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

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

Three Months Ended
June 30,March 31,December 31,September 30,June 30,March 31,
202420242023202320232023
Property mix:(1)
Seniors Housing Operating54%47%43%45%40%42%
Triple-net(2)26%35%37%35%42%37%
Outpatient Medical20%18%20%20%18%21%
Relationship mix: (1)
Cogir Management Corporation8%8%6%4%3%4%
Integra Healthcare Properties8%7%8%8%8%9%
Sunrise Senior Living6%5%5%5%7%6%
Avery Healthcare5%5%5%4%3%3%
Oakmont Management Group5%4%4%4%3%3%
Remaining relationships68%71%72%75%76%75%
Geographic mix:(1)
California13%11%11%11%11%13%
United Kingdom10%10%9%9%8%10%
Florida9%8%8%5%4%5%
Texas9%8%8%8%7%8%
Canada7%7%7%6%5%6%
Remaining geographic areas52%56%57%61%65%58%
(1) Excludes our share of investments in unconsolidated entities and non-segment/corporate NOI. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.
(2) During the three months ended June 30, 2024, we wrote off previously recognized straight-line rent receivable and unamortized lease incentive balances of $88,319,000 through a reduction of rental income, which relates to leases for which the collection of substantially all contractual lease payments was no longer probable due to agreements reached to convert Triple-net properties to Seniors Housing Operating RIDEA structures.

Lease Expirations The following table sets forth information regarding lease expirations for certain portions of our portfolio as of June 30, 2024 (dollars in thousands):

Expiration Year (1)
2024202520262027202820292030203120322033Thereafter
Triple-net:
Properties4161015534512742345
Base rent (2)$13,495$8,016$12,467$1,259$6,404$1,051$40,930$11,002$102,099$55,517$463,577
% of base rent1.9%1.1%1.7%0.2%0.9%0.1%5.7%1.5%14.3%7.8%64.8%
Units/beds6925211,557806162573,6694236,1633,26739,443
% of units/beds1.2%0.9%2.7%0.1%1.1%0.5%6.5%0.7%10.9%5.8%69.6%
Outpatient Medical:
Square feet1,397,5761,168,7081,540,4351,566,8251,611,3431,508,7621,327,6921,542,9361,606,9951,215,5205,018,944
Base rent (2)$41,702$36,467$42,635$46,776$45,699$44,174$39,624$44,562$49,018$32,006$146,951
% of base rent7.3%6.4%7.5%8.2%8.0%7.8%7.0%7.8%8.6%5.6%25.8%
Leases30926025425027818811993163105182
% of leases14.0%11.8%11.5%11.4%12.6%8.5%5.4%4.2%7.4%4.8%8.4%
(1) Excludes our share of investments in unconsolidated entities, developments, land parcels, loans receivable and sub-leases. Investments classified as held for sale are included in the current year.
(2) The most recent monthly cash base rent annualized. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles or other non-cash income.

We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved, and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in "Cautionary Statement Regarding Forward-Looking Statements" and other sections of this Quarterly Report on Form 10-Q. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends. Please refer to our

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

Annual Report on Form 10-K for the year ended December 31, 2023, under the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Corporate Governance

Maintaining investor confidence and trust is important in today's business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.welltower.com/investors/governance. The information on our website is not incorporated by reference in this Quarterly Report on Form 10-Q, and our web address is included as an inactive textual reference only.

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash include resident fees and services, rent and interest receipts, interest earned on short-term deposits, borrowings under our unsecured revolving credit facility and commercial paper program, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses, general and administrative expenses and other expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below.

The following is a summary of our sources and uses of cash flows for the periods presented (dollars in thousands):

Six Months EndedChange
June 30, 2024June 30, 2023$%
Cash, cash equivalents and restricted cash at beginning of period$2,076,083$722,292$1,353,791187%
Cash provided from (used in) operating activities1,012,225792,303219,92228%
Cash provided from (used in) investing activities(1,859,742)(1,326,216)(533,526)(40)%
Cash provided from (used in) financing activities1,637,6852,102,311(464,626)(22)%
Effect of foreign currency translation(2,653)8,379(11,032)(132)%
Cash, cash equivalents and restricted cash at end of period$2,863,598$2,299,069$564,52925%

Operating Activities Please see "Results of Operations" for discussion of net income fluctuations. For the six months ended June 30, 2024 and 2023, cash flows provided from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash provided from/used in investing activities are primarily attributable to net changes in real property investments and dispositions, loans receivable and investments in unconsolidated entities, which are summarized above in "Key Transactions." Please refer to Notes 3 and 5 of our unaudited consolidated financial statements for additional information. The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands):

Six Months EndedChange
June 30, 2024June 30, 2023$%
New development$459,122$474,115$(14,993)-3%
Recurring capital expenditures, tenant improvements and lease commissions118,96477,60841,35653%
Renovations, redevelopments and other capital improvements178,638127,37051,26840%
Total$756,724$679,093$77,63111%

The change in new development is primarily due to the number and size of construction projects on-going during the relevant periods. Renovations, redevelopments and other capital improvements include expenditures to maximize property value, increase net operating income, maintain a market-competitive position and/or achieve property stabilization. The increase in renovations, redevelopments and other capital improvements is due primarily to portfolio growth.

Financing Activities The changes in net cash provided from/used in financing activities are primarily attributable to changes related to our long-term debt arrangements, the issuances of common stock and dividend payments which are summarized above in "Key Transactions." Please refer to Notes 10, 11 and 14 to our unaudited consolidated financial statements for additional information.

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

In May 2023, we issued $1,035,000,000 aggregate principal amount of 2.75% exchangeable senior unsecured notes maturing May 15, 2028. In January 2024, we repaid our $400,000,000 4.5% senior unsecured notes at maturity. In March 2024, we repaid our $950,000,000 3.625% senior unsecured notes at maturity.

In July 2024, we issued $1,035,000,000 aggregate principal amount of 3.125% exchangeable senior unsecured notes maturing July 15, 2029.

Also in July 2024, we closed on an expanded $5,000,000,000 unsecured revolving credit facility, which replaced our $4,000,000,000 existing line of credit. The new facility is comprised of a $3,000,000,000 revolving line of credit maturing in June 2028 that can be extended for an additional year and a $2,000,000,000 revolving line of credit maturing in June 2029. The revolving lines of credit will bear interest at a borrowing rate of 0.725% over the adjusted SOFR rate and includes an annual facility fee of 0.125%.

Off-Balance Sheet Arrangements

At June 30, 2024, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 95%. We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. At June 30, 2024, we had 23 outstanding letter of credit obligations. Please see Notes 8, 12 and 13 to our unaudited consolidated financial statements for additional information.

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of June 30, 2024 (in thousands):

Payments Due by Period
Contractual ObligationsTotal20242025-20262027-2028Thereafter
Senior unsecured notes and term credit facilities: (1)
U.S. Dollar senior unsecured notes$9,585,000$—$1,950,000$2,285,000$5,350,000
Canadian Dollar senior unsecured notes (2)219,234——219,234—
Pounds Sterling senior unsecured notes (2)1,327,200——695,200632,000
U.S. Dollar term credit facility1,010,000—10,0001,000,000—
Canadian Dollar term credit facility (2)182,695——182,695—
Secured debt: (1,2)
Consolidated1,800,684106,622470,312285,176938,574
Unconsolidated1,020,570104,167566,389149,570200,444
Contractual interest obligations: (3)
Senior unsecured notes and term loans (2)3,254,972279,739884,280647,2001,443,753
Consolidated secured debt (2)401,27241,863124,31099,174135,925
Unconsolidated secured debt (2)112,44618,67733,64916,05344,067
Financing lease liabilities (4)428,3912,1889,4149,299407,490
Operating lease liabilities (4)947,54610,62633,98732,946869,987
Purchase obligations (5)900,270428,415458,44040113,014
Total contractual obligations$21,190,280$992,297$4,540,781$5,621,948$10,035,254
(1) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(2) Based on foreign currency exchange rates in effect as of the balance sheet date.
(3) Based on variable interest rates in effect as of the balance sheet date.
(4) See Note 6 to our unaudited consolidated financial statements for additional information.
(5) See Note 13 to our unaudited consolidated financial statements for additional information. Excludes amounts related to asset acquisitions under contract that have not yet closed as of June 30, 2024, including the acquisitions described in Note 3.

Capital Structure

Please refer to "Credit Strength" above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of June 30, 2024, we were in compliance in all material respects with the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest

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

charged. We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On April 1, 2022, Welltower and Welltower OP jointly filed with the Securities and Exchange Commission (the "SEC") an open-ended automatic or “universal” shelf registration statement on Form S-3 (the "Shelf Form S-3") covering an indeterminate amount of future offerings of Welltower's debt securities, common stock, preferred stock, depositary shares, guarantees of debt securities issued by Welltower OP, warrants and units and Welltower OP’s debt securities and guarantees of debt securities issued by Welltower. On April 1, 2022, Welltower also filed with the SEC a registration statement in connection with its enhanced dividend reinvestment plan ("DRIP") under which it may issue up to 15,000,000 shares of common stock. On May 3, 2023, Welltower and Welltower OP filed post-effective amendment no. 1 to the Shelf Form S-3 pursuant to which Welltower OP expressly adopted the Shelf Form S-3 as its own registration statement following its statutory conversion from a corporation to a limited liability company. As of July 26, 2024, 15,000,000 shares of common stock remained available for issuance under the DRIP registration statement.

On April 30, 2024, Welltower and Welltower OP entered into an equity distribution agreement (the "EDA") with (i) Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., BNY Mellon Capital Markets, LLC, BofA Securities, Inc., BOK Financial Securities, Inc., Capital One Securities, Inc., Citigroup Global Markets Inc., Citizens JMP Securities, LLC, Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Fifth Third Securities, Inc., Goldman Sachs & Co. LLC, Jefferies LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc., Loop Capital Markets LLC, Mizuho Securities USA LLC, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, Regions Securities LLC, Robert W. Baird & Co. Incorporated, Scotia Capital (USA) Inc., Synovus Securities, Inc., TD Securities (USA) LLC, Truist Securities, Inc. and Wells Fargo Securities, LLC as sales agents and forward sellers and (ii) the forward purchasers named therein relating to issuances, offers and sales from time to time of up to $3,500,000,000 aggregate amount of common stock of Welltower (together with the existing master forward sale confirmations relating thereto, the "ATM Program"). The ATM Program also allows Welltower to enter into forward sale agreements. As of July 26, 2024, we had $2,366,084,000 of remaining capacity under the ATM Program and there were no outstanding forward sales agreements. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our unsecured revolving credit facility and commercial paper program.

In connection with the filing of the Shelf Form S-3, Welltower also filed with the SEC a prospectus supplement that will continue an offering that was previously covered by a prior registration statement relating to the registration of up to 475,327 shares of common stock of Welltower Inc. (the "DownREIT II Shares") that may be issued from time to time if, and to the extent that, certain holders of Class A units (the "DownREIT II Units") of HCN G&L DownREIT II LLC, a Delaware limited liability company (the "DownREIT II"), tender such DownREIT II Units for redemption by the DownREIT II, and HCN DownREIT Member, LLC, a majority-owned indirect subsidiary of Welltower (including its permitted successors and assigns, the "Managing Member"), or a designated affiliate of the Managing Member, elects to assume the redemption obligations of the DownREIT II and to satisfy all or a portion of the redemption consideration by issuing DownREIT II Shares to the holders instead of or in addition to paying a cash amount. On July 22, 2022, Welltower filed with the SEC a prospectus supplement relating to the registration of up to 300,026 shares of common stock of Welltower Inc. that may be issued from time to time if, and to the extent that, certain holders of Class A Common Units (the "OP Units") of Welltower OP tender the OP Units for redemption by Welltower OP, and Welltower Inc. elects to assume the redemption obligations of Welltower OP and to satisfy all or a portion of the redemption consideration by issuing shares of its common stock to the holders instead of or in addition to paying a cash amount. On August 9, 2023, Welltower filed with the SEC a prospectus supplement relating to the registration of up to 13,559,535 shares of common stock of Welltower Inc. (the "Exchanged Shares") that may, under certain circumstances, be issuable upon exchange of 2.750% exchangeable senior notes due 2028 of Welltower OP and the resale from time to time by the recipients of the Exchanged Shares.

Supplemental Guarantor Information

Welltower OP has issued the unsecured notes described in Note 11 to our unaudited consolidated financial statements. All unsecured notes are fully and unconditionally guaranteed by Welltower, and Welltower OP is 99.730% owned by Welltower as of June 30, 2024. Effective January 4, 2021, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include certain credit enhancements. We have adopted these new rules, which permits subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent. Accordingly, separate consolidated financial statements of Welltower OP have not been presented. Furthermore, Welltower and Welltower OP have no material assets, liabilities, or operations other than financing activities and their investments in non-guarantor subsidiaries. Therefore, we meet the criteria in Rule 13-01 of Regulation S-X to omit the summarized financial information from our disclosures.

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

Results of Operations

Summary

Our primary sources of revenue include resident fees and services, rent, interest income and interest earned on short-term deposits. Our primary expenses include property operating expenses, depreciation and amortization, interest expense, general and administrative expenses and other expenses. We evaluate our business and make resource allocations on our three business segments: Seniors Housing Operating, Triple-net and Outpatient Medical. The primary performance measures for our properties are NOI and same store NOI ("SSNOI") and other supplemental measures include FFO and Adjusted EBITDA, which are further discussed below. Please see Non-GAAP Financial Measures for additional information and reconciliations related to these supplemental measures.

Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023Amount%20242023Amount%
Net income (loss)$260,670$106,342$154,328145%$392,304$134,977$257,327191%
NICS254,714103,040151,674147%381,860128,713253,147197%
FFO493,773466,18227,5916%1,050,476852,244198,23223%
EBITDA777,240604,127173,11329%1,428,2461,119,322308,92428%
NOI713,587706,8066,7811%1,476,4151,309,782166,63313%
SSNOI532,202491,58440,6188%1,040,377941,32599,05211%
Per share data (fully diluted):
NICS$0.42$0.20$0.22110%$0.65$0.26$0.39150%
FFO$0.82$0.93$(0.11)(12)%$1.78$1.71$0.074%
Interest coverage ratio5.59x3.81x1.78x47%4.91x3.63x1.28x35%
Fixed charge coverage ratio5.21x3.51x1.70x48%4.57x3.32x1.25x38%

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

Seniors Housing Operating

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

Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
Revenues:
Resident fees and services$1,393,473$1,159,449$234,02420%$2,753,747$2,291,134$462,61320%
Interest income16,0772,09513,982667%21,1004,64616,454354%
Other income1,9002,895(995)(34)%3,3635,340(1,977)(37)%
Total revenues1,411,4501,164,439247,01121%2,778,2102,301,120477,09021%
Property operating expenses1,034,906885,187149,71917%2,054,2531,768,971285,28216%
NOI (1)376,544279,25297,29235%723,957532,149191,80836%
Other expenses:
Depreciation and amortization253,531220,42833,10315%490,327440,83549,49211%
Interest expense7,32616,136(8,810)(55)%18,51227,623(9,111)(33)%
Loss (gain) on extinguishment of debt, net1,705—1,705n/a1,711—1,711n/a
Provision for loan losses, net6,1421,8674,275229%7,7101,7945,916330%
Impairment of assets1,778—1,778n/a45,10912,62932,480257%
Other expenses37,7248,06029,664368%46,48125,63920,84281%
308,206246,49161,71525%609,850508,520101,33020%
Income (loss) from continuing operations before income taxes and other items68,33832,76135,577109%114,10723,62990,478383%
Income (loss) from unconsolidated entities(2,526)(39,445)36,91994%(6,793)(55,034)48,24188%
Gain (loss) on real estate dispositions, net137,061(2,096)139,157n/a141,663(1,263)142,926n/a
Income (loss) from continuing operations202,873(8,780)211,653n/a248,977(32,668)281,645862%
Net income (loss)202,873(8,780)211,653n/a248,977(32,668)281,645862%
Less: Net income (loss) attributable to noncontrolling interests(442)(2,872)2,43085%(1,444)(6,189)4,74577%
Net income (loss) attributable to common stockholders$203,315$(5,908)$209,223n/a$250,421$(26,479)$276,900n/a
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

Resident fees and services and property operating expenses increased for the three and six month periods ended June 30, 2024 compared to the same periods in the prior year primarily due to acquisitions outpacing dispositions during 2023 and year to date 2024. Additionally, our Seniors Housing Operating revenues are dependent on occupancy and rate growth, both of which have continued to steadily increase from prior year. Average occupancy is as follows:

Three Months Ended(1)
March 31,June 30,September 30,December 31,
202379.0%79.6%80.7%82.2%
202482.5%82.8%

(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.

Interest income increased for the three and six month periods ended June 30, 2024 compared to the same periods in the prior year primarily due to an increase in third party real estate loans in connection with the various transactions that occurred during 2023 and year to date 2024.

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

QTD PoolYTD Pool
Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
SSNOI (1)$257,009$223,244$33,76515.1%$501,642$417,923$83,71920.0%

(1) For the QTD Pool and YTD Pool, amounts relate to 584 and 575 same store properties, respectively. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

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

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, our provision for depreciation and amortization will change accordingly.

During the six months ended June 30, 2024, we recorded $41,157,000 of impairment charges related to nine Seniors Housing Operating properties which were disposed of or classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell. Also, we recorded $3,952,000 related to two held for use properties for which the carrying value exceeded the estimated fair value. During the six months ended June 30, 2023, we recorded impairment charges of $12,252,000 related to two 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.

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, including $26 million of expense recognized during the three months ended June 30, 2024 in excess of amounts already accrued as part of the transition of 89 Atria properties to other existing Welltower operators discussed in Note 9 to our unaudited consolidated financial statements. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices. The fluctuation in the gain on sales of properties is primarily related to the disposal of the Revera Canadian portfolio, which is further discussed in Note 5 to our unaudited consolidated financial statements.

During the six months ended June 30, 2024, we completed construction conversions representing $194,012,000 or $314,444 per unit. The following is a summary of our consolidated Seniors Housing Operating construction projects in process, excluding expansions (dollars in thousands):

As of June 30, 2024
Expected Conversion Year(1)PropertiesUnits/BedsAnticipated Remaining FundingConstruction in Progress Balance
2024131,997$75,266$639,908
202582,047240,169365,426
20264740147,57347,548
TBD(2)567,266
Total30$1,120,148
(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 provisions for loan losses will fluctuate based on our third party loan activity. 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 EndedSix Months Ended
June 30,June 30,
2024202320242023
Beginning balance$1,804,419$2,058,618$1,955,048$1,701,939
Debt issued1,49310,5622,872373,462
Debt assumed—20,448—26,930
Debt extinguished(75,993)(3,315)(196,939)(3,315)
Debt disposed(1)(164,640)—(164,640)—
Principal payments(9,136)(11,997)(19,983)(25,004)
Foreign currency(5,979)20,477(26,194)20,781
Ending balance$1,550,164$2,094,793$1,550,164$2,094,793
Ending weighted average interest4.53%4.71%4.53%4.71%
(1) Please see Note 5 for additional information.

The majority of our Seniors Housing Operating properties are formed through partnership interests. Income (loss) from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Income (loss) from unconsolidated entities during the six months ended June 30, 2023 includes an impairment charge of $28,708,000 related to an unconsolidated management company. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures.

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

Triple-net

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

Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
Revenues:
Rental income$141,151$198,916$(57,765)(29)%$362,895$401,335$(38,440)(10)%
Interest income46,52836,52010,00827%93,31770,28323,03433%
Other income93166,692(65,761)(99)%2,13068,575(66,445)(97)%
Total revenues188,610302,128(113,518)(38)%458,342540,193(81,851)(15)%
Property operating expenses10,49510,598(103)(1)%21,31222,321(1,009)(5)%
NOI (1)178,115291,530(113,415)(39)%437,030517,872(80,842)(16)%
Other expenses:
Depreciation and amortization61,76655,2346,53212%124,301109,76214,53913%
Interest expense352(795)1,147144%710(810)1,520188%
Loss (gain) on derivatives and financial instruments, net(5,825)1,280(7,105)(555)%(8,879)2,210(11,089)(502)%
Provision for loan losses, net(962)591(1,553)(263)%(1,529)1,441(2,970)(206)%
Impairment of assets6161,086(470)(43)%6161,086(470)(43)%
Other expenses8,4208187,602929%9,6253,2856,340193%
64,36758,2146,15311%124,844116,9747,8707%
Income (loss) from continuing operations before income taxes and other items113,748233,316(119,568)(51)%312,186400,898(88,712)(22)%
Income (loss) from unconsolidated entities2,614(630)3,244515%(539)7,802(8,341)(107)%
Gain (loss) on real estate dispositions, net21,268(72)21,340n/a21,29444820,846n/a
Income (loss) from continuing operations137,630232,614(94,984)(41)%332,941409,148(76,207)(19)%
Net income (loss)137,630232,614(94,984)(41)%332,941409,148(76,207)(19)%
Less: Net income (loss) attributable to noncontrolling interests5,4736,187(714)(12)%10,97112,090(1,119)(9)%
Net income attributable to common stockholders$132,157$226,427$(94,270)(42)%$321,970$397,058$(75,088)(19)%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

Rental income decreased primarily due to the write-off of straight-line receivable and unamortized lease incentive balances of $97,665,000 during the six months ended June 30, 2024, which relate to leases for which the collection of substantially all contractual lease payments was no longer deemed probable due primarily to agreements reached to convert Triple-net properties to Seniors Housing Operating RIDEA structures. This decrease was partially offset by increases in rent primarily due to acquisitions during the second half of 2023.

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 six months ended June 30, 2024, we had leases with rental rate increases ranging from 0.05% to 20.05% in our Triple-net portfolio.

The increase in interest income is primarily driven by increased advances on loans receivable during the second half of 2023.

As part of the substantial exit of the Genesis HealthCare operating relationship, which we disclosed on March 2, 2021, we transitioned the sublease of a portfolio of seven facilities from Genesis HealthCare 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 together 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 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 during the six months ended June 30, 2023.

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 Triple-net segment (dollars in thousands):

QTD PoolYTD Pool
Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
SSNOI (1)$150,087$144,917$5,1703.6%$299,290$287,907$11,3834.0%

(1) For the QTD Pool and YTD Pool, amounts relate to 523 and 515 same store properties, respectively. 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.

During the six months ended June 30, 2024, we recorded an impairment charge of $616,000 related to one held for use property for which the carrying value exceeded the estimated fair value. During the six months ended June 30, 2023, we recorded impairment charges of $1,086,000 related to one held for sale property for which the carrying values exceeded the estimated fair value less costs to sell. 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.

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 HC-One transactions that closed in 2021 and 2023.

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 EndedSix Months Ended
June 30,June 30,
2024202320242023
Beginning balance$38,023$38,949$38,260$39,179
Principal payments(236)(226)(473)(456)
Ending balance$37,787$38,723$37,787$38,723
Ending weighted average interest4.39%4.39%4.39%4.39%

A portion of our Triple-net properties were formed through partnerships. Income (loss) from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. The fluctuation in income (loss) from unconsolidated entities from the prior year relates primarily to the timing and amount of hypothetical liquidation at book value adjustments related to in substance real estate investments. 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 EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
Revenues:
Rental income$194,660$184,523$10,1375%$390,568$366,163$24,4057%
Interest income84895753793%1,7001861,514814%
Other income2,5771,5741,00364%4,9794,6743057%
Total revenues198,085186,19211,8936%397,247371,02326,2247%
Property operating expenses61,18558,6972,4884%123,648117,0626,5866%
NOI (1)136,900127,4959,4057%273,599253,96119,6388%
Other expenses:
Depreciation and amortization66,74866,2834651%133,280130,4602,8202%
Interest expense1,3103,152(1,842)(58)%3,0287,256(4,228)(58)%
Loss (gain) on extinguishment of debt, net—1(1)(100)%—6(6)(100)%
Provision for loan losses, net(17)(2)(15)(750)%(4)(2)(2)(100)%
Other expenses331647(316)(49)%9401,194(254)(21)%
68,37270,081(1,709)(2)%137,244138,914(1,670)(1)%
Income (loss) from continuing operations before income taxes and other items68,52857,41411,11419%136,355115,04721,30819%
Income (loss) from unconsolidated entities4,808(257)5,065n/a4,445(171)4,616n/a
Gain (loss) on real estate dispositions, net8,114—8,114n/a8,193(606)8,799n/a
Income (loss) from continuing operations81,45057,15724,29343%148,993114,27034,72330%
Net income (loss)81,45057,15724,29343%148,993114,27034,72330%
Less: Net income (loss) attributable to noncontrolling interests218309(91)(29)%(134)991(1,125)(114)%
Net income (loss) attributable to common stockholders$81,232$56,848$24,38443%$149,127$113,279$35,84832%
(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 2023 and year to date in 2024. 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 six months ended June 30, 2024, our consolidated Outpatient Medical portfolio signed 170,090 square feet of new leases and 832,359 square feet of renewals. The weighted-average term of these leases was seven years, with a rate of $42.90 per square foot and tenant improvement and lease commission costs of $31.38 per square foot. Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 2.0% to 5.0%.

The fluctuation in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions that occurred during 2023 and year to date in 2024. To the extent we acquire or dispose of additional properties in the future, these expenses will change accordingly. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices.

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

QTD PoolYTD Pool
Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
SSNOI (1)$125,106$123,423$1,6831.4%$239,445$235,495$3,9501.7%

(1) For the QTD Pool and YTD, amounts relate to 410 and 380 same store properties, respectively. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

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

During the six months ended June 30, 2024, we completed construction conversions representing $106,596,000 or $484 per square foot. The following is a summary of our consolidated Outpatient Medical construction projects in process, excluding expansions (dollars in thousands):

As of June 30, 2024
Expected Conversion YearPropertiesSquare FeetAnticipated Remaining FundingConstruction in Progress Balance
20247486,763$107,500$203,386
20253290,559127,00738,751
TBD(1)133,702
Total11$275,839
(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 EndedSix Months Ended
June 30,June 30,
2024202320242023
Beginning balance$228,334$409,241$229,137$388,836
Debt assumed———46,741
Debt extinguished(14,866)(44,550)(14,866)(69,181)
Principal payments(735)(1,616)(1,538)(3,321)
Ending balance$212,733$363,075$212,733$363,075
Ending weighted average interest5.51%4.68%5.51%4.68%

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

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

Non-Segment/Corporate

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

Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
Revenues:
Other income$26,739$12,719$14,020110%$50,826$13,871$36,955266%
Total revenues26,73912,71914,020110%50,82613,87136,955266%
Property operating expenses4,7114,19052112%8,9978,07192611%
Consolidated net operating income (loss) (1)22,0288,52913,499158%41,8295,80036,029621%
Expenses:
Interest expense124,436133,844(9,408)(7)%258,492262,671(4,179)(2)%
General and administrative expenses55,56544,28711,27825%108,88388,65820,22523%
Other expenses2,2091,54466543%5,7693,6962,07356%
182,210179,6752,5351%373,144355,02518,1195%
Income (loss) from continuing operations before income taxes and other items(160,182)(171,146)10,9646%(331,315)(349,225)17,9105%
Income tax benefit (expense)(1,101)(3,503)2,40269%(7,292)(6,548)(744)(11)%
Income (loss) from continuing operations(161,283)(174,649)13,3668%(338,607)(355,773)17,1665%
Net income (loss)(161,283)(174,649)13,3668%(338,607)(355,773)17,1665%
Less: Net income (loss) attributable to noncontrolling interests707(322)1,029320%1,051(628)1,679267%
Net income (loss) attributable to common stockholders$(161,990)$(174,327)$12,3377%$(339,658)$(355,145)$15,4874%
(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

The increase in other income for six month periods ended June 30, 2024 is primarily due to interest earned on deposits. 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.

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

Three Months EndedChangeSix Months EndedChange
June 30,June 30,
20242023$%20242023$%
Senior unsecured notes$118,212$125,451$(7,239)(6)%$246,172$246,265$(93)—%
Unsecured credit facility and commercial paper program1,5331,467665%3,0683,873(805)(21)%
Loan expense4,6916,926(2,235)(32)%9,25212,533(3,281)(26)%
Totals$124,436$133,844$(9,408)(7)%$258,492$262,671$(4,179)(2)%

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, as well as the movement in foreign exchange rates and related hedge activity. Please refer to Note 11 to our unaudited consolidated financial statements for additional information. The change in interest expense on our unsecured revolving credit facility and commercial paper program is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes. Please refer to Note 10 to our unaudited consolidated financial statements 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 six months ended June 30, 2024 and 2023 were 2.96% and 2.75%, respectively. The increase during the six month period is primarily driven by compensation costs associated with increased employee headcount.

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

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

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

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

depreciation and amortization. Enterprise value 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 tables below reflect 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
June 30,March 31,December 31,September 30,June 30,March 31,
FFO Reconciliation:202420242023202320232023
Net income (loss) attributable to common stockholders$254,714$127,146$83,911$127,470$103,040$25,673
Depreciation and amortization382,045365,863380,730339,314341,945339,112
Impairment of assets2,39443,33114,9947,3881,08612,629
Loss (gain) on real estate dispositions, net(166,443)(4,707)1,783(71,102)2,168(747)
Noncontrolling interests(6,348)(11,996)(11,436)(8,789)(12,841)(13,327)
Unconsolidated entities27,41137,06621,87724,84330,78422,722
FFO$493,773$556,703$491,859$419,124$466,182$386,062
Average diluted shares outstanding604,563577,530552,380525,138501,970494,494
Per diluted share data:
Net income attributable to common stockholders(1)$0.42$0.22$0.15$0.24$0.20$0.05
FFO$0.82$0.96$0.89$0.80$0.93$0.78
(1) Includes adjustment to the numerator for income (loss) attributable to OP Unitholders.
Six Months Ended
June 30,
FFO Reconciliations:20242023
Net income attributable to common stockholders$381,860$128,713
Depreciation and amortization747,908681,057
Impairment of assets45,72513,715
Loss (gain) on real estate dispositions, net(171,150)1,421
Noncontrolling interests(18,344)(26,168)
Unconsolidated entities64,47753,506
FFO$1,050,476$852,244
Average diluted common shares outstanding:591,047498,305
Per diluted share data:
Net income attributable to common stockholders(1)$0.65$0.26
FFO$1.78$1.71
(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 tables below reflect the reconciliation of consolidated NOI to net income, the most directly comparable U.S. GAAP measure, for the periods presented (dollars in thousands):

Three Months Ended
June 30,March 31,December 31,September 30,June 30,March 31,
NOI Reconciliations:202420242023202320232023
Net income (loss)$260,670$131,634$88,440$134,722$106,342$28,635
Loss (gain) on real estate dispositions, net(166,443)(4,707)1,783(71,102)2,168(747)
Loss (income) from unconsolidated entities(4,896)7,7832,0084,03140,3327,071
Income tax expense (benefit)1,1016,191(4,768)4,5843,5033,045
Other expenses48,68414,13136,30738,22011,06922,745
Impairment of assets2,39443,33114,9947,3881,08612,629
Provision for loan losses, net5,1631,0142,5174,0592,456777
Loss (gain) on extinguishment of debt, net1,7056—115
Loss (gain) on derivatives and financial instruments, net(5,825)(3,054)(7,215)2,8851,280930
General and administrative expenses55,56553,31844,32746,10644,28744,371
Depreciation and amortization382,045365,863380,730339,314341,945339,112
Interest expense133,424147,318154,574156,532152,337144,403
Consolidated net operating income (NOI)$713,587$762,828$713,697$666,740$706,806$602,976
NOI by segment:
Seniors Housing Operating$376,544$347,413$301,077$284,909$279,252$252,897
Triple-net178,115258,915256,985226,278291,530226,342
Outpatient Medical136,900136,699135,484129,754127,495126,466
Non-segment/corporate22,02819,80120,15125,7998,529(2,729)
Total NOI$713,587$762,828$713,697$666,740$706,806$602,976
Six Months Ended
June 30,
NOI Reconciliations:20242023
Net income (loss)$392,304$134,977
Loss (gain) on real estate dispositions, net(171,150)1,421
Loss (income) from unconsolidated entities2,88747,403
Income tax expense (benefit)7,2926,548
Other expenses62,81533,814
Impairment of assets45,72513,715
Provision for loan losses, net6,1773,233
Loss (gain) on extinguishment of debt, net1,7116
Loss (gain) on derivatives and financial instruments, net(8,879)2,210
General and administrative expenses108,88388,658
Depreciation and amortization747,908681,057
Interest expense280,742296,740
Consolidated net operating income (NOI)$1,476,415$1,309,782
NOI by segment:
Seniors Housing Operating$723,957$532,149
Triple-net437,030517,872
Outpatient Medical273,599253,961
Non-segment/corporate41,8295,800
Total NOI$1,476,415$1,309,782

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

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

QTD PoolYTD Pool
SSNOI Property Reconciliations:Seniors Housing OperatingTriple-netOutpatient MedicalTotalSeniors Housing OperatingTriple-netOutpatient MedicalTotal
Consolidated properties9296053701,9049296053701,904
Unconsolidated properties763976191763976191
Total properties1,0056444462,0951,0056444462,095
Recent acquisitions/development conversions(1)(80)(62)(12)(154)(89)(70)(42)(201)
Under development(33)—(11)(44)(33)—(11)(44)
Under redevelopment(2)(4)(4)—(8)(4)(4)—(8)
Current held for sale(24)(28)(1)(53)(24)(28)(1)(53)
Land parcels, loans and subleases(15)(4)(9)(28)(15)(4)(9)(28)
Transitions(3)(256)(18)—(274)(256)(18)—(274)
Other(4)(9)(5)(3)(17)(9)(5)(3)(17)
Same store properties5845234101,5175755153801,470
(1) Acquisitions and development conversions will enter the QTD Pool after five full quarters and YTD Pool after six full quarters of acquisition or certificate of occupancy.
(2) Redevelopment properties will enter the QTD Pool after five full quarters and YTD Pool after six full quarters of operations post redevelopment completion.
(3) Transitioned properties will enter the QTD Pool after five full quarters and YTD Pool after six 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 QTD Pool and YTD Pool (dollars in thousands):

QTD PoolYTD Pool
Three Months EndedSix Months Ended
June 30,June 30,
SSNOI Reconciliations:2024202320242023
Seniors Housing Operating:
Consolidated NOI$376,544$279,252$723,957$532,149
NOI attributable to unconsolidated investments23,04113,62944,82225,756
NOI attributable to noncontrolling interests(12,085)(15,974)(29,443)(32,235)
NOI attributable to non-same store properties(130,203)(53,574)(238,057)(108,118)
Non-cash NOI attributable to same store properties(230)(1,047)111(1,634)
Currency and ownership adjustments (1)(58)9582522,005
SSNOI at Welltower Share257,009223,244501,642417,923
Triple-net:
Consolidated NOI178,115291,530437,030517,872
NOI attributable to unconsolidated investments5,3666,86410,96216,158
NOI attributable to noncontrolling interests(8,042)(7,723)(16,047)(15,332)
NOI attributable to non-same store properties(95,455)(122,551)(186,040)(186,663)
Non-cash NOI attributable to same store properties70,336(23,070)53,952(44,401)
Currency and ownership adjustments (1)(233)(133)(567)273
SSNOI at Welltower Share150,087144,917299,290287,907
Outpatient Medical:
Consolidated NOI136,900127,495273,599253,961
NOI attributable to unconsolidated investments4,3134,6579,0249,592
NOI attributable to noncontrolling interests(2,301)(4,708)(5,024)(9,896)
NOI attributable to non-same store properties(9,795)(1,556)(30,970)(13,553)
Non-cash NOI attributable to same store properties(4,040)(4,771)(7,247)(9,924)
Currency and ownership adjustments (1)292,306635,315
SSNOI at Welltower Share125,106123,423239,445235,495
SSNOI at Welltower Share:
Seniors Housing Operating257,009223,244501,642417,923
Triple-net150,087144,917299,290287,907
Outpatient Medical125,106123,423239,445235,495
Total$532,202$491,584$1,040,377$941,325
(1) Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.36 and to translate U.K. properties at a GBP/USD rate of 1.25.

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

The tables below reflect the reconciliation of EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented (dollars in thousands):

Three Months Ended
June 30,March 31,December 31,September 30,June 30,March 31,
EBITDA Reconciliations:202420242023202320232023
Net income (loss)$260,670$131,634$88,440$134,722$106,342$28,635
Interest expense133,424147,318154,574156,532152,337144,403
Income tax expense (benefit)1,1016,191(4,768)4,5843,5033,045
Depreciation and amortization382,045365,863380,730339,314341,945339,112
EBITDA$777,240$651,006$618,976$635,152$604,127$515,195
Interest Coverage Ratio:
Interest expense$133,424$147,318$154,574$156,532$152,337$144,403
Capitalized interest14,47813,80914,54713,94711,87010,335
Non-cash interest expense(8,953)(9,284)(5,871)(6,716)(5,824)(5,083)
Total interest138,949151,843163,250163,763158,383149,655
EBITDA$777,240$651,006$618,976$635,152$604,127$515,195
Interest coverage ratio5.59x4.29x3.79x3.88x3.81x3.44x
Fixed Charge Coverage Ratio:
Total interest$138,949$151,843$163,250$163,763$158,383$149,655
Secured debt principal payments10,10711,88712,43012,86513,83914,942
Total fixed charges149,056163,730175,680176,628172,222164,597
EBITDA$777,240$651,006$618,976$635,152$604,127$515,195
Fixed charge coverage ratio5.21x3.98x3.52x3.60x3.51x3.13x
Six Months Ended
June 30,
EBITDA Reconciliations:20242023
Net income (loss)$392,304$134,977
Interest expense280,742296,740
Income tax expense (benefit)7,2926,548
Depreciation and amortization747,908681,057
EBITDA$1,428,246$1,119,322
Interest Coverage Ratio:
Interest expense$280,742$296,740
Non-cash interest expense(18,237)(10,907)
Capitalized interest28,28722,205
Total interest290,792308,038
EBITDA$1,428,246$1,119,322
Interest coverage ratio4.91x3.63x
Fixed Charge Coverage Ratio:
Total interest$290,792$308,038
Secured debt principal payments21,99428,781
Total fixed charges312,786336,819
EBITDA$1,428,246$1,119,322
Fixed charge coverage ratio4.57x3.32x

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 in thousands):

Twelve Months Ended
June 30,March 31,December 31,September 30,June 30,March 31,
Adjusted EBITDA Reconciliations:202420242023202320232023
Net income$615,466$461,138$358,139$271,497$134,122$123,452
Interest expense591,848610,761607,846593,663576,813552,226
Income tax expense (benefit)7,1089,5106,3647,0445,7175,279
Depreciation and amortization1,467,9521,427,8521,401,1011,362,6571,377,0421,345,392
EBITDA2,682,3742,509,2612,373,4502,234,8612,093,6942,026,349
Loss (income) from unconsolidated entities8,92654,15453,44256,08458,75125,477
Stock-based compensation expense38,36438,82936,61134,76232,29927,709
Loss (gain) on extinguishment of debt, net1,712879495697
Loss (gain) on real estate dispositions, net(240,469)(71,858)(67,898)(65,258)4,7806,144
Impairment of assets68,10766,79936,09734,24931,21730,131
Provision for loan losses, net12,75310,0469,80917,76114,19211,098
Loss (gain) on derivatives and financial instruments, net(13,209)(6,104)(2,120)5,3539,3735,751
Other expenses137,34299,727108,34196,98874,24998,346
Lease termination and leasehold interest adjustment (1)—(65,485)(65,485)(65,485)(65,485)(56,397)
Casualty losses, net of recoveries6,1637,77810,10716,44615,76014,865
Other impairment (2)114,31625,99816,64212,309—(620)
Adjusted EBITDA$2,816,379$2,669,153$2,509,003$2,378,164$2,268,925$2,189,550
Adjusted Interest Coverage Ratio:
Interest expense$591,848$610,761$607,846$593,663$576,813$552,226
Capitalized interest56,78154,17350,69945,91440,83035,347
Non-cash interest expense(30,824)(27,695)(23,494)(21,903)(21,946)(22,728)
Total interest617,805637,239635,051617,674595,697564,845
Adjusted EBITDA$2,816,379$2,669,153$2,509,003$2,378,164$2,268,925$2,189,550
Adjusted interest coverage ratio4.56x4.19x3.95x3.85x3.81x3.88x
Adjusted Fixed Charge Coverage Ratio:
Total interest$617,805$637,239$635,051$617,674$595,697$564,845
Secured debt principal payments47,28951,02154,07655,63556,54557,088
Total fixed charges665,094688,260689,127673,309652,242621,933
Adjusted EBITDA$2,816,379$2,669,153$2,509,003$2,378,164$2,268,925$2,189,550
Adjusted fixed charge coverage ratio4.23x3.88x3.64x3.53x3.48x3.52x
(1) Primarily relates to the derecognition of leasehold interests and the gain recognized in other income.
(2) Represents the write-off or recovery of straight-line rent receivable and unamortized lease incentive balances relating to leases placed on cash recognition.

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

Our leverage ratios include book capitalization, undepreciated book capitalization and enterprise value. 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. Enterprise value represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization.

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

As of
June 30,March 31,December 31,September 30,June 30,March 31,
202420242023202320232023
Book capitalization:
Unsecured credit facility and commercial paper$—$—$—$—$—$—
Long-term debt obligations (1)14,027,12814,285,68615,815,22615,899,42016,040,53015,074,320
Cash and cash equivalents and restricted cash(2,863,598)(2,478,335)(2,076,083)(2,686,711)(2,299,069)(638,796)
Total net debt11,163,53011,807,35113,739,14313,212,70913,741,46114,435,524
Total equity and noncontrolling interests(2)29,688,57928,547,90826,371,72723,818,61922,193,11421,596,155
Book capitalization$40,852,109$40,355,259$40,110,870$37,031,328$35,934,575$36,031,679
Net debt to book capitalization ratio27%29%34%36%38%40%
Undepreciated book capitalization:
Total net debt$11,163,530$11,807,351$13,739,143$13,212,709$13,741,461$14,435,524
Accumulated depreciation and amortization9,908,0079,537,5629,274,8148,868,6278,599,6228,417,151
Total equity and noncontrolling interests(2)29,688,57928,547,90826,371,72723,818,61922,193,11421,596,155
Undepreciated book capitalization$50,760,116$49,892,821$49,385,684$45,899,955$44,534,197$44,448,830
Net debt to undepreciated book capitalization ratio22%24%28%29%31%32%
Enterprise value:
Common shares outstanding608,151590,934564,241532,268508,159496,295
Period end share price$104.25$93.44$90.17$81.92$80.89$71.69
Common equity market capitalization$63,399,742$55,216,873$50,877,611$43,603,395$41,104,982$35,579,389
Total net debt11,163,53011,807,35113,739,14313,212,70913,741,46114,435,524
Noncontrolling interests(2)712,153999,965967,351864,583988,6731,148,000
Consolidated enterprise value$75,275,425$68,024,189$65,584,105$57,680,687$55,835,116$51,162,913
Net debt to consolidated enterprise value ratio15%17%21%23%25%28%
(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, 2023 for further information on significant accounting policies that impact us. There have been no material changes to these policies in 2024.

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 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, health emergencies (such as the COVID-19 pandemic) 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, 2023, 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. For more information, see Notes 12 and 17 to our consolidated financial statements.

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):

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