Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						Amount						%
Net income (loss)																														$	28,635					$	65,751					$	(37,116)					(56)		%
NICS																														25,673						61,925						(36,252)						(59)		%
FFO																														386,062						347,635						38,427						11		%
EBITDA																														515,195						496,548						18,647						4		%
NOI																														602,976						542,035						60,941						11		%
SSNOI																														439,449						402,216						37,233						9		%
Per share data (fully diluted):
NICS																														$	0.05					$	0.14					$	(0.09)					(64)		%
FFO																														$	0.78					$	0.77					$	0.01					1		%
Interest coverage ratio																														3.44		x				4.03		x				(0.59)		x				(15)		%
Fixed charge coverage ratio																														3.13		x				3.57		x				(0.44)		x				(12)		%

Seniors Housing Operating

The following is a summary of our results of operations for the Seniors Housing Operating segment (dollars in thousands):

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						$						%
Revenues:
Resident fees and services																														$	1,131,685					$	994,335					$	137,350					14		%
Interest income																														2,551						1,417						1,134						80		%
Other income																														2,445						860						1,585						184		%
Total revenues																														1,136,681						996,612						140,069						14		%
Property operating expenses																														883,784						789,928						93,856						12		%
NOI (1)																														252,897						206,684						46,213						22		%
Other expenses:
Depreciation and amortization																														220,407						192,793						27,614						14		%
Interest expense																														11,487						7,650						3,837						50		%
Loss (gain) on extinguishment of debt, net																														—						(15)						15						100		%
Provision for loan losses, net																														(73)						267						(340)						(127)		%
Impairment of assets																														12,629						—						12,629						n/a
Other expenses																														17,579						8,191						9,388						115		%
																														262,029						208,886						53,143						25		%
Income (loss) from continuing operations before income taxes and other items																														(9,132)						(2,202)						(6,930)						(315)		%
Income (loss) from unconsolidated entities																														(15,589)						(17,782)						2,193						12		%
Gain (loss) on real estate dispositions, net																														833						2,701						(1,868)						(69)		%
Income from continuing operations																														(23,888)						(17,283)						(6,605)						(38)		%
Net income (loss)																														(23,888)						(17,283)						(6,605)						(38)		%
Less: Net income (loss) attributable to noncontrolling interests																														(3,317)						(5,381)						2,064						38		%
Net income (loss) attributable to common stockholders																														$	(20,571)					$	(11,902)					$	(8,669)					(73)		%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

Resident fees and services and property operating expenses increased for the three month periods ended March 31, 2023 compared to the same period in the prior year primarily due to acquisitions outpacing dispositions during 2022 and year to date 2023. Additionally, our Seniors Housing Operating revenues are dependent on occupancy and rate growth, both of which have continued to increase since the same period in the prior year. Average occupancy is as follows:

						Three Months Ended(1)
						March 31,						June 30,						September 30,						December 31,
2022						76.3		%				77.1		%				78.0		%				78.3		%
2023						79.0		%

(1) Average occupancy includes our minority ownership share related to unconsolidated properties and excludes the minority partners' noncontrolling ownership share related to consolidated properties. Also excludes land parcels and properties under development.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

						QTD Pool
						Three Months Ended												Change
						March 31, 2023						March 31, 2022						$						%
SSNOI (1)						$	211,306					$	177,089					$	34,217					19.3		%

(1) For the QTD Pool, amounts relate to 746 same store properties. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

During the three months ended March 31, 2023, we recorded impairment charges of $12,252,000 related to three held for sale properties for which the carrying values exceeded the estimated fair value less costs to sell and $377,000 related to one held for use property for which the carrying value exceeded the estimated fair value. No impairment was recorded during the same period in 2022. Transaction costs related to asset acquisitions are capitalized as a component of the purchase price. The fluctuation in other expenses is primarily due to the timing of noncapitalizable transaction costs associated with acquisitions and operator transitions. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices.

Depreciation and amortization fluctuates as a result of acquisitions, dispositions and transitions. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

During the three months ended March 31, 2023, we completed one conversion representing $26,711,667 or $193,563 per unit. The following is a summary of our Seniors Housing Operating construction projects in process, excluding expansions (dollars in thousands):

As of March 31, 2023
Expected Conversion Year(1)						Properties						Units/Beds						Anticipated Remaining Funding						Construction in Progress Balance
2023						9						1,216						$	67,110					$	272,677
2024						15						2,439						529,421						404,803
2025						2						665						124,569						27,936
TBD(2)						11																		106,173
Total						37																		$	811,589
(1) Properties expected to be converted in phases over multiple years are reflected in the last expected year.
(2) Represents projects for which a final budget or expected conversion date are not yet known.

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

						Three Months Ended
						March 31, 2023												March 31, 2022
						Amount						Weighted Average Interest Rate						Amount						Weighted Average Interest Rate
Beginning balance						$	1,701,939					4.32		%				$	1,599,522					2.81		%
Debt transferred						—						—		%				32,478						4.79		%
Debt issued						362,900						4.97		%				5,385						3.08		%
Debt assumed						6,482						4.21		%				—						—		%
Debt extinguished						—						—		%				(94,647)						4.21		%
Principal payments						(13,007)						3.86		%				(12,998)						2.92		%
Foreign currency						304						4.39		%				24,733						2.73		%
Ending balance						$	2,058,618					4.58		%				$	1,554,473					2.83		%
Monthly averages						$	1,822,546					4.44		%				$	1,606,723					2.84		%

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The majority of our Seniors Housing Operating properties are formed through partnership interests. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures.

Triple-net

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

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						$						%
Revenues:
Rental income																														$	202,419					$	196,001					$	6,418					3		%
Interest income																														33,763						37,506						(3,743)						(10)		%
Other income																														1,883						1,656						227						14		%
Total revenues																														238,065						235,163						2,902						1		%
Property operating expenses																														11,723						11,211						512						5		%
NOI (1)																														226,342						223,952						2,390						1		%
Other expenses:
Depreciation and amortization																														54,528						53,504						1,024						2		%
Interest expense																														(15)						314						(329)						(105)		%
Loss (gain) on derivatives and financial instruments, net																														930						2,578						(1,648)						(64)		%
Provision for loan losses, net																														850						(1,065)						1,915						180		%
Other expenses																														2,467						11,044						(8,577)						(78)		%
																														58,760						66,375						(7,615)						(11)		%
Income (loss) from continuing operations before income taxes and other items																														167,582						157,577						10,005						6		%
Income (loss) from unconsolidated entities																														8,432						15,543						(7,111)						(46)		%
Gain (loss) on real estate dispositions, net																														520						20,449						(19,929)						(97)		%
Income from continuing operations																														176,534						193,569						(17,035)						(9)		%
Net income																														176,534						193,569						(17,035)						(9)		%
Less: Net income (loss) attributable to noncontrolling interests																														5,903						7,065						(1,162)						(16)		%
Net income attributable to common stockholders																														$	170,631					$	186,504					$	(15,873)					(9)		%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. For the three months ended March 31, 2023, we had 23 leases with rental rate increases ranging from 0.58% to 43.39% in our Triple-net portfolio.

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

						QTD Pool
						Three Months Ended												Change
						March 31, 2023						March 31, 2022						$						%
SSNOI (1)						$	117,716					$	116,780					$	936					0.8		%

(1) For the QTD Pool, amounts relate to 415 same store properties. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

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

Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The fluctuation in other expenses is primarily due to noncapitalizable transaction costs from acquisitions and segment transitions. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

During the three months ended March 31, 2023, there were no Triple-net construction projects completed. The following is a summary of our consolidated Triple-net construction projects in process, excluding expansions (dollars in thousands):

As of March 31, 2023
Expected Conversion Year						Properties						Units/Beds						Anticipated Remaining Funding						Construction in Progress Balance
2023						1						191						$	32,701					$	121,441

During the three months ended March 31, 2022, loss (gain) on derivatives and financial instruments, net is primarily attributable to the mark-to-market of the equity warrants received as part of the Safanad/HC-One transaction that closed in the second quarter of 2021. In addition, the mark-to-market adjustment on our Genesis HealthCare available-for-sale investment is reflected in all periods.

Interest expense represents secured debt interest expense and related fees. The change in secured debt interest expense is due to the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The following is a summary of our Triple-net secured debt principal activity for the periods presented (dollars in thousands):

						Three Months Ended
						March 31, 2023												March 31, 2022
						Amount						Weighted Average Interest Rate						Amount						Weighted Average Interest Rate
Beginning balance						$	39,179					4.39		%				$	72,536					4.57		%
Debt transferred						—						—		%				(32,478)						4.79		%
Principal payments						(230)						4.37		%				(221)						4.37		%
Ending balance						$	38,949					4.39		%				$	39,837					4.39		%
Monthly averages						$	39,029					4.39		%				$	39,914					4.39		%

A portion of our Triple-net properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. The decrease in income from unconsolidated entities is primarily related to the restructure of an unconsolidated joint venture into a consolidated structure. Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Outpatient Medical

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

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						$						%
Revenues:
Rental income																														$	181,640					$	160,389					$	21,251					13		%
Interest income																														91						71						20						28		%
Other income																														3,100						2,863						237						8		%
Total revenues																														184,831						163,323						21,508						13		%
Property operating expenses																														58,365						49,915						8,450						17		%
NOI (1)																														126,466						113,408						13,058						12		%
Other expenses:
Depreciation and amortization																														64,177						57,791						6,386						11		%
Interest expense																														4,104						4,567						(463)						(10)		%
Loss (gain) on extinguishment of debt, net																														5						3						2						67		%
Provision for loan losses, net																														—						(6)						6						100		%
Other expenses																														547						789						(242)						(31)		%
																														68,833						63,144						5,689						9		%
Income (loss) from continuing operations before income taxes and other items																														57,633						50,264						7,369						15		%
Income (loss) from unconsolidated entities																														86						(645)						731						113		%
Gain (loss) on real estate dispositions, net																														(606)						(216)						(390)						(181)		%
Income from continuing operations																														57,113						49,403						7,710						16		%
Net income (loss)																														57,113						49,403						7,710						16		%
Less: Net income (loss) attributable to noncontrolling interests																														682						2,142						(1,460)						(68)		%
Net income (loss) attributable to common stockholders																														$	56,431					$	47,261					$	9,170					19		%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

Rental income has increased due primarily to acquisitions and construction conversions that occurred during 2022 and the year to date in 2023. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Our leases could renew above or below current rental rates, resulting in an increase or decrease in rental income. For the three months ended March 31, 2023, our consolidated outpatient medical portfolio signed 80,010 square feet of new leases and 539,121 square feet of renewals. The weighted-average term of these leases was seven years, with a rate of $32.21 per square foot and tenant improvement and lease commission costs of $13.81 per square foot. Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 1.0% to 9.0%.

The fluctuations in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions that occurred during 2022 and year to date in 2023. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

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

						QTD Pool
						Three Months Ended												Change
						March 31, 2023						March 31, 2022						$						%
SSNOI (1)						$	110,423					$	108,347					$	2,076					1.9		%

(1) For the QTD Pool, amounts relate to 371 same store properties. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

During the three months ended March 31, 2023, we completed one conversion representing $9,351,000 or $555 per square foot. The following is a summary of the consolidated Outpatient Medical construction projects in process, excluding expansions (dollars in thousands):

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As of March 31, 2023
Expected Conversion Year						Properties						Square Feet						Anticipated Remaining Funding						Construction in Progress Balance
2023						3						228,276						$	88,881					$	39,856
2024						2						211,368						118,010						22,478
TBD(1)						2																		36,679
Total						7																		$	99,013
(1) Represents projects for which a final budget or expected conversion date are not yet known.

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

						Three Months Ended
						March 31, 2023												March 31, 2022
						Amount						Weighted Average Interest Rate						Amount						Weighted Average Interest Rate
Beginning balance						$	388,836					4.38		%				$	530,254					3.49		%
Debt assumed						46,741						3.54		%				—						—		%
Debt extinguished						(24,631)						4.53		%				(6,174)						4.17		%
Principal payments						(1,705)						4.27		%				(2,749)						4.38		%
Ending balance						$	409,241					4.43		%				$	521,331					3.51		%
Monthly averages						$	409,860					4.41		%				$	526,392					3.49		%

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

Non-Segment/Corporate

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

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						$						%
Revenues:
Other income																														$	1,152					$	606					$	546					90		%
Total revenues																														1,152						606						546						90		%
Property operating expenses																														3,881						2,615						1,266						48		%
NOI (1)																														(2,729)						(2,009)						(720)						(36)		%
Expenses:
Interest expense																														128,827						109,165						19,662						18		%
General and administrative expenses																														44,371						37,706						6,665						18		%
Other expenses																														2,152						6,045						(3,893)						(64)		%
																														175,350						152,916						22,434						15		%
Loss from continuing operations before income taxes and other items																														(178,079)						(154,925)						(23,154)						(15)		%
Income tax benefit (expense)																														(3,045)						(5,013)						1,968						39		%
Loss from continuing operations																														(181,124)						(159,938)						(21,186)						(13)		%
Net loss attributable to common stockholders																														$	(181,124)					$	(159,938)					$	(21,186)					(13)		%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

																		Three Months Ended												Change
																														March 31,						March 31,
																														2023						2022						$						%
Senior unsecured notes																														$	120,814					$	101,239					$	19,575					19		%
Unsecured credit facility and commercial paper program																														2,406						2,779						(373)						(13)		%
Loan expense																														5,607						5,147						460						9		%
Totals																														$	128,827					$	109,165					$	19,662					18		%

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, as well as the movement in foreign exchange rates and related hedge activity. Please refer to Note 11 for additional information. The change in interest expense on our unsecured revolving credit facility and commercial paper program is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes. Please refer to Note 10 for additional information regarding our unsecured revolving credit facility and commercial paper program. Loan expenses represent the amortization of costs incurred in connection with senior unsecured notes issuances.

General and administrative expenses as a percentage of consolidated revenues for the three months ended March 31, 2023 and 2022 were 2.84% and 2.70%, respectively. The provision for income taxes primarily relates to state taxes, foreign taxes and taxes based on income generated by entities that are structured as TRSs.

Other

Non-GAAP Financial Measures

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

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

SSNOI excludes non-cash NOI and includes adjustments to present consistent ownership percentages and to translate Canadian properties and U.K. properties using a consistent exchange rate. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties.

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

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

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

															Three Months Ended
																		March 31,						December 31,						September 30,						June 30,						March 31,
FFO Reconciliation:																		2023						2022						2022						2022						2022
Net income (loss) attributable to common stockholders																		$	25,673					$	(3,728)					$	(6,767)					$	89,785					$	61,925
Depreciation and amortization																		339,112						342,286						353,699						310,295						304,088
Impairment of assets																		12,629						13,146						4,356						—						—
Loss (gain) on real estate dispositions, net																		(747)						4,423						(1,064)						3,532						(22,934)
Noncontrolling interests																		(13,327)						(13,989)						(14,614)						(13,173)						(14,753)
Unconsolidated entities																		22,722						15,847						27,253						19,150						19,309
FFO																		$	386,062					$	357,985					$	362,863					$	409,589					$	347,635
Average diluted shares outstanding
For net income (loss) purposes																		494,494						483,305						463,366						457,082						449,802
For FFO purposes																		494,494						486,419						466,950						457,082						449,802
Per diluted share data:
Net income attributable to common stockholders(1)																		$	0.05					$	(0.01)					$	(0.01)					$	0.20					$	0.14
FFO																		$	0.78					$	0.74					$	0.78					$	0.90					$	0.77
(1) Includes adjustment to the numerator for income (loss) attributable to OP Unitholders.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The table below reflects the reconciliation of consolidated NOI to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Dollar amounts are in thousands.

																		Three Months Ended
																		March 31,						December 31,						September 30,						June 30,						March 31,
NOI Reconciliations:																		2023						2022						2022						2022						2022
Net income (loss)																		$	28,635					$	1,798					$	(2,653)					$	95,672					$	65,751
Loss (gain) on real estate dispositions, net																		(747)						4,423						(1,064)						3,532						(22,934)
Loss (income) from unconsolidated entities																		7,071						4,650						6,698						7,058						2,884
Income tax expense (benefit)																		3,045						(4,088)						3,257						3,065						5,013
Other expenses																		22,745						24,954						15,481						35,166						26,069
Impairment of assets																		12,629						13,146						4,356						—						—
Provision for loan losses, net																		777						10,469						490						165						(804)
Loss (gain) on extinguishment of debt, net																		5						87						2						603						(12)
Loss (gain) on derivatives and financial instruments, net																		930						258						6,905						(1,407)						2,578
General and administrative expenses																		44,371						41,319						34,811						36,554						37,706
Depreciation and amortization																		339,112						342,286						353,699						310,295						304,088
Interest expense																		144,403						140,391						139,682						127,750						121,696
Consolidated net operating income (NOI)																		$	602,976					$	579,693					$	561,664					$	618,453					$	542,035
NOI by segment:
Seniors Housing Operating																		$	252,897					$	234,091					$	230,686					$	281,911					$	206,684
Triple-net																		226,342						222,879						217,324						222,869						223,952
Outpatient Medical																		126,466						124,421						119,257						115,674						113,408
Non-segment/corporate																		(2,729)						(1,698)						(5,603)						(2,001)						(2,009)
Total NOI																		$	602,976					$	579,693					$	561,664					$	618,453					$	542,035

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

						QTD Pool
SSNOI Property Reconciliations:						Seniors Housing Operating						Triple-net						Outpatient Medical						Total
Consolidated properties						854						575						356						1,785
Unconsolidated properties						105						39						79						223
Total properties						959						614						435						2,008
Recent acquisitions/development conversions(1)						(98)						(13)						(44)						(155)
Under development						(41)						—						(6)						(47)
Under redevelopment(2)						(9)						(6)						(4)						(19)
Current held for sale						(5)						(7)						(1)						(13)
Land parcels, loans and subleases						(21)						(8)						(9)						(38)
Transitions(3)						(29)						(163)						—						(192)
Other(4)						(10)						(2)						—						(12)
Same store properties						746						415						371						1,532
(1) Acquisitions and development conversions will enter the QTD Pool five full quarters after acquisition or certificate of occupancy.
(2) Redevelopment properties will enter the QTD Pool five full quarters of operations post redevelopment completion.
(3) Transitioned properties will enter the QTD Pool after five full quarters of operations with the new operator in place or under the new structure.
(4) Represents properties that are either closed or being closed.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

						QTD Pool
						Three Months Ended
SSNOI Reconciliations:						March 31, 2023						March 31, 2022
Seniors Housing Operating:
Consolidated NOI						$	252,897					$	206,684
NOI attributable to unconsolidated investments						12,126						12,751
NOI attributable to noncontrolling interests						(16,260)						(24,392)
NOI attributable to non-same store properties						(35,634)						(12,519)
Non-cash NOI attributable to same store properties						(1,301)						(1,865)
Currency and ownership adjustments (1)						(522)						(3,570)
SSNOI at Welltower Share						211,306						177,089
Triple-net:
Consolidated NOI						226,342						223,952
NOI attributable to unconsolidated investments						9,293						9,955
NOI attributable to noncontrolling interests						(7,608)						(15,338)
NOI attributable to non-same store properties						(95,978)						(91,430)
Non-cash NOI attributable to same store properties						(14,099)						(8,567)
Currency and ownership adjustments (1)						(234)						(1,792)
SSNOI at Welltower Share						117,716						116,780
Outpatient Medical:
Consolidated NOI						126,466						113,408
NOI attributable to unconsolidated investments						4,935						4,830
NOI attributable to noncontrolling interests						(5,188)						(5,240)
NOI attributable to non-same store properties						(11,676)						(1,989)
Non-cash NOI attributable to same store properties						(4,294)						(3,237)
Currency and ownership adjustments (1)						180						575
SSNOI at Welltower Share						110,423						108,347
SSNOI at Welltower Share:
Seniors Housing Operating						211,306						177,089
Triple-net						117,716						116,780
Outpatient Medical						110,423						108,347
Total						$	439,445					$	402,216
(1) Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.37 and to translate U.K. properties at a GBP/USD rate of 1.20.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

																		Three Months Ended
																		March 31,						December 31,						September 30,						June 30,						March 31,
EBITDA Reconciliations:																		2023						2022						2022						2022						2022
Net income (loss)																		$	28,635					$	1,798					$	(2,653)					$	95,672					$	65,751
Interest expense																		144,403						140,391						139,682						127,750						121,696
Income tax expense (benefit)																		3,045						(4,088)						3,257						3,065						5,013
Depreciation and amortization																		339,112						342,286						353,699						310,295						304,088
EBITDA																		$	515,195					$	480,387					$	493,985					$	536,782					$	496,548
Interest Coverage Ratio:
Interest expense																		$	144,403					$	140,391					$	139,682					$	127,750					$	121,696
Non-cash interest expense																		(5,083)						(4,280)						(6,759)						(6,606)						(4,109)
Capitalized interest																		10,335						9,762						8,863						6,387						5,479
Total interest																		149,655						145,873						141,786						127,531						123,066
EBITDA																		$	515,195					$	480,387					$	493,985					$	536,782					$	496,548
Interest coverage ratio																		3.44		x				3.29		x				3.48		x				4.21		x				4.03		x
Fixed Charge Coverage Ratio:
Total interest																		$	149,655					$	145,873					$	141,786					$	127,531					$	123,066
Secured debt principal payments																		14,942						13,989						13,775						14,382						15,968
Total fixed charges																		164,597						159,862						155,561						141,913						139,034
EBITDA																		$	515,195					$	480,387					$	493,985					$	536,782					$	496,548
Fixed charge coverage ratio																		3.13		x				3.01		x				3.18		x				3.78		x				3.57		x

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

															Twelve Months Ended
																		March 31,						December 31,						September 30,						June 30,						March 31,
Adjusted EBITDA Reconciliations:																		2023						2022						2022						2022						2022
Net income																		$	123,452					$	160,568					$	224,964					$	417,953					$	368,038
Interest expense																		552,226						529,519						510,976						493,816						488,407
Income tax expense (benefit)																		5,279						7,247						13,386						15,069						9,783
Depreciation and amortization																		1,345,392						1,310,368						1,252,583						1,166,638						1,097,228
EBITDA																		2,026,349						2,007,702						2,001,909						2,093,476						1,963,456
Loss (income) from unconsolidated entities																		25,477						21,290						28,814						37,948						38,866
Stock-based compensation expense																		27,709						26,027						22,402						20,766						18,994
Loss (gain) on extinguishment of debt, net																		697						680						(497)						(504)						54,505
Loss (gain) on real estate dispositions, net																		6,144						(16,043)						(32,139)						(151,029)						(199,229)
Impairment of assets																		30,131						17,502						6,713						3,847						27,539
Provision for loan losses, net																		11,098						10,320						(188)						(949)						5,083
Loss (gain) on derivatives and financial instruments, net																		5,751						8,334						7,246						(7,737)						(6,689)
Other expenses																		98,346						101,670						92,199						80,293						56,814
Lease termination and leasehold interest adjustment (1)																		(56,397)						(64,854)						(63,454)						(64,094)						(7,697)
Casualty losses, net of recoveries																		14,865						10,391						7,802						8,472						5,799
Other impairment (2)																		(620)						(620)						(620)						(620)						—
Adjusted EBITDA																		$	2,189,550					$	2,122,399					$	2,070,187					$	2,019,869					$	1,957,441
Adjusted Interest Coverage Ratio:
Interest expense																		$	552,226					$	529,519					$	510,976					$	493,816					$	488,407
Capitalized interest																		35,347						30,491						26,054						21,860						20,335
Non-cash interest expense																		(22,728)						(21,754)						(18,679)						(21,258)						(18,624)
Total interest																		564,845						538,256						518,351						494,418						490,118
Adjusted EBITDA																		$	2,189,550					$	2,122,399					$	2,070,187					$	2,019,869					$	1,957,441
Adjusted interest coverage ratio																		3.88		x				3.94		x				3.99		x				4.09		x				3.99		x
Adjusted Fixed Charge Coverage Ratio:
Total interest																		$	564,845					$	538,256					$	518,351					$	494,418					$	490,118
Secured debt principal payments																		57,088						58,114						61,002						64,267						65,600
Total fixed charges																		621,933						596,370						579,353						558,685						555,718
Adjusted EBITDA																		$	2,189,550					$	2,122,399					$	2,070,187					$	2,019,869					$	1,957,441
Adjusted fixed charge coverage ratio																		3.52		x				3.56		x				3.57		x				3.62		x				3.52		x
(1) Represents revenues and property operating expenses associated with a leasehold portfolio interest relating to 26 properties assumed by a wholly-owned affiliate in conjunction with the Holiday Retirement transaction. Subsequent to the initial transaction, we purchased eight of the leased properties and one of the properties was sold by the landlord and removed from the lease. No rent was paid in excess of net cash flow relating to the leasehold properties and therefore, the net impact has been excluded from Adjusted EBITDA. Additionally, in conjunction with the lease termination, during the three months ended June 30, 2022 we recognized $58,621,000 in other income from the derecognition of the right of use asset and related lease liability which has also been excluded from Adjusted EBITDA.
(2) Represents changes in the reserve for straight-line rent receivable balances relating to leases placed on cash recognition.

Our leverage ratios include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt less cash and cash equivalents and restricted cash), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The table below reflects the reconciliation of our leverage ratios to our balance sheets for the periods presented. Amounts are in thousands, except share price.

															As of
																		March 31,						December 31,						September 30,						June 30,						March 31,
																		2023						2022						2022						2022						2022
Book capitalization:
Unsecured credit facility and commercial paper																		$	—					$	—					$	654,715					$	354,000					$	299,968
Long-term debt obligations (1)																		15,074,320						14,661,552						14,555,643						14,790,432						14,352,529
Cash and cash equivalents and restricted cash																		(638,796)						(722,292)						(425,184)						(442,251)						(367,043)
Total net debt																		14,435,524						13,939,260						14,785,174						14,702,181						14,285,454
Total equity and noncontrolling interests(2)																		21,596,155						21,393,996						20,457,650						19,873,913						19,178,026
Book capitalization																		$	36,031,679					$	35,333,256					$	35,242,824					$	34,576,094					$	33,463,480
Net debt to book capitalization ratio																		40%						39%						42%						43%						43%
Undepreciated book capitalization:
Total net debt																		$	14,435,524					$	13,939,260					$	14,785,174					$	14,702,181					$	14,285,454
Accumulated depreciation and amortization																		8,417,151						8,075,733						7,687,077						7,437,779						7,215,622
Total equity and noncontrolling interests(2)																		21,596,155						21,393,996						20,457,650						19,873,913						19,178,026
Undepreciated book capitalization																		$	44,448,830					$	43,408,989					$	42,929,901					$	42,013,873					$	40,679,102
Net debt to undepreciated book capitalization ratio																		32%						32%						34%						35%						35%
Market capitalization:
Common shares outstanding																		496,295						490,509						472,517						463,369						453,948
Period end share price																		$	71.69					$	65.55					$	64.32					$	82.35					$	96.14
Common equity market capitalization																		$	35,579,389					$	32,152,865					$	30,392,293					$	38,158,437					$	43,642,561
Total net debt																		14,435,524						13,939,260						14,785,174						14,702,181						14,285,454
Noncontrolling interests(2)																		1,148,000						1,099,182						1,288,343						1,317,733						1,282,450
Market capitalization																		$	51,162,913					$	47,191,307					$	46,465,810					$	54,178,351					$	59,210,465
Net debt to market capitalization ratio																		28%						30%						32%						27%						24%
(1) Amounts include senior unsecured notes, secured debt and lease liabilities related to financing leases, as reflected on our Consolidated Balance Sheets. Operating lease liabilities related to the ASC 842 adoption are excluded.
(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests as reflected on our Consolidated Balance Sheets.

Critical Accounting Policies and Estimates

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

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

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

Management has discussed the development and selection of its critical accounting policies and estimates with the Audit Committee of the Board of Directors. Management believes the current assumptions and other considerations used to estimate amounts reflected in our unaudited consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our unaudited consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 2 to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for further information on significant accounting policies that impact us. There have been no material changes to these policies in 2023.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When Welltower uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “pro forma,” “estimate” or similar expressions that do not relate solely to historical matters, Welltower is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause Welltower’s actual results to differ materially from Welltower’s expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the impact of the COVID-19 pandemic; the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; Welltower’s ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting Welltower’s properties; Welltower’s ability to re-lease space at similar rates as vacancies occur; Welltower’s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting Welltower’s properties; changes in rules or practices governing Welltower’s financial reporting; the movement of U.S. and foreign currency exchange rates; Welltower’s ability to maintain its qualification as a REIT; key management personnel recruitment and retention; and other risks described in Welltower’s reports filed from time to time with the SEC. Other important factors are identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Finally, Welltower undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates. We seek to mitigate the underlying foreign currency exposures with gains and losses on derivative contracts hedging these exposures. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. This section is presented to provide a discussion of the risks associated with potential fluctuations in interest rates and foreign currency exchange rates.

We historically borrow on our unsecured revolving credit facility and commercial paper program to acquire, construct or make loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue equity or long-term fixed rate debt to repay the borrowings under our unsecured revolving credit facility and commercial paper program. We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.

A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity or repaid by the sale of assets. To illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate debt instruments after considering the effects of interest rate swaps, whereby we modeled the change in net present values arising from a hypothetical 1% increase in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis performed as of the dates indicated (in thousands):