined to be the primary beneficiary. Accounting Standards Codification Topic 810, Consolidations (“ASC 810”), requires enterprises to perform a qualitative approach to determining whether or not a VIE will need to be consolidated. This evaluation is based on an enterprise’s ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance and the rights held by limited partners or non-managing members.

The designation of an entity as a VIE is reassessed upon certain events, including but not limited to: (i) a change to the contractual arrangements of the entity or in the ability of a party to exercise its participation or kick-out rights, (ii) a change to the capitalization structure of the entity or (iii) acquisitions or sales of interests that constitute a change in control.

Revenue Recognition

For our Triple-net and Outpatient Medical segments, a significant source of our revenue is generated through leasing arrangements and accounted for under ASC 842, Leases ("ASC 842"). 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. Leases in our Outpatient Medical portfolio typically include some form of operating expense reimbursement by the tenant and upon adoption of ASC 842, we elected the lessor practical expedient to not separate non-lease components from the associated lease components resulting in presenting all revenue associated with Outpatient Medical leases as leasing revenue on the Consolidated Statements of Comprehensive Income. Certain payments made to tenants are treated as lease incentives and amortized as a reduction of revenue over the lease term.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and generally is recognized monthly as services are provided. Agreements with residents generally have varying terms and are cancellable by the resident with 30 days’ notice. We have elected the lessor practical expedient within ASC 842 and recognize and disclose the revenues for Seniors Housing Operating resident agreement based upon the predominant component, generally the non-lease service component, under ASC 606, Revenue from Contracts with Customers. Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. Management contracts are present in some of our joint venture agreements to provide asset and property management, leasing, marketing and other services and are recognized monthly as services are provided.

Our Seniors Housing Operating segment also contains continuing care retirement communities, which operate as entrance fee communities. The entrance fee communities offer different contracts which vary in terms of how much of the entrance fee is considered to be refundable upon move-out, temporarily refundable until a period of time has passed, or nonrefundable. Refundable entrance fees are recorded as a payable within the accrued expenses and other liabilities line item of our Consolidated Balance Sheets. Nonrefundable entrance fees are recorded as deferred revenue within the same line item and are recognized into revenue over the estimated remaining stay of the resident. We use a third party actuarial expert to determine the estimated remaining stay of each resident based on demographic data.

Interest income on loans is recognized as earned based upon the principal amount outstanding, subject to an evaluation of collectability risk.

We recognize gains on the disposition of real estate when control transfers to the buyer, generally when consideration and title are exchanged and the risks and rewards of ownership transfer. We recognize losses from dispositions of real estate when known.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.

Restricted Cash

Restricted cash primarily consists of amounts held by lenders to provide future payments for real estate taxes, insurance, tenant and capital improvements, amounts held in escrow relating to transactions we are entitled to receive over a period of time as outlined in the escrow agreement and net proceeds from property sales that were executed as tax-deferred dispositions under Internal Revenue Code (“IRC”) Section 1031.

Deferred Loan Expenses

Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of debt arrangements. Deferred loan expenses related to debt instruments, excluding the primary unsecured credit facility, are recorded as a reduction of the related debt liability. Deferred loan expenses related to the primary unsecured credit facility are included in receivables and other assets. We amortize these costs over the term of the debt using the straight-line method, which approximates the effective interest method.

Investments in Unconsolidated Entities

Investments in entities that we do not consolidate but have the ability to exercise significant influence over operating and financial policies are reported under the equity method of accounting. Under the equity method, our share of the investee’s earnings or losses is included in our consolidated results of operations. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the equity interest inclusive of transaction costs. To the extent that our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of equity in earnings of the entity. For earnings of equity method investments with pro rata distribution allocations, net income or loss is allocated between the partners in the joint venture based upon their respective stated ownership. In other instances, net income or loss may be allocated between the partners in the joint venture based on the hypothetical liquidation at book value method ("HLBV method"). Under the HLBV method, we recognize income and loss in each period based on the change in liquidation proceeds we would receive from a hypothetical liquidation of the underlying investment at book value.

We evaluate our investments in unconsolidated entities for impairment and, when present, record impairment charges based upon a comparison of the estimated fair value of the equity method investment to its carrying value if the decline in the estimated fair value of such an investment below its carrying value is other-than-temporary. This evaluation of indicators of impairment of investments in unconsolidated entities is dependent on a number of factors including the performance of each investment, a change in conditions or a change in management's investment strategy. When required, we estimate the fair value of an investment and assess whether any impairment is other-than-temporary using observable and unobservable inputs such as historical and forecasted cash flows and estimated capitalization rates.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Welltower OP Noncontrolling Interests

Members of Welltower OP other than Welltower have the right under the limited liability company agreement to redeem their Class A Common Units ("OP Units") for shares of Welltower common stock or cash, at Welltower's sole discretion, as the initial member. Accordingly, we classify the non-Welltower OP Units held by such other members in permanent equity because Welltower may elect to issue shares of Welltower common stock to the non-Welltower members who choose to redeem their OP Units rather than using cash.

Redeemable Noncontrolling Interests

Certain noncontrolling interests are redeemable at fair value. Accordingly, we record the carrying amount of the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss and its share of other comprehensive income or loss, and contributions or distributions or (ii) the redemption value. If the interests are redeemable in the future, we accrete the carrying value to the redemption value over the period until expected redemption, currently a weighted-average period of approximately five years. In accordance with ASC 810, the redeemable noncontrolling interests are classified outside of permanent equity, as a mezzanine item, on the balance sheet. At December 31, 2023, the current redemption value of redeemable noncontrolling interests exceeded the carrying value of $290,605,000 by $46,178,000.

We entered into certain DownREIT partnerships which give a real estate seller the ability to exchange its property on a tax deferred basis for equity membership interests (“DownREIT Units”). The DownREIT Units may be redeemed any time following the first anniversary of the date of issuance at the election of the holders for one share of our common stock per unit or, at our option, cash.

Real Property Owned

Real estate acquisitions are generally classified as asset acquisitions for which we record 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 primarily consist of land, buildings and improvements. In making estimates of relative fair value, we utilize a number of sources including independent appraisals, our own analysis of recently acquired or developed and existing comparable properties in our portfolio and other market data.

Identifiable intangible assets and liabilities consist primarily of the above or below market component of in-place leases and the value associated with the presence of in-place leases. The value allocable to the above or below market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease intangibles and below market leases are included in other liabilities on the balance sheet and are amortized to rental income over the remaining terms of the respective leases.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values for in-place tenants based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The total amount of other intangible assets acquired is further allocated to in-place lease values for in-place residents with such value representing (i) value associated with lost revenue related to tenant reimbursable operating costs that would be incurred in an assumed re-leasing period, and (ii) value associated with lost rental revenue from existing leases during an assumed re-leasing period. This intangible asset is amortized over the remaining life of the lease or the assumed re-leasing period.

Real property developed by us is recorded at cost, including the capitalization of construction period interest. Owned properties are depreciated on a straight-line basis over their estimated useful lives which range from 15 to 40 years for buildings and 5 to 15 years for improvements. We consider costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investment activities in our Consolidated Statement of Cash Flows.

The net book value of real property owned is reviewed quarterly on a property by property basis to determine if facts and circumstances suggest that a property may be impaired. This evaluation of indicators of impairment of a property is dependent on a number of factors, including when there is an event or adverse change in the operating performance of the property or a change in management's intent to hold and operate the property. If an indicator of impairment of the property is identified, management estimates whether the carrying value is recoverable using observable and unobservable inputs such as historical and forecasted cash flows and estimated capitalization rates. If the estimated undiscounted cash flows indicate that the carrying value of the property will not be recoverable, the carrying value of the property is reduced to the estimated fair market value and an impairment charge is recognized for the difference between the carrying value and the fair value. Additionally, properties that meet the held for sale criteria are recorded at the lesser of fair value less costs to sell or the carrying value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expenditures for repairs and maintenance are expensed as incurred.

Capitalization of Construction Period Interest

We capitalize interest costs associated with funds used for the construction of properties owned by us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of interest which approximates our company-wide cost of financing. Our interest expense reflected in the Consolidated Statements of Comprehensive Income has been reduced by the amounts capitalized.

Loans Receivable

Loans receivable are recorded on our Consolidated Balance Sheets in real estate loans receivable, net of credit allowance, or for non-real estate loans receivable, in receivables and other assets. Real estate loans receivable consists of mortgage loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment or pledge of the partnership interest in, the related properties, corporate guarantees and/or personal guarantees. Non-real estate loans are generally corporate loans with no real estate backing. Interest income on loans is recognized as earned based upon the principal amount outstanding, subject to an evaluation of the risk of credit loss.

In Substance Real Estate Investments

We provide loans to third parties for the acquisition, development and construction of real estate. Under these arrangements, it is possible that we will participate in the expected residual profits of the project through the sale, refinancing or acquisition of the property. We evaluate the characteristics of each arrangement, including its risks and rewards, to determine whether they are more similar to those associated with a loan or an investment in real estate. Arrangements with characteristics implying loan classification are presented as real estate loans receivable and result in the recognition of interest income. Arrangements with characteristics implying real estate joint ventures are treated as in substance real estate investments and presented as investments in unconsolidated entities and are accounted for using the equity method. The classification of each arrangement as either a real estate loan receivable or investment in unconsolidated entity involves judgment and relies on various factors, including market conditions, amount and timing of expected residual profits, credit enhancements in the form of guarantees, estimated fair value of the collateral, and significance of borrower equity in the project, among others. The classification of such arrangements is performed at inception, and periodically reassessed when significant changes occur in the circumstances or conditions described above.

Allowance for Credit Losses on Loans Receivable

The allowance for credit losses on loans receivable 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. We evaluate the collectability of our loans receivable based on a combination of credit quality indicators, 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 status 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 and expectations of future performance of the borrowers to determine the reserve for credit losses.

Goodwill

Goodwill is tested annually for impairment and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill. We have not had any goodwill impairments.

Fair Value of Derivative Instruments

Derivatives are recorded at fair value on the balance sheet as assets or liabilities. The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values of our derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of our forward exchange contracts are estimated by pricing models that consider foreign currency spot rates, forward trade rates and discount rates. Such amounts and the recognition of such amounts are subject to estimates that may change in the future. See Note 12 for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

						Year Ended December 31,
						2023						2022
Unearned revenue						$	374,545					$	432,941
Other liabilities						325,715						311,506
Accounts payable						173,215						216,732
Taxes payable						130,006						144,021
Other accrued expenses						139,691						135,944
Accrued payroll						158,255						120,713
Accrued interest						124,210						117,741
Derivative liabilities						96,023						55,727
Total						$	1,521,660					$	1,535,325

Federal Income Tax

We have elected to be treated as a REIT under the applicable provisions of the IRC, commencing with our first taxable year, and made no provision for U.S. federal income tax purposes prior to our acquisition of our taxable REIT subsidiaries (“TRSs”). As a result of these, as well as subsequent acquisitions, we now record income tax expense or benefit with respect to certain of our entities that are taxed as TRSs under provisions similar to those applicable to regular corporations and not under the REIT provisions. We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes a change in our judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes a change in our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur. See Note 19 for additional information.

Foreign Currency

Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. We translate the results of operations of our foreign subsidiaries into U.S. Dollars using average rates of exchange in effect during the period, and we translate balance sheet accounts using exchange rates in effect at the end of the period. We record resulting currency translation adjustments in accumulated other comprehensive income, a component of stockholders’ equity, on our Consolidated Balance Sheets.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding for the period, adjusted for non-vested shares of restricted stock. The computation of diluted earnings per share is similar to basic earnings per share, except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued. Additionally, net income (loss) allocated to OP Units and DownREIT Units (discussed above) has been included in the numerator and redeemable common stock related to the OP Units and DownREIT Units have been included in the denominator for the purpose of computing diluted earnings per share.

Reclassifications

Certain amounts in prior years have been reclassified to conform to current year presentation.

Government Grant Income

On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide financial aid to individuals, businesses, and state and local governments. During the years ended December 31, 2023, 2022 and 2021, 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. For the years ended December 31, 2023, 2022 and 2021 we recognized $21,220,000, $38,607,000 and $97,933,000, respectively, of government

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

grant income as a reduction to property operating expenses in our Consolidated Statements of Comprehensive Income. Additionally, for the year ended December 31, 2021, we recognized $4,642,000 of government grant income in other income in our Consolidated Statements of Comprehensive Income. The amount of qualifying expenditures and lost revenue exceeded grant income recognized and we believe we have complied and will continue to comply with all grant conditions. In the event of non-compliance, all such amounts are subject to recapture.

New Accounting Standards

• In March 2020, the FASB issued an amendment to the reference rate reform standard, which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting for relationships affected by reference rate reform. In December 2022, the FASB extended the date for which this guidance can be applied from December 31, 2022 to December 31, 2024. We continue to monitor developments related to the LIBOR transition and identification of an alternative, market-accepted rate.

• In November 2023, the FASB issued Accounting Standards Update No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is to be applied retrospectively to all periods presented in the financial statements. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and disclosures.

• In December 2023, the FASB issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09")," which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and disclosures.

3. Real Property Acquisitions and Development

The total purchase price for all properties acquired has been allocated to the tangible 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. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. Transaction costs directly related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in other expenses on our Consolidated Statements of Comprehensive Income. Our acquisition of properties are at times subject to earn out provisions based on the future operating performance of the acquired properties, which could result in incremental payments in the future. Our policy is to recognize such contingent consideration when the contingency is resolved and the consideration becomes payable. As of December 31, 2023, we do not expect future payments under these provisions to be material and no liabilities for such amounts have been accrued.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of our real property investment activity by segment for the periods presented (in thousands):

						Year Ended December 31, 2023
						Seniors Housing Operating						Triple-net						Outpatient Medical						Total
Land and land improvements						$	251,507					$	127,523					$	79,506					$	458,536
Buildings and improvements						2,006,021						969,481						343,252						3,318,754
Acquired lease intangibles						208,239						—						50,373						258,612
Construction in progress						165,934						—						—						165,934
Right of use assets, net						24,212						—						927						25,139
Total net real estate assets						2,655,913						1,097,004						474,058						4,226,975
Receivables and other assets						21,999						—						1,632						23,631
Total assets acquired(1)						2,677,912						1,097,004						475,690						4,250,606
Secured debt						(372,482)						—						(40,953)						(413,435)
Lease liabilities						(24,212)						—						(953)						(25,165)
Accrued expenses and other liabilities						(26,666)						—						(11,528)						(38,194)
Total liabilities acquired						(423,360)						—						(53,434)						(476,794)
Noncontrolling interests(2)						(32,692)						—						(925)						(33,617)
Non-cash acquisition related activity(3)						(181,929)						—						—						(181,929)
Cash disbursed for acquisitions						2,039,931						1,097,004						421,331						3,558,266
Construction in progress additions						646,466						25,646						422,103						1,094,215
Less: Capitalized interest						(39,799)						(2,416)						(8,484)						(50,699)
Accruals(4)						(4,735)						(1,358)						(22,488)						(28,581)
Cash disbursed for construction in progress						601,932						21,872						391,131						1,014,935
Capital improvements to existing properties						399,130						33,592						84,960						517,682
Total cash invested in real property, net of cash acquired						$	3,040,993					$	1,152,468					$	897,422					$	5,090,883

(1) Excludes $4,708,000 of unrestricted and restricted cash acquired.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests.

(3) Relates to the acquisition of assets previously financed as loans receivable and the acquisition of assets previously recognized as investments in unconsolidated entities.

(4) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

						Year Ended December 31, 2022
						Seniors Housing Operating						Triple-net						Outpatient Medical						Total
Land and land improvements						$	206,618					$	7,536					$	68,379					$	282,533
Buildings and improvements						2,067,051						59,248						253,358						2,379,657
Acquired lease intangibles						129,429						—						35,316						164,745
Construction in progress						108,141						—						—						108,141
Right of use assets, net						169						—						3,852						4,021
Total net real estate assets						2,511,408						66,784						360,905						2,939,097
Receivables and other assets						14,406						—						501						14,907
Total assets acquired(1)						2,525,814						66,784						361,406						2,954,004
Secured debt						(279,788)						(39,574)						—						(319,362)
Lease liabilities						—						—						(3,852)						(3,852)
Accrued expenses and other liabilities						(112,962)						(1,428)						(1,414)						(115,804)
Total liabilities acquired						(392,750)						(41,002)						(5,266)						(439,018)
Noncontrolling interests(2)						(115,112)						(4)						(1,095)						(116,211)
Non-cash acquisition related activity(3)						(64,975)						(27,780)						—						(92,755)
Cash disbursed for acquisitions						1,952,977						(2,002)						355,045						2,306,020
Construction in progress additions						489,001						83,368						91,662						664,031
Less: Capitalized interest						(24,432)						(4,210)						(1,849)						(30,491)
Accruals (4)						(4,621)						—						2,818						(1,803)
Cash disbursed for construction in progress						459,948						79,158						92,631						631,737
Capital improvements to existing properties						352,099						48,052						75,865						476,016
Total cash invested in real property, net of cash acquired						$	2,765,024					$	125,208					$	523,541					$	3,413,773

(1) Excludes $6,563,000 of unrestricted and restricted cash acquired.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests. For the year ended December 31, 2022, 1,227,000 OP Units were issued as a component of funding for certain transactions.

(3) Relates to the acquisition of assets previously financed as loans receivable and the acquisition of assets previously recognized as investments in unconsolidated entities.

(4) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

						Year Ended December 31, 2021
						Seniors Housing Operating						Triple-net						Outpatient Medical						Total
Land and land improvements						$	449,335					$	88,839					$	64,843					$	603,017
Buildings and improvements						2,347,609						809,328						313,864						3,470,801
Acquired lease intangibles						264,589						—						24,751						289,340
Right of use assets, net						77,455						—						—						77,455
Total net real estate assets						3,138,988						898,167						403,458						4,440,613
Receivables and other assets						6,096						411						3,534						10,041
Total assets acquired(1)						3,145,084						898,578						406,992						4,450,654
Lease liabilities						(138,126)						—						—						(138,126)
Accrued expenses and other liabilities						(191,454)						(8,703)						(266)						(200,423)
Total liabilities acquired						(329,580)						(8,703)						(266)						(338,549)
Noncontrolling interests(2)						(4,942)						(6,449)						(16,540)						(27,931)
Cash disbursed for acquisitions						2,810,562						883,426						390,186						4,084,174
Construction in progress additions						322,050						77,412						42,464						441,926
Less: Capitalized interest						(13,834)						(3,078)						(2,440)						(19,352)
Accruals(3)						35						—						(4,646)						(4,611)
Cash disbursed for construction in progress						308,251						74,334						35,378						417,963
Capital improvements to existing properties						197,829						37,345						47,414						282,588
Total cash invested in real property, net of cash acquired						$	3,316,642					$	995,105					$	472,978					$	4,784,725

(1) Excludes $4,201,000 of unrestricted and restricted cash acquired.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests.

(3) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Canadian Pension Plan Investment Board ("CPPIB")

During the year ended December 31, 2023, we paid $69,606,000 to acquire the 45% redeemable noncontrolling ownership interest in two consolidated joint ventures with CPPIB, which owned interests in ten medical office buildings. In conjunction with the transaction, $118,256,000 was removed from redeemable noncontrolling interests with the difference recorded to capital in excess of par value on our Consolidated Balance Sheets. The transaction is excluded from the table above.

Holiday Retirement Acquisition

On July 30, 2021, we acquired a portfolio of 85 seniors housing properties owned by Holiday Retirement for $1,576,600,000, which are included in our Seniors Housing Operating segment and in the table above for the year ended December 31, 2021. Atria Senior Living assumed operations of the portfolio following its acquisition of the Holiday Retirement management company pursuant to an incentive-based management agreement. As part of this transaction, a wholly owned subsidiary assumed the leasehold interest in a 26 property portfolio and subsequently purchased eight of the leased properties and one of the properties was sold by the landlord, National Health Investors ("NHI"), and removed from the master lease. Effective April 1, 2022, our leasehold interest related to the master lease with NHI for the remaining 17 properties was terminated as a result of the transition or sale of the properties by NHI. The lease termination was part of an agreement to resolve outstanding litigation with NHI. In conjunction with the agreement, a wholly owned subsidiary and the lessee on the master lease agreed to release $6,883,000 of cash to the landlord, which represents the net cash flow generated from the properties since we assumed the leasehold interest. Additionally, in conjunction with the lease termination, during the year ended December 31, 2022, we recognized $58,621,000 in other income on our Consolidated Statements of Comprehensive Income from the derecognition of the right of use asset and related liability.

Affinity Living Communities ("Affinity") Acquisition

In February 2024, we entered into a definitive agreement to acquire 25 Seniors Housing Operating properties for a total purchase price of $969 million, which will be managed under the Affinity brand. The transaction is expected to be funded through a combination of cash and the assumption of $523 million of secured debt, subject to customary closing conditions and lender consents.

Construction Activity

The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands):

						Year Ended
						December 31, 2023						December 31, 2022						December 31, 2021
Development projects:
Seniors Housing Operating						$	463,644					$	227,796					$	117,386
Triple-net						141,142						—						22,990
Outpatient Medical						190,770						44,777						125,179
Total development projects						795,556						272,573						265,555
Expansion projects						71,250						18,280						5,292
Total construction in progress conversions						$	866,806					$	290,853					$	270,847

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Real Estate Intangibles

The following is a summary of our real estate intangibles, excluding those related to ground leases or classified as held for sale, as of the dates indicated (dollars in thousands):

						December 31, 2023						December 31, 2022
Assets:
In place lease intangibles						$	2,001,827					$	1,817,580
Above market tenant leases						66,663						57,203
Lease commissions						97,980						70,675
Gross historical cost						2,166,470						1,945,458
Accumulated amortization						(1,651,656)						(1,484,048)
Net book value						$	514,814					$	461,410
Weighted-average amortization period in years						6.7						7.6
Liabilities:
Below market tenant leases						$	70,364					$	77,985
Accumulated amortization						(47,939)						(52,701)
Net book value						$	22,425					$	25,284
Weighted-average amortization period in years						8.4						8.4

The following is a summary of real estate intangible amortization income (expense) for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Rental income related to (above)/below market tenant leases, net						$	384					$	1,551					$	1,680
Amortization related to in place lease intangibles and lease commissions						(226,663)						(217,187)						(115,579)

The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):

						Assets						Liabilities
2024						$	212,725					$	4,450
2025						76,031						3,534
2026						44,257						2,889
2027						34,860						2,440
2028						29,095						1,834
Thereafter						117,846						7,278
Totals						$	514,814					$	22,425

5. Dispositions, Real Property Held for Sale and Impairment

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (e.g. property type, relationship or geography). At December 31, 2023, 15 Seniors Housing Operating, one Triple-net and four Outpatient Medical properties, with an aggregate net real estate balance of $372,883,000, were classified as held for sale. In addition to the real property balances, secured debt balances of $185,263,000 and net other assets and (liabilities) of $21,568,000 were included in the Consolidated Balance Sheets related to the held for sale properties. Expected gross sales proceeds related to the held for sale properties are approximately $546,568,000, which includes non-cash consideration relating to 14 Canadian Revera properties discussed below.

During the year ended December 31, 2023, we recorded impairment charges of $15,401,000 related to four Seniors Housing Operating properties and one Triple-net property which were classified as held for sale for which the carrying value exceeded the estimated fair values less costs to sell. Additionally, during 2023 we recorded impairment charges of $20,696,000 related to three Seniors Housing Operating properties and two Triple-net properties, which were held for use for which the carrying value exceeded the fair values. 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. 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. During the year ended December 31, 2021, we recorded impairment charges of $19,567,000 related to four Triple-net properties and one Outpatient Medical property, which were disposed of or classified as held for sale. Additionally, during the year ended December 31, 2021, we recorded $31,540,000 of impairment charges related to two Seniors Housing Operating and two Triple-net properties that were held for use.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating results attributable to properties sold or classified as held for sale which do not meet the definition of discontinued operations, are not reclassified on our Consolidated Statements of Comprehensive Income. We recognized income (loss) from continuing operations before income taxes and other items from properties sold or classified as held for sale of $58,816,000 for the year ended December 31, 2023 and $(8,941,000) and $11,437,000 for the same periods in 2022 and 2021, respectively.

The following is a summary of our real property disposition activity for the periods presented (in thousands):

						Year Ended
						December 31, 2023						December 31, 2022						December 31, 2021
Real estate dispositions:
Seniors Housing Operating(1)						$	385,128					$	85,413					$	112,837
Triple-net						6,391						89,827						486,369
Outpatient Medical						—						393						229,660
Total dispositions						391,519						175,633						828,866
Gain (loss) on real estate dispositions, net						67,898						16,043						235,375
Net other assets (liabilities) disposed						(846)						7,820						6,081
Non-cash consideration						(361,830)						—						—
Cash proceeds from real estate dispositions						$	96,741					$	199,496					$	1,070,322

(1) Dispositions occurring in the year ended December 31, 2023 include the disposition of unconsolidated equity method investments related to Revera. See discussion below for further information.

Strategic Dissolution of Revera Joint Ventures

During the year ended December 31, 2023, we entered into definitive agreements to dissolve our existing Revera joint venture relationships across the U.S., U.K. and Canada. The transactions include acquiring the remaining interests in 110 properties from Revera, while simultaneously selling interests in 31 properties to Revera.

In June 2023, we closed the U.K. portfolio portion of the transaction through the acquisition of the remaining ownership interest in 29 properties previously held in two separate consolidated joint venture structures in which we owned 75% and 90% of the interests in exchange for the disposition to Revera of our interests in four properties. In addition, we received cash from Revera of $107,341,000 relating to the net settlement of loans previously made to the joint ventures. Operations for the 29 retained properties were transitioned to Avery Healthcare.

Total proceeds related to the four properties disposed were $222,521,000, which included non-cash consideration from Revera of $241,728,000, comprised of the fair value of interests received by us of $198,837,000 and an allocation of Revera's noncontrolling interests of $42,891,000, partially offset by $9,049,000 of transaction-related expenses as well as the $10,158,000 of cash paid to equalize the value exchanged between the parties. We disposed of net real property owned of $224,208,000, resulting in a loss of $1,687,000 recognized within gain (loss) on real estate dispositions, net within our Consolidated Statements of Comprehensive Income. Consideration transferred to acquire the additional interests in the 29 properties was comprised of the fair value of interests transferred by us of $198,837,000 and $5,776,000 of cash paid for transaction-related expenses. We derecognized $180,497,000 of noncontrolling interests and $22,270,000 of liabilities previously due to Revera with an adjustment of $1,846,000 recognized in capital in excess of par value. The non-cash investing activity with respect to the sale of the four properties and non-cash financing activity with respect to the acquisition of Revera's interests in the 29 properties has been excluded from our Consolidated Statement of Cash Flows.

We closed the portion of the transactions predominantly related to the U.S. portfolio during the third quarter of 2023 through (i) the acquisition of the remaining interests in ten properties currently under development or recently developed by Sunrise Senior Living that were previously held within an equity method joint venture owned 34% by us and 66% by Revera, (ii) the disposition of our minority interests in 12 U.S. properties and one Canadian development project and (iii) the disposition of our 34% interest in the Sunrise Senior Living management company. We recorded net real estate investments of $479,525,000 related to the ten acquired and now consolidated properties, which was comprised of $31,456,000 of cash consideration and $448,069,000 of non-cash consideration. Non-cash consideration primarily includes $270,486,000 of assumed mortgage debt secured by the acquired properties, which was subsequently repaid in full by us immediately following the transaction, $47,734,000 of carryover investment from our prior 34% equity method ownership interest and $119,258,000 of fair value interests in the 13 properties transferred by us to Revera. We also derecognized $56,905,000 of equity method investments related to the 13 properties retained by Revera and recorded a gain on real estate dispositions of $62,075,000. In conjunction with this transaction, operations for two of the now wholly owned properties, along with operations for 26 existing wholly owned properties, transitioned to Oakmont Management Group. The non-cash investing activity with respect to the fair value of interests exchanged in the transaction, non-cash investing activity with respect to the carrying value of prior equity method interests now included in the basis of the acquired properties and non-cash financing activity with respect to the assumption of the secured mortgage debt have been excluded from our Consolidated Statements of Cash Flows.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Canadian portfolio consists of 85 properties in a joint venture owned 75% by us and 25% by Revera. As a part of the transaction, we intend to acquire Revera's interest in 71 properties and sell our interests in the remaining 14 properties. As of December 31, 2023, operations for all 71 retained properties have transitioned to new operators. The transaction is expected to close in the first half of 2024.

Genesis HealthCare

As part of the substantial exit of the Genesis HealthCare ("Genesis") operating relationship, which we disclosed on March 2, 2021, we transitioned the sublease of a portfolio of seven facilities from Genesis to Complete Care Management in the second quarter of 2021. As part of the March 2021 transaction, we entered into a forward sale agreement for the seven properties valued at $182,618,000, which was expected to close when the Welltower-held purchase option became exercisable. As of March 31, 2023, the right of use assets related to the properties were $115,359,000 and were reflected as held for sale with the corresponding lease liabilities of $66,530,000 on our Consolidated Balance Sheet.

On May 1, 2023, we executed a series of transactions that included the assignment of the leasehold interest to a newly formed tri-party unconsolidated joint venture with Aurora Health Network, Peace Capital (an affiliate of Complete Care Management) and us, and culminated with the closing of the purchase option by the joint venture. The transactions resulted in net cash proceeds to us of $104,240,000 (excluded from the dispositions table above) after our retained interest of $11,571,000 in the joint venture and a gain from the loss of control and derecognition of the leasehold interest of $65,485,000, which we recorded in other income within our Consolidated Statements of Comprehensive Income.

6. Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we generally use our incremental borrowing rate available at lease commencement, underlying collateral for the lease and the ability to borrow against that collateral on a secured basis to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer term market rates).

The components of lease expense were as follows for the periods presented (in thousands):

												Year Ended December 31,
						Classification						2023						2022						2021
Operating lease cost: (1)
Real estate lease expense						Property operating expenses						$	21,970					$	22,150					$	22,642
Non-real estate investment lease expense						General and administrative expenses						7,243						5,794						4,596
Finance lease cost:
Amortization of leased assets						Property operating expenses						5,854						6,837						8,105
Interest on lease liabilities						Interest expense						4,050						6,164						6,574
Sublease income						Rental income						(3,933)						(11,487)						(8,687)
Total												$	35,184					$	29,458					$	33,230

(1) Includes short-term leases which are immaterial.

Maturities of lease liabilities as of December 31, 2023 are as follows (in thousands):

						Operating Leases						Finance Leases
2024						$	19,329					$	5,547
2025						18,800						3,980
2026						16,637						4,030
2027						16,494						3,991
2028						16,291						3,948
Thereafter						863,847						369,892
Total lease payments						951,398						391,388
Less: Imputed interest						(647,845)						(311,711)
Total present value of lease liabilities						$	303,553					$	79,677

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases in which we are the lessee is as follows for the periods presented (in thousands, except lease terms and discount rate):

			Classification						December 31, 2023						December 31, 2022
Right of use assets:
Operating leases - real estate			Right of use assets, net						$	283,293					$	287,984
Finance leases - real estate			Right of use assets, net						67,676						35,958
Real estate right of use assets, net									350,969						323,942
Operating leases - non-real estate investments			Receivables and other assets						11,338						10,119
Finance leases - held for sale(1)			Real property held for sale, net of accumulated depreciation						—						116,453
Total right of use assets, net									$	362,307					$	450,514
Lease liabilities:
Operating leases									$	303,553					$	302,360
Finance leases									79,677						113,464
Total lease liabilities									$	383,230					$	415,824
Weighted average remaining lease term (years):
Operating leases									45.6						46.0
Finance leases									60.7						19.8
Weighted average discount rate:
Operating leases									5.27		%				5.56		%
Finance leases									7.71		%				5.01		%

(1) During the year ended December 31, 2023, we contributed finance leases at seven properties previously classified as held for sale into a newly formed unconsolidated joint venture, which recognized the purchase option within the leases. See Note 5 for further discussion.

Supplemental cash flow information related to leases was as follows for the periods indicated (in thousands):

									Year Ended December 31,
			Classification						2023						2022						2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			Decrease (increase) in receivables and other assets						$	(590)					$	8,805					$	9,081
Operating cash flows from operating leases			Increase (decrease) in accrued expenses and other liabilities						(2,037)						(5,570)						(6,008)
Operating cash flows from finance leases			Decrease (increase) in receivables and other assets						3,061						8,672						8,336
Financing cash flows from finance leases			Other financing activities						(2,704)						(2,255)						(3,578)

Substantially all of our operating leases in which we are the lessor contain 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. During the years ended December 31, 2023, 2022 and 2021, we wrote-off previously recognized straight-line rent receivable balances of $16,642,000, $0 and $49,241,000, respectively, through a reduction of rental income, which relate to leases for which collection of substantially all contractual lease payments were no longer deemed probable.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. Rental income related to operating leases and the corresponding variable lease payments, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes for the periods indicated were as follows (in thousands):

						Year Ended December 31,
						2023						2022						2021
Fixed income from operating leases						$	1,344,096					$	1,258,238					$	1,193,837
Variable lease income						211,977						193,548						180,858

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASC 606. Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $466,162,000, $410,749,000 and $194,078,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The following table sets forth the future minimum lease payments receivable for leases in effect at December 31, 2023 (excluding properties in our Seniors Housing Operating portfolio and excluding any operating expense reimbursements) (in thousands):

2024						$	1,391,509
2025						1,379,176
2026						1,343,749
2027						1,323,525
2028						1,307,766
Thereafter						10,469,656
Totals						$	17,215,381

7. Loans Receivable

Loans receivable are recorded on our Consolidated Balance Sheets in real estate loans receivable, net of allowance for credit losses, or for non-real estate loans receivable, in receivables and other assets, net of allowance for credit losses.

Accrued interest receivable was $31,798,000 and $22,878,000 as of December 31, 2023 and December 31, 2022, respectively, and is included in receivables and other assets on the Consolidated Balance Sheets. The following is a summary of our loans receivable (in thousands):

						Year Ended December 31,
						2023						2022
Mortgage loans						$	1,057,516					$	707,464
Other real estate loans						324,660						195,566
Allowance for credit losses on real estate loans receivable						(20,589)						(12,186)
Real estate loans receivable, net of credit allowance						1,361,587						890,844
Non-real estate loans						503,993						441,231
Allowance for credit losses on non-real estate loans receivable						(173,874)						(152,063)
Non-real estate loans receivable, net of credit allowance						330,119						289,168
Total loans receivable, net of credit allowance						$	1,691,706					$	1,180,012

The following is a summary of our loan activity for the periods presented (in thousands):

						Year Ended
						December 31, 2023						December 31, 2022						December 31, 2021
Advances on loans receivable						$	490,736					$	156,045					$	997,449
Less: Receipts on loans receivable						90,215						196,310						343,260
Net cash advances (receipts) on loans receivable						$	400,521					$	(40,265)					$	654,189

During the year ended December 31, 2021, we provided £540 million (approximately $750,330,000 based on the Sterling/ U.S. Dollar exchange rate as of the date of funding) of senior loan financing and a £30 million delayed facility for working capital and capital expenditures to affiliates of Safanad, a global real estate and private equity firm, as part of the recapitalization of its investment in HC-One Group ("HC-One"). During the year ended December 31, 2023, we amended the loan agreement to provide an additional £65 million of financing relating to HC-One's acquisition of an operating platform and extended the maturity to October 2028. As of December 31, 2023, the outstanding principal balance on the expanded loan is £611,453,000 (approximately $779,175,000 based on the Sterling/U.S. Dollar exchange rate as of December 31, 2023). As part of the original loan and as part of the 2023 expansion, we received equity warrants, which provide us the right to participate in the capital appreciation of HC-One above a designated price upon liquidation. See Note 12 for additional details.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of our loans by credit loss category (in thousands):

			December 31, 2023
Loan category			Years of Origination			Loan Carrying Value						Allowance for Credit Loss						Net Loan Balance						No. of Loans
Deteriorated loans			2007 - 2023			$	215,283					$	(172,045)					$	43,238					9
Collective loan pool			2007 - 2018			227,810						(3,028)						224,782						14
Collective loan pool			2019			23,960						(319)						23,641						4
Collective loan pool			2020			34,938						(464)						34,474						5
Collective loan pool			2021			871,754						(11,794)						859,960						11
Collective loan pool			2022			126,324						(1,680)						124,644						18
Collective loan pool			2023			386,100						(5,133)						380,967						17
Total loans						$	1,886,169					$	(194,463)					$	1,691,706					78

During the year ended December 31, 2021, we entered into definitive agreements to substantially exit our operating relationship with Genesis primarily through the transition of 51 properties to other operators. To effectuate this transition, we agreed to provide Genesis a lease termination fee of $86,310,000 upon successful transition of all properties, which was to be used to immediately repay indebtedness to us. These property transitions substantially occurred throughout 2021, and as of December 31, 2023, $85,043,000 of the lease termination fee has been earned by Genesis and repaid to us to reduce substantially all of the outstanding balance of this indebtedness.

Additionally, upon achievement of certain restructuring milestones, we agreed to reduce the balance of Genesis' unsecured notes payable to us by an additional $169,771,000 in exchange for an equity interest in Genesis. As of December 31, 2023, the amount of the potential reduction of the balance of these unsecured notes has increased to $238,104,000 due to accrued unpaid interest. The maturity date on the unsecured notes has been extended to March 29, 2024. The unsecured notes are included in the deteriorated loan category, and per our policy have had no interest recognized in the three years ended December 31, 2023. The achievement of milestones required for forgiveness has not yet occurred and as of December 31, 2023, the outstanding contractual balance of the unsecured notes, before potential debt reduction, is $290,296,000 and the carrying value is $24,246,000 after application of an allowance for credit losses and consideration of unrecognized interest.

During the year ended December 31, 2023, certain secured indebtedness payable by Genesis to us, which has a carrying value of $166,859,000, was modified to extend the maturity date to March 29, 2024, with no other changes to the terms. Both the unsecured and the secured notes with Genesis are included in non-real estate loans receivable.

The total allowance for credit losses is deemed to be sufficient to absorb expected losses relating to our loan portfolio. The following is a summary of the allowance for credit losses on loans receivable for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Balance at beginning of year						$	164,249					$	166,785					$	224,036
Provision for loan losses, net(1)						8,797						(1,394)						7,270
Loan write-offs(2)						—						—						(64,075)
Purchased deteriorated loan						19,077						—						—
Reserve for unrecognized interest added to principal						2,066						—						—
Foreign currency translation						274						(1,142)						(446)
Balance at end of year						$	194,463					$	164,249					$	166,785
(1) Excludes the provision for loan loss on held-to-maturity debt securities.
(2) Includes $64,075,000 related to the Genesis lease terminations for the twelve months ended December 31, 2021.

The following is a summary of our deteriorated loans (in thousands):

						Year Ended December 31,
						2023						2022						2021
Balance of deteriorated loans at end of year						$	215,283					$	174,841					$	178,369
Allowance for credit losses						(172,045)						(148,438)						(148,438)
Balance of deteriorated loans not reserved						$	43,238					$	26,403					$	29,931
Interest recognized on deteriorated loans(1)						$	1,681					$	—					$	3,185

(1 Represents cash interest recognized in the period.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Investments in Unconsolidated Entities

We participate in a number of joint ventures, which generally invest in seniors housing and health care real estate. Our share of the results of operations for these properties has been included in our consolidated results of operations from the date of acquisition by the joint ventures and are reflected in our Consolidated Statements of Comprehensive Income as income or loss from unconsolidated entities. The following is a summary of our investments in unconsolidated entities (dollars in thousands):

						Percentage Ownership(1)						December 31, 2023						December 31, 2022
Seniors Housing Operating						10% to 95%						$	1,248,774					$	1,171,307
Triple-net						10% to 88%						147,679						111,812
Outpatient Medical						15% to 50%						240,078						216,671
Total												$	1,636,531					$	1,499,790

(1) As of December 31, 2023 and includes ownership of investments classified as liabilities and excludes ownership of in-substance real estate.

During the year ended December 31, 2023, we recognized $35,293,000 of impairment losses related to investments in unconsolidated entities in our Consolidated Statements of Comprehensive Income as income or loss from unconsolidated entities. No such impairment losses were recognized during the years ended December 31, 2022 or 2021.

Through June 30, 2023, we owned 34% of Sunrise Senior Living Management, Inc. ("Sunrise ManCo"), who provided comprehensive property management and accounting services with respect to certain of our Seniors Housing Operating properties operated by Sunrise. We pay Sunrise annual management fees pursuant to long-term management agreements. The majority of our management agreements have initial terms expiring in 2028, plus, if applicable, optional renewal periods ranging from an additional 3 to 15 years depending on the property. The management fees payable to Sunrise under the management agreements include a fee based on a percentage of revenues generated by the applicable properties plus, if applicable, positive or negative adjustments based on specified performance targets. For the period in which we owned Sunrise ManCo in 2023, we recognized management fees of $14,185,000 which are reflected within property operating expenses in our Consolidated Statements of Comprehensive Income. For the years ended December 31, 2022 and 2021, we recognized $27,660,000 and $37,052,000 of management fees, respectively. Prior to the sale of our interest in Sunrise ManCo, we recognized an impairment charge of $28,708,000 in income from unconsolidated entities on our Consolidated Statements of Comprehensive Income for the year ended December 31, 2023, calculated as the excess of the carrying value of our investment in the management company compared to estimated sales proceeds for its sale.

At December 31, 2023, the aggregate unamortized basis difference of our joint venture investments of $144,144,000 is primarily attributable to the difference between the amount for which we purchased our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the joint venture. This difference is being amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.

We have made loans related to 24 properties as of December 31, 2023 for the development and construction of certain properties which are classified as in substance real estate investments and have a carrying value of $832,746,000. We believe that such borrowers typically represent VIEs in accordance with ASC 810. VIEs are required to be consolidated by their primary beneficiary, which is the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impacts the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We have concluded that we are not the primary beneficiary of such borrowers, therefore, the loan arrangements were assessed based on among other factors, the amount and timing of expected residual profits, the estimated fair value of the collateral and the significance of the borrower’s equity in the project. Based on these assessments the arrangements have been classified as in substance real estate investments. We expect to fund an additional $195,763,000 related to these investments.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Credit Concentration

We use consolidated net operating income (“NOI”) as our credit concentration metric. See Note 18 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the year ended December 31, 2023, excluding our share of NOI in unconsolidated entities (dollars in thousands):

						Number of						Total						Percent of
Concentration by relationship:(1)						Properties						NOI						NOI(2)
Integra Healthcare Properties						147						$	215,466					8%
Sunrise Senior Living(3)						88						150,801						6%
Cogir Management Corporation						120						112,571						4%
Avery Healthcare						84						100,017						4%
Oakmont Management Group						64						94,487						4%
Remaining portfolio						1,398						2,016,877						74%
Totals						1,901						$	2,690,219					100%

(1) Integra Healthcare Properties is in our Triple-net segment. Sunrise Senior Living ("Sunrise"), Cogir Management Corporation and Oakmont Management Group are in our Seniors Housing Operating segment. Avery Healthcare is in both our Seniors Housing Operating and Triple-net segments.

(2) NOI with our top five relationships comprised 30% of total NOI for the year ending December 31, 2022.

(3) For the year ended December 31, 2023, we recognized $793,920,000 of revenue from properties managed by Sunrise.

In December 2022, ProMedica relinquished to Welltower its 15% interest in 147 skilled nursing facilities previously owned by the Welltower/ProMedica joint venture in exchange for a lease modification, which relieved ProMedica from its lease obligation on the properties and amended the lease on the remaining 58 assisted living and memory care properties that continue to be held by the Welltower/ProMedica joint venture. The reduction of ProMedica's noncontrolling interest of $273,504,000 resulting from its relinquishment of the interest in the joint venture previously holding the 147 skilled nursing facilities is a non-cash financing activity excluded from our Consolidated Statement of Cash Flows. The 58 assisted living and memory care assets continue to be operated by ProMedica and backed by the existing guaranty.

Concurrently with the above, Welltower and Integra Healthcare Properties ("Integra") entered into master leases for the skilled nursing portfolio, which were subsequently subleased to regional operators. Also in December 2022, we sold to Integra a 15% ownership interest in 54 of those skilled nursing facilities for approximately $73 million, with no gain recognized as the properties continue to be consolidated following the transaction. This transaction represents the initial tranche of the newly formed joint venture owned 85% by Welltower and 15% by Integra. In January 2023, Integra acquired a 15% interest in an additional 31 of the remaining 93 skilled nursing facilities for approximately $74 million.

10. Borrowings Under Credit Facilities and Commercial Paper Program

At December 31, 2023, we had a primary unsecured credit facility with a consortium of 31 banks that included a $4,000,000,000 unsecured revolving credit facility, a $1,000,000,000 unsecured term credit facility and a $250,000,000 Canadian-denominated unsecured term credit facility. The unsecured revolving credit facility is comprised of a $1,000,000,000 tranche that matures on June 4, 2026 (none outstanding at December 31, 2023) and a $3,000,000,000 tranche that matures on June 4, 2025 (none outstanding at December 31, 2023). The term credit facilities mature on July 19, 2026. Each tranche of the revolving facility and term loans may be extended for two successive terms of six months at our option. We have an option, through an accordion feature, to upsize the unsecured revolving credit facility and the $1,000,000,000 unsecured term credit facility by up to an additional $1,250,000,000, in the aggregate, and the $250,000,000 Canadian-denominated unsecured term credit facility by up to an additional $250,000,000. The primary unsecured credit facility also allows us to borrow up to $1,000,000,000 in alternate currencies (none outstanding at December 31, 2023). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over the secured overnight financing rate ("SOFR") interest rate. Based on our current credit ratings, the loans under the unsecured revolving credit facility currently bear interest at 0.775% over the adjusted SOFR rate at December 31, 2023. In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on our debt ratings and was 0.15% at December 31, 2023.

Under the terms of our commercial paper program, we may issue unsecured commercial paper notes with maturities that vary, but do not exceed 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1,000,000,000 (none outstanding at December 31, 2023).

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following information relates to aggregate borrowings under the unsecured revolving credit facility and commercial paper program for the periods presented (dollars in thousands):

						Year Ended December 31,
						2023						2022						2021
Balance outstanding at year end						$	—					$	—					$	325,000
Maximum amount outstanding at any month end						$	205,000					$	1,565,000					$	994,000
Average amount outstanding (total of daily principal balances
divided by days in period)						$	16,233					$	766,167					$	384,418
Weighted-average interest rate (actual interest expense divided
by average borrowings outstanding)						5.05		%				1.75		%				0.33		%

11. Senior Unsecured Notes and Secured Debt

At December 31, 2023, the annual principal payments due on debt obligations were as follows (in thousands):

						Senior Unsecured Notes (1,2)						Secured Debt (3)						Totals
2024						$	1,350,000					$	400,258					$	1,750,258
2025						1,260,000						428,821						1,688,821
2026						700,000						155,500						855,500
2027(4,5)						1,916,604						210,091						2,126,695
2028(6)						2,485,865						107,546						2,593,411
Thereafter(7)						5,987,150						920,229						6,907,379
Total principal balance						$	13,699,619					$	2,222,445					$	15,922,064
Unamortized discounts and premiums, net						(26,271)						—						(26,271)
Unamortized debt issuance costs, net						(72,812)						(20,237)						(93,049)
Fair value adjustments and other, net						(48,314)						(18,881)						(67,195)
Total carrying value of debt						$	13,552,222					$	2,183,327					$	15,735,549

(1) Annual interest rates range from 2.05% to 7.02%. The ending weighted average interest rate, after considering the effects of interest rate swaps, was 4.05%, 4.06%, and 3.67%. as of December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

(2) All senior unsecured notes with the exception of the $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 have been issued by Welltower OP and are fully and unconditionally guaranteed by Welltower. The $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 have been issued through private placement by a wholly owned subsidiary of Welltower OP and are fully and unconditionally guaranteed by Welltower OP.

(3) Annual interest rates range from 1.25% to 8.13%. The ending weighted average interest rate, after considering the effects of interest rate swaps and caps, was 4.76%, 4.33%, and 3.03% as of December 31, 2023, December 31, 2022, and December 31, 2021, respectively. Gross real property value of the properties securing the debt totaled $5,511,479,000 at December 31, 2023.

(4) Includes a $1,000,000,000 unsecured term loan and a $250,000,000 Canadian-denominated unsecured term loan (approximately $189,365,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2023). Both term loans mature on July 19, 2026 and may be extended for two successive terms of six months at our option. The loans bear interest at adjusted SOFR plus 0.85% (6.31% at December 31, 2023) and Canadian Dealer Offered Rate plus 0.85% (6.31% at December 31, 2023), respectively.

(5) Includes $300,000,000 of Canadian-denominated 2.95% senior unsecured notes due 2027 (approximately $227,239,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2023).

(6) Includes £550,000,000 of 4.80% senior unsecured notes due 2028 (approximately $700,865,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on December 31, 2023).

(7) Includes £500,000,000 of 4.50% senior unsecured notes due 2034 (approximately $637,150,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on December 31, 2023).

The following is a summary of our senior unsecured notes principal activity during the periods presented (dollars in thousands):

						Year Ended December 31,
						2023						2022						2021
Beginning balance						$	12,584,529					$	11,707,961					$	11,509,533
Debt issued						1,035,000						1,050,000						1,750,000
Debt extinguished						—						—						(1,533,752)
Foreign currency						80,090						(173,432)						(17,820)
Ending balance						$	13,699,619					$	12,584,529					$	11,707,961

In January 2024, we repaid our $400,000,000 4.5% senior unsecured notes at maturity.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Welltower, the parent entity that consolidates Welltower OP and all other subsidiaries, fully and unconditionally guarantees to each holder of all series of senior unsecured notes issued by Welltower OP that the principal of and premium, if any, and interest on the notes will be promptly paid in full when due, whether at the applicable maturity date, by acceleration or redemption or otherwise, and interest on the overdue principal of and interest on the notes, if any, if lawful, and all other obligations of Welltower OP to the holders of the notes will be promptly paid in full or performed. Welltower’s guarantees of such notes are its senior unsecured obligation and rank equally with all of Welltower’s other future unsecured senior indebtedness and guarantees from time to time outstanding. Welltower’s guarantees of such notes are effectively subordinated to all liabilities of its subsidiaries and to its secured indebtedness to the extent of the assets securing such indebtedness. Because Welltower conducts substantially all of its business through its subsidiaries, Welltower's ability to make required payments with respect to the guarantees depends on the financial results and condition of its subsidiaries and its ability to receive funds from its subsidiaries, whether by dividends, loans, distributions or other payments.

We may repurchase, redeem or refinance senior unsecured notes from time to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the early redemption of such securities pursuant to their terms. The senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, subject to certain contractual restrictions, at a redemption price equal to the sum of: (i) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (ii) any “make-whole” amount due under the terms of the notes in connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Exchangeable Senior Unsecured Notes

In May 2023, Welltower OP issued $1,035,000,000 aggregate principal amount of 2.75% exchangeable senior unsecured notes maturing May 15, 2028 (the "Exchangeable Notes" or the "Notes") unless earlier exchanged, purchased or redeemed. The Exchangeable Notes will pay interest semi-annually in arrears on May 15 and November 15 of each year. The net proceeds from the offering of the Exchangeable Notes were approximately $1,011,780,000 after deducting the underwriting fees and other expenses. We recognized contractual interest expense on the Exchangeable Notes of approximately $18,184,000 for the year end December 31, 2023. Additionally, amortization of related issuance costs for the year end December 31, 2023 were $2,975,000. Unamortized issuance costs were $20,245,000 as of December 31, 2023.

Prior to the close of business on the business day immediately preceding November 15, 2027, the Notes are exchangeable at the option of the holders only upon certain circumstances and during certain periods, including upon a notice of redemption described below. On or after November 15, 2027, the Notes will be exchangeable at the option of the holders at any time prior to the close of business on the second scheduled trading day preceding the maturity date. Welltower OP will settle exchanges of the Notes by delivering cash up to the principal amount of the Notes exchanged and, in respect of the remainder of the exchanged value, if any, in excess thereof, cash or shares of Welltower's common stock, or a combination thereof, at the election of Welltower OP. The exchange rate initially equals 10.4808 shares of common stock per $1,000 principal amount of Notes (equivalent to an exchange price of approximately $95.41 per share of common stock). The exchange rate is subject to adjustment upon the occurrence of certain events but will not be adjusted for any accrued and unpaid interest.

Welltower OP may redeem the Notes, at its option, in whole or in part, on any business day on or after May 20, 2026, if the last reported sales price of the common stock has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Welltower OP provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding the redemption date.

The following is a summary of our secured debt principal activity for the periods presented (dollars in thousands):

						Year Ended December 31,
						2023						2022						2021
Beginning balance						$	2,129,954					$	2,202,312					$	2,378,073
Debt issued						385,115						113,183						23,569
Debt assumed						428,578						328,096						—
Debt extinguished						(687,780)						(399,066)						(132,031)
Principal payments						(54,076)						(58,114)						(65,587)
Foreign currency						20,654						(56,457)						(1,712)
Ending balance						$	2,222,445					$	2,129,954					$	2,202,312

Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain 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, 2023, we were in compliance in all material respects with all of the covenants under our debt agreements.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Derivative Instruments

We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to our capital structure. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contracts, interest rate swaps, interest rate locks and debt issued in foreign currencies to offset a portion of these risks.

Cash Flow Hedges and Fair Value Hedges of Interest Rate Risk

We enter into interest rate swaps in order to maintain a capital structure containing targeted amounts of fixed and floating-rate debt and manage interest rate risk. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our fixed-rate payments. These interest rate swap agreements are used to hedge the variable cash flows associated with variable-rate debt.

Interest rate swaps designated as fair value hedges involve the receipt of fixed amounts from a counterparty in exchange for our variable-rate payments. These interest rate swap agreements hedge the exposure to changes in the fair value of fixed-rate debt attributable to changes in the designated benchmark interest rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in earnings. We record the gain or loss on the hedged items in interest expense, the same line item as the offsetting loss or gain on the related interest rate swaps. In March 2022, we entered into a fixed to floating swap in connection with our March 2022 senior note issuance. As of December 31, 2023, the carrying amount of the notes, exclusive of the hedge, is $545,872,000. The fair value of the swap as of December 31, 2023 was ($48,314,000) and was recorded as a derivative liability with an offset to senior unsecured notes on our Consolidated Balance Sheets.

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into earnings over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately recognized in the Consolidated Statements of Comprehensive Income. Approximately $2,562,000 of losses, which are included in other comprehensive income ("OCI"), are expected to be reclassified into earnings in the next 12 months.

Cash flows from derivatives accounted for as a fair value or cash flow hedge are classified in the same category as the cash flows from the items being hedged in the Consolidated Statement of Cash Flows.

Foreign Currency Forward Contracts and Cross Currency Swap Contracts Designated as Net Investment Hedges

We use foreign currency forward and cross currency forward swap contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to U.S. Dollar of the instrument is recorded as a cumulative translation adjustment component of OCI.

During the years ended December 31, 2023, 2022, and 2021 we settled certain net investment hedges generating cash proceeds of $29,553,000, $61,853,000 and $14,505,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.

Derivative Contracts Undesignated

We use foreign currency exchange contracts to manage existing exposures to foreign currency exchange risk. Gains and losses resulting from the changes in fair value of these instruments are recorded in interest expense on the Consolidated Statements of Comprehensive Income and are substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures. In addition, we have several interest rate cap contracts related to variable rate secured debt agreements. Gains and losses resulting from the changes in fair values of these instruments are also recorded in interest expense.

Equity Warrants

We received equity warrants through our lending activities further described in Note 7, which were accounted for as loan origination fees. The warrants provide us the right to participate in the capital appreciation of the underlying HC-One real estate portfolio above a designated price upon liquidation and contain net settlement terms qualifying as derivatives under ASC Topic 815. The warrants are classified within receivables and other assets on our Consolidated Balance Sheets. These warrants are measured at fair value with changes in fair value being recognized within gain (loss) on derivatives and financial instruments in our Consolidated Statements of Comprehensive Income.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):

						December 31, 2023						December 31, 2022
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars						$	2,025,000					$	1,075,000
Denominated in Pound Sterling						£	1,660,708					£	1,890,708
Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars						$	250,000					$	250,000
Denominated in Pound Sterling						£	1,050,000					£	1,050,000
Interest rate swaps and caps designated as cash flow hedges:
Denominated in U.S. Dollars(1)						$	872,601					$	25,000
Interest rate swaps designated as fair value hedges:
Denominated in U.S. Dollars						$	550,000					$	550,000
Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars						$	—					$	26,137
Foreign currency exchange contracts denominated in Canadian Dollars						$	80,000					$	80,000

(1) At December 31, 2023 the maximum maturity date was September 1, 2028.

The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):

												Year Ended
Description						Location						December 31, 2023						December 31, 2022						December 31, 2021
Gain (loss) on derivative instruments designated as hedges recognized in income						Interest expense						$	18,068					$	28,894					$	23,133
Gain (loss) on derivative instruments not designated as hedges recognized in income						Interest expense						$	(1,383)					$	4,255					$	(433)
Gain (loss) on equity warrants recognized in income						Gain (loss) on derivatives and financial instruments, net						$	2,218					$	(6,837)					$	10,361
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI						OCI						$	(245,095)					$	442,620					$	79,702

13. Commitments and Contingencies

At December 31, 2023, we had 23 outstanding letter of credit obligations totaling $49,680,000 and expiring during 2024 and 2025. At December 31, 2023, we had outstanding construction in progress of $1,304,441,000 and were committed to providing additional funds of approximately $966,829,000 to complete construction. Additionally, at December 31, 2023, we had outstanding investments classified as in substance real estate of $832,746,000 and were committed to provide additional funds of $195,763,000 (see Note 8 for additional information). Purchase obligations include $969 million representing a definitive agreement to acquire 25 Seniors Housing Operating properties entered into in February 2024 (see Note 3 for additional information) and $39,387,000 of contingent purchase obligations to fund capital improvements. Rents due from the tenants are increased to reflect the additional investment in the property.

14. Stockholders’ Equity

The following is a summary of our stockholders’ equity capital accounts as of the dates indicated:

						December 31, 2023						December 31, 2022
Preferred Stock, $1.00 par value:
Authorized shares						50,000,000						50,000,000
Issued shares						—						—
Outstanding shares						—						—
Common Stock, $1.00 par value:
Authorized shares						700,000,000						700,000,000
Issued shares						566,001,632						492,283,488
Outstanding shares						564,241,181						490,508,937

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock

In August 2023, we entered into an equity distribution agreement whereby we can offer and sell up to $4,000,000,000 aggregate amount of our common stock ("ATM Program", as amended from time to time). The ATM Program also allows us to enter into forward sale agreements (none outstanding at December 31, 2023). As of December 31, 2023, we had $1,854,611,000 of remaining capacity under the ATM Program. Subsequent to December 31, 2023, we sold 5,046,308 shares of common stock under the ATM Program.

In November 2023, we issued 20,125,000 shares of common stock. The shares were sold pursuant to an underwriting agreement, dated as of November 6, 2023.

On May 1, 2020, our Board of Directors authorized a share repurchase program whereby we may repurchase up to $1 billion of common stock through December 31, 2021. On November 7, 2022, our Board of Directors approved a follow-on share repurchase program for up to $3 billion of common stock (the "Stock Repurchase Program"). Under the Stock Repurchase Program, we are not required to purchase shares but may choose to do so in the open market or through privately-negotiated transactions, through block trades, by effecting a tender offer, by way of an accelerated share repurchase program, through the purchase of call options or the sale of put options, or otherwise, or by any combination of the foregoing. We expect to finance any share repurchases using available cash and may use proceeds from borrowings or debt offerings. The Stock Repurchase Program has no expiration date and does not obligate us to repurchase any specific number of shares. We did not repurchase any shares of our common stock during the years ended December 31, 2023, 2022, and 2021.

The following is a summary of our common stock issuances during the periods indicated (dollars in thousands, except shares and average price amounts):

						Shares Issued						Average Price						Gross Proceeds						Net Proceeds
2021 Option exercises						338						$	56.21					$	19					$	19
2021 ATM Program issuances						29,667,348						80.41						2,385,683						2,348,182
2021 Stock incentive plans, net of forfeitures						171,189												—						—
2021 Totals						29,838,875												$	2,385,702					$	2,348,201
2022 Option exercises						2,433						$	67.00					$	163					$	163
2022 ATM Program issuances						43,092,888						86.23						3,715,971						3,667,691
2022 Redemption of OP Units and DownREIT Units						5,498												—						—
2022 Stock incentive plans, net of forfeitures						168,641												—						—
2022 Totals						43,269,460												$	3,716,134					$	3,667,854
2023 Option exercises						3,541						$	78.23					$	277					$	277
2023 ATM Program issuances						53,300,874						80.92						4,313,007						4,290,766
2023 Equity issuance						20,125,000						88.06						1,772,216						1,719,086
2023 Redemption of OP Units and DownREIT Units						335,562												—						—
2023 Stock incentive plans, net of forfeitures						(32,733)												—						—
2023 Totals						73,732,244												$	6,085,500					$	6,010,129

Dividends

Please refer to Note 19 for information related to federal income tax of dividends. The following is a summary of our dividend payments (in thousands, except per share amounts):

						Year Ended
						December 31, 2023												December 31, 2022												December 31, 2021
						Per Share						Amount						Per Share						Amount						Per Share						Amount
Common stock						$	2.44					$	1,259,676					$	2.44					$	1,133,182					$	2.44					$	1,037,194

Accumulated Other Comprehensive Income

The following is a summary of accumulated other comprehensive income/(loss) for the periods presented (in thousands):

						December 31, 2023						December 31, 2022
Foreign currency translation						$	(913,675)					$	(1,115,317)
Derivative and financial instruments designated as hedges						750,515						995,610
Total accumulated other comprehensive income (loss)						$	(163,160)					$	(119,707)

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Stock Incentive Plans

In March 2022, our Board of Directors approved the 2022 Long-Term Plan ("2022 Plan"), which authorizes up to 10,000,000 shares of common stock or units to be issued at the discretion of the Compensation Committee of the Board of Directors. Awards granted after March 28, 2022 are issued out of the 2022 Plan. The awards granted under the 2016 Long-Term Incentive Plan continue to vest and options expire ten years from the date of grant. Our non-employee directors, officers and key employees are eligible to participate in the 2022 Plan. The 2022 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock units, deferred stock units, performance units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted stock units generally range from three to five years. Options expire ten years from the date of grant.

Under our long-term incentive plan, certain restricted stock awards are market, performance and time-based. For market and performance based awards, we will grant a target number of restricted stock units, with the ultimate award determined by the total shareholder return and operating performance metrics, measured in each case over a measurement period of three to four years. Performance based awards vest after the end of the performance periods. The expected term represents the period from the grant date to the end of the performance period. Compensation expense for performance based awards is measured based on the probability of achievement of certain performance goals and is recognized over the performance period. For the portion of the grant for which the award is determined by the operating performance metrics, the compensation cost is based on the grant date closing price and management’s estimate of corporate achievement of the financial metrics. If the estimated number of performance based restricted stock to be earned changes, an adjustment will be recorded to recognize the accumulated difference between the revised and previous estimates. For the portion of the grant determined by the total shareholder return ("TSR"), management used a Monte Carlo model to assess the fair value and compensation cost. For time based awards, the fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant and is amortized over the vesting periods. For purposes of measuring stock-based compensation expense, we consider whether an adjustment to the observable market price is necessary to reflect material nonpublic information that is known to us at the time the award is granted. No adjustments were deemed necessary for the years ended December 31, 2023, 2022, or 2021. Forfeitures are accounted for as they occur.

The following table summarizes compensation expense recognized for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Stock options						$	2,741					$	2,378					$	1,088
Restricted stock units						34,458						23,771						16,724
Total compensation expense						$	37,199					$	26,149					$	17,812

Stock Options

The following is a summary of time-based stock option activity in 2023:

			Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Life (years)						Intrinsic Value ($000's)
Outstanding as of December 31, 2022			551,515						$	75.82
Options granted			93,674						75.50
Options exercised			(5,189)						79.82
Options forfeited			(3,740)						77.77
Outstanding as of December 31, 2023			636,260						$	75.73					7.8						$	9,190
Exercisable as of December 31, 2023			210,262						$	72.72					7.4						$	7,817

We used the Black-Scholes option pricing model to determine the grant date fair value of time-based options. The weighted-average assumptions used are as follows:

			2023
Dividend yield			3.20%
Estimated volatility(1)			34.82%
Risk free rate			4.12%
Expected life of options			4.8
Estimated fair value			$20.55

(1) Estimated volatility over the life of the plan is using 50% historical volatility and 50% implied volatility.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, there was $4,895,000 of total unrecognized compensation expense related to unvested time-based stock options that is expected to be recognized over a weighted-average period of two years.

During December 2021, we granted performance-based stock options. The grant date fair value of $20.31 was estimated on the date of grant using the Black-Scholes option pricing model. These options have a performance condition based on a Funds From Operations goal measured over the performance period of January 1, 2022 to December 31, 2024. These awards vest over two years after the end of the performance period, with a portion vesting immediately at the end of the performance period. Compensation expense is measured based on the probability of achievement of the performance goal and is recognized over both the performance period and vesting period. At December 31, 2022 and December 31, 2023, the performance goal was not probable of being achieved. The following is a summary of performance-based stock option activity as of December 31, 2023:

			Shares						Weighted Average Exercise Price
Outstanding as of December 31, 2022			825,216						$	83.44
Options forfeited			(10,095)						83.44
Outstanding as of December 31, 2023			815,121						$	83.44

Restricted Stock

During January 2022, we granted performance-based restricted stock awards under the terms of an Out Performance Program ("OPP"). The grant date fair value was estimated on the date of grant using a Monte Carlo model. These awards have performance conditions based on a Funds From Operations goal and absolute and relative TSR goals measured over the performance period of January 1, 2022 to December 31, 2025. These awards vest after the end of the performance period. Compensation expense is measured based on the probability of achievement of the performance goals and is recognized over the performance period. At December 31, 2022 and December 31, 2023, the performance goals were not probable of being achieved. The following is a summary of our non-vested OPP restricted stock activity as of December 31, 2023:

						Restricted Stock
						Number of Shares						Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2022						936,915						$	27.60
Forfeited or expired						(4,690)						27.60
Non-vested at December 31, 2023						932,225						$	27.60

The following is a summary of the status of our non-vested restricted stock (including market, performance and time-based awards, and excluding OPP awards) as of December 31, 2023:

						Restricted Stock
						Number of Shares						Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2022						803,327						$	84.78
Vested						(255,514)						82.40
Granted						414,177						97.20
Change in awards based on performance(1)						798,065						106.59
Forfeited or expired						(14,040)						87.80
Non-vested at December 31, 2023						1,746,015						$	98.03

(1) Represents the change in number of market and performance based awards earned based on performance achievement.

We used a Monte Carlo model to assess the compensation cost associated with the portion of the market awards granted for which achievement will be determined using total shareholder return measures. The model also considers a post-vesting holding period. The weighted-average assumptions used are as follows:

						2023
Dividend yield						3.20%
Estimated volatility over the life of the plan(1)						27.33% - 39.02%
Risk free rate						4.44% - 5.08%
Estimated market based performance award value based on total shareholder return measure						$118.87

(1) Estimated volatility over the life of the plan is using 50% historical volatility and 50% implied volatility.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023, there was $40,721,000 of total unrecognized compensation expense related to unvested restricted stock that is expected to be recognized over a weighted-average period of two years.

16. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

						Year Ended December 31,
						2023						2022						2021
Numerator for basic earnings per share - net income attributable to common stockholders						$	340,094					$	141,214					$	336,138
Adjustment for net income (loss) attributable to OP Units and DownREIT Units						(303)						165						(3,020)
Numerator for diluted earnings per share						$	339,791					$	141,379					$	333,118
Denominator for basic earnings per share - weighted average shares						515,629						462,185						424,976
Effect of dilutive securities:
Employee stock options						32						20						—
Non-vested restricted shares and units						1,031						1,058						447
OP Units and DownREIT Units						1,983						1,865						1,396
Employee stock purchase program						26						30						22
Dilutive potential common shares						3,072						2,973						1,865
Denominator for diluted earnings per share - adjusted weighted average shares						518,701						465,158						426,841
Basic earnings per share						$	0.66					$	0.31					$	0.79
Diluted earnings per share						$	0.66					$	0.30					$	0.78

As of December 31, 2021, outstanding forward sales agreements for the sale of 5,187,250 shares were not included in the computation of diluted earnings per share because such forward sales were anti-dilutive for the period. There were no outstanding forward sale agreements as of December 31, 2023 or December 31, 2022. Employee stock options were anti-dilutive for 2021.

The Exchangeable Notes were not included in the computation of diluted earnings per share as they were anti-dilutive for the year ended December 31, 2023.

17. Disclosure about Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy exists for disclosures of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined below:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Mortgage Loans, Other Real Estate Loans and Non-real Estate Loans Receivable — The fair value of mortgage loans, other real estate loans and non-real estate loans receivable is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Cash and Cash Equivalents and Restricted Cash — The carrying amount approximates fair value.

Equity Warrants — The fair value of equity warrants is estimated using Level 3 inputs and includes data points such as enterprise value of the underlying HC-One Group real estate portfolio, marketability discount for private company warrants,

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

dividend yield, volatility and risk-free rate. The enterprise value is driven by projected cash flows, weighted average cost of capital and a terminal capitalization rate.

Borrowings Under Primary Unsecured Credit Facility and Commercial Paper Program — The carrying amount of the primary unsecured credit facility and commercial paper program approximates fair value because the borrowings are interest rate adjustable.

Senior Unsecured Notes — The fair value of the senior unsecured notes payable is estimated based on Level 1 publicly available trading prices. The carrying amount of the variable rate senior unsecured notes approximates fair value because they are interest rate adjustable.

Secured Debt — The fair value of fixed rate secured debt is estimated using Level 2 inputs by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities. The carrying amount of variable rate secured debt approximates fair value because the borrowings are interest rate adjustable.

Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps — Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from Level 2 observable market data, including yield curves and foreign exchange rates.

Redeemable DownREIT Unitholder Interests — Our redeemable DownREIT Unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs unless the fair value is below the initial amount, in which case the redeemable DownREIT Unitholder interests are recorded at the initial amount adjusted for distributions to the unitholders and income or loss attributable to the unitholders. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.

The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):

						December 31, 2023												December 31, 2022
						Carrying						Fair						Carrying						Fair
						Amount						Value						Amount						Value
Financial assets:
Mortgage loans receivable						$	1,043,252					$	1,105,260					$	697,906					$	739,159
Other real estate loans receivable						318,335						319,905						192,938						190,977
Cash and cash equivalents						1,993,646						1,993,646						631,681						631,681
Restricted cash						82,437						82,437						90,611						90,611
Non-real estate loans receivable						330,119						312,985						289,168						277,601
Foreign currency forward contracts, interest rate swaps and cross currency swaps						37,118						37,118						191,357						191,357
Equity warrants						35,772						35,772						30,436						30,436
Financial liabilities:
Senior unsecured notes						$	13,552,222					$	13,249,247					$	12,437,273					$	11,381,873
Secured debt						2,183,327						2,144,059						2,110,815						2,054,889
Foreign currency forward contracts, interest rate swaps and cross currency swaps						96,023						96,023						55,727						55,727
Redeemable DownREIT Unitholder interests						$	77,928					$	77,928					$	75,355					$	75,355

Items Measured at Fair Value on a Recurring Basis

The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair value on a recurring basis. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following summarizes items measured at fair value on a recurring basis (in thousands):

						Fair Value Measurements as of December 31, 2023
						Total						Level 1						Level 2						Level 3
Equity warrants						$	35,772					$	—					$	—					$	35,772
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) (1)						(58,905)						—						(58,905)						—
Totals						$	(23,133)					$	—					$	(58,905)					$	35,772

(1) Please see Note 12 for additional information.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the change in fair value for equity warrants using unobservable Level 3 inputs for the years presented (in thousands):

						Years Ended
						December 31, 2023						December 31, 2022
Beginning balance						$	30,436					$	41,909
Warrants acquired						1,202						—
Mark-to-market adjustment						2,218						(6,837)
Foreign currency						1,916						(4,636)
Ending balance						$	35,772					$	30,436

The most significant assumptions utilized in the valuation of the equity warrants are the cash flows of the underlying HC-One Group enterprise, as well as the terminal capitalization rate which was 10.0% and 10.5% at year end December 31, 2023 and 2022, respectively.

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis that are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired, exchanged or assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 7 for impairments of loans receivable) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally resides within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in asset acquisitions using current interest rates at which similar borrowings could be obtained on the transaction date.

18. Segment Reporting

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our three operating segments: Seniors Housing Operating, Triple-net and Outpatient Medical. Our Seniors Housing Operating properties include seniors apartments, assisted living, independent living/continuing care retirement communities, independent supportive living communities (Canada), care homes with and without nursing (U.K.) and combinations thereof that are generally owned and/or operated through RIDEA structures (see Note 19). Our Triple-net properties include the property types described above as well as long-term/post-acute care facilities. Under the Triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our Outpatient Medical properties are typically leased to multiple tenants and generally require a certain level of property management by us.

We evaluate performance based upon consolidated NOI of each segment. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

Non-segment revenue consists mainly of interest income on cash investments recorded in other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining NOI.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments. All inter-segment transactions are eliminated.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary information for the reportable segments (which excludes unconsolidated entities) during the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

Year Ended December 31, 2023:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment/Corporate						Total
Resident fees and services						$	4,753,804					$	—					$	—					$	—					$	4,753,804
Rental income						—						814,751						741,322						—						1,556,073
Interest income						10,096						157,592						666						—						168,354
Other income						9,743						70,986						9,167						69,868						159,764
Total revenues						4,773,643						1,043,329						751,155						69,868						6,637,995
Property operating expenses						3,655,508						42,194						231,956						18,118						3,947,776
Consolidated net operating income (loss)						1,118,135						1,001,135						519,199						51,750						2,690,219
Depreciation and amortization						906,771						231,028						263,302						—						1,401,101
Interest expense						56,509						(65)						10,543						540,859						607,846
General and administrative expenses						—						—						—						179,091						179,091
Loss (gain) on derivatives and financial instruments, net						—						(2,120)						—						—						(2,120)
Loss (gain) on extinguishment of debt, net						—						—						7						—						7
Provision for loan losses, net						3,197						6,348						264						—						9,809
Impairment of assets						24,999						11,098						—						—						36,097
Other expenses						96,972						5,060						2,289						4,020						108,341
Income (loss) from continuing operations before income taxes and other items						29,687						749,786						242,794						(672,220)						350,047
Income tax (expense) benefit						—						—						—						(6,364)						(6,364)
Income (loss) from unconsolidated entities						(69,835)						16,700						(307)						—						(53,442)
Gain (loss) on real estate dispositions, net						68,290						259						(651)						—						67,898
Income (loss) from continuing operations						28,142						766,745						241,836						(678,584)						358,139
Net income (loss)						$	28,142					$	766,745					$	241,836					$	(678,584)					$	358,139
Total assets						$	24,857,722					$	9,985,952					$	7,353,819					$	1,814,673					$	44,012,166

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2022:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment/Corporate						Total
Resident fees and services						$	4,173,711					$	—					$	—					$	—					$	4,173,711
Rental income						—						782,329						669,457						—						1,451,786
Interest income						7,867						142,402						302						—						150,571
Other income						63,839						6,776						8,998						4,934						84,547
Total revenues						4,245,417						931,507						678,757						4,934						5,860,615
Property operating expenses						3,292,045						44,483						205,997						16,245						3,558,770
Consolidated net operating income (loss)						953,372						887,024						472,760						(11,311)						2,301,845
Depreciation and amortization						854,800						215,887						239,681						—						1,310,368
Interest expense						34,833						963						18,078						475,645						529,519
General and administrative expenses						—						—						—						150,390						150,390
Loss (gain) on derivatives and financial instruments, net						—						8,334						—						—						8,334
Loss (gain) on extinguishment of debt, net						386						80						15						199						680
Provision for loan losses, net						1,039						9,289						(8)						—						10,320
Impairment of assets						13,146						3,595						761						—						17,502
Other expenses						66,026						13,043						2,537						20,064						101,670
Income (loss) from continuing operations before income taxes and other items						(16,858)						635,833						211,696						(657,609)						173,062
Income tax (expense) benefit						—						—						—						(7,247)						(7,247)
Income (loss) from unconsolidated entities						(53,318)						34,495						(2,467)						—						(21,290)
Gain (loss) on real estate dispositions, net						5,794						16,648						(6,399)						—						16,043
Income (loss) from continuing operations						(64,382)						686,976						202,830						(664,856)						160,568
Net income (loss)						$	(64,382)					$	686,976					$	202,830					$	(664,856)					$	160,568
Total assets						$	22,000,732					$	8,619,314					$	6,614,887					$	658,300					$	37,893,233

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2021:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment/Corporate						Total
Resident fees and services						$	3,197,223					$	—					$	—					$	—					$	3,197,223
Rental income						—						761,441						613,254						—						1,374,695
Interest income						4,231						124,540						8,792						—						137,563
Other income						11,796						4,603						13,243						2,992						32,634
Total revenues						3,213,250						890,584						635,289						2,992						4,742,115
Property operating expenses						2,529,344						49,462						186,939						8,817						2,774,562
Consolidated net operating income (loss)						683,906						841,122						448,350						(5,825)						1,967,553
Depreciation and amortization						593,565						220,699						223,302						—						1,037,566
Interest expense						39,327						6,376						17,506						426,644						489,853
General and administrative expenses						—						—						—						126,727						126,727
Loss (gain) on derivatives and financial instruments, net						—						(7,333)						—						—						(7,333)
Loss (gain) on extinguishment of debt, net						(2,628)						—						(4)						52,506						49,874
Provision for loan losses, net						394						10,339						(3,463)						—						7,270
Impairment of assets						22,317						26,579						2,211						—						51,107
Other expenses						27,132						4,189						2,523						7,895						41,739
Income (loss) from continuing operations before income taxes and other items						3,799						580,273						206,275						(619,597)						170,750
Income tax (expense) benefit						—						—						—						(8,713)						(8,713)
Income (loss) from unconsolidated entities						(39,225)						20,687						(4,395)						—						(22,933)
Gain (loss) on real estate dispositions, net						6,146						135,881						93,348						—						235,375
Income (loss) from continuing operations						(29,280)						736,841						295,228						(628,310)						374,479
Net income (loss)						$	(29,280)					$	736,841					$	295,228					$	(628,310)					$	374,479

Our portfolio of properties and other investments are located in the United States, the United Kingdom and Canada. Revenues and assets are attributed to the country in which the property is physically located. The following is a summary of geographic information for the periods presented (dollars in thousands):

						Year Ended
						December 31, 2023												December 31, 2022												December 31, 2021
Revenues:						Amount						%						Amount						%						Amount						%
United States						$	5,521,933					83.2		%				$	4,843,417					82.6		%				$	3,766,707					79.4		%
United Kingdom						606,750						9.1		%				558,308						9.5		%				552,650						11.7		%
Canada						509,312						7.7		%				458,890						7.9		%				422,758						8.9		%
Total						$	6,637,995					100.0		%				$	5,860,615					100.0		%				$	4,742,115					100.0		%
						Year Ended
						December 31, 2023												December 31, 2022												December 31, 2021
Resident fees and services:						Amount						%						Amount						%						Amount						%
United States						$	3,811,915					80.2		%				$	3,325,466					79.7		%				$	2,389,257					74.7		%
United Kingdom						447,219						9.4		%				401,195						9.6		%				396,610						12.4		%
Canada						494,670						10.4		%				447,050						10.7		%				411,356						12.9		%
Total						$	4,753,804					100.0		%				$	4,173,711					100.0		%				$	3,197,223					100.0		%
						As of
						December 31, 2023												December 31, 2022
Assets:						Amount						%						Amount						%
United States						$	36,929,186					83.9		%				$	31,740,907					83.8		%
United Kingdom						3,587,230						8.2		%				3,476,793						9.2		%
Canada						3,495,750						7.9		%				2,675,533						7.0		%
Total						$	44,012,166					100.0		%				$	37,893,233					100.0		%

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Income Taxes and Distributions

We elected to be taxed as a REIT commencing with our first taxable year. To qualify as a REIT for federal income tax purposes, at least 90% of taxable income (excluding 100% of net capital gains) must be distributed to stockholders. REITs that do not distribute a certain amount of taxable income in the current year are also subject to a 4% federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, basis differences in acquisitions, recording of impairments, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.

Cash distributions paid to common stockholders, for federal income tax purposes, are as follows for the periods presented:

						Year Ended December 31,
						2023						2022						2021
Per share:
Ordinary dividend(1)						$	1.6719					$	2.4400					$	1.4828
Long-term capital gain/(loss)(2)						0.1159						—						0.8371
Return of capital						0.6522						—						0.1201
Totals						$	2.4400					$	2.4400					$	2.4400

(1) For the years ended December 31, 2023, 2022 and 2021, includes Section 199A dividends of $1.6719, $2.4400 and $1.4828 respectively.

(2) For the years ended December 31, 2023, 2022 and 2021, includes Unrecaptured Section 1250 Gains of $0.0150, $0.0000 and $0.4523, respectively.

Our consolidated provision for income tax expense (benefit) is as follows for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Current tax expense						$	8,840					$	18,289					$	10,199
Deferred tax benefit						(2,476)						(11,042)						(1,486)
Income tax expense (benefit)						$	6,364					$	7,247					$	8,713

REITs generally are not subject to U.S. federal income taxes on that portion of REIT taxable income or capital gain that is distributed to stockholders. For the tax year ended December 31, 2023, as a result of ownership of investments in Canada and the U.K., we were subject to foreign income taxes under the respective tax laws of these jurisdictions.

The provision for income taxes for the year ended December 31, 2023 primarily relates to state taxes, foreign taxes, and taxes based on income generated by entities that are structured as TRSs. For the tax years ended December 31, 2023, 2022 and 2021, the foreign tax provision/(benefit) amount included in the consolidated provision for income taxes was $5,938,000, $5,222,000 and $6,787,000, respectively.

A reconciliation of income taxes, which is computed by applying the federal corporate tax rate for the years ended December 31, 2023, 2022 and 2021, to the income tax expense/(benefit) is as follows for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Tax at statutory rate on earnings from continuing operations before unconsolidated entities, noncontrolling interests and income taxes						$	76,547					$	35,241					$	80,470
Increase (decrease) in valuation allowance(1)						35,515						30,237						19,383
Tax at statutory rate on earnings not subject to federal income taxes						(141,044)						(75,729)						(117,931)
Foreign permanent depreciation						2,103						2,033						1,449
Other differences						33,243						15,465						25,342
Totals						$	6,364					$	7,247					$	8,713

(1) Excluding purchase price accounting.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Each TRS and foreign entity subject to income taxes is a tax paying component for purposes of classifying deferred tax assets and liabilities. The tax effects of taxable and deductible temporary differences, as well as tax asset/(liability) attributes, are summarized as follows for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Investments and property, primarily differences in investment basis, depreciation and amortization, the basis of land assets and the treatment of interests and certain costs						$	(40,336)					$	(39,212)					$	(32,616)
Operating loss and interest deduction carryforwards						323,852						254,852						247,015
Expense accruals and other						64,970						94,999						53,367
Valuation allowances						(330,073)						(294,558)						(264,321)
Net deferred tax assets (liabilities)						$	18,413					$	16,081					$	3,445

On the basis of the evaluations performed as required by the codification, valuation allowances totaling $330,073,000 were recorded on U.S. taxable REIT subsidiaries as well as entities in other jurisdictions to limit the deferred tax assets to the amount that we believe is more likely than not realizable. However, the amount of the deferred tax asset considered realizable could be adjusted if (i) estimates of future taxable income during the carryforward period are reduced or increased or (ii) objective negative evidence in the form of cumulative losses is no longer present (and additional weight may be given to subjective evidence such as our projections for growth). The valuation allowance rollforward is summarized as follows for the periods presented (in thousands):

						Year Ended December 31,
						2023						2022						2021
Beginning balance						$	294,558					$	264,321					$	244,938
Expense (benefit)						35,515						30,237						19,383
Ending balance						$	330,073					$	294,558					$	264,321

As a REIT, we are subject to certain corporate level taxes for any related asset dispositions that may occur during the five-year period immediately after such assets were owned by a C corporation (“built-in gains tax”). The amount of income potentially subject to this special corporate level tax is generally equal to the lesser of (i) the excess of the fair value of the asset over its adjusted tax basis as of the date it became a REIT asset, or (ii) the actual amount of gain. Some but not all gains recognized during this period of time could be offset by available net operating losses and capital loss carryforwards.

Given the applicable statute of limitations, we generally are subject to audit by the Internal Revenue Service (“IRS”) for the year ended December 31, 2020 and subsequent years. The statute of limitations may vary in the states in which we own properties or conduct business. We do not expect to be subject to audit by state taxing authorities for any year prior to the year ended December 31, 2019. We are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to May 2019 related to entities acquired or formed in connection with acquisitions, and by the U.K.’s HM Revenue & Customs for periods subsequent to August 2017 related to entities acquired or formed in connection with acquisitions.

At December 31, 2023, we had a net operating loss (“NOL”) carryforward related to the REIT of $358,461,000. Due to our uncertainty regarding the realization of certain deferred tax assets, we have not recorded a deferred tax asset related to NOLs generated by the REIT. These amounts can be used to offset future taxable income (and/or taxable income for prior years if an audit determines that tax is owed), if any. The REIT will be entitled to utilize NOLs and tax credit carryforwards only to the extent that REIT taxable income exceeds our deduction for dividends paid. The NOL carryforwards generated through December 31, 2019 will expire through 2039. Beginning with the tax years after December 31, 2017, the law eliminates the NOL carryback period for REITs, replaces the 20-year NOL carryforward period with an indefinite carryforward period and, with respect to tax years beginning after 2020, limits the use of NOLs to 80% of taxable income.

At December 31, 2023 and 2022, we had an NOL carryforward related to Canadian entities of $467,804,000 and $368,979,000 respectively. These Canadian losses have a 20-year carryforward period. At December 31, 2023 and 2022, we had an NOL carryforward related to U.K. entities of $218,258,000 and $184,779,000 respectively. These U.K. losses do not have a finite carryforward period.

WELLTOWER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Variable Interest Entities

We have entered into joint ventures and have certain subsidiaries that are either wholly owned by us or by consolidated joint ventures which own real estate investments and are deemed to be VIEs. Our VIEs primarily hold real estate assets within our Seniors Housing Operating and Triple-net portfolios, the nature and risk of which are consistent with our overall portfolio. We have concluded that we are the primary beneficiary of these VIEs based on a combination of operational control of the entities and the rights to receive residual returns or the obligation to absorb losses arising from the entities. Except for capital contributions associated with the initial entity formations, the entities have been and are expected to be funded from the ongoing operations of the underlying properties. Accordingly, such entities have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands):

						December 31, 2023						December 31, 2022
Assets:
Net real estate investments						$	3,277,741					$	1,499,078
Cash and cash equivalents						19,529						15,582
Receivables and other assets						43,513						9,949
Total assets(1)						$	3,340,783					$	1,524,609
Liabilities and equity:
Secured debt						$	76,507					$	155,992
Lease liabilities						2,539						1,329
Accrued expenses and other liabilities						13,850						28,417
Total equity						3,247,887						1,338,871
Total liabilities and equity						$	3,340,783					$	1,524,609

(1) Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs and VIE's creditors do not have recourse to Welltower.

We recognized revenues from consolidated VIEs in the aggregate of $253,989,000, $48,347,000 and $40,251,000 for the years ending December 31, 2023, 2022 and 2021.

In addition, we have certain entities that qualify as unconsolidated VIEs including borrowers of loans receivable and in substance real estate investments. Our maximum exposure on these entities is limited to the net carrying value of the investments. Refer to Note 7 and Note 8 for additional details.