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

The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:


	Three Months Ended
	September 30,	June 30,	March 31,	December 31,	September 30,	June 30,	March 31,
	2024	2024	2024	2023	2023	2023	2023
Property mix:(1)
Seniors Housing Operating	49%	54%	47%	43%	45%	40%	42%
Triple-net	34%	26%	35%	37%	35%	42%	37%
Outpatient Medical	17%	20%	18%	20%	20%	18%	21%

Relationship mix: (1)
Cogir Management Corporation	7%	8%	8%	6%	4%	3%	4%
Integra Healthcare Properties	6%	8%	7%	8%	8%	8%	9%
Sunrise Senior Living	5%	6%	5%	5%	5%	7%	6%
Avery Healthcare	4%	5%	5%	5%	4%	3%	3%
Oakmont Management Group	4%	5%	4%	4%	4%	3%	3%
Remaining relationships	74%	68%	71%	72%	75%	76%	75%

Geographic mix:(1)
California	11%	13%	11%	11%	11%	11%	13%
United Kingdom	10%	10%	10%	9%	9%	8%	10%
Texas	8%	9%	8%	8%	8%	7%	8%
Florida	8%	9%	8%	8%	5%	4%	5%
Canada	6%	7%	7%	7%	6%	5%	6%
Remaining geographic areas	57%	52%	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.

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


	Expiration Year (1)
	2024			2025			2026			2027			2028			2029			2030			2031			2032			2033			Thereafter
Triple-net:
Properties	—			16			10			1			5			4			19			5			155			42			322
Base rent (2)	$	—		$	8,016		$	12,630		$	1,259		$	6,566		$	1,083		$	41,397		$	11,074		$	102,681		$	59,482		$	431,884
% of base rent	—		%	1.2		%	1.9		%	0.2		%	1.0		%	0.2		%	6.1		%	1.6		%	15.2		%	8.8		%	63.8		%
Units/beds	—			521			1,557			80			616			219			2,043			423			9,226			3,267			37,667
% of units/beds	—		%	0.9		%	2.8		%	0.1		%	1.1		%	0.4		%	3.7		%	0.8		%	16.6		%	5.9		%	67.7		%

Outpatient Medical:
Square feet	991,135			1,132,045			1,368,075			1,528,272			1,535,925			1,520,877			1,355,760			1,600,965			1,694,050			1,187,186			5,767,000
Base rent (2)	$	29,047		$	35,608		$	38,819		$	46,527		$	43,641		$	45,077		$	40,585		$	46,429		$	51,192		$	31,598		$	167,961
% of base rent	5.0		%	6.2		%	6.7		%	8.1		%	7.6		%	7.8		%	7.0		%	8.1		%	8.9		%	5.5		%	29.1		%
Leases	188			256			237			262			266			205			125			104			172			101			280
% of leases	8.6		%	11.7		%	10.8		%	11.9		%	12.1		%	9.3		%	5.7		%	4.7		%	7.8		%	4.6		%	12.8		%

(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 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."

Item 2. 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):


	Nine Months Ended				Change
	September 30, 2024		September 30, 2023		$		%
Cash, cash equivalents and restricted cash at beginning of period	$	2,076,083	$	722,292	$	1,353,791	187	%
Cash provided from (used in) operating activities	1,697,209		1,231,359		465,850		38	%
Cash provided from (used in) investing activities	(3,309,218)		(2,563,554)		(745,664)		(29)	%
Cash provided from (used in) financing activities	3,315,287		3,311,103		4,184		—	%
Effect of foreign currency translation	5,047		(14,489)		19,536		135	%
Cash, cash equivalents and restricted cash at end of period	$	3,784,408	$	2,686,711	$	1,097,697	41	%

Operating Activities Please see "Results of Operations" for discussion of net income fluctuations. For the nine months ended September 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):


	Nine Months Ended				Change
	September 30, 2024		September 30, 2023		$		%
New development	$	632,511	$	730,712	$	(98,201)	-13	%
Recurring capital expenditures, tenant improvements and lease commissions	199,861		127,633		72,228		57	%
Renovations, redevelopments and other capital improvements	338,891		206,457		132,434		64	%
Total	$	1,171,263	$	1,064,802	$	106,461	10	%

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 September 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 September 30, 2024, we had 20 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 September 30, 2024 (in thousands):


	Payments Due by Period
Contractual Obligations	Total		2024		2025-2026		2027-2028		Thereafter

Senior unsecured notes and term credit facilities: (1)
U.S. Dollar senior unsecured notes	$	10,620,000	$	—	$	1,950,000	$	2,285,000	$	6,385,000
Canadian Dollar senior unsecured notes (2)	221,970		—		—		221,970		—
Pounds Sterling senior unsecured notes (2)	1,406,790		—		—		736,890		669,900
U.S. Dollar term credit facility	1,010,000		—		10,000		1,000,000		—
Canadian Dollar term credit facility (2)	184,975		—		—		184,975		—
Secured debt: (1,2)
Consolidated	2,581,878		96,016		510,785		606,507		1,368,570
Unconsolidated	870,888		98,880		545,788		100,788		125,432
Contractual interest obligations: (3)

Senior unsecured notes and term loans (2)	3,328,995		174,199		948,908		719,559		1,486,329
Consolidated secured debt (2)	636,414		27,860		186,563		134,767		287,224
Unconsolidated secured debt (2)	51,502		7,748		25,668		10,225		7,861
Financing lease liabilities (4)	427,281		1,087		9,405		9,299		407,490
Operating lease liabilities (4)	945,715		5,131		34,006		32,963		873,615
Purchase obligations (5)	868,203		295,683		558,390		401		13,729

Total contractual obligations	$	23,154,611	$	706,604	$	4,779,513	$	6,043,344	$	11,625,150

(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 September 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 September 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.

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

However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged. We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On 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 October 25, 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 October 25, 2024, we had approximately $696,822,000 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 October 8, 2024, Welltower filed with the SEC a prospectus supplement relating to the registration of up to 23,471,419 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 or 3.125% Exchangeable Senior Notes due 2029 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 99.701% owned by Welltower as of September 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-

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

guarantor subsidiaries. Therefore, we meet the criteria in Rule 13-01 of Regulation S-X to omit the summarized financial information from our disclosures.

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 Ended						Change					Nine Months Ended						Change
	September 30,											September 30,
	2024			2023			Amount			%		2024			2023			Amount			%
Net income (loss)	$	456,800		$	134,722		$	322,078		239	%	$	849,104		$	269,699		$	579,405		215	%
NICS	449,849			127,470			322,379			253	%	831,709			256,183			575,526			225	%
FFO	635,817			419,124			216,693			52	%	1,686,293			1,271,368			414,925			33	%
EBITDA	994,923			635,152			359,771			57	%	2,423,169			1,754,474			668,695			38	%
NOI	842,962			666,740			176,222			26	%	2,319,377			1,976,522			342,855			17	%
SSNOI	539,909			482,198			57,711			12	%	1,472,719			1,330,919			141,800			11	%

Per share data (fully diluted):
NICS	$	0.73		$	0.24		$	0.49		204	%	$	1.39		$	0.50		$	0.89		178	%
FFO	$	1.03		$	0.80		$	0.23		29	%	$	2.81		$	2.51		$	0.30		12	%

Interest coverage ratio	6.83		x	3.88		x	2.95		x	76	%	5.55		x	3.72		x	1.83		x	49	%
Fixed charge coverage ratio	6.37		x	3.60		x	2.77		x	77	%	5.17		x	3.42		x	1.75		x	51	%

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 Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
Revenues:
Resident fees and services	$	1,511,524	$	1,199,808	$	311,716	26	%	$	4,265,271	$	3,490,942	$	774,329	22	%
Interest income	16,328		2,194		14,134		644	%	37,428		6,840		30,588		447	%
Other income	2,498		1,897		601		32	%	5,861		7,237		(1,376)		(19)	%
Total revenues	1,530,350		1,203,899		326,451		27	%	4,308,560		3,505,019		803,541		23	%
Property operating expenses	1,135,887		918,990		216,897		24	%	3,190,140		2,687,961		502,179		19	%
NOI (1)	394,463		284,909		109,554		38	%	1,118,420		817,058		301,362		37	%
Other expenses:
Depreciation and amortization	279,693		215,195		64,498		30	%	770,020		656,030		113,990		17	%
Interest expense	8,742		14,358		(5,616)		(39)	%	27,254		41,981		(14,727)		(35)	%
Loss (gain) on extinguishment of debt, net	—		—		—		n/a		1,711		—		1,711		n/a
Provision for loan losses, net	5,543		384		5,159		n/a		13,253		2,178		11,075		508	%
Impairment of assets	20,887		2,400		18,487		770	%	65,996		15,029		50,967		339	%
Other expenses	17,914		34,865		(16,951)		(49)	%	64,395		60,504		3,891		6	%
	332,779		267,202		65,577		25	%	942,629		775,722		166,907		22	%

Income (loss) from continuing operations before income taxes and other items	61,684		17,707		43,977		248	%	175,791		41,336		134,455		325	%
Income (loss) from unconsolidated entities	4,247		(6,021)		10,268		171	%	(2,546)		(61,055)		58,509		96	%
Gain (loss) on real estate dispositions and acquisitions of controlling interests, net	63		71,173		(71,110)		(100)	%	141,726		69,910		71,816		103	%
Income (loss) from continuing operations	65,994		82,859		(16,865)		(20)	%	314,971		50,191		264,780		528	%
Net income (loss)	65,994		82,859		(16,865)		(20)	%	314,971		50,191		264,780		528	%
Less: Net income (loss) attributable to noncontrolling interests	(465)		1,208		(1,673)		(138)	%	(1,909)		(4,981)		3,072		62	%
Net income (loss) attributable to common stockholders	$	66,459	$	81,651	$	(15,192)	(19)	%	$	316,880	$	55,172	$	261,708	474	%

(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 nine month periods ended September 30, 2024 compared to the same periods in the prior year primarily due to acquisitions and construction conversions outpacing dispositions during 2023 and year to date 2024, as well as the conversion of Triple-net properties to Seniors Housing Operating RIDEA structures in the second and third quarters of 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,
2023	79.0	%	79.6	%	80.7	%	82.2	%
2024	82.5	%	82.8	%	83.8	%

(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 nine month periods ended September 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 provisions for loan losses will fluctuate based on our third party loan activity.

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


	QTD Pool								YTD Pool
	Three Months Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
SSNOI (1)	$	277,912	$	229,596	$	48,316	21.0	%	$	720,750	$	604,928	$	115,822	19.1	%

(1) For the QTD Pool and YTD Pool, amounts relate to 620 and 547 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 expense fluctuates as a result of acquisitions, dispositions and transitions. To the extent that we acquire, develop or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

During the nine months ended September 30, 2024, we recorded $65,996,000 of impairment charges related to fourteen properties. During the nine months ended September 30, 2023, we recorded impairment charges of $15,029,000 related to six properties.

Transaction costs related to asset acquisitions are capitalized as a component of the purchase price. The fluctuation in other expenses is primarily due to the timing of noncapitalizable transaction costs associated with acquisitions and operator transitions. In April 2024, we reached an agreement to transition 89 Atria Senior Living properties to six of our existing operating partners. In conjunction with the termination of the property management agreements, we recognized $26 million within other expenses on our Consolidated Statements of Comprehensive Income during the second quarter in excess of amounts already accrued. As of September 30, 2024, we have transitioned operations for all 89 properties.

Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices which are further discussed in Note 5 to our unaudited consolidated financial statements.

During the nine months ended September 30, 2024, we completed construction conversions representing $462,246,000 or $379,824 per unit. The following is a summary of our consolidated Seniors Housing Operating construction projects in process, excluding expansions (dollars in thousands):


As of September 30, 2024
Expected Conversion Year(1)	Properties	Units/Beds	Anticipated Remaining Funding		Construction in Progress Balance
2024	6	1,171	$	44,253	$	366,086
2025	12	2,251	214,528		484,445
2026	6	1,102	224,945		71,929

TBD(2)	5				67,332
Total	29				$	989,792

(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						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Beginning balance	$	1,550,164		$	2,094,793		$	1,955,048		$	1,701,939
Debt transferred	27,084			—			27,084			—
Debt issued	836			7,907			3,708			381,369
Debt assumed	364,130			270,352			364,130			297,282
Debt extinguished	—			(284,748)			(196,939)			(288,063)

Debt disposed(1)	—			—			(164,640)			—
Principal payments	(9,597)			(11,288)			(29,580)			(36,292)
Foreign currency	6,070			(20,969)			(20,124)			(188)
Ending balance	$	1,938,687		$	2,056,047		$	1,938,687		$	2,056,047

Ending weighted average interest	4.44		%	4.83		%	4.44		%	4.83		%

(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 nine months ended September 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 Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
Revenues:
Rental income	$	227,531	$	194,912	$	32,619	17	%	$	590,426	$	596,247	$	(5,821)	(1)	%
Interest income	51,866		39,928		11,938		30	%	145,183		110,211		34,972		32	%
Other income	1,118		1,482		(364)		(25)	%	3,248		70,057		(66,809)		(95)	%
Total revenues	280,515		236,322		44,193		19	%	738,857		776,515		(37,658)		(5)	%
Property operating expenses	9,345		10,044		(699)		(7)	%	30,657		32,365		(1,708)		(5)	%
NOI (1)	271,170		226,278		44,892		20	%	708,200		744,150		(35,950)		(5)	%
Other expenses:
Depreciation and amortization	57,583		58,196		(613)		(1)	%	181,884		167,958		13,926		8	%
Interest expense	90		374		(284)		(76)	%	800		(436)		1,236		283	%
Loss (gain) on derivatives and financial instruments, net	(9,906)		2,885		(12,791)		(443)	%	(18,785)		5,095		(23,880)		(469)	%

Provision for loan losses, net	(1,345)		3,675		(5,020)		(137)	%	(2,874)		5,116		(7,990)		(156)	%
Impairment of assets	2,534		4,988		(2,454)		(49)	%	3,150		6,074		(2,924)		(48)	%
Other expenses	2,445		1,627		818		50	%	12,070		4,912		7,158		146	%
	51,401		71,745		(20,344)		(28)	%	176,245		188,719		(12,474)		(7)	%
Income (loss) from continuing operations before income taxes and other items	219,769		154,533		65,236		42	%	531,955		555,431		(23,476)		(4)	%
Income (loss) from unconsolidated entities	(8,680)		2,056		(10,736)		(522)	%	(9,219)		9,858		(19,077)		(194)	%
Gain (loss) on real estate dispositions and acquisitions of controlling interests, net	272,334		(12)		272,346		n/a		293,628		436		293,192		n/a
Income (loss) from continuing operations	483,423		156,577		326,846		209	%	816,364		565,725		250,639		44	%
Net income (loss)	483,423		156,577		326,846		209	%	816,364		565,725		250,639		44	%
Less: Net income (loss) attributable to noncontrolling interests	5,523		5,686		(163)		(3)	%	16,494		17,776		(1,282)		(7)	%
Net income attributable to common stockholders	$	477,900	$	150,891	$	327,009	217	%	$	799,870	$	547,949	$	251,921	46	%

(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

The increase in rental income for the three months ended September 30, 2024 was primarily due to acquisitions, partially offset by the transition of Triple-net properties to Seniors Housing Operating structures during the second and third quarter of 2024, as well as annual rent increases.

The decrease in rental income for the nine months ended September 30, 2024 was primarily due to the write-off of straight-line receivable and unamortized lease incentive balances of $97,674,000, related 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, partially offset by increases in rent due to acquisitions and annual rent increases. For the nine months ended September 30, 2024, we had leases with rental rate increases ranging from 0.05% to 20.05% in our Triple-net portfolio. 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.

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

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

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 nine months ended September 30, 2023.

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


	QTD Pool								YTD Pool
	Three Months Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
SSNOI (1)	$	134,513	$	128,789	$	5,724	4.4	%	$	390,178	$	371,950	$	18,228	4.9	%

(1) For the QTD Pool and YTD Pool, amounts relate to 458 and 450 same store properties, respectively. Please see "Non-GAAP Financial Measures" below for additional information and reconciliations.

Depreciation and amortization expense 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 nine months ended September 30, 2024, we recorded an impairment charge of $3,150,000 related to two properties. During the nine months ended September 30, 2023, we recorded impairment charges of $6,074,000 related to two properties. 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 (loss) on real estate dispositions and acquisitions of controlling interests, net were related to the volume and timing and price of related transactions. During the quarter ended September 30, 2024, the Company, which held a 25% minority interest in an existing joint venture that owned 39 properties subject to triple-net leases with two tenants, acquired the remaining beneficial interest for $205,029,000 in cash, net of cash and restricted cash acquired. We evaluated the acquisition and determined that the entity meets the criteria of a variable interest entity ("VIE"). We consolidated the joint venture upon acquisition of the beneficial interests and recorded a gain on change of control of interests of $179,770,000 in gain (loss) on real estate dispositions and acquisitions of controlling interests, net on the Consolidated Statements of Comprehensive Income.

Additionally, on September 30, 2024, we reached agreements with our tenant to sell 15 properties, which are included in two master leases previously classified as operating leases. As a result of the agreement to sell the properties, the two leases were classified as sales-type leases and $92,593,000 was recognized in gain (loss) on real estate dispositions and acquisitions of controlling interests, net.

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 Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Beginning balance	$	37,787		$	38,723		$	38,260		$	39,179
Debt transferred	(27,084)			—			(27,084)			—

Debt assumed	532,575			—			532,575			—


Principal payments	(76)			(228)			(549)			(684)

Ending balance	$	543,202		$	38,495		$	543,202		$	38,495

Ending weighted average interest	4.01		%	4.39		%	4.01		%	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 Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
Revenues:
Rental income	$	202,955	$	189,595	$	13,360	7	%	$	593,523	$	555,758	$	37,765	7	%
Interest income	852		98		754		769	%	2,552		284		2,268		799	%
Other income	2,040		2,265		(225)		(10)	%	7,019		6,939		80		1	%
Total revenues	205,847		191,958		13,889		7	%	603,094		562,981		40,113		7	%
Property operating expenses	62,778		62,204		574		1	%	186,426		179,266		7,160		4	%
NOI (1)	143,069		129,754		13,315		10	%	416,668		383,715		32,953		9	%
Other expenses:
Depreciation and amortization	66,503		65,923		580		1	%	199,783		196,383		3,400		2	%
Interest expense	(573)		2,313		(2,886)		(125)	%	2,455		9,569		(7,114)		(74)	%
Loss (gain) on extinguishment of debt, net	—		1		(1)		(100)	%	—		7		(7)		(100)	%
Provision for loan losses, net	(5)		—		(5)		n/a		(9)		(2)		(7)		(350)	%

Other expenses	(500)		1,117		(1,617)		(145)	%	440		2,311		(1,871)		(81)	%
	65,425		69,354		(3,929)		(6)	%	202,669		208,268		(5,599)		(3)	%
Income (loss) from continuing operations before income taxes and other items	77,644		60,400		17,244		29	%	213,999		175,447		38,552		22	%
Income (loss) from unconsolidated entities	395		(66)		461		698	%	4,840		(237)		5,077		n/a
Gain (loss) on real estate dispositions and acquisitions of controlling interests, net	(131)		(59)		(72)		(122)	%	8,062		(665)		8,727		n/a
Income (loss) from continuing operations	77,908		60,275		17,633		29	%	226,901		174,545		52,356		30	%
Net income (loss)	77,908		60,275		17,633		29	%	226,901		174,545		52,356		30	%
Less: Net income (loss) attributable to noncontrolling interests	609		636		(27)		(4)	%	475		1,627		(1,152)		(71)	%
Net income (loss) attributable to common stockholders	$	77,299	$	59,639	$	17,660	30	%	$	226,426	$	172,918	$	53,508	31	%

(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 nine months ended September 30, 2024, our consolidated Outpatient Medical portfolio signed 314,579 square feet of new leases and 1,536,738 square feet of renewals. The weighted-average term of these leases was 8 years, with a rate of $42.01 per square foot and tenant improvement and lease commission costs of $31.84 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 Pool								YTD Pool
	Three Months Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
SSNOI (1)	$	127,484	$	123,813	$	3,671	3.0	%	$	361,791	$	354,041	$	7,750	2.2	%

(1) For the QTD Pool and YTD, amounts relate to 412 and 381 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 nine months ended September 30, 2024, we completed construction conversions representing $162,699,000 or $641 per square foot. The following is a summary of our consolidated Outpatient Medical construction projects in process, excluding expansions (dollars in thousands):


As of September 30, 2024
Expected Conversion Year	Properties	Square Feet	Anticipated Remaining Funding		Construction in Progress Balance
2024	5	345,629	$	55,123	$	179,195
2025	5	355,794	107,913		94,415
TBD(1)	1				33,912
Total	11				$	307,522

(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						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Beginning balance	$	212,733		$	363,075		$	229,137		$	388,836


Debt assumed	—			—			—			46,741
Debt extinguished	(112,000)			(40,137)			(126,866)			(109,318)

Principal payments	(744)			(1,349)			(2,282)			(4,670)

Ending balance	$	99,989		$	321,589		$	99,989		$	321,589

Ending weighted average interest	4.19		%	4.87		%	4.19		%	4.87		%

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 Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
Revenues:

Other income	$	38,951	$	29,834	$	9,117	31	%	$	89,777	$	43,705	$	46,072	105	%
Total revenues	38,951		29,834		9,117		31	%	89,777		43,705		46,072		105	%
Property operating expenses	4,691		4,035		656		16	%	13,688		12,106		1,582		13	%
Consolidated net operating income (loss) (1)	34,260		25,799		8,461		33	%	76,089		31,599		44,490		141	%
Expenses:
Interest expense	130,791		139,487		(8,696)		(6)	%	389,283		402,158		(12,875)		(3)	%
General and administrative expenses	77,901		46,106		31,795		69	%	186,784		134,764		52,020		39	%
Loss (gain) on extinguishment of debt, net	419		—		419		n/a		419		—		419		n/a
Other expenses	380		611		(231)		(38)	%	6,149		4,307		1,842		43	%
	209,491		186,204		23,287		13	%	582,635		541,229		41,406		8	%
Income (loss) from continuing operations before income taxes and other items	(175,231)		(160,405)		(14,826)		(9)	%	(506,546)		(509,630)		3,084		1	%
Income tax benefit (expense)	4,706		(4,584)		9,290		203	%	(2,586)		(11,132)		8,546		77	%

Income (loss) from continuing operations	(170,525)		(164,989)		(5,536)		(3)	%	(509,132)		(520,762)		11,630		2	%
Net income (loss)	(170,525)		(164,989)		(5,536)		(3)	%	(509,132)		(520,762)		11,630		2	%
Less: Net income (loss) attributable to noncontrolling interests	1,284		(278)		1,562		562	%	2,335		(906)		3,241		358	%
Net income (loss) attributable to common stockholders	$	(171,809)	$	(164,711)	$	(7,098)	(4)	%	$	(511,467)	$	(519,856)	$	8,389	2	%

(1) See "Non-GAAP Financial Measures" below for additional information and reconciliations.

The increase in other income for nine month periods ended September 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 Ended				Change				Nine Months Ended				Change
	September 30,								September 30,
	2024		2023		$		%		2024		2023		$		%
Senior unsecured notes	$	122,059	$	133,173	$	(11,114)	(8)	%	$	368,231	$	379,438	$	(11,207)	(3)	%

Unsecured credit facility and commercial paper program	1,597		1,552		45		3	%	4,665		5,425		(760)		(14)	%
Loan expense	7,135		4,762		2,373		50	%	16,387		17,295		(908)		(5)	%
Totals	$	130,791	$	139,487	$	(8,696)	(6)	%	$	389,283	$	402,158	$	(12,875)	(3)	%

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 nine months ended September 30, 2024 and 2023 were 3.25% and 2.76%, respectively. During the three months ended September 30, 2024, we recognized $29,838,000 as a cumulative catch up of stock compensation expense due to the change in the probability of achievement of specific performance goals related to special non-recurring performance-based stock option and restricted stock awards granted in December 2021 and January 2022. Please refer to Note 15 to our unaudited consolidated financial statements for additional information. The additional increase in general and administrative expenses during the nine months ended September 30, 2024 was 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 acquisitions of controlling interests, 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 seven 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 seven 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 seven 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 seven 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/losses on disposition of properties and acquisitions of controlling interests, impairment of assets, 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

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

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 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 acquisitions of controlling interests, and impairment of assets. Amounts are in thousands except for per share data.


	Three Months Ended
	September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
FFO Reconciliation:	2024		2024		2024		2023		2023		2023		2023
Net income (loss) attributable to common stockholders	$	449,849	$	254,714	$	127,146	$	83,911	$	127,470	$	103,040	$	25,673
Depreciation and amortization	403,779		382,045		365,863		380,730		339,314		341,945		339,112
Impairment of assets	23,421		2,394		43,331		14,994		7,388		1,086		12,629
Loss (gain) on real estate dispositions and acquisitions of controlling interests, net	(272,266)		(166,443)		(4,707)		1,783		(71,102)		2,168		(747)
Noncontrolling interests	(5,801)		(6,348)		(11,996)		(11,436)		(8,789)		(12,841)		(13,327)
Unconsolidated entities	36,835		27,411		37,066		21,877		24,843		30,784		22,722
FFO	$	635,817	$	493,773	$	556,703	$	491,859	$	419,124	$	466,182	$	386,062

Average diluted shares outstanding	618,306		604,563		577,530		552,380		525,138		501,970		494,494

Per diluted share data:
Net income attributable to common stockholders(1)	$	0.73	$	0.42	$	0.22	$	0.15	$	0.24	$	0.20	$	0.05
FFO	$	1.03	$	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.


	Nine Months Ended
	September 30,
FFO Reconciliations:	2024		2023
Net income (loss) attributable to common stockholders	$	831,709	$	256,183
Depreciation and amortization	1,151,687		1,020,371
Impairment of assets	69,146		21,103
Loss (gain) on real estate dispositions and acquisitions of controlling interests, net	(443,416)		(69,681)
Noncontrolling interests	(24,145)		(34,957)
Unconsolidated entities	101,312		78,349
FFO	$	1,686,293	$	1,271,368

Average diluted common shares outstanding:	600,191		507,353

Per diluted share data:
Net income attributable to common stockholders(1)	$	1.39	$	0.50
FFO	$	2.81	$	2.51

(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
	September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
NOI Reconciliations:	2024		2024		2024		2023		2023		2023		2023
Net income (loss)	$	456,800	$	260,670	$	131,634	$	88,440	$	134,722	$	106,342	$	28,635
Loss (gain) on real estate dispositions and acquisitions of controlling interests, net	(272,266)		(166,443)		(4,707)		1,783		(71,102)		2,168		(747)
Loss (income) from unconsolidated entities	4,038		(4,896)		7,783		2,008		4,031		40,332		7,071
Income tax expense (benefit)	(4,706)		1,101		6,191		(4,768)		4,584		3,503		3,045
Other expenses	20,239		48,684		14,131		36,307		38,220		11,069		22,745
Impairment of assets	23,421		2,394		43,331		14,994		7,388		1,086		12,629
Provision for loan losses, net	4,193		5,163		1,014		2,517		4,059		2,456		777
Loss (gain) on extinguishment of debt, net	419		1,705		6		—		1		1		5
Loss (gain) on derivatives and financial instruments, net	(9,906)		(5,825)		(3,054)		(7,215)		2,885		1,280		930
General and administrative expenses	77,901		55,565		53,318		44,327		46,106		44,287		44,371
Depreciation and amortization	403,779		382,045		365,863		380,730		339,314		341,945		339,112
Interest expense	139,050		133,424		147,318		154,574		156,532		152,337		144,403
Consolidated net operating income (NOI)	$	842,962	$	713,587	$	762,828	$	713,697	$	666,740	$	706,806	$	602,976

NOI by segment:
Seniors Housing Operating	$	394,463	$	376,544	$	347,413	$	301,077	$	284,909	$	279,252	$	252,897
Triple-net	271,170		178,115		258,915		256,985		226,278		291,530		226,342
Outpatient Medical	143,069		136,900		136,699		135,484		129,754		127,495		126,466
Non-segment/corporate	34,260		22,028		19,801		20,151		25,799		8,529		(2,729)
Total NOI	$	842,962	$	713,587	$	762,828	$	713,697	$	666,740	$	706,806	$	602,976


	Nine Months Ended
	September 30,
NOI Reconciliations:	2024		2023
Net income (loss)	$	849,104	$	269,699
Loss (gain) on real estate dispositions and acquisitions of controlling interests, net	(443,416)		(69,681)
Loss (income) from unconsolidated entities	6,925		51,434
Income tax expense (benefit)	2,586		11,132
Other expenses	83,054		72,034
Impairment of assets	69,146		21,103
Provision for loan losses, net	10,370		7,292
Loss (gain) on extinguishment of debt, net	2,130		7
Loss (gain) on derivatives and financial instruments, net	(18,785)		5,095
General and administrative expenses	186,784		134,764
Depreciation and amortization	1,151,687		1,020,371
Interest expense	419,792		453,272
Consolidated net operating income (NOI)	$	2,319,377	$	1,976,522

NOI by segment:
Seniors Housing Operating	$	1,118,420	$	817,058
Triple-net	708,200		744,150
Outpatient Medical	416,668		383,715
Non-segment/corporate	76,089		31,599
Total NOI	$	2,319,377	$	1,976,522

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 Pool				YTD Pool
SSNOI Property Reconciliations:	Seniors Housing Operating	Triple-net	Outpatient Medical	Total	Seniors Housing Operating	Triple-net	Outpatient Medical	Total
Consolidated properties	1,008	606	371	1,985	1,008	606	371	1,985
Unconsolidated properties	76	—	76	152	76	—	76	152
Total properties	1,084	606	447	2,137	1,084	606	447	2,137
Recent acquisitions/development conversions(1)	(114)	(92)	(12)	(218)	(187)	(100)	(43)	(330)
Under development	(31)	—	(11)	(42)	(31)	—	(11)	(42)
Under redevelopment(2)	(2)	(4)	—	(6)	(2)	(4)	—	(6)
Current held for sale	(23)	(10)	—	(33)	(23)	(10)	—	(33)
Land parcels, loans and subleases(3)	(15)	(19)	(9)	(43)	(15)	(19)	(9)	(43)
Transitions(4)	(271)	(19)	—	(290)	(271)	(19)	—	(290)
Other(5)	(8)	(4)	(3)	(15)	(8)	(4)	(3)	(15)
Same store properties	620	458	412	1,490	547	450	381	1,378

(1) Acquisitions and development conversions will enter the QTD Pool after five full quarters and YTD Pool after seven full quarters of acquisition or certificate of occupancy.
(2) Redevelopment properties will enter the QTD Pool after five full quarters and YTD Pool after seven full quarters of operations post redevelopment completion.
(3) Includes 15 Triple-net properties accounted for as sales-type leases expected to be sold to the tenant.
(4) Transitioned properties will enter the QTD Pool after five full quarters and YTD Pool after seven full quarters of operations with the new operator in place or under the new structure.
(5) 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 Pool				YTD Pool
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
SSNOI Reconciliations:	2024		2023		2024		2023

Seniors Housing Operating:
Consolidated NOI	$	394,463	$	284,909	$	1,118,420	$	817,058
NOI attributable to unconsolidated investments	22,709		19,037		67,530		44,793
NOI attributable to noncontrolling interests	(11,624)		(15,656)		(41,066)		(47,891)
NOI attributable to non-same store properties	(125,424)		(58,152)		(423,300)		(209,470)
Non-cash NOI attributable to same store properties	(840)		(1,073)		(438)		(2,081)
Currency and ownership adjustments (1)	(1,372)		531		(396)		2,519
SSNOI at Welltower Share	277,912		229,596		720,750		604,928

Triple-net:
Consolidated NOI	271,170		226,278		708,200		744,150
NOI attributable to unconsolidated investments	5,214		5,705		16,177		21,863
NOI attributable to noncontrolling interests	(8,028)		(8,010)		(24,076)		(23,342)
NOI attributable to non-same store properties	(116,046)		(74,338)		(258,028)		(307,696)
Non-cash NOI attributable to same store properties	(16,985)		(20,509)		(50,750)		(62,971)
Currency and ownership adjustments (1)	(812)		(337)		(1,345)		(54)
SSNOI at Welltower Share	134,513		128,789		390,178		371,950

Outpatient Medical:
Consolidated NOI	143,069		129,754		416,668		383,715
NOI attributable to unconsolidated investments	4,120		4,746		13,144		14,338
NOI attributable to noncontrolling interests	(2,382)		(3,195)		(7,406)		(13,091)
NOI attributable to non-same store properties	(10,224)		(3,194)		(46,498)		(22,206)
Non-cash NOI attributable to same store properties	(7,010)		(5,131)		(14,094)		(14,868)
Currency and ownership adjustments (1)	(89)		833		(23)		6,153
SSNOI at Welltower Share	127,484		123,813		361,791		354,041

SSNOI at Welltower Share:
Seniors Housing Operating	277,912		229,596		720,750		604,928
Triple-net	134,513		128,789		390,178		371,950
Outpatient Medical	127,484		123,813		361,791		354,041
Total	$	539,909	$	482,198	$	1,472,719	$	1,330,919

(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
	September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
EBITDA Reconciliations:	2024			2024			2024			2023			2023			2023			2023
Net income (loss)	$	456,800		$	260,670		$	131,634		$	88,440		$	134,722		$	106,342		$	28,635
Interest expense	139,050			133,424			147,318			154,574			156,532			152,337			144,403
Income tax expense (benefit)	(4,706)			1,101			6,191			(4,768)			4,584			3,503			3,045
Depreciation and amortization	403,779			382,045			365,863			380,730			339,314			341,945			339,112
EBITDA	$	994,923		$	777,240		$	651,006		$	618,976		$	635,152		$	604,127		$	515,195

Interest Coverage Ratio:
Interest expense	$	139,050		$	133,424		$	147,318		$	154,574		$	156,532		$	152,337		$	144,403
Capitalized interest	15,668			14,478			13,809			14,547			13,947			11,870			10,335
Non-cash interest expense	(9,008)			(8,953)			(9,284)			(5,871)			(6,716)			(5,824)			(5,083)
Total interest	145,710			138,949			151,843			163,250			163,763			158,383			149,655
EBITDA	$	994,923		$	777,240		$	651,006		$	618,976		$	635,152		$	604,127		$	515,195
Interest coverage ratio	6.83		x	5.59		x	4.29		x	3.79		x	3.88		x	3.81		x	3.44		x

Fixed Charge Coverage Ratio:
Total interest	$	145,710		$	138,949		$	151,843		$	163,250		$	163,763		$	158,383		$	149,655
Secured debt principal payments	10,417			10,107			11,887			12,430			12,865			13,839			14,942
Total fixed charges	156,127			149,056			163,730			175,680			176,628			172,222			164,597
EBITDA	$	994,923		$	777,240		$	651,006		$	618,976		$	635,152		$	604,127		$	515,195
Fixed charge coverage ratio	6.37		x	5.21		x	3.98		x	3.52		x	3.60		x	3.51		x	3.13		x


	Nine Months Ended
	September 30,
EBITDA Reconciliations:	2024			2023
Net income (loss)	$	849,104		$	269,699
Interest expense	419,792			453,272
Income tax expense (benefit)	2,586			11,132
Depreciation and amortization	1,151,687			1,020,371
EBITDA	$	2,423,169		$	1,754,474

Interest Coverage Ratio:
Interest expense	$	419,792		$	453,272
Non-cash interest expense	(27,245)			(17,623)
Capitalized interest	43,955			36,152
Total interest	436,502			471,801
EBITDA	$	2,423,169		$	1,754,474
Interest coverage ratio	5.55		x	3.72		x

Fixed Charge Coverage Ratio:
Total interest	$	436,502		$	471,801
Secured debt principal payments	32,411			41,646
Total fixed charges	468,913			513,447
EBITDA	$	2,423,169		$	1,754,474
Fixed charge coverage ratio	5.17		x	3.42		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 in thousands):


	Twelve Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
Adjusted EBITDA Reconciliations:	2024			2024			2024			2023			2023			2023			2023
Net income (loss)	$	937,544		$	615,466		$	461,138		$	358,139		$	271,497		$	134,122		$	123,452
Interest expense	574,366			591,848			610,761			607,846			593,663			576,813			552,226
Income tax expense (benefit)	(2,182)			7,108			9,510			6,364			7,044			5,717			5,279
Depreciation and amortization	1,532,417			1,467,952			1,427,852			1,401,101			1,362,657			1,377,042			1,345,392
EBITDA	3,042,145			2,682,374			2,509,261			2,373,450			2,234,861			2,093,694			2,026,349
Loss (income) from unconsolidated entities	8,933			8,926			54,154			53,442			56,084			58,751			25,477
Stock-based compensation expense	69,542			38,364			38,829			36,611			34,762			32,299			27,709
Loss (gain) on extinguishment of debt, net	2,130			1,712			8			7			94			95			697
Loss (gain) on real estate dispositions and acquisitions of controlling interests, net	(441,633)			(240,469)			(71,858)			(67,898)			(65,258)			4,780			6,144
Impairment of assets	84,140			68,107			66,799			36,097			34,249			31,217			30,131
Provision for loan losses, net	12,887			12,753			10,046			9,809			17,761			14,192			11,098
Loss (gain) on derivatives and financial instruments, net	(26,000)			(13,209)			(6,104)			(2,120)			5,353			9,373			5,751
Other expenses	119,361			137,342			99,727			108,341			96,988			74,249			98,346
Lease termination and leasehold interest adjustment (1)	—			—			(65,485)			(65,485)			(65,485)			(65,485)			(56,397)
Casualty losses, net of recoveries	8,373			6,163			7,778			10,107			16,446			15,760			14,865
Other impairment (2)	102,007			114,316			25,998			16,642			12,309			—			(620)
Adjusted EBITDA	$	2,981,885		$	2,816,379		$	2,669,153		$	2,509,003		$	2,378,164		$	2,268,925		$	2,189,550

Adjusted Interest Coverage Ratio:
Interest expense	$	574,366		$	591,848		$	610,761		$	607,846		$	593,663		$	576,813		$	552,226
Capitalized interest	58,502			56,781			54,173			50,699			45,914			40,830			35,347
Non-cash interest expense	(33,116)			(30,824)			(27,695)			(23,494)			(21,903)			(21,946)			(22,728)
Total interest	599,752			617,805			637,239			635,051			617,674			595,697			564,845
Adjusted EBITDA	$	2,981,885		$	2,816,379		$	2,669,153		$	2,509,003		$	2,378,164		$	2,268,925		$	2,189,550
Adjusted interest coverage ratio	4.97		x	4.56		x	4.19		x	3.95		x	3.85		x	3.81		x	3.88		x

Adjusted Fixed Charge Coverage Ratio:
Total interest	$	599,752		$	617,805		$	637,239		$	635,051		$	617,674		$	595,697		$	564,845
Secured debt principal payments	44,841			47,289			51,021			54,076			55,635			56,545			57,088
Total fixed charges	644,593			665,094			688,260			689,127			673,309			652,242			621,933
Adjusted EBITDA	$	2,981,885		$	2,816,379		$	2,669,153		$	2,509,003		$	2,378,164		$	2,268,925		$	2,189,550
Adjusted fixed charge coverage ratio	4.63		x	4.23		x	3.88		x	3.64		x	3.53		x	3.48		x	3.52		x

(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
	September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
	2024		2024		2024		2023		2023		2023		2023
Book capitalization:
Unsecured credit facility and commercial paper	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Long-term debt obligations (1)	15,854,937		14,027,128		14,285,686		15,815,226		15,899,420		16,040,530		15,074,320
Cash and cash equivalents and restricted cash	(3,784,408)		(2,863,598)		(2,478,335)		(2,076,083)		(2,686,711)		(2,299,069)		(638,796)
Total net debt	12,070,529		11,163,530		11,807,351		13,739,143		13,212,709		13,741,461		14,435,524
Total equity and noncontrolling interests(2)	31,064,003		29,688,579		28,547,908		26,371,727		23,818,619		22,193,114		21,596,155
Book capitalization	$	43,134,532	$	40,852,109	$	40,355,259	$	40,110,870	$	37,031,328	$	35,934,575	$	36,031,679
Net debt to book capitalization ratio	28%		27%		29%		34%		36%		38%		40%

Undepreciated book capitalization:
Total net debt	$	12,070,529	$	11,163,530	$	11,807,351	$	13,739,143	$	13,212,709	$	13,741,461	$	14,435,524
Accumulated depreciation and amortization	10,276,509		9,908,007		9,537,562		9,274,814		8,868,627		8,599,622		8,417,151
Total equity and noncontrolling interests(2)	31,064,003		29,688,579		28,547,908		26,371,727		23,818,619		22,193,114		21,596,155
Undepreciated book capitalization	$	53,411,041	$	50,760,116	$	49,892,821	$	49,385,684	$	45,899,955	$	44,534,197	$	44,448,830
Net debt to undepreciated book capitalization ratio	23%		22%		24%		28%		29%		31%		32%

Enterprise value:
Common shares outstanding	618,396		608,151		590,934		564,241		532,268		508,159		496,295
Period end share price	$	128.03	$	104.25	$	93.44	$	90.17	$	81.92	$	80.89	$	71.69
Common equity market capitalization	$	79,173,240	$	63,399,742	$	55,216,873	$	50,877,611	$	43,603,395	$	41,104,982	$	35,579,389
Total net debt	12,070,529		11,163,530		11,807,351		13,739,143		13,212,709		13,741,461		14,435,524
Noncontrolling interests(2)	729,722		712,153		999,965		967,351		864,583		988,673		1,148,000
Consolidated enterprise value	$	91,973,491	$	75,275,425	$	68,024,189	$	65,584,105	$	57,680,687	$	55,835,116	$	51,162,913
Net debt to consolidated enterprise value ratio	13%		15%		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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