UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☑

☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~September~~June 30, ~~2017~~

2019


☐

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number: 1-8923

WELLTOWER INC.

(Exact name of registrant as specified in its charter)


~~Delaware~~		~~34-1096634~~
Delaware					34-1096634
(State or other jurisdiction of ~~incorporation or organization)~~ Incorporation)					(~~I.R.S.~~IRS Employer Identification No.)

4500 Dorr Street ~~Toledo, Ohio~~	Toledo,	Ohio		43615

(Address of principal executive offices)			(Zip Code)

(419)				247-2800
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

~~(419) 247-2800~~

~~(Registrant’s telephone number, including area code)~~

~~Not Applicable~~

~~(Former name, former address and former fiscal year, if changed since last report)~~



Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $1.00 par value per share	WELL	New York Stock Exchange
4.800% Notes due 2028	WELL28	New York Stock Exchange
4.500% Notes due 2034	WELL34	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑þ No o

Indicate by check mark whether the registrant has submitted electronically, ~~and posted on its corporate Web site,~~ if any, every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑

Accelerated filer o

Non-accelerated filer o

~~(Do~~

Smaller reporting company

☐

Emerging growth company

☐

(Do not check if a smaller reporting company)

~~Smaller reporting company o~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ☑

As of ~~October 31, 2017,~~July 19, 2019, the registrant had ~~370,356,835~~405,246,816 shares of common stock outstanding.

TABLE OF CONTENTS

		~~Page~~

	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets ~~— September~~- June 30, ~~2017~~2019 and December 31, ~~2016~~ 2018	3

Consolidated Statements of Comprehensive Income —- Three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~ 2018	4

Consolidated Statements of Equity ~~— Nine~~- Three and six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~ 2018	6

Consolidated Statements of Cash Flows ~~— Nine~~- Six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~ 2018	7

Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3. Quantitative and Qualitative Disclosures About Market Risk	51 50

Item 4. Controls and Procedures	52 51

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	51

Item 1A. Risk Factors	52 53

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53 52

Item 5. Other Information	53 52

Item 6. Exhibits	53

Signatures	54 53

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


				September 30, 2017		December 31, 2016
				(Unaudited)		(Note)		June 30, 2019 (Unaudited)			December 31, 2018 (Note)
Assets:	Assets:
Real estate investments:	Real estate investments:
	Real property owned:
		Land and land improvements		$	2,806,586	$	2,591,071
		Buildings and improvements			26,010,364		24,496,153
		Acquired lease intangibles			1,492,279		1,402,884
		Real property held for sale, net of accumulated depreciation			70,995		1,044,859
		Construction in progress			344,742		506,091
			Gross real property owned		30,724,966		30,041,058
		Less accumulated depreciation and amortization			(4,826,418)		(4,093,494)
			Net real property owned		25,898,548		25,947,564
	Real estate loans receivable				496,850		622,628
		Less allowance for losses on loans receivable			(5,406)		(6,563)
			Net real estate loans receivable		491,444		616,065
	Net real estate investments				26,389,992		26,563,629
Real property owned:
Land and land improvements								$	3,337,234		$	3,205,091
Buildings and improvements								28,691,274			28,019,502
Acquired lease intangibles								1,589,138			1,581,159
Real property held for sale, net of accumulated depreciation								1,704,206			590,271
Construction in progress								363,160			194,365
Less accumulated depreciation and amortization								(5,539,435		)	(5,499,958		)
Net real property owned								30,145,577			28,090,430
Right of use assets, net								550,342			—
Real estate loans receivable, net of allowance								368,994			330,339
Net real estate investments								31,064,913			28,420,769
Other assets:	Other assets:
		Investments in unconsolidated entities			407,507		457,138
		Goodwill			68,321		68,321
		Cash and cash equivalents			236,247		419,378
		Restricted cash			59,064		187,842
		Straight-line rent receivable			393,142		342,578
		Receivables and other assets			626,106		826,298
			Total other assets		1,790,387		2,301,555
Investments in unconsolidated entities								519,387			482,914
Goodwill								68,321			68,321
Cash and cash equivalents								268,666			215,376
Restricted cash								91,052			100,753
Straight-line rent receivable								419,501			367,093
Receivables and other assets								716,857			686,846
Total other assets								2,083,784			1,921,303
Total assets	Total assets			$	28,180,379	$	28,865,184	$	33,148,697		$	30,342,072

Liabilities and equity	Liabilities and equity
Liabilities:	Liabilities:
		Borrowings under primary unsecured credit facility		$	420,000	$	645,000
		Senior unsecured notes			8,315,395		8,161,619
		Secured debt			2,713,513		3,477,699
		Capital lease obligations			72,684		73,927
		Accrued expenses and other liabilities			1,027,375		827,034
Unsecured credit facility and commercial paper								$	1,869,188		$	1,147,000
Senior unsecured notes								10,606,106			9,603,299
Secured debt								2,675,507			2,476,177
Lease liabilities								469,029			70,668
Accrued expenses and other liabilities								1,076,061			1,034,283
Total liabilities	Total liabilities				12,548,967		13,185,279	16,695,891			14,331,427
Redeemable noncontrolling interests	Redeemable noncontrolling interests				386,748		398,433	483,234			424,046
Equity:	Equity:
		Preferred stock			718,503		1,006,250
		Common stock			371,012		363,071
		Capital in excess of par value			17,564,805		16,999,691
		Treasury stock			(62,363)		(54,741)
		Cumulative net income			5,416,427		4,803,575
		Cumulative dividends			(9,138,346)		(8,144,981)
		Accumulated other comprehensive income (loss)			(141,240)		(169,531)
		Other equity			1,127		3,059
			Total Welltower Inc. stockholders’ equity		14,729,925		14,806,393
		Noncontrolling interests			514,739		475,079
Preferred stock								—			718,498
Common stock								406,014			384,465
Capital in excess of par value								19,740,145			18,424,368
Treasury stock								(74,042		)	(68,499		)
Cumulative net income								6,539,766			6,121,534
Cumulative dividends								(11,516,994		)	(10,818,557		)
Accumulated other comprehensive income (loss)								(100,622		)	(129,769		)
Other equity								188			294
Total Welltower Inc. stockholders’ equity								14,994,455			14,632,334
Noncontrolling interests								975,117			954,265
Total equity	Total equity				15,244,664		15,281,472	15,969,572			15,586,599
Total liabilities and equity	Total liabilities and equity			$	28,180,379	$	28,865,184	$	33,148,697		$	30,342,072

NOTE: The consolidated balance sheet at December 31, ~~2016~~2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

~~See notes to unaudited consolidated financial statements~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2017		2016		2017		2016
Revenues:
	Rental income		$	362,880	$	421,152	$	1,085,621	$	1,259,442
	Resident fees and services			702,380		630,017		2,049,757		1,847,386
	Interest income			20,187		25,080		61,836		74,275	Three Months Ended						Six Months Ended
	Other income			6,036		2,884		15,169		21,735	June 30,						June 30,
		Total revenues		1,091,483		1,079,133		3,212,383		3,202,838	2019			2018			2019			2018
Revenues:
Resident fees and services											$	914,085		$	763,345		$	1,782,370		$	1,499,279
Rental income											385,586			333,601			766,670			676,970
Interest income											17,356			13,462			32,475			28,110
Other income											3,079			15,504			10,836			18,518
Total revenues											1,320,106			1,125,912			2,592,351			2,222,877

Expenses:	Expenses:
Property operating expenses											701,127			568,751			1,371,934			1,125,216
Depreciation and amortization											248,052			236,275			491,984			464,476
Interest expense											141,336			121,416			286,568			244,191
General and administrative expenses											33,741			32,831			69,023			66,536
Loss (gain) on derivatives and financial instruments, net											1,913			(7,460		)	(574		)	(14,633		)
Loss (gain) on extinguishment of debt, net											—			299			15,719			12,006
Provision for loan losses											—			—			18,690			—
Impairment of assets											9,939			4,632			9,939			32,817
Other expenses											21,628			10,058			30,384			13,770
Total expenses											1,157,736			966,802			2,293,667			1,944,379
	Interest expense			122,578		129,699		357,405		394,985
	Property operating expenses			523,997		473,680		1,536,021		1,382,148
	Depreciation and amortization			230,138		218,061		683,262		673,326
	General and administrative			29,913		36,828		93,643		122,434
	Transaction costs			-		19,842		-		33,207
	Loss (gain) on derivatives, net			324		(2,516)		2,284		(2,516)
	Loss (gain) on extinguishment of debt, net			-		-		36,870		9
	Impairment of assets			-		9,705		24,662		24,019
	Other expenses			99,595		-		117,608		3,161
		Total expenses		1,006,545		885,299		2,851,755		2,630,773

Income (loss) from continuing operations before income taxes
	and income from unconsolidated entities			84,938		193,834		360,628		572,065
Income (loss) from continuing operations before income taxes and other items											162,370			159,110			298,684			278,498
Income tax (expense) benefit	Income tax (expense) benefit			(669)		305		5,535		2,543	(1,599		)	(3,841		)	(3,821		)	(5,429		)
Income (loss) from unconsolidated entities	Income (loss) from unconsolidated entities			3,408		(1,749)		(23,676)		(7,528)	(9,049		)	1,249			(18,248		)	(1,180		)
Gain (loss) on real estate dispositions, net											(1,682		)	10,755			165,727			348,939
Income (loss) from continuing operations	Income (loss) from continuing operations			87,677		192,390		342,487		567,080	150,040			167,273			442,342			620,828

Gain (loss) on real estate dispositions, net				1,622		162,351		287,869		163,881
Net income	Net income			89,299		354,741		630,356		730,961	150,040			167,273			442,342			620,828
Less:		Preferred stock dividends		11,676		16,352		37,734		49,055
Less:		Preferred stock redemption charge		-		-		9,769		-
Less:		Net income (loss) attributable to noncontrolling interests⁽¹⁾		3,580		3,479		7,735		2,553
Less: Preferred stock dividends											—			11,676			—			23,352
Less: Net income (loss) attributable to noncontrolling interests⁽¹⁾											12,278			1,165			24,110			5,373
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders		$	74,043	$	334,910	$	575,118	$	679,353	$	137,762		$	154,432		$	418,232		$	592,103

Average number of common shares outstanding:	Average number of common shares outstanding:
	Basic			369,089		358,932		366,096		356,911
	Diluted			370,740		361,237		367,894		358,752
Basic											404,607			371,640			398,073			371,552
Diluted											406,673			373,075			400,096			373,186

Earnings per share:	Earnings per share:
Basic:
Income (loss) from continuing operations											$	0.37		$	0.45		$	1.11		$	1.67
Net income (loss) attributable to common stockholders											$	0.34		$	0.42		$	1.05		$	1.59
	Basic:
	Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions		$	0.20	$	0.93	$	1.57	$	1.90
	Net income (loss) attributable to common stockholders*		$	0.20	$	0.93	$	1.57	$	1.90

	Diluted:
	Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions		$	0.20	$	0.93	$	1.56	$	1.89
	Net income (loss) attributable to common stockholders*		$	0.20	$	0.93	$	1.56	$	1.89
Diluted:
Income (loss) from continuing operations											$	0.37		$	0.45		$	1.11		$	1.66
Net income (loss) attributable to common stockholders											$	0.34		$	0.41		$	1.05		$	1.59

Dividends declared and paid per common share	Dividends declared and paid per common share		$	0.87	$	0.86	$	2.61	$	2.58	$	0.87		$	0.87		$	1.74		$	1.74

* Amounts may not sum due to rounding

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

~~See notes to unaudited consolidated financial statements~~

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016
Net income
$
89,299

$
354,741

$
630,356

$
730,961

Other comprehensive income (loss):

Unrecognized gain (loss) on equity investments

(3,808)

5,908

(20,285)

(5,252)

Change in net unrealized gains (losses) on cash flow hedges:

Unrealized gains (losses) on cash flow hedges

2

401

2

1,371

Unrecognized actuarial gain (loss)

-

(2)

-

-

Foreign currency translation gain (loss)

37,343

516

70,769

(48,496)
Total other comprehensive income (loss)

33,537

6,823

50,486

(52,377)

Total comprehensive income (loss)

122,836

361,564

680,842

678,584
Less: Total comprehensive income (loss) attributable to noncontrolling interests⁽¹⁾

14,732

1,846

29,930

13,117
Total comprehensive income (loss) attributable to common stockholders
$
108,104

$
359,718

$
650,912

$
665,467

(1) Includes amounts attributable to redeemable noncontrolling interests.

~~See notes to unaudited consolidated financial statements~~

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Net income $ 150,040
$ 167,273
$ 442,342
$ 620,828

Other comprehensive income (loss):
Foreign currency translation gain (loss) (54,024 ) (200,826 ) 24,596
(121,802 )
Derivative instruments gain (loss) 100,407
150,703
12,725
88,005
Total other comprehensive income (loss) 46,383
(50,123 ) 37,321
(33,797 )

Total comprehensive income (loss) 196,423
117,150
479,663
587,031
Less: Total comprehensive income (loss) attributable
to noncontrolling interests⁽¹⁾
14,665
(7,580 ) 32,284
(7,258 )
Total comprehensive income (loss) attributable to common stockholders $ 181,758
$ 124,730
$ 447,379
$ 594,289

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

		Nine Months Ended September 30, 2017
														Accumulated
						Capital in								Other								Six Months Ended June 30, 2019
		Preferred		Common		Excess of		Treasury		Cumulative				Comprehensive		Other		Noncontrolling				Preferred Stock			Common Stock		Capital in Excess of Par Value			Treasury Stock			Cumulative Net Income		Cumulative Dividends			Accumulated Other Comprehensive Income (Loss)			Other Equity			Noncontrolling Interests			Total
		Stock				Par Value		Stock		Net Income		Dividends		Income (Loss)		Equity		Interests		Total
Balances at beginning of period		$	1,006,250	$	363,071	$	16,999,691	$	(54,741)	$	4,803,575	$	(8,144,981)	$	(169,531)	$	3,059	$	475,079	$	15,281,472
Balances at December 31, 2018																						$	718,498		$	384,465	$	18,424,368		$	(68,499	)	$	6,121,534	$	(10,818,557	)	$	(129,769	)	$	294		$	954,265		$	15,586,599
Comprehensive income:	Comprehensive income:
	Net income (loss)										622,621								9,907		632,528
	Other comprehensive income														28,291				22,195		50,486
Net income (loss)																																	280,470											10,785			291,255
Other comprehensive income																																						(14,849		)				5,787			(9,062		)
Total comprehensive income	Total comprehensive income																				683,014																										282,193
Net change in noncontrolling interests	Net change in noncontrolling interests						9,784												7,558		17,342						(8,845		)															(1,497		)	(10,342		)
Amounts related to stock incentive plans, net of forfeitures	Amounts related to stock incentive plans, net of forfeitures				337		17,151		(7,611)								(1,942)				7,935				120		7,420			(5,993		)									(26		)				1,521
Proceeds from issuance of common stock	Proceeds from issuance of common stock				7,513		522,954														530,467				7,212		525,408																				532,620
Redemption of preferred stock			(287,500)				9,760				(9,769)										(287,509)
Redemption of equity membership units					91		5,465		(11)												5,545
Conversion of preferred stock	Conversion of preferred stock		(247)																		(247)	(718,498		)	12,712		705,786																				—
Option compensation expense																	10				10
Dividends paid:	Dividends paid:
	Common stock dividends												(955,631)								(955,631)
	Preferred stock dividends												(37,734)								(37,734)
Balances at end of period		$	718,503	$	371,012	$	17,564,805	$	(62,363)	$	5,416,427	$	(9,138,346)	$	(141,240)	$	1,127	$	514,739	$	15,244,664

		Nine Months Ended September 30, 2016
														Accumulated
						Capital in								Other
		Preferred		Common		Excess of		Treasury		Cumulative				Comprehensive		Other		Noncontrolling
		Stock				Par Value		Stock		Net Income		Dividends		Income (Loss)		Equity		Interests		Total
Balances at beginning of period		$	1,006,250	$	354,811	$	16,478,300	$	(44,372)	$	3,725,772	$	(6,846,056)	$	(88,243)	$	4,098	$	585,325	$	15,175,885
Common stock dividends																																			(344,760		)										(344,760		)
Balances at March 31, 2019																						$	—		$	404,509	$	19,654,137		$	(74,492	)	$	6,402,004	$	(11,163,317	)	$	(144,618	)	$	268		$	969,340		$	16,047,831
Comprehensive income:	Comprehensive income:
	Net income (loss)										728,408								7,363		735,771
	Other comprehensive income														(62,941)				10,564		(52,377)
Net income (loss)																																	137,762											11,349			149,111
Other comprehensive income																																						43,996						2,387			46,383
Total comprehensive income	Total comprehensive income																				683,394																										195,494
Net change in noncontrolling interests	Net change in noncontrolling interests						(45,765)												(128,859)		(174,624)						(23,672		)															(7,959		)	(31,631		)
Amounts related to stock incentive plans, net of forfeitures	Amounts related to stock incentive plans, net of forfeitures				689		38,888		(7,822)								(1,285)				30,470				18		7,959			450											(80		)				8,347
Proceeds from issuance of common stock	Proceeds from issuance of common stock				7,203		512,139														519,342				1,487		101,721																				103,208
Option compensation expense																	207				207
Dividends paid:	Dividends paid:
	Common stock dividends												(921,381)								(921,381)
	Preferred stock dividends												(49,055)								(49,055)
Balances at end of period		$	1,006,250		362,703		16,983,562		(52,194)		4,454,180		(7,816,492)		(151,184)		3,020		474,393	$	15,264,238
Common stock dividends																																			(353,677		)										(353,677		)
Balances at June 30, 2019																						$	—		$	406,014	$	19,740,145		$	(74,042	)	$	6,539,766	$	(11,516,994	)	$	(100,622	)	$	188		$	975,117		$	15,969,572

~~See notes to unaudited consolidated financial statements~~

Six Months Ended June 30, 2018
Preferred
Stock Common
Stock Capital in
Excess of
Par Value Treasury
Stock Cumulative
Net Income Cumulative
Dividends Accumulated Other
Comprehensive
Income (Loss) Other
Equity Noncontrolling
Interests Total
Balances at December 31, 2017 $ 718,503
$ 372,449
$ 17,662,681
$ (64,559 ) $ 5,316,580
$ (9,471,712 ) $ (111,465 ) $ 670
$ 502,305
$ 14,925,452
Comprehensive income:
Net income (loss)

449,347

5,191
454,538
Other comprehensive income

20,212

(3,886 ) 16,326
Total comprehensive income

470,864
Net change in noncontrolling interests
(13,157 )

(2,719 ) (15,876 )
Amounts related to stock incentive plans, net of forfeitures
150
11,085
(4,137 )

7,098
Proceeds from issuance of common stock
130
7,060

7,190
Conversion of preferred stock (5 )
5

—
Dividends paid:
Common stock dividends

(323,726 )

(323,726 )
Preferred stock dividends

(11,676 )

(11,676 )
Balances at March 31, 2018 $ 718,498
$ 372,729
$ 17,667,674
$ (68,696 ) $ 5,765,927
$ (9,807,114 ) $ (91,253 ) $ 670
$ 500,891
$ 15,059,326
Comprehensive income:
Net income (loss)

166,108

2,355
168,463
Other comprehensive income

(41,378 )

(8,745 ) (50,123 )
Total comprehensive income

118,340
Net change in noncontrolling interests

(14,822 )

(35,937 ) (50,759 )
Amounts related to stock incentive plans, net of forfeitures

18
5,801
35

(11 )

5,843
Proceeds from issuance of common stock

54
2,731

2,785
Dividends paid:
Common stock dividends

(323,372 )

(323,372 )
Preferred stock dividends

(11,676 )

(11,676 )
Balances at June 30, 2018 $ 718,498
$ 372,801
$ 17,661,384
$ (68,661 ) $ 5,932,035
$ (10,142,162 ) $ (132,631 ) $ 659
$ 458,564
$ 14,800,487

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Nine Months Ended

September 30,

2017

2016
Operating activities:
��

Net income
$
630,356

$
730,961
Adjustments to reconcile net income to

net cash provided from (used in) operating activities:

Depreciation and amortization

683,262

673,326

Other amortization expenses

12,095

5,419

Impairment of assets

24,662

24,019

Stock-based compensation expense

16,459

20,618

Loss (gain) on derivatives, net

2,284

(2,516)

Loss (gain) on extinguishment of debt, net

36,870

9

Loss (income) from unconsolidated entities

23,676

7,528

Rental income in excess of cash received

(64,865)

(60,212)

Amortization related to above (below) market leases, net

180

362

Loss (gain) on sales of properties, net

(287,869)

(163,881)

Distributions by unconsolidated entities

116

473

Increase (decrease) in accrued expenses and other liabilities

171,713

79,619

Decrease (increase) in receivables and other assets

(86,475)

(35,557)
Net cash provided from (used in) operating activities

1,162,464

1,280,168

Investing activities:

Cash disbursed for acquisitions

(575,694)

(1,448,126)

Cash disbursed for capital improvements to existing properties

(159,142)

(141,200)

Cash disbursed for construction in progress

(198,068)

(325,372)

Capitalized interest

(10,033)

(12,109)

Investment in real estate loans receivable

(70,051)

(105,496)

Other investments, net of payments

50,877

(88,398)

Principal collected on real estate loans receivable

82,263

225,092

Contributions to unconsolidated entities

(73,802)

(41,747)

Distributions by unconsolidated entities

58,754

72,564

Proceeds from (payments on) derivatives

55,771

56,842

Decrease (increase) in restricted cash

130,470

(21,218)

Proceeds from sales of real property

1,237,851

538,032
Net cash provided from (used in) investing activities

529,196

(1,291,136)

Financing activities:

Net increase (decrease) under unsecured credit facilities

(225,000)

515,000

Proceeds from issuance of senior unsecured notes

7,500

693,560

Payments to extinguish senior unsecured notes

(5,000)

(400,000)

Net proceeds from the issuance of secured debt

190,459

193,541

Payments on secured debt

(1,050,879)

(471,898)

Net proceeds from the issuance of common stock

530,992

520,067

Redemption of preferred stock

(287,500)

-

Payments for deferred financing costs and prepayment penalties

(54,027)

(18,831)

Contributions by noncontrolling interests⁽¹⁾

47,209

142,381

Distributions to noncontrolling interests⁽¹⁾

(51,824)

(106,076)

Cash distributions to stockholders

(992,621)

(970,436)

Other financing activities

(8,416)

(8,941)
Net cash provided from (used in) financing activities

(1,899,107)

88,367
Effect of foreign currency translation on cash and cash equivalents

24,316

(9,690)
Increase (decrease) in cash and cash equivalents

(183,131)

67,709
Cash and cash equivalents at beginning of period

419,378

360,908
Cash and cash equivalents at end of period
$
236,247

$
428,617

Supplemental cash flow information:

Interest paid
$
312,896

$
360,421

Income taxes paid

5,606

7,070

(1) Includes amounts attributable to redeemable noncontrolling interests.

~~See notes to unaudited consolidated financial statements~~

Six Months Ended
June 30,
2019 2018
Operating activities:

Net income $ 442,342
$ 620,828
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization 491,984
464,476
Other amortization expenses 9,761
7,984
Provision for loan losses 18,690
—
Impairment of assets 9,939
32,817
Stock-based compensation expense 15,192
16,725
Loss (gain) on derivatives and financial instruments, net (574 ) (14,633 )
Loss (gain) on extinguishment of debt, net 15,719
12,006
Loss (income) from unconsolidated entities 18,248
1,180
Rental income less than (in excess of) cash received (53,234 ) 13,544
Amortization related to above (below) market leases, net (2 ) 1,363
Loss (gain) on real estate dispositions, net (165,727 ) (348,939 )
Distributions by unconsolidated entities 46
21
Increase (decrease) in accrued expenses and other liabilities 55,415
46,718
Decrease (increase) in receivables and other assets (3,317 ) (15,666 )
Net cash provided from (used in) operating activities 854,482

838,424

Investing activities:
Cash disbursed for acquisitions (2,718,808 ) (595,596 )
Cash disbursed for capital improvements to existing properties (124,176 ) (111,332 )
Cash disbursed for construction in progress (155,409 ) (62,978 )
Capitalized interest (6,256 ) (4,436 )
Investment in real estate loans receivable (62,935 ) (48,291 )
Principal collected on real estate loans receivable 6,840
91,427
Other investments, net of payments (17,640 ) (48,212 )
Contributions to unconsolidated entities (119,001 ) (32,768 )
Distributions by unconsolidated entities 70,844
22,897
Proceeds from (payments on) derivatives (21,643 ) (27,678 )
Proceeds from sales of real property 616,820
947,218
Net cash provided from (used in) investing activities (2,531,364 )
130,251

Financing activities:
Net increase (decrease) in unsecured credit facility and commercial paper 722,188
(179,000 )
Proceeds from issuance of senior unsecured notes 2,036,964
545,074
Payments to extinguish senior unsecured notes (1,050,000 ) (450,000 )
Net proceeds from the issuance of secured debt 295,969
44,606
Payments on secured debt (178,700 ) (224,958 )
Net proceeds from the issuance of common stock 647,156
10,188
Payments for deferred financing costs and prepayment penalties (24,177 ) (18,639 )
Contributions by noncontrolling interests⁽¹⁾
39,122
8,421
Distributions to noncontrolling interests⁽¹⁾
(64,004 ) (59,484 )
Cash distributions to stockholders (695,099 ) (670,859 )
Other financing activities (8,615 ) (5,639 )
Net cash provided from (used in) financing activities 1,720,804

(1,000,290 )
Effect of foreign currency translation on cash, cash equivalents and restricted cash (333 )
(5,305 )
Increase (decrease) in cash, cash equivalents and restricted cash 43,589
(36,920 )
Cash, cash equivalents and restricted cash at beginning of period 316,129

309,303
Cash, cash equivalents and restricted cash at end of period $ 359,718
$ 272,383

Supplemental cash flow information:
Interest paid $ 252,714
$ 209,156
Income taxes paid (received), net 2,040
4,835

⁽¹⁾ Includes amounts attributable to redeemable noncontrolling interests.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Welltower Inc. (the "Company"), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The ~~company~~Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical ~~properties. Founded in 1970, we were the first REIT to invest exclusively in health care facilities.~~properties.

2. Accounting Policies and Related Matters

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (such as normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 are not necessarily an indication of the results that may be expected for the year ending December 31, ~~2017.~~2019. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2018.

New Accounting Standards

~~In May 2014, the Financial Accounting Standards Board (the “FASB”) issued~~

We adopted Accounting Standards Update ~~(“ASU”) No. 2014-09, “Revenue from Contracts with Customers~~2016-02, Leases (Topic 606),” which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted beginning after December 15, 2016. A reporting entity may apply the new standard using either a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or a full retrospective approach. We are currently evaluating the impact that the adoption of the standard will have on our consolidated financial statements and have not yet determined the method by which we will adopt the new standard. A significant source of our revenue is generated through leasing arrangements, which are specifically excluded from ASU 2014-09. We anticipate that we will be required to separately disclose the components of total revenue between lease revenue accounted for under existing leasing guidance and service revenue accounted for under ASU 2014-09, including non-lease components such as certain services embedded in base leasing fees. Under ASU 2014-09, revenue recognition for real estate sales is mainly based on the transfer of control versus current guidance of continuing involvement. We expect that the new guidance will result in more transactions qualifying as sales of real estate and being recognized at an earlier date than under the current guidance.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,” which will require entities to measure their investments at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The practicability exception will be available for equity investments that do not have readily determinable fair values. ASU 2016-01 is effective for fiscal years and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic~~ 842),” ("ASC 842") which requires lessees to recognize assets and liabilities on their consolidated balance sheet related to the rights and obligations created by most leases, while continuing to recognize expenses on their consolidated statement of comprehensive income ~~statements~~ over the lease term. ~~It will also require disclosures designed to give financial statement users information regarding amount, timing, and uncertainty~~We adopted ASC 842 as of cash flows arising from leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Entities are required to use aJanuary 1, 2019, using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits us to carry forward our prior conclusions for lease classification and initial direct costs on existing leases. We also made an accounting policy election to keep short-term leases less than twelve months off the balance sheet for all classes of underlying assets.

In July 2018, the FASB issued ASU 2018-11 "Leases (Topic 842): Targeted Improvements" that ~~exist or are entered into after~~(1) simplifies transition requirements for both lessees and lessors by adding an option that permits entities to apply the ~~beginning~~transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) allows lessors to elect, as a practical expedient, to not separate lease and non-lease components in a contract, and instead to account for as a single lease component, if certain criteria are met. This practical expedient causes an entity to assess whether a contract is predominantly lease or service-based and recognize the ~~financial statements. We~~entire contract under the relevant accounting guidance (i.e. predominantly lease-based would be accounted for under ASC 842 and predominantly service-based would be accounted for under ASU 2014-09, "Revenue from Contracts with Customers (ASC 606)"). For the year ended December 31, 2018, we recognized revenue for our Seniors Housing Operating resident agreements in accordance with the provisions of the prior lease guidance, ASC 840, "Leases." Upon adoption of ASC 842, we elected the lessor practical expedient described above and recognized revenue for our Seniors Housing Operating segment based upon the predominant component, the non-lease service component. Therefore, beginning on January 1, 2019, we accounted for these resident agreements under ASC 606. The timing and pattern of revenue recognition is substantially the same as that prior to adoption.

The FASB also issued ASU 2018-20 "Leases (Topic 842) - Narrow Improvements for Lessors," which provides lessors the ability to make an accounting policy election not to evaluate whether certain sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are ~~currently evaluating~~ the ~~impact~~primary obligation of the lessor as owner of the underlying leased asset. A lessor that makes this ~~standard~~election will exclude these taxes from the measurement of lease revenue and the associated expense. Upon adoption of ASC 842, we utilized this practical expedient in instances in which real estate taxes are paid directly by our tenants to taxing authorities. For triple-net leasing arrangements in which the tenant remits payment for real estate taxes to us and we pay the taxing authority, we have included the associated revenue and expense in rental income and property operating expenses on the Consolidated Statements of Comprehensive Income. This reporting had no impact on our ~~consolidated financial statements. We believe that~~net income.

For leases in which the Company is the lessee, primarily consisting of ground leases and various office and equipment leases, we recognized upon adoption a right of ~~this standard will likely have a material impact to our consolidated balance sheet for~~use asset of $509,386,000 which included the ~~recognition~~present value of ~~certain operating~~minimum leases ~~as right-of-use assets~~payments, existing above and/or below market lease intangible values and ~~lease liabilities. We are in the process of analyzing our lease portfolio and evaluating systems to comply with the standard’s retrospective adoption requirements~~.

~~In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which~~

existing straight-line rent liabilities

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~allows companies to make a policy election as to whether they will include an estimate~~

associated with such leases. We also recognized operating lease liabilities of awards expected to be forfeited or whether they will account for forfeitures as they occur. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We adopted ASU 2016-09 on January 1, 2017, and we elected to account for forfeitures as they occur. This election had an immaterial impact on our consolidated financial statements.$357,070,000. The standard ~~also requires an employer to classify as a financing activity in the statement~~did not materially impact our Consolidated Statements of ~~cash flow the cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding obligation. This aspect~~Comprehensive Income or our Consolidated Statement of the standard is required to be applied on a retrospective basis and resulted in an increase in net cash provided by operating activities and a decrease in net cash used in financing activities of $7,822,000Cash Flows. See Note 6 for ~~the nine months ended September 30, 2016. Upon adoption, no other provisions of~~additional details.

The following ASU ~~2016-09 had an effect on our unaudited~~ ~~consolidated~~ ~~financial statements or related footnote disclosures.~~

has been issued but not yet adopted:

In ~~June~~ 2016, the FASB issued ASU ~~No.~~ 2016-13, “Measurement of Credit Losses on Financial ~~Instruments,” which~~Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under the new leases standard from the scope of the new credit losses standard. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial ~~statements~~.

statements.

In January 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business,” which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. A reporting entity must apply ASU 2017-01 using a prospective approach. We adopted ASU 2017-01 on January 1, 2017 and as a result, have classified our real estate acquisitions completed during the nine months ended September 30, 2017 as asset acquisitions rather than business combinations due to the fact that substantially all of the fair value of the gross assets acquired were concentrated in a single asset or group of similar identifiable assets. We have recorded identifiable assets acquired, liabilities assumed and any noncontrolling interests associated with any asset acquisitions at cost on a relative fair value basis and have capitalized transaction costs incurred.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities,” which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently in the process of evaluating the effects this standard will have on our consolidated financial statements.

3. Real Property Acquisitions and Development

The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their relative fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. ~~Effective January 1, 2017, with our adoption of ASU 2017-01, transaction~~Transaction costs related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in ~~“Other Expenses”~~other expenses on our Consolidated Statements of Comprehensive Income. Certain of our ~~subsidiaries’~~subsidiaries�� functional currencies are the local currencies of their respective countries. ~~See Note 2~~

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



	Six Months Ended
	June 30, 2019												June 30, 2018
	Seniors Housing Operating			Triple-net			Outpatient Medical			Totals			Seniors Housing Operating			Triple-net			Outpatient Medical			Totals
Land and land improvements	$	103,743		$	8,099		$	132,154		$	243,996		$	47,865		$	1,691		$	7,369		$	56,925
Buildings and improvements	1,109,966			96,244			1,198,608			2,404,818			535,921			—			42,673			578,594
Acquired lease intangibles	58,773			—			85,492			144,265			68,084			—			5,852			73,936
Construction in progress	36,174			—			—			36,174			—			—			—			—
Right of use assets, net	—			—			56,073			56,073			—			—			—			—
Receivables and other assets	4,560			—			376			4,936			1,255			—			1			1,256
Total assets acquired⁽¹⁾	1,313,216			104,343			1,472,703			2,890,262			653,125			1,691			55,895			710,711
Secured debt	(43,209		)	—			—			(43,209		)	(89,973		)	—			—			(89,973		)
Lease liabilities	—			—			(45,287		)	(45,287		)	—			—			—			—
Accrued expenses and other liabilities	(8,677		)	—			(22,506		)	(31,183		)	(14,686		)	(6		)	(632		)	(15,324		)
Total liabilities acquired	(51,886		)	—			(67,793		)	(119,679		)	(104,659		)	(6		)	(632		)	(105,297		)
Noncontrolling interests	(38,830		)	(1,056		)	—			(39,886		)	(9,818		)	—			—			(9,818		)
Non-cash acquisition related activity⁽²⁾	(11,889		)	—			—			(11,889		)	—			—			—			—
Cash disbursed for acquisitions	1,210,611			103,287			1,404,910			2,718,808			538,648			1,685			55,263			595,596
Construction in progress additions	110,761			24,066			26,587			161,414			20,704			38,238			11,319			70,261
Less: Capitalized interest	(3,560		)	(908		)	(1,788		)	(6,256		)	(1,783		)	(1,432		)	(1,221		)	(4,436		)
Foreign currency translation	141			65			—			206			1,176			132			—			1,308
Accruals⁽³⁾	—			—			45			45			—			—			(4,155		)	(4,155		)
Cash disbursed for construction in progress	107,342			23,223			24,844			155,409			20,097			36,938			5,943			62,978
Capital improvements to existing properties	97,867			7,423			18,886			124,176			76,237			8,569			26,526			111,332
Total cash invested in real property, net of cash acquired	$	1,415,820		$	133,933		$	1,448,640		$	2,998,393		$	634,982		$	47,192		$	87,732		$	769,906

⁽¹⁾ Excludes $ 1,910,000 and $4,392,000 of unrestricted and restricted cash acquired during the six months ended June 30, 2019 and 2018, respectively.

⁽²⁾ Relates to the ~~financial statements included~~acquisition of assets previously recognized as investments in ~~our Annual Report on Form 10-K~~unconsolidated entities.

⁽³⁾ Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the ~~year ended December 31, 2016 for information regarding our foreign currency policies.~~

current period.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Triple-net Activity~~

Nine Months Ended

(In thousands)
September 30, 2017
September 30, 2016

Land and land improvements

$
31,948

$
21,713

Buildings and improvements

206,910

220,274

Acquired lease intangibles

-

2,876

Total assets acquired

238,858

244,863

Accrued expenses and other liabilities

(21,236)

(2,145)

Total liabilities assumed

(21,236)

(2,145)

Noncontrolling interests

(7,275)

(3,162)

Non-cash acquisition related activity⁽¹⁾

(54,901)

(51,733)

Cash disbursed for acquisitions

155,446

187,823

Construction in progress additions

106,186

133,611

Less:
Capitalized interest

(3,886)

(6,263)

Foreign currency translation

(656)

(3,179)

Cash disbursed for construction in progress

101,644

124,169

Capital improvements to existing properties

17,873

21,447

Total cash invested in real property, net of cash acquired

$
274,963

$
333,439

(1) For the nine months ended September 30, 2017, $54,901,000 is related to the acquisition of assets previously financed as real estate loans receivable. For the nine months ended September 30, 2016, $45,044,000 is related to the acquisition of assets previously financed as real estate loans receivable and $6,689,000 is related to the acquisition of assets previously financed as an investment in an unconsolidated entity.

~~Seniors Housing Operating Activity~~

Nine Months Ended

(In thousands)
September 30, 2017
September 30, 2016

Land and land improvements

$
31,006

$
122,649

Building and improvements

384,522

1,108,195

Acquired lease intangibles

48,197

90,771

Restricted cash

1,692

137

Receivables and other assets

3,164

2,179

Total assets acquired⁽¹⁾

468,581

1,323,931

Secured debt

-

(49,381)

Accrued expenses and other liabilities

(43,364)

(12,328)

Total liabilities assumed

(43,364)

(61,709)

Noncontrolling interests

(4,701)

(1,089)

Non-cash acquisition related activity⁽²⁾

(59,065)

(17,477)

Cash disbursed for acquisitions

361,451

1,243,656

Construction in progress additions

65,282

139,160

Less:
Capitalized interest

(5,996)

(3,923)

Foreign currency translation

(6,218)

(5,953)

Cash disbursed for construction in progress

53,068

129,284

Capital improvements to existing properties

110,372

84,444

Total cash invested in real property, net of cash acquired

$
524,891

$
1,457,384

(1) Excludes $4,581,000 and $135,000 of cash acquired during the nine months ended September 30, 2017 and 2016, respectively.
(2) Includes $6,349,000 related to the acquisition of assets previously financed as real estate loans receivable during the nine months ended September 30, 2017. Includes $51,097,000 and $17,477,000 for the nine months ended September 30, 2017 and 2016, respectively, related to the acquisition of assets previously financed as an investments in an unconsolidated entity.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Outpatient Medical Activity~~

Nine Months Ended

(In thousands)
September 30, 2017

September 30, 2016

Land and land improvements

$
25,060

$
1,466

Buildings and improvements

62,336

27,272

Acquired lease intangibles

8,397

4,592

Receivables and other assets

3

-


Total assets acquired

95,796


33,330

Secured debt

(25,709)

-

Accrued expenses and other liabilities

(2,210)

(1,670)

Total liabilities assumed

(27,919)

(1,670)

Noncontrolling interests

(9,080)

-

Non-cash acquisition activity⁽¹⁾

-

(15,013)

Cash disbursed for acquisitions

58,797

16,647

Construction in progress additions

33,495

81,843

Less:
Capitalized interest

(1,847)

(2,588)

Accruals⁽²⁾

11,708

(7,336)

Cash disbursed for construction in progress

43,356


71,919

Capital improvements to existing properties

30,897

35,309

Total cash invested in real property

$
133,050

$
123,875

(1) Represents the acquisition of assets previously financed as real estate loans receivable.
(2) Represents the change in non-cash consideration accruals for amounts to be paid in periods other than the period in which the construction projects converted to operations.

Construction Activity

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



	Six Months Ended
	June 30, 2019		June 30, 2018
Development projects:
Seniors Housing Operating	$	28,117	$	37,215
Triple-net	—		59,188
Outpatient Medical	—		11,358
Total construction in progress conversions	$	28,117	$	107,761

Nine Months Ended

September 30, 2017

September 30, 2016

Development projects:

Triple-net

$
283,472

$
24,535

Seniors housing operating

3,634

-

Outpatient medical

63,036

44,113

Total development projects

350,142

68,648

Expansion projects

10,336

2,879
Total construction in progress conversions

$
360,478

$
71,527

4. Real Estate Intangibles

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

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~



	June 30, 2019			December 31, 2018
Assets:
In place lease intangibles	$	1,473,060		$	1,410,725
Above market tenant leases	69,656			63,935
Below market ground leases ⁽¹⁾	—			64,513
Lease commissions	46,422			41,986
Gross historical cost	1,589,138			1,581,159
Accumulated amortization	(1,163,936		)	(1,197,336		)
Net book value	$	425,202		$	383,823

Weighted-average amortization period in years	8.6			16.0

Liabilities:
Below market tenant leases	$	94,082		$	81,676
Above market ground leases ⁽¹⁾	—			8,540
Gross historical cost	94,082			90,216
Accumulated amortization	(45,147		)	(44,266		)
Net book value	$	48,935		$	45,950

Weighted-average amortization period in years	8.2			14.7

September 30, 2017

December 31, 2016
Assets:


In place lease intangibles

$
1,333,368

$
1,252,143

Above market tenant leases


64,408

61,700

Below market ground leases


62,224

61,628

Lease commissions


32,279

27,413

Gross historical cost


1,492,279

1,402,884

Accumulated amortization


(1,098,814)

(966,714)

Net book value

$
393,465

$
436,170



Weighted-average amortization period in years


14.5

13.7



Liabilities:


Below market tenant leases

$
90,671

$
89,468

Above market ground leases


8,540

8,107

Gross historical cost


99,211

97,575

Accumulated amortization


(57,449)

(52,134)

Net book value

$
41,762

$
45,441



Weighted-average amortization period in years


15.5

15.2
⁽¹⁾ Effective on January 1, 2019 with the adoption of ASC 842, above and below market ground lease intangibles are reported within the right of use assets, net line on the Consolidated Balance Sheet.

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Rental income related to above/below market tenant leases, net

$
173

$
278

$
745

$
569
Property operating expenses related to above/below market ground leases, net

(306)

(309)

(925)

(931)
Depreciation and amortization related to in place lease intangibles and lease commissions

(34,270)

(30,137)

(109,011)

(95,610)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Rental income related to (above)/below market tenant leases, net	$	73		$	(333	)	$	(82	)	$	(684	)
Amortization related to in place lease intangibles and lease commissions	(28,518		)	(33,763		)	(53,423		)	(66,024		)

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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



	Assets		Liabilities
2019	$	84,909	$	4,777
2020	101,374		8,835
2021	51,215		7,865
2022	34,495		7,130
2023	28,361		4,989
Thereafter	124,848		15,339
Total	$	425,202	$	48,935

Assets

Liabilities
2017

$
39,678

$
1,636
2018

104,524

6,190
2019

50,051

5,731
2020

30,582

5,234
2021

20,918

4,746
Thereafter

147,712

18,225
Total

$
393,465

$
41,762

5. Dispositions and Assets Held for Sale ~~and Discontinued Operations~~

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations ~~(e.g.~~(i.e., property type, relationship or geography). At June 30, 2019, 55 Seniors Housing Operating, 30 Triple-net, and four Outpatient Medical properties with an aggregate real estate balance of $1,704,206,000 were classified as held for sale. In addition, secured debt of $37,429,000 and net other assets and liabilities of $58,816,000 related to the held for sale properties. During the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016,~~2019, we recorded net impairment charges of $9,939,000 on certain ~~held-for-sale seniors housing operating, triple-net, and outpatient medical~~held for sale properties for which the carrying ~~values~~value exceeded the fair values, less estimated costs to sell, if applicable. The following is a summary of our real property disposition activity for the periods presented (in thousands):

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~



	Six Months Ended June 30,
	2019			2018
Real estate dispositions:
Seniors Housing Operating	$	8,726		$	2,200
Triple-net	442,865			367,978
Outpatient Medical	—			223,069
Total dispositions	451,591			593,247
Gain (loss) on real estate dispositions, net	165,727			348,939
Net other assets/liabilities disposed	(498		)	5,032
Proceeds from real estate dispositions	$	616,820		$	947,218

Nine Months Ended

September 30, 2017
September 30, 2016
Real estate dispositions:

Triple-net

$
899,104

$
295,365

Seniors housing operating

16,206

-

Outpatient medical

12,202

78,786

Total dispositions

927,512

374,151
Gain (loss) on real estate dispositions, net

287,869

163,881

Net other assets/liabilities disposed

22,470

-
Proceeds from real estate dispositions

$
1,237,851

$
538,032

Dispositions and Assets Held for Sale

Pursuant to our adoption of ASU ~~No.~~ 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, operating results attributable to properties sold subsequent to or classified as held for sale after January 1, 2014 and which do not meet the definition of discontinued operations are no longer reclassified on our Consolidated Statements of Comprehensive Income. The following represents the activity related to these properties for the periods presented (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Revenues:
Total revenues	$	112,694	$	121,079	$	228,441	$	249,639
Expenses:
Interest expense	479		579		983		1,200
Property operating expenses	70,244		74,213		146,260		150,120
Provision for depreciation	12,520		18,431		24,897		38,275
Total expenses	83,243		93,223		172,140		189,595
Income (loss) from real estate dispositions, net	$	29,451	$	27,856	$	56,301	$	60,044

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Revenues:

Rental income

$
1,955

$
31,966

$
23,255

$
99,057
Expenses:



Interest expense


-

4,939

1,714

16,697

Property operating expenses


2,111

1,476

7,209

4,411

Provision for depreciation


26

4,604

1,167

20,873

Total expenses

2,137

11,019

10,090

41,981
Income (loss) from real estate dispositions, net

$
(182)

$
20,947

$
13,165

$
57,076

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer-term market rates). For leases that commenced prior to January 1, 2019, we used the incremental borrowing rate on December 31, 2018.

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

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



	Classification	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost: ⁽¹⁾
Real estate lease expense	Property operating expenses	$	7,267		$	14,679
Non-real estate lease expense	General and administrative expenses	408			770
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,153			4,245
Interest on lease liabilities	Interest expense	1,166			2,169
Sublease income	Rental income	(1,043		)	(2,087		)
Total		$	9,951		$	19,776

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

Maturities of lease liabilities as of June 30, 2019 are as follows (in thousands):



	Operating Leases			Finance Leases
2019	$	9,809		$	4,488
2020	19,625			8,821
2021	19,558			8,485
2022	18,627			7,852
2023	18,707			68,967
Thereafter	1,595,101			86,081
Total lease payments	1,681,427			184,694
Less: Imputed interest	(1,321,129		)	(75,963		)
Total present value of lease liabilities	$	360,298		$	108,731

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases was as follows for the date indicated (in thousands, except lease terms and discount rate):



	Classification	June 30, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	386,061
Finance leases	Right of use assets, net	164,281
Real estate right of use assets, net		550,342
Operating leases - corporate	Receivables and other assets	5,055
Total right of use assets, net		$	555,397

Lease liabilities:
Operating leases		$	360,298
Financing leases		108,731
Total		$	469,029

Weighted average remaining lease term (years):
Operating leases		50.0
Finance leases		15.8

Weighted average discount rate:
Operating leases		5.21		%
Finance leases		5.17		%

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



	Classification	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	4,627
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	3,916
Financing cash flows from finance leases	Other financing activities	(1,638		)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our outpatient medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $766,670,000 of rental and other revenues related to operating lease payments, of which $94,017,000 was for variable lease payments for the six months ended June 30, 2019, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at June 30, 2019 (excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):



2019	$	925,026
2020	1,380,111
2021	1,346,698
2022	1,237,904
2023	1,255,408
Thereafter	9,745,880
Totals	$	15,891,027

7. Real Estate Loans Receivable

Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 for discussion of our accounting policies for real estate loans receivable and related interest income.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of our net real estate loans receivable (in thousands):



	June 30, 2019			December 31, 2018
Mortgage loans	$	332,770		$	317,443
Other real estate loans	104,596			81,268
Less allowance for losses on loans receivable	(68,372		)	(68,372		)
Totals	$	368,994		$	330,339

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



	Six Months Ended
	June 30, 2019							June 30, 2018
		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net			Outpatient Medical		Totals
Advances on real estate loans receivable:
Investments in new loans		$	25,000	$	5,000	$	30,000	$	11,806	$	8,281		$	7,022	$	27,109
Draws on existing loans		20,051		12,884		32,935		—		21,182			—		21,182
Net cash advances on real estate loans		45,051		17,884		62,935		11,806		29,463			7,022		48,291
Receipts on real estate loans receivable:
Loan payoffs		4,384		—		4,384		—		58,557			—		58,557
Principal payments on loans		2,456		—		2,456		—		32,870			—		32,870
Net cash receipts on real estate loans		6,840		—		6,840		—		91,427			—		91,427
Net cash advances (receipts) on real estate loans		$	38,211	$	17,884	$	56,095	$	11,806	$	(61,964	)	$	7,022	$	(43,136	)

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Nine Months Ended

September 30, 2017

September 30, 2016

Outpatient

Outpatient

Triple-net

Medical

Totals

Triple-net

Medical

Totals
Advances on real estate loans receivable:

Investments in new loans

$
11,315

$
-

$
11,315

$
8,223

$
-

$
8,223

Draws on existing loans

58,736

-

58,736

94,622

2,651

97,273

Net cash advances on real estate loans

70,051

-

70,051

102,845

2,651

105,496
Receipts on real estate loans receivable:

Loan payoffs

142,392

60,500

202,892

251,293

27,303

278,596

Principal payments on loans

1,121

-

1,121

6,553

-

6,553

Sub-total

143,513

60,500

204,013

257,846

27,303

285,149

Less: Non-cash activity⁽¹⁾⁽²⁾

(61,250)

(60,500)

(121,750)

(45,044)

(15,013)

(60,057)

Net cash receipts on real estate loans

82,263

-

82,263

212,802

12,290

225,092
Net cash advances (receipts) on real estate loans

(12,212)

-

(12,212)

(109,957)

(9,639)

(119,596)
Change in balance due to foreign currency translation

8,183

-

8,183

(9,819)

-

(9,819)
Net change in real estate loans receivable

$
(65,279)

$
(60,500)

$
(125,779)

$
(164,820)

$
(24,652)

$
(189,472)

(1) Triple-net and prior year outpatient medical represents acquisitions of assets previously financed as real estate loans.
(2) Current year outpatient medical represents a deed in lieu of foreclosure on a previously financed first mortgage property.

In 2016, we restructured ~~two existing~~ real estate loans ~~in the triple-net segment~~ with Genesis ~~Healthcare. The two existing loans, with a combined principal balance of $317,000,000, were scheduled to mature in 2017~~HealthCare and ~~2018. These loans were restructured into four separate loans effective October 1, 2016. Each loan has a five-year term, a 10% interest rate and 25 basis point annual escalator. In 2016, we~~ recorded a loan loss charge in the amount of $6,935,000 on one of the loans as the present value of expected future cash flows was less than the carrying value of the loan. ~~We expect~~In 2017, we recorded an additional loan loss charge of $62,966,000 relating to ~~collect all principal amounts due under~~real estate loans with Genesis HealthCare based on an estimation of expected future cash flows discounted at the effective interest rate of the loans. In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain Triple-net real estate loans ~~and, due to~~receivable that were no longer deemed collectible. During the ~~passage~~quarter ended June 30, 2019, these loans were written off. As of ~~time, at September~~June 30, ~~2017,~~2019, the allowance for loan ~~losses related~~loss balance of $68,372,000 is deemed to ~~these loans is $5,406,000.~~be sufficient to absorb expected losses. At ~~September~~June 30, ~~2017,~~2019, we had noone real estate ~~loans~~loan with an outstanding ~~balances~~balance of $2,534,000 on non-accrual ~~status and recorded no provision for loan losses during~~status.

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



	Six Months Ended
	June 30, 2019		June 30, 2018
Balance of impaired loans at end of period	$	188,068	$	214,871
Allowance for loan losses	68,372		68,372
Balance of impaired loans not reserved	$	119,696	$	146,499
Average impaired loans for the period	$	197,426	$	252,172
Interest recognized on impaired loans⁽¹⁾	7,964		8,847

⁽¹⁾ Represents cash interest recognized in the ~~three months ended September 30, 2017.~~period since loans were identified as impaired.

Nine Months Ended

September 30, 2017

September 30, 2016
Balance of impaired loans at end of period

$
282,929

$
-
Allowance for loan losses

5,406

-
Balance of impaired loans not reserved

$
277,523

$
-
Average impaired loans for the period

$
324,255

$
-
Interest recognized on impaired loans

23,957

-

7.8. Investments in Unconsolidated Entities

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

Percentage Ownership⁽¹⁾

September 30, 2017

December 31, 2016

Triple-net
10% to 49%

$
22,543

$
27,005

Seniors housing operating
10% to 50%

332,390

407,172

Outpatient medical
43%

52,574

22,961

Total

$
407,507

$
457,138

(1) Excludes ownership of in-substance real estate.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~During the nine months ended September~~



	Percentage Ownership⁽¹⁾	June 30, 2019		December 31, 2018
Seniors Housing Operating	10% to 50%	$	379,886	$	344,982
Triple-net	10% to 49%	9,459		34,284
Outpatient Medical	43% to 50%	130,042		103,648
Total		$	519,387	$	482,914

⁽¹⁾ Excludes ownership of in-substance real estate.

At June 30, ~~2017, we increased our ownership in the Sunrise Senior Living, Inc. management company from 24% to 34%. At September 30, 2017,~~2019, the aggregate unamortized basis difference of our joint venture investments of ~~$83,843,000~~$101,571,000 is primarily attributable to the difference between the amount for which we purchase our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the ~~entity.~~joint venture. This difference is being amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.

9. Credit Concentration

We use consolidated net operating income (“NOI”) as our credit concentration metric. See Note 1718 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, excluding our share of NOI in unconsolidated entities (dollars in thousands):



	Number of	Total		Percent of
Concentration by relationship:⁽¹⁾	Properties	NOI		NOI⁽²⁾
Sunrise Senior Living⁽³⁾	165	$	174,422	14%
ProMedica	218	107,541		9%
Revera⁽³⁾	98	72,928		6%
Genesis HealthCare	60	60,984		5%
Benchmark Senior Living⁽⁴⁾	48	55,530		5%
Remaining portfolio	1,009	749,012		61%
Totals	1,598	$	1,220,417	100%

⁽¹⁾ Genesis Healthcare and ProMedica are in our Triple-net segment. Sunrise Senior Living and Revera are in our Seniors Housing Operating segment. Benchmark Senior Living is in both our Triple-net and Seniors Housing Operating segments.

⁽²⁾ NOI with our top five relationships comprised 38% of total NOI for the year ended December 31, 2018.

⁽³⁾ Revera owns a controlling interest in Sunrise Senior Living.

⁽⁴⁾ Please see Note 21 for additional information.

Number of

Total

Percent of
Concentration by relationship:⁽¹⁾

Properties

NOI

NOI⁽²⁾

Sunrise Senior Living⁽³⁾

157

235,814

14%

Genesis Healthcare

86

$
149,345

9%

Revera⁽³⁾

98

117,124

7%

Brookdale Senior Living

137

113,466

7%

Benchmark Senior Living

48

74,070

4%

Remaining portfolio

752

986,543

59%

Totals

1,278

$
1,676,362

100%

(1) Genesis Healthcare is in our triple-net segment. Sunrise Senior Living and Revera are in our seniors housing operating segment. Benchmark Senior Living and Brookdale Senior Living are in both our triple-net and seniors housing operating segments.
(2) NOI with our top five relationships comprised 45% of total NOI for the year ending December 31, 2016.
(3) Revera owns a controlling interest in Sunrise Senior Living.

9.10. Borrowings Under Credit Facilities and ~~Related Items~~

Commercial Paper Program

At ~~September~~June 30, ~~2017,~~2019, we had a primary unsecured credit facility with a consortium of 2931 banks that includes a $3,000,000,000 unsecured revolving credit facility ($935,000,000 outstanding at June 30, 2019), a $500,000,000 unsecured term credit facility and a $250,000,000 Canadian-denominated unsecured term credit facility. We have an option, through an accordion feature, to upsize the unsecured revolving credit facility and the $500,000,000 unsecured term credit facility by up to an additional $1,000,000,000, in the aggregate, and the $250,000,000 Canadian-denominated unsecured term credit facility by up to an additional $250,000,000. The primary unsecured credit facility also allows us to borrow up to $1,000,000,000 in alternate currencies (none outstanding at ~~September~~June 30, ~~2017)~~2019). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate ~~(2.13%~~(3.22% at ~~September~~June 30, ~~2017)~~2019). The applicable margin is based on our debt ratings and was ~~0.90%~~0.825% at ~~September~~June 30, ~~2017.~~2019. In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on our debt ratings and was 0.15% at ~~September~~June 30, ~~2017.~~2019. The term credit facilities mature on ~~May 13, 2021.~~July 19, 2023. The revolving credit facility is scheduled to mature on ~~May 13, 2020~~July 19, 2022 and can be extended for two successive terms of six months each at our option.

In January 2019, we established an unsecured commercial paper program (the "Commercial Paper Program"). Under the terms of the program, we may issue unsecured commercial paper notes with maturities that vary, but do not exceed 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $1,000,000,000. As of June 30, 2019, there was a balance of $934,188,000 outstanding on the Commercial Paper Program ($935,000,000 in principal outstanding net of an unamortized discount of $812,000), which reduces the borrowing capacity on the unsecured revolving credit facility. The notes bear interest at various floating rates with a weighted average of 2.70% as of June 30, 2019 and a weighted average maturity of 31 days as of June 30, 2019.

The following information relates to aggregate borrowings under the ~~primary~~ unsecured revolving credit facility and Commercial Paper Program for the periods presented (dollars in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016
Balance outstanding at quarter end⁽¹⁾

$
420,000

$
1,350,000

$
420,000

$
1,350,000
Maximum amount outstanding at any month end

$
645,000

$
1,560,000

$
1,010,000

$
1,560,000
Average amount outstanding (total of daily









principal balances divided by days in period)

$
450,130

$
1,050,217

$
601,436

$
782,427
Weighted average interest rate (actual interest



expense divided by average borrowings outstanding)


2.19%

1.44%

1.95%

1.35%

(1) As of September 30, 2017, letters of credit in the aggregate amount of $25,576,000 have been issued, which reduces the borrowing capacity on the unsecured revolving credit facility.



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Balance outstanding at quarter end	$	1,870,000		$	540,000		$	1,870,000		$	540,000
Maximum amount outstanding at any month end	$	2,880,000		$	685,000		$	2,880,000		$	865,000
Average amount outstanding (total of daily
principal balances divided by days in period)	$	1,807,631		$	562,747		$	1,301,883		$	463,978
Weighted average interest rate (actual interest
expense divided by average borrowings outstanding)	3.08		%	3.04		%	3.11		%	2.91		%

~~10.~~

11. Senior Unsecured Notes and Secured Debt

We may repurchase, redeem or refinance senior unsecured notes from time to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the early redemption of such securities pursuant to their terms. The senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the sum of (1) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (2) any “make-whole” amount due under the terms of the notes in connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.At ~~September~~June 30, ~~2017,~~2019, the annual principal payments due on these debt obligations were as follows (in thousands):

Senior

Secured

Unsecured Notes^(1,2)

Debt ^(1,3)

Totals
2017
$
-

$
121,412

$
121,412
2018

450,000

426,728

876,728
2019

600,000

491,941

1,091,941
2020⁽⁴⁾

697,327

184,281

881,608
2021^(5,6)

1,149,856

221,721

1,371,577
Thereafter^(7,8,9,10)

5,507,210

1,273,919

6,781,129
Totals
$
8,404,393

$
2,720,002

$
11,124,395

(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the balance sheet.
(2) Annual interest rates range from 1.9% to 6.5%.
(3) Annual interest rates range from 1.45% to 7.98%. Carrying value of the properties securing the debt totaled $5,766,501,000 at September 30, 2017.
(4) In November 2015, one of our wholly-owned subsidiaries issued and we guaranteed $300,000,000 of Canadian-denominated 3.35% senior unsecured notes due 2020 (approximately $239,827,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2017).
(5) On May 13, 2016, we refinanced the funding on a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $199,856,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2017). The loan matures on May 13, 2021 and bears interest at the Canadian Dealer Offered Rate plus 95 basis points (2.30% at September 30, 2017).
(6) On May 13, 2016, we refinanced the funding on a $500,000,000 unsecured term credit facility. The loan matures on May 13, 2021 and bears interest at LIBOR plus 95 basis points (2.19% at September 30, 2017).
(7) On November 20, 2013, we completed the sale of £550,000,000 (approximately $737,110,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2017) of 4.8% senior unsecured notes due 2028.
(8) On November 25, 2014, we completed the sale of £500,000,000 (approximately $670,100,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2017) of 4.5% senior unsecured notes due 2034.
(9) In May 2015, we issued $750,000,000 of 4.0% senior unsecured notes due 2025. In October 2015, we issued an additional $500,000,000 of these notes under a re-opening of the offer.
(10) In March 2016, we issued $700,000,000 of 4.25% senior unsecured notes due 2026.



	Senior Unsecured Notes^(1,2)		Secured Debt ^(1,3)		Totals
2019	$	—	$	312,291	$	312,291
2020⁽⁴⁾	1,236,665		144,518		1,381,183
2021	450,000		383,425		833,425
2022	600,000		352,410		952,410
2023^(5,6)	1,790,971		330,498		2,121,469
Thereafter^(7,8)	6,633,920		1,166,840		7,800,760
Totals	$	10,711,556	$	2,689,982	$	13,401,538

(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the Consolidated Balance Sheet.

(2) Annual interest rates range from 2.86% to 6.50%.

(3) Annual interest rates range from 1.69% to 12.00%. Carrying value of the properties securing the debt totaled $5,991,142,000 at June 30, 2019.

(4) Includes a $300,000,000 Canadian-denominated 3.35% senior unsecured notes due 2020 (approximately $229,165,000 based on the Canadian/U.S. Dollar exchange rate on June 30, 2019) and a $1,000,000,000 unsecured term loan facility that matures on May 28, 2020 which was put in place to bridge the acquisition of the CNL Healthcare Properties portfolio. The unsecured term loan facility was subsequently extinguished in July 2019 with proceeds from the disposition of the Benchmark Senior Living portfolio.

(5) Includes a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $190,971,000 based on the Canadian/U.S. Dollar exchange rate on June 30, 2019). The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.9% (2.86% at June 30, 2019).

(6) Includes a $500,000,000 unsecured term credit facility. The loan matures on July 19, 2023 and bears interest at LIBOR plus 0.9% (3.29% at June 30, 2019).

(7) Includes a £550,000,000 4.80% senior unsecured notes due 2028 (approximately $698,720,000 based on the Sterling/U.S. Dollar exchange rate in effect on June 30, 2019).

(8) Includes a £500,000,000 4.50% senior unsecured notes due 2034 (approximately $635,200,000 based on the Sterling/U.S. Dollar exchange rate in effect on June 30, 2019).

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



	Six Months Ended
	June 30, 2019				June 30, 2018
				Weighted Avg.				Weighted Avg.
	Amount			Interest Rate	Amount			Interest Rate
Beginning balance	$	9,699,984		4.48%	$	8,417,447		4.31%
Debt issued	2,050,000			3.58%	550,000			4.25%
Debt extinguished	(1,050,000		)	4.98%	(450,000		)	2.25%
Foreign currency	11,572			3.52%	(55,693		)	4.02%
Ending balance	$	10,711,556		4.24%	$	8,461,754		4.46%

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended

September 30, 2017

September 30, 2016

Weighted Avg.

Weighted Avg.

Amount

Interest Rate

Amount

Interest Rate
Beginning balance
$
8,260,038

4.245%

$
8,645,758

4.237%
Debt issued

7,500

1.940%

705,000

4.228%
Debt extinguished

(5,000)

1.830%

(400,000)

3.625%
Foreign currency

141,855

4.241%

(159,816)

4.443%
Ending balance
$
8,404,393

4.293%

$
8,790,942

4.264%

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


	Nine Months Ended						Six Months Ended
		September 30, 2017		September 30, 2016			June 30, 2019				June 30, 2018
			Weighted Avg.			Weighted Avg.				Weighted Avg.				Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount			Interest Rate	Amount			Interest Rate
Beginning balance	$	3,465,066	4.094%	$	3,478,207	4.440%	$	2,485,711		3.90%	$	2,618,408		3.76%
Debt issued		190,459	2.730%		193,541	3.053%	295,969			3.52%	44,606			3.38%
Debt assumed		23,094	6.670%		47,156	4.132%	42,000			4.62%	85,192			4.40%
Debt extinguished		(1,003,372)	5.321%		(416,009)	4.986%	(151,473		)	4.42%	(196,573		)	5.66%
Principal payments		(47,507)	4.339%		53,636	3.631%	(27,227		)	3.74%	(28,385		)	3.91%
Foreign currency		92,262	3.196%		(55,889)	4.478%	45,002			3.37%	(61,170		)	3.33%
Ending balance	$	2,720,002	3.735%	$	3,300,642	4.272%	$	2,689,982		3.84%	$	2,462,078		3.76%

Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of ~~September~~June 30, ~~2017,~~2019, we were in compliance with all of the covenants under our debt agreements.

~~11.~~

12. Derivative Instruments

We are exposed to, ~~various market~~among other risks, ~~including~~ the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to manage the general trend in interest rates at the applicable dates and our perceptionimpact of ~~the future volatility of interest rates. In addition, non-U.S. investments expose us to the potential losses associated with adverse~~ changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to ~~U.S. Dollar exchange rates. We may elect~~our capital structure. Our risk management program is designed to manage ~~this risk through~~ the ~~use of~~exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contacts, interest rate swaps, interest rate locks, and ~~issuing~~ debt issued in foreign ~~currencies.~~

~~Interest Rate Swap Contracts and~~currencies to offset a portion of these risks.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

For instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is ~~reported~~deferred as a component of other comprehensive income (“OCI”), and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings. ~~Approximately $6,454,000~~

Cash Flow Hedges of ~~gains, which~~Interest Rate Risk

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

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

consolidated statements of income.

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

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

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, we settled certain net investment hedges generating cash proceeds of ~~$55,771,000~~$6,716,000 and ~~$56,842,000,~~necessitating cash payments of $27,774,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings ~~when~~if the hedged investment is sold or substantially liquidated.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Derivative Contracts Undesignated

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

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


		September 30, 2017		December 31, 2016	June 30, 2019			December 31, 2018
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	575,000	$	900,000	$	500,000		$	575,000
Denominated in Pounds Sterling	£	550,000	£	550,000	£	1,340,708		£	890,708

Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000	$	250,000	$	250,000		$	250,000
Denominated in Pounds Sterling	£	1,050,000	£	1,050,000	£	1,050,000		£	1,050,000

Derivatives designated as cash flow hedges:
Denominated in U.S. Dollars	$	-	$	57,000
Denominated in Canadian Dollars	$	54,000	$	54,000
Denominated in Pounds Sterling	£	54,000	£	48,000
Interest rate swaps designated as cash flow hedges:
Denominated in U.S Dollars ⁽¹⁾					$	1,188,250		$	—

Derivative instruments not designated:
Denominated in Canadian Dollars	$	680,000	$	37,000
Interest rate caps denominated in U.S. Dollars					$	405,819		$	405,819
Forward purchase contracts denominated in Canadian Dollars					$	(217,500	)	$	(325,000	)
Forward sales contracts denominated in Canadian Dollars					$	280,000		$	405,000
Forward purchase contracts denominated in Pounds Sterling					£	(125,000	)	£	(350,000	)
Forward sales contracts denominated in Pounds Sterling					£	125,000		£	350,000

⁽¹⁾ At June 30, 2019 the maximum maturity date was July 15, 2021.

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



		Three Months Ended June 30,					Six Months Ended June 30,
	Location	2019			2018		2019			2018
Gain (loss) on derivative instruments designated as hedges recognized in income	Interest expense	$	7,134		$	4,091	$	12,467		$	3,822

Gain (loss) on derivative instruments not designated as hedges recognized in income	Interest expense	$	(1,128	)	$	734	$	(2,666	)	$	2,453

Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI	OCI	$	100,407		$	150,703	$	12,725		$	88,005

Three Months Ended

Nine Months Ended

September 30,

September 30,

Location

2017

2016

2017

2016

Gain (loss) on forward exchange contracts recognized in income

Interest expense

$
(576)

$
3,420

$
3,613

$
4,789

(Gain) on release of cumulative translation adjustment related to ineffectiveness on net investment hedge

Loss (gain) on derivatives, net

-

(2,516)

-

(2,516)

Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI

OCI

(98,003)

53,421

(239,884)

229,256

~~12.~~13. Commitments and Contingencies

At ~~September~~June 30, ~~2017,~~2019, we had 14 outstanding letter of credit obligations totaling ~~$162,629,000~~$48,111,000 and expiring between ~~2017~~2019 and 2024. At ~~September~~June 30, ~~2017,~~2019, we had outstanding construction in progress of ~~$344,742,000~~$363,160,000 and were committed to providing additional funds of approximately ~~$317,542,000~~$483,210,000 to complete construction. ~~At September 30, 2017, we had~~Purchase obligations include contingent purchase obligations totaling ~~$16,053,000.~~$8,476,000. These contingent purchase obligations relate to unfunded capital improvement obligations and contingent obligations on acquisitions. Rents due from the tenant are increased to reflect the additional investment in the property. In September 2017, we entered into an agreement with the University of Toledo Foundation to transfer our corporate headquarters as a gift. The gift is conditional based on certain terms within the agreement, which expire on November 30, 2017. Once the conditional terms have been satisfied, we expect to record the expense related to the gift.

We evaluate our leases for operating versus capital lease treatment in accordance with ASC Topic 840 “Leases.” A lease is classified as a capital lease if it provides for transfer of ownership of the leased asset at the end of the lease term, contains a bargain purchase option, has a lease term greater than 75% of the economic life of the leased asset, or if the net present value of the future minimum lease payments are in excess of 90% of the fair value of the leased asset. Certain leases contain bargain purchase options and have been classified as capital leases. At September 30, 2017, we had operating lease obligations of $1,105,254,000 relating to certain ground leases and company office space and capital lease obligations of $90,288,000 relating primarily to certain investment properties. Regarding ground leases, we have sublease agreements with certain of our operators that require the operators to reimburse us for our monthly operating lease obligations. At September 30, 2017, ~~aggregate future minimum rentals to be received under these noncancelable subleases totaled $71,964,000.~~

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~13.~~

14. Stockholders’ Equity

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


	September 30, 2017	December 31, 2016	June 30, 2019	December 31, 2018
Preferred Stock:
Authorized shares	50,000,000	50,000,000	50,000,000	50,000,000
Issued shares	14,375,000	25,875,000	—	14,375,000
Outstanding shares	14,370,065	25,875,000	—	14,369,965

Common Stock, $1.00 par value:
Authorized shares	700,000,000	700,000,000	700,000,000	700,000,000
Issued shares	371,430,074	363,576,924	406,497,122	384,849,236
Outstanding shares	370,341,635	362,602,173	405,254,113	383,674,603

Preferred ~~Stock.~~Stock The following is a summary of our preferred stock activity during the periods indicated:


	Nine Months Ended				Six Months Ended
	September 30, 2017		September 30, 2016		June 30, 2019			June 30, 2018
		Weighted Avg.		Weighted Avg.			Weighted Avg.			Weighted Avg.
	Shares	Dividend Rate	Shares	Dividend Rate	Shares		Dividend Rate	Shares		Dividend Rate
Beginning balance	25,875,000	6.500%	25,875,000	6.500%	14,369,965		6.50%	14,370,060		6.50%
Shares redeemed	(11,500,000)	6.500%	-	0.000%
Shares converted	(4,935)	6.500%	-	0.000%	(14,369,965	)	6.50%	(95	)	6.50%
Ending balance	14,370,065	6.500%	25,875,000	0.000%	—		—%	14,369,965		6.50%

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we ~~recognized a charge of $9,769,000 in connection with the redemption~~converted all of the outstanding Series ~~J preferred~~I Preferred Stock. Each share was converted into 0.8857 shares of common stock.

Common ~~Stock.~~Stock In February 2019, we entered into separate amended and restated equity distribution agreements whereby we can offer and sell up to $1,500,000,000 aggregate amount of our common stock ("Equity Shelf Program"). The Equity Shelf Program also allows us to enter into forward sale agreements. As of June 30, 2019, we had $1,360,820,000 of remaining capacity under the Equity Shelf Program, which excludes forward sales agreements outstanding for the sale of 2,194,575 shares with maturity dates in the fourth quarter. We expect to physically settle the forward sales for cash proceeds.

The following is a summary of our common stock issuances during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 (dollars in thousands, except average price amounts):

Shares Issued

Average Price

Gross Proceeds

Net Proceeds
2016 Dividend reinvestment plan issuances

3,946,821

$
70.51

$
278,578

$
278,297
2016 Option exercises

137,579

50.57

6,958

6,958
2016 Equity shelf program issuances

3,119,801

75.27

237,131

234,812
2016 Stock incentive plans, net of forfeitures

442,899

-

-
2016 Totals

7,647,100

$
522,667

$
520,067

2017 Dividend reinvestment plan issuances

4,312,447

$
71.14

$
306,785

$
305,996
2017 Option exercises

209,192

50.62

10,590

10,590
2017 Equity shelf program issuances

2,986,574

72.30

215,917

214,406
2017 Preferred stock conversions

4,296

-

-
2017 Redemption of equity membership units

91,180

-

-
2017 Stock incentive plans, net of forfeitures

135,773

-

-
2017 Totals

7,739,462

$
533,292

$
530,992



	Shares Issued	Average Price	Gross Proceeds		Net Proceeds
2018 Dividend reinvestment plan issuances	182,910	$55.40	$	10,133	$	10,133
2018 Option exercises	1,026	53.61	55		55
2018 Preferred stock conversions	83		—		—
2018 Stock incentive plans, net of forfeitures	114,037		—		—
2018 Totals	298,056		$	10,188	$	10,188

2019 Dividend reinvestment plan issuances	4,304,712	$75.20	$	323,724	$	320,243
2019 Option exercises	10,736	51.32	551		551
2019 Equity Shelf Program issuances	4,384,045	74.97	328,665		326,362
2019 Preferred stock conversions	12,712,452		—		—
2019 Stock incentive plans, net of forfeitures	167,565		—		—
2019 Totals	21,579,510		$	652,940	$	647,156

Dividends. The increase in dividends is primarily attributable to increases in our common shares outstanding, offset by the conversion of the Series I Preferred Stock as described ~~above and an increase in common dividends per share.~~above. The following is a summary of our dividend payments (in thousands, except per share amounts):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended

September 30, 2017

September 30, 2016

Per Share

Amount

Per Share

Amount
Common Stock

$
2.6100

$
955,631

$
2.5800

$
921,381
Series I Preferred Stock

2.4375

35,035

2.4375

35,039
Series J Preferred Stock

0.2347

2,699

1.2189

14,016
Totals

$
993,365

$
970,436

Six Months Ended
June 30, 2019 June 30, 2018
Per Share Amount Per Share Amount
Common Stock $ 1.7400
$ 698,437
$ 1.7400
$ 647,098
Series I Preferred Stock —
—
1.6250
23,352
Totals $ 698,437
$ 670,450

Accumulated Other Comprehensive Income. The following is a summary of accumulated other comprehensive income (loss) for the periods presented (in thousands):



	June 30, 2019			December 31, 2018
Foreign currency translation	$	(851,584	)	$	(868,006	)
Derivative instruments	751,502			738,777
Actuarial losses	(540		)	(540		)
Total accumulated other comprehensive loss	$	(100,622	)	$	(129,769	)

Unrecognized gains (losses) related to:

Foreign Currency Translation

Available for Sale Securities

Actuarial Losses

Cash Flow Hedges

Total
Balance at December 31, 2016

$
(173,496)

$
5,120

$
(1,153)

$
(2)

$
(169,531)
Other comprehensive income before reclassification adjustments


48,574

(20,285)

-

2

28,291
Net current-period other comprehensive income


48,574

(20,285)

-

2

28,291
Balance at September 30, 2017

$
(124,922)

$
(15,165)

$
(1,153)

$
-

$
(141,240)

Balance at December 31, 2015

$
(85,484)

$
-

$
(1,343)

$
(1,416)

$
(88,243)
Other comprehensive income before reclassification adjustments


(59,060)

(5,252)

-

11


(64,301)
Reclassification amount to net income

-

-

-

1,360 ⁽¹⁾

1,360
Net current-period other comprehensive income


(59,060)

(5,252)

-

1,371


(62,941)
Balance at September 30, 2016

$
(144,544)

$
(5,252)

$
(1,343)

$
(45)

$
(151,184)

(1) Please see Note 11 for additional information.

~~14.~~15. Stock Incentive Plans

Our 2016 Long-Term Incentive Plan (“2016 Plan”) authorizes up to 10,000,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Our non-employee directors, officers and key employees are eligible to participate in the 2016 Plan. The 2016 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock, deferred stock units, performance units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three to five years. Options expire ten years from the date of grant. Stock-based compensation expense totaled ~~$6,790,000~~$7,662,000 and ~~$16,459,000~~$15,192,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2019, respectfully, and ~~$5,401,000~~$5,167,000 and ~~$20,618,000~~$16,725,000 for the same periods in ~~2016.~~2018.

~~15.~~

16. Earnings Per Share

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

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Numerator for basic and diluted earnings
per share - net income (loss) attributable
to common stockholders	$	137,762	$	154,432	$	418,232	$	592,103

Denominator for basic earnings per
share - weighted average shares	404,607		371,640		398,073		371,552
Effect of dilutive securities:
Employee stock options	—		14		1		15
Non-vested restricted shares	955		325		911		523
Redeemable shares	1,096		1,096		1,096		1,096
Employee stock purchase program	15		—		15		—
Dilutive potential common shares	2,066		1,435		2,023		1,634
Denominator for diluted earnings per
share - adjusted weighted average shares	406,673		373,075		400,096		373,186

Basic earnings per share	$	0.34	$	0.42	$	1.05	$	1.59
Diluted earnings per share	$	0.34	$	0.41	$	1.05	$	1.59

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Numerator for basic and diluted earnings

per share - net income (loss) attributable


to common stockholders

$
74,043

$
334,910

$
575,118

$
679,353



Denominator for basic earnings per


share - weighted average shares


369,089

358,932

366,096

356,911
Effect of dilutive securities:


Employee stock options


40

128

53

119

Non-vested restricted shares


515

526

464

414

Redeemable shares

1,096

1,651

1,281

1,308
Dilutive potential common shares


1,651

2,305

1,798

1,841
Denominator for diluted earnings per


share - adjusted weighted average shares


370,740

361,237

367,894

358,752



Basic earnings per share

$
0.20

$
0.93

$
1.57

$
1.90
Diluted earnings per share

$
0.20

$
0.93

$
1.56

$
1.89

The Series I Cumulative Convertible Perpetual Preferred Stock ~~was~~were excluded from the 2018 calculation as the effect of the conversions were anti-dilutive. As of June 30, 2019, forward sales agreements outstanding for the sale of 2,194,575 shares of common stock were not included in the ~~calculations as~~computation of diluted earnings per share because such forward sales were anti-dilutive for the ~~effect of conversions into common stock was anti-dilutive.~~period.

~~16.~~

17. Disclosure about Fair Value of Financial Instruments

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets and liabilities. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 for additional information. The guidance describes three levels of inputs that may be used to measure fair value:

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

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

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

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

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

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

~~Available-for-sale~~

Equity ~~Investments~~Securities — ~~Available-for-sale equity investments~~Equity securities are recorded at their fair value based on Level 1 publicly available trading prices.

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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

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

Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps — Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from observable market ~~value. Fair market value is determined using Level 2 inputs by estimating the future value of the currency pair based on existing~~data, including yield curves and foreign exchange rates ~~comprised~~(all of ~~current spot and traded forward points, and calculating a present value of the net amount using a discount factor based on observable traded interest rates.~~

our derivatives are Level 2).

Redeemable OP Unitholder Interests — Our redeemable unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.

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

September 30, 2017

December 31, 2016

Carrying Amount

Fair Value

Carrying Amount

Fair Value
Financial assets:



Mortgage loans receivable

$
377,283

$
413,221

$
485,735

$
521,773

Other real estate loans receivable


119,567

124,408

136,893

138,050

Available-for-sale equity investments


7,615

7,615

27,899

27,899

Cash and cash equivalents


236,247

236,247

419,378

419,378

Foreign currency forward contracts


13,682

13,682

135,561

135,561



Financial liabilities:



Borrowings under unsecured credit facilities

$
420,000

$
420,000

$
645,000

$
645,000

Senior unsecured notes


8,315,395

9,186,768

8,161,619

8,879,176

Secured debt


2,713,513

2,750,467

3,477,699

3,558,378

Foreign currency forward contracts

55,264

55,264

4,342

4,342



Redeemable OP unitholder interests

$
104,363

$
104,363

$
110,502

$
110,502

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019 December 31, 2018
Carrying Amount Fair Value Carrying Amount Fair Value
Financial assets:
Mortgage loans receivable $ 264,398
$ 274,116
$ 249,071
$ 257,337
Other real estate loans receivable 104,596
105,706
81,268
82,742
Equity securities 11,860
11,860
11,286
11,286
Cash and cash equivalents 268,666
268,666
215,376
215,376
Restricted cash 91,052
91,052
100,753
100,753
Foreign currency forward contracts, interest rate swaps and cross currency swaps 91,290
91,290
94,729
94,729

Financial liabilities:
Unsecured revolving credit facility and commercial paper note program $ 1,869,188
$ 1,869,188
$ 1,147,000
$ 1,147,000
Senior unsecured notes 10,606,106
11,026,259
9,603,299
10,043,797
Secured debt 2,675,507
2,737,838
2,476,177
2,499,130
Foreign currency forward contracts, interest rate swaps and cross currency swaps 32,249
32,249
71,109
71,109

Redeemable OP unitholder interests $ 121,476
$ 121,476
$ 103,071
$ 103,071

Items Measured at Fair Value on a Recurring Basis

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

Fair Value Measurements as of September 30, 2017

Total

Level 1

Level 2

Level 3
Available-for-sale equity investments⁽¹⁾

$
7,615

$
7,615

$
-

$
-
Foreign currency forward contracts, net⁽²⁾

(41,582)

-

(41,582)

-
Redeemable OP unitholder interests

104,363

-

104,363

-
Totals

$
70,396

$
7,615

$
62,781

$
-

(1) Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date.
(2) Please see Note 11 for additional information.



	Fair Value Measurements as of June 30, 2019
	Total		Level 1		Level 2		Level 3
Equity securities	$	11,860	$	11,860	$	—	$	—
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability)⁽¹⁾	59,041		—		59,041		—
Redeemable OP unitholder interests	121,476		—		121,476		—
Totals	$	192,377	$	11,860	$	180,517	$	—

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

⁽¹⁾Please see Note 12 for additional information.

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 67 for impairments of real estate loans receivable) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally resides within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in ~~business combinations and~~ asset acquisitions using current interest rates at which similar borrowings could be obtained on the transaction date.

~~17.~~

18. Segment Reporting

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our three operating segments: ~~triple-net,~~Seniors Housing Operating, Triple-net and Outpatient Medical. Our seniors housing operating and outpatient medical. During the three months ended December 31, 2016, we reclassified interest expense on our foreign-denominated senior notes from the seniors housing operating segment to non-segment. Accordingly, the segment information provided in this Note has been reclassified to conform to the current presentation for all periods presented.

~~Our triple-net~~ properties include ~~long-term/post-acute care facilities,~~ assisted living, ~~facilities,~~ independent living/continuing care retirement communities, ~~care homes (United Kingdom),~~ independent ~~support~~supportive living ~~facilities~~ communities

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Canada), care homes with and without nursing ~~(United Kingdom)~~(U.K.) and combinations ~~thereof.~~thereof that are owned and/or operated through RIDEA structures (see Note 19). Under the ~~triple-net~~Triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our ~~seniors housing operating properties include the seniors housing communities referenced above that are owned and/or operated through RIDEA structures (see Note 18). Our~~ outpatient medical properties are typically leased to multiple tenants and generally require a certain level of property ~~management.~~

management by us.

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

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

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016)~~2018). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments. There are no intersegment sales or transfers.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Summary information for the reportable segments (which excludes unconsolidated entities) is as follows (in thousands):



Three Months Ended June 30, 2019:	Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate			Total
Resident fees and services	$	914,085		$	—		$	—		$	—		$	914,085
Rental income	—			222,362			163,224			—			385,586
Interest income	—			17,118			238			—			17,356
Other income	1,444			1,278			(97		)	454			3,079
Total revenues	915,529			240,758			163,365			454			1,320,106

Property operating expenses	637,317			12,823			50,987			—			701,127
Consolidated net operating income	278,212			227,935			112,378			454			618,979

Depreciation and amortization	136,551			56,056			55,445			—			248,052
Interest expense	17,572			3,225			3,386			117,153			141,336
General and administrative expenses	—			—			—			33,741			33,741
Loss (gain) on derivatives and financial instruments, net	—			1,913			—			—			1,913
Impairment of assets	—			(940		)	10,879			—			9,939
Other expenses	11,857			5,560			(4		)	4,215			21,628
Income (loss) from continuing operations before income taxes and other items	112,232			162,121			42,672			(154,655		)	162,370
Income tax (expense) benefit	375			(1,361		)	(586		)	(27		)	(1,599		)
(Loss) income from unconsolidated entities	(17,453		)	6,578			1,826			—			(9,049		)
Gain (loss) on real estate dispositions, net	(550		)	(1,130		)	(2		)	—			(1,682		)
Income (loss) from continuing operations	94,604			166,208			43,910			(154,682		)	150,040
Net income (loss)	$	94,604		$	166,208		$	43,910		$	(154,682	)	$	150,040

Total assets	$	16,440,104		$	9,494,388		$	7,004,561		$	209,644		$	33,148,697



Three Months Ended June 30, 2018:	Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate			Total
Resident fees and services	$	763,345		$	—		$	—		$	—		$	763,345
Rental income	—			197,961			135,640			—			333,601
Interest income	172			13,247			43			—			13,462
Other income	1,650			13,212			144			498			15,504
Total revenues	765,167			224,420			135,827			498			1,125,912

Property operating expenses	525,662			136			42,953			—			568,751
Consolidated net operating income	239,505			224,284			92,874			498			557,161

Depreciation and amortization	134,779			55,309			46,187			—			236,275
Interest expense	16,971			3,800			1,656			98,989			121,416
General and administrative expenses	—			—			—			32,831			32,831
Loss (gain) on derivatives and financial instruments, net	—			(7,460		)	—			—			(7,460		)
Loss (gain) on extinguishment of debt, net	299			—			—			—			299
Impairment of assets	2,212			2,420			—			—			4,632
Other expenses	6,167			957			2,095			839			10,058
Income (loss) from continuing operations before income taxes and other items	79,077			169,258			42,936			(132,161		)	159,110
Income tax (expense) benefit	(2,617		)	(688		)	(378		)	(158		)	(3,841		)
(Loss) income from unconsolidated entities	(5,204		)	5,062			1,391			—			1,249
Gain (loss) on real estate dispositions, net	(1		)	10,759			(3		)	—			10,755
Income (loss) from continuing operations	71,255			184,391			43,946			(132,319		)	167,273
Net income (loss)	$	71,255		$	184,391		$	43,946		$	(132,319	)	$	167,273

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, 2017:

Triple-net

Seniors Housing Operating

Outpatient Medical

Non-segment / Corporate

Total
Rental income

$
221,555

$
-

$
141,325

$
-

$
362,880
Resident fees and services

-

702,380

-

-

702,380
Interest income

20,187

-

-

-

20,187
Other income

3,174

1,497

667

698

6,036
Total revenues

244,916

703,877

141,992

698

1,091,483

Property operating expenses

-

478,777

45,220

-

523,997
Consolidated net operating income

244,916

225,100

96,772

698

567,486

Interest expense

3,622

16,369

2,929

99,658

122,578
Loss (gain) on derivatives, net

324

-

-

-

324
Depreciation and amortization

62,891

119,089

48,158

-

230,138
General and administrative

-

-

-

29,913

29,913
Other expenses

89,236 ⁽¹⁾

5,157

530

4,672

99,595
Income (loss) from continuing operations before income taxes and income from unconsolidated entities

88,843

84,485

45,155

(133,545)

84,938
Income tax (expense) benefit

(816)

(1,519)

(366)

2,032

(669)
Income (loss) from unconsolidated entities

5,478

(2,886)

816

-

3,408
Income (loss) from continuing operations

93,505

80,080

45,605

(131,513)

87,677
Gain (loss) on real estate dispositions, net

(185)

(197)

2,004

-

1,622
Net income (loss)

$
93,320

$
79,883

$
47,609

$
(131,513)

$
89,299

Total assets

$
9,463,910

$
13,538,090

$
4,992,534

$
185,845

$
28,180,379

(1) Represents non-capitalizable transaction costs primarily related to a joint venture transaction with an existing seniors housing operator including the conversion of properties from triple-net to seniors housing operating, an exchange of PropCo/OpCo interests, and termination/restructuring of pre-existing relationships.

Three Months Ended September 30, 2016:

Triple-net

Seniors Housing Operating

Outpatient Medical

Non-segment / Corporate

Total
Rental income

$
286,226

$
-

$
134,926

$
-

$
421,152
Resident fees and services

-

630,017

-

-

630,017
Interest income

23,017

1,054

1,009

-

25,080
Other income

1,621

716

358

189

2,884
Total revenues

310,864

631,787

136,293

189

1,079,133

Property operating expenses

-

432,292

41,388

-

473,680
Consolidated net operating income

310,864

199,495

94,905

189

605,453

Interest expense

4,714

20,360

3,986

100,639

129,699
Loss (gain) on derivatives, net

-

-

-

(2,516)

(2,516)
Depreciation and amortization

74,296

97,210

46,555

-

218,061
General and administrative

-

-

-

36,828

36,828
Transaction costs

1,613

18,083

146

-

19,842
Impairment of assets

5,070

-

4,635

-

9,705
Income (loss) from continuing operations before income taxes and income from unconsolidated entities

225,171

63,842

39,583

(134,762)

193,834
Income tax (expense) benefit

(896)

515

417

269

305
Income (loss) from unconsolidated entities

1,998

(3,891)

144

-

(1,749)
Income (loss) from continuing operations

226,273

60,466

40,144

(134,493)

192,390
Gain (loss) on real estate dispositions, net

163,579

-

(1,228)

-

162,351
Net income (loss)

$
389,852

$
60,466

$
38,916

$
(134,493)

$
354,741


Nine Months Ended September 30, 2017:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total

Six Months Ended June 30, 2019											Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate			Total
Resident fees and services											$	1,782,370		$	—		$	—		$	—		$	1,782,370
Rental income	$	666,735	$	-	$	418,886	$	-	$	1,085,621	—			454,394			312,276			—			766,670
Resident fees and services		-		2,049,757		-		-		2,049,757
Interest income		61,767		69		-		-		61,836	—			32,064			411			—			32,475
Other income		7,496		4,005		2,497		1,171		15,169	5,545			2,541			139			2,611			10,836
Total revenues		735,998		2,053,831		421,383		1,171		3,212,383	1,787,915			488,999			312,826			2,611			2,592,351

Property operating expenses		-		1,400,313		135,708		-		1,536,021	1,245,003			27,778			99,153			—			1,371,934
Consolidated net operating income		735,998		653,518		285,675		1,171		1,676,362	542,912			461,221			213,673			2,611			1,220,417


Depreciation and amortization											268,126			117,404			106,454			—			491,984
Interest expense		11,647		47,587		7,342		290,829		357,405	35,823			6,665			6,734			237,346			286,568
Loss (gain) on derivatives, net		2,284		-		-		-		2,284
Depreciation and amortization		182,672		356,023		144,567		-		683,262
General and administrative		-		-		-		93,643		93,643
General and administrative expenses											—			—			—			69,023			69,023
Loss (gain) on derivatives and financial instruments, net											—			(574		)	—			—			(574		)
Loss (gain) on extinguishment of debt, net		29,083		3,414		4,373		-		36,870	—			—			—			15,719			15,719
Provision for loan losses											—			18,690			—			—			18,690
Impairment of assets		4,846		14,191		5,625		-		24,662	—			(940		)	10,879			—			9,939
Other expenses		96,425		8,100		2,201		10,882		117,608	14,803			8,589			750			6,242			30,384
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		409,041		224,203		121,567		(394,183)		360,628
Income (loss) from continuing operations before income taxes and other items											224,160			311,387			88,856			(325,719		)	298,684
Income tax (expense) benefit		(2,070)		9,133		(655)		(873)		5,535	(244		)	(2,312		)	(951		)	(314		)	(3,821		)
Income (loss) from unconsolidated entities		14,983		(40,527)		1,868		-		(23,676)
(Loss) income from unconsolidated entities											(34,033		)	12,236			3,549			—			(18,248		)
Gain (loss) on real estate dispositions, net											(710		)	166,444			(7		)	—			165,727
Income (loss) from continuing operations		421,954		192,809		122,780		(395,056)		342,487	189,173			487,755			91,447			(326,033		)	442,342
Gain (loss) on real estate dispositions, net		273,051		12,814		2,004		-		287,869
Net income (loss)	$	695,005	$	205,623	$	124,784	$	(395,056)	$	630,356	$	189,173		$	487,755		$	91,447		$	(326,033	)	$	442,342



Six Months Ended June 30, 2018	Seniors Housing Operating			Triple-net			Outpatient Medical			Non-segment / Corporate			Total
Resident fees and services	$	1,499,279		$	—		$	—		$	—		$	1,499,279
Rental income	—			404,792			272,178			—			676,970
Interest income	257			27,798			55			—			28,110
Other income	2,798			14,589			265			866			18,518
Total revenues	1,502,334			447,179			272,498			866			2,222,877

Property operating expenses	1,037,603			157			87,456			—			1,125,216
Consolidated net operating income	464,731			447,022			185,042			866			1,097,661

Depreciation and amortization	260,548			111,341			92,587			—			464,476
Interest expense	33,906			7,242			3,332			199,711			244,191
General and administrative expenses	—			—			—			66,536			66,536
Loss (gain) on derivatives and financial instruments, net	—			(14,633		)	—			—			(14,633		)
Loss (gain) on extinguishment of debt, net	110			(32		)	11,928			—			12,006
Impairment of assets	4,513			28,304			—			—			32,817
Other expenses	5,979			2,077			2,693			3,021			13,770
Income (loss) from continuing operations before income taxes and other items	159,675			312,723			74,502			(268,402		)	278,498
Income tax (expense) benefit	(2,455		)	(1,824		)	(806		)	(344		)	(5,429		)
(Loss) income from unconsolidated entities	(14,684		)	10,883			2,621			—			(1,180		)
Gain (loss) on real estate dispositions, net	4			134,156			214,779			—			348,939
Income (loss) from continuing operations	142,540			455,938			291,096			(268,746		)	620,828
Net income (loss)	$	142,540		$	455,938		$	291,096		$	(268,746	)	$	620,828

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2016:

Triple-net

Seniors Housing Operating

Outpatient Medical

Non-segment / Corporate

Total
Rental income

$
857,184

$
-

$
402,258

$
-

$
1,259,442
Resident fees and services

-

1,847,386

-

-

1,847,386
Interest income

67,842

3,126

3,307

-

74,275
Other income

4,317

11,889

4,824

705

21,735
Total revenues

929,343

1,862,401

410,389

705

3,202,838

Property operating expenses

-

1,259,182

122,966

-

1,382,148
Consolidated net operating income

929,343

603,219

287,423

705

1,820,690

Interest expense

16,832

61,157

15,132

301,864

394,985
Loss (gain) on derivatives, net

-

-

-

(2,516)

(2,516)
Depreciation and amortization

229,906

301,354

142,066

-

673,326
General and administrative

-

-

-

122,434

122,434
Transaction costs

5,760

25,259

2,188

-

33,207
Loss (gain) on extinguishment of debt, net

97

(88)

-

-

9
Impairment of assets

19,384

-

4,635

-

24,019
Other expenses

-

-

-

3,161

3,161
Income (loss) from continuing operations before income taxes and income from unconsolidated entities

657,364

215,537

123,402

(424,238)

572,065
Income tax expense

(1,425)

5,304

(59)

(1,277)

2,543
(Loss) income from unconsolidated entities

8,097

(15,713)

88

-

(7,528)
Income (loss) from continuing operations

664,036

205,128

123,431

(425,515)

567,080
Gain (loss) on real estate dispositions, net

165,109

-

(1,228)

-

163,881
Net income (loss)

$
829,145

$
205,128

$
122,203

$
(425,515)

$
730,961

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



	Three Months Ended								Six Months Ended
	June 30, 2019				June 30, 2018				June 30, 2019				June 30, 2018
Revenues:	Amount		%		Amount		%		Amount		%		Amount		%
United States	$	1,092,376	82.8	%	$	895,734	79.5	%	$	2,136,042	82.4	%	$	1,759,523	79.1	%
United Kingdom	112,647		8.5	%	112,031		10.0	%	225,065		8.7	%	228,556		10.3	%
Canada	115,083		8.7	%	118,147		10.5	%	231,244		8.9	%	234,798		10.6	%
Total	$	1,320,106	100.0	%	$	1,125,912	100.0	%	$	2,592,351	100.0	%	$	2,222,877	100.0	%

	As of
	June 30, 2019				December 31, 2018
Assets:	Amount		%		Amount		%
United States	$	27,496,270	82.9	%	$	24,884,292	82.0	%
United Kingdom	3,173,654		9.6	%	3,078,994		10.1	%
Canada	2,478,773		7.5	%	2,378,786		7.9	%
Total	$	33,148,697	100.0	%	$	30,342,072	100.0	%

~~WELLTOWER INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016
Revenues:

Amount
%

Amount
%

Amount
%

Amount
%
United States

$
871,431
79.9%

$
874,050
81.0%

$
2,582,042
80.4%

$
2,581,533
80.6%
United Kingdom

105,028
9.6%

95,068
8.8%

298,618
9.3%

295,203
9.2%
Canada

115,024
10.5%

110,015
10.2%

331,723
10.3%

326,102
10.2%
Total

$
1,091,483
100.0%

$
1,079,133
100.0%

$
3,212,383
100.0%

$
3,202,838
100.0%

As of

September 30, 2017

December 31, 2016

Assets:

Amount
%

Amount
%

United States

$
22,535,209
80.0%

$
23,572,459
81.7%

United Kingdom

3,202,180
11.3%

2,782,489
9.6%

Canada

2,442,990
8.7%

2,510,236
8.7%

Total

$
28,180,379
100.0%

$
28,865,184
100.0%

~~18.~~ 19.Income Taxes and Distributions

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

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, a REIT may lease “qualified health care properties” on an arm’s-length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such TRS by a person who qualifies as an “eligible independent contractor.” Generally, the rent received from the TRS will meet the related party rent exception and will be treated as “rents from real property.” A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients. We have entered into various joint ventures that were structured under RIDEA. Resident level rents and related operating expenses for these facilities are reported in the unaudited consolidated financial statements and are subject to federal and state income taxes as the operations of such facilities are included in TRS entities. Certain net operating loss carryforwards could be utilized to offset taxable income in future years.

Income taxes reflected in the financial statements primarily represents U.S. federal, ~~and~~ state and local income taxes as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The provision for income taxes for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, was primarily due to operating income or losses, offset by certain discrete items at our TRS entities. In 2014, we established certain wholly-owned direct and indirect subsidiaries in Luxembourg and Jersey and transferred interests in certain foreign investments into this holding company structure. The structure includes a property holding company that is tax resident in the United Kingdom. No material adverse current tax consequences in Luxembourg, Jersey or the United Kingdom resulted from the creation of this holding company structure and ~~all~~most of the subsidiary entities in the structure are treated as disregarded entities of the company for U.S. federal income tax purposes. The company reflects current and deferred tax liabilities for any such withholding taxes incurred as a result of this holding company structure in its consolidated financial statements. Generally, given current statutes of limitations, we are subject to audit by the Internal Revenue Service ~~(“IRS”)~~ for the year ended December 31, ~~2013~~2015 and subsequent years and by state taxing authorities for the year ended December 31, ~~2012~~2014 and subsequent years. The ~~company~~Company and its subsidiaries are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to our initial investments in Canada in May ~~2012,~~2013, by HM Revenue & Customs for periods subsequent to our initial investments in the United Kingdom in August ~~2012 and by Luxembourg taxing authorities generally for periods subsequent to our establishment of certain Luxembourg-based subsidiaries during 2014.~~

2013.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~19.~~

20.Variable Interest Entities

We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be ~~variable interest entities (“VIE”).~~VIEs. We have concluded that we are the primary beneficiary of these VIEs based on a combination of operational control of the joint venture and the rights to receive residual returns or the obligation to absorb losses arising from the joint ventures. Except for capital contributions associated with the initial joint venture formations, the joint ventures have been and are expected to be funded from the ongoing operations of the underlying properties. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands):



	June 30, 2019		December 31, 2018
Assets:
Net real estate investments	$	966,417	$	973,813
Cash and cash equivalents	22,491		18,678
Receivables and other assets	15,411		14,600
Total assets⁽¹⁾	$	1,004,319	$	1,007,091

Liabilities and equity:
Secured debt	$	462,836	$	465,433
Lease liabilities	1,326		—
Accrued expenses and other liabilities	21,922		18,229
Total equity	518,235		523,429
Total liabilities and equity	$	1,004,319	$	1,007,091

(1) Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs.

September 30, 2017

December 31, 2016
Assets

Net real property owned

$
1,010,638

$
989,596

Cash and cash equivalents

11,874

10,501

Receivables and other assets

18,920

12,102

Total assets⁽¹⁾

$
1,041,432

$
1,012,199

Liabilities and equity

Secured debt

$
472,445

$
450,255

Accrued expenses and other liabilities

16,982

13,803

Redeemable noncontrolling interests

176,591

185,556

Total equity

375,414

362,585

Total liabilities and equity

$
1,041,432

$
1,012,199

(1) Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs.

21. Subsequent Events

Disposition of Benchmark Senior Living On July 16, 2019, we disposed of our Benchmark Senior Living portfolio for a $1.8 billion gross sale price. The portfolio consisted of 48 seniors housing operating properties located in New England. Proceeds were used to extinguish the $1 billion bridge loan (discussed in Note 11) and $24 million of secured debt.

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

		~~EXECUTIVE SUMMARY~~

EXECUTIVE SUMMARY

Company Overview	29
Business Strategy	29
Key Transactions ~~in 2017~~	29
Key Performance Indicators, Trends and Uncertainties ~~Corporate Governance~~	29 29 30 31 33
Corporate Governance	33

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash	33
Off-Balance Sheet Arrangements ~~Contractual Obligations~~ ~~Capital Structure~~	33 34 35 35
Contractual Obligations	34
Capital Structure	34

RESULTS OF OPERATIONS

Summary ~~Triple-net~~	35
Seniors Housing Operating ~~Outpatient Medical~~ ~~Non-Segment/Corporate~~	36 36 38 40 42 35
Triple-net	37
~~OTHER~~ Outpatient Medical	39
Non-Segment/Corporate	41

OTHER

Non-GAAP Financial Measures	42
Critical Accounting Policies	49
Cautionary Statement Regarding Forward-Looking Statements	51




	50

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

The following discussion and analysis isare based primarily on the unaudited consolidated financial statements of Welltower Inc. for the periods presented and should be read together with the notes thereto contained in this Quarterly Report on Form 10-Q. Other important factors are identified in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, including factors identified under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References herein to “we,” “us,” “our,” or the ~~“company”~~“Company” refer to Welltower Inc. and its subsidiaries unless specifically noted otherwise.

Executive Summary

Company Overview

Welltower Inc. (NYSE:~~HCN)~~WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The ~~company~~Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (U.S.), Canada and the United Kingdom (U.K.), consisting of seniors housing and post-acute communities and outpatient medical ~~properties~~. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets.

properties.

The following table summarizes our consolidated portfolio for the three months ended ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

Percentage of

Number of

Type of Property
NOI⁽¹⁾

NOI

Properties

Triple-net
$
244,916

43.2%

570

Seniors housing operating

225,100

39.7%

442

Outpatient medical

96,772

17.1%

266

Totals
$
566,788

100.0%

1,278

(1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

Percentage of Number of
Type of Property
NOI⁽¹⁾
NOI Properties
Seniors Housing Operating $ 278,212
45.0 % 575
Triple-net 227,935
36.8 % 671
Outpatient Medical 112,378
18.2 % 352
Totals $ 618,525
100.0 % 1,598

⁽¹⁾ Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

Business Strategy

Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in NOI and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.

Substantially all of our revenues are derived from operating lease rentals, resident fees and services and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our ~~customers/~~obligors/partners experience operating difficulties and become unable to generate sufficient cash to make payments or operating distributions to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our ~~proactive and comprehensive~~ asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division ~~actively~~ manages and monitors the outpatient medical portfolio with a comprehensive process including review of tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things. ~~In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends.~~ We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we ~~are~~ generally ~~able~~aim to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.

In addition to our ~~asset/property~~asset management and research efforts, we also aim to structure our relevant investments to ~~help~~ mitigate payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are

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

typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.

For the ~~nine~~six months ended ~~September~~June 30, ~~2017, rental income and~~2019, resident fees and services and rental income represented ~~34%~~69% and ~~64%~~30%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment.

Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount outstanding during the term of the loan and any interest rate adjustments.

Our primary sources of cash include resident fees and services, rent and interest receipts, ~~resident fees and services,~~ borrowings under our ~~primary~~ 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 and general and administrative expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our ~~primary~~ unsecured revolving credit facility and Commercial Paper Program, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from NOI and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under our ~~primary~~ unsecured revolving credit facility and Commercial Paper Program, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also ~~possible~~likely that investment dispositions may occur in the future. To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any investment dispositions in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our ~~primary~~ unsecured revolving credit ~~facility.~~facility and Commercial Paper Program. At ~~September~~June 30, ~~2017,~~2019, we had ~~$236,247,000~~$268,666,000 of cash and cash equivalents, ~~$59,064,000~~$91,052,000 of restricted cash and ~~$2,554,424,000~~$1,130,000,000 of available borrowing capacity under our ~~primary~~ unsecured revolving credit facility.

Key Transactions ~~in 2017~~

Capital. The following summarizes key capital transaction that occurred during the six months ended June 30, 2019:

In January 2019, we established an unsecured Commercial Paper Program. Under the terms of the program, we may issue, from time to time, unsecured commercial paper with maturities that vary, but do not exceed 397 days from the date of issue, up to a maximum aggregate principal amount outstanding at any time of $1,000,000,000.

In February 2019, we completed the issuance of $500,000,000 of 3.625% senior unsecured notes due 2024 and $550,000,000 of 4.125% senior unsecured notes due 2029 for net proceeds of approximately $1,036,964,000.

In February 2019, we elected to effect the mandatory conversion of all of the outstanding 6.50% Series I Cumulative Convertible Perpetual Preferred Stock. Each share of convertible stock was converted into 0.8857 shares of common stock.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we extinguished ~~$1,003,372,000~~$151,473,000 of secured debt at a blended average interest rate of ~~5.3%.~~ 4.42% and in March 2019 we repaid our $600,000,000 of 4.125% senior unsecured notes due 2019 and $450,000,000 of 6.125% senior unsecured notes due 2020.

In ~~addition,~~May 2019, we ~~redeemed all 11,500,000 shares~~drew on a $1,000,000,000 unsecured term loan facility that matures on May 28, 2020 which was put in place to bridge the acquisition of ~~our 6.5% Series J Cumulative Redeemable Preferred Stock.~~ the CNL Healthcare Properties portfolio. The unsecured term loan facility was subsequently extinguished in July 2019 with proceeds from the disposition of the Benchmark Senior Living portfolio.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, we ~~raised $522,702,000 through our dividend reinvestment program~~entered into amended and ~~our~~restated Equity Shelf Program (as defined below).

~~Investments~~~~. The following summarizes~~ pursuant to which we may offer and sell up to $1,500,000,000 of common stock from time to time. We sold 10,884,000 shares of common stock under our ~~acquisitions~~ATM and ~~joint venture investments completed during the nine months ended September 30, 2017 (dollars in thousands):~~

DRIP programs, via both cash settle and forward sale agreements, generating expected gross proceeds of approximately $833,444,000.

Properties

Investment Amount⁽¹⁾

Capitalization Rates⁽²⁾

Book Amount⁽³⁾

Triple-net
7
$
127,653

6.5%

$
238,858

Seniors housing operating
7

320,400

6.5%

468,581

Outpatient medical
4

71,395

6.7%

95,796

Totals
18
$
519,448

6.5%

$
803,235

(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected income to be received in cash divided by investment amounts.
(3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our unaudited consolidated financial statements for additional information.

~~Dispositions~~~~. The following summarizes property dispositions made during the nine months ended September 30, 2017 (dollars in thousands):~~

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

Properties

Proceeds⁽¹⁾

Capitalization Rates⁽²⁾

Book Amount⁽³⁾

Triple-net
58
$
1,160,191

6.8%

$
899,104

Seniors housing operating
2

29,715

4.4%

16,206

Outpatient medical
1

15,940

9.1%

12,202

Totals
61
$
1,205,846

6.8%

$
927,512

(1) Represents pro rata proceeds received upon disposition including any seller financing.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.

Investments The following summarizes our property acquisitions and joint venture investments completed during the six months ended June 30, 2019 (dollars in thousands):

Properties
Investment Amount⁽¹⁾

Capitalization Rates⁽²⁾

Book Amount⁽³⁾
Seniors Housing Operating 51
$ 1,159,864
5.2 % $ 1,308,656
Triple-net 4
102,344
6.4 % 104,343
Outpatient Medical 66
1,399,112
5.7 % 1,472,327
Totals 121
$ 2,661,320
5.5 % $ 2,885,326

⁽¹⁾ Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
⁽²⁾ Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts.
⁽³⁾ Represents amounts recorded in Net real estate investments including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our unaudited consolidated financial statements for additional information.

Dispositions The following summarizes property dispositions made during the six months ended June 30, 2019 (dollars in thousands):

Properties
Proceeds⁽¹⁾

Capitalization Rates⁽²⁾

Book Amount⁽³⁾
Seniors Housing Operating⁽⁴⁾
3
$ 11,478
2.2 % $ 8,726
Triple-net 35
614,823
6.7 % 442,865
Totals 38
$ 626,301
6.7 % $ 451,591

⁽¹⁾ Represents pro rata proceeds received upon disposition including any seller financing.
⁽²⁾ Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
⁽³⁾ Represents carrying value of net real estate assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.
⁽⁴⁾ Includes the disposition of an unconsolidated real estate investment.

Dividends. Our Board of Directors ~~increased~~announced the annual cash dividend toof $3.48 per common share ($0.87 per share quarterly), ~~as compared to $3.44 per common share for 2016, beginning in February 2017.~~consistent with 2018. The dividend declared for the quarter ended ~~September~~June 30, ~~2017~~2019 represents the ~~186~~193^thrd consecutive quarterly dividend payment.

Key Performance Indicators, Trends and Uncertainties

We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.

Operating Performance. We believe that net income and net income attributable to common stockholders (“NICS”) per the ~~Statement~~Consolidated Statements of Comprehensive Income are the most appropriate earnings measures. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”), consolidated net operating income (“NOI”) and same store NOI (“SSNOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations. These earnings measures (and FFO per share amounts) are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands, except per share amounts):

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,

2016

2016

2016

2016

2017

2017

2017
NICS
$
148,969

$
195,474

$
334,910

$
333,042

$
312,639

$
188,429

$
74,043
FFO

391,264

416,974

401,870

372,829

306,231

384,390

295,722
NOI

597,414

617,825

605,453

583,486

552,129

556,747

567,486
SSNOI

441,299

457,660

446,955

444,090

444,209

457,714

464,062

Per share data (fully diluted):

NICS
$
0.42

$
0.54

$
0.93

$
0.91

$
0.86

$
0.51

$
0.20

FFO

1.10

1.16

1.11

1.02

0.84

1.04

0.80

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

Three Months Ended
March 31, June 30, September 30, December 31, March 31, June 30,
2018 2018 2018 2018 2019 2019
Net income (loss) $ 453,555
$ 167,273
$ 84,226
$ 124,696
$ 292,302
$ 150,040
NICS 437,671
154,432
64,384
101,763
280,470
137,762
FFO 353,220
378,725
285,272
374,966
358,383
390,021
NOI 540,500
557,161
579,222
590,599
601,438
618,979
SSNOI 407,613
417,399
412,269
408,687
416,682
409,789

Per share data (fully diluted):
NICS $ 1.17
$ 0.41
$ 0.17
$ 0.27
$ 0.71
$ 0.34
FFO $ 0.95
$ 1.02
$ 0.76
$ 0.99
$ 0.91
$ 0.96

Credit ~~Strength.~~ Strength We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and ~~IRC section~~Internal Revenue Code ("IRC") Section 1031 deposits. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations of these measures. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:

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



	Three Months Ended
	March, 31	June 30,	September 30,	December 31,	March 31,	June 30,
	2018	2018	2018	2018	2019	2019

Net debt to book capitalization ratio	42%	42%	46%	45%	43%	48%
Net debt to undepreciated book capitalization ratio	35%	36%	39%	38%	36%	41%
Net debt to market capitalization ratio	34%	31%	34%	31%	28%	30%

Interest coverage ratio	6.67x	4.34x	3.38x	3.60x	4.80x	3.74x
Fixed charge coverage ratio	5.49x	3.58x	2.85x	3.05x	4.38x	3.42x

Three Months Ended

March, 31

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,

2016

2016

2016

2016

2017

2017

2017

Net debt to book capitalization ratio

45%

45%

45%

43%

42%

41%

42%
Net debt to undepreciated book

capitalization ratio

40%

39%

39%

37%

36%

35%

36%
Net debt to market capitalization ratio

32%

30%

31%

31%

29%

27%

29%

Interest coverage ratio

3.85x

4.21x

5.24x

5.26x

5.67x

4.60x

3.63x
Fixed charge coverage ratio

3.06x

3.34x

4.17x

4.15x

4.53x

3.72x

2.97x

Concentration Risk. We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns. Property mix measures the portion of our NOI that relates to our various property types. Relationship mix measures the portion of our NOI that relates to our current top five relationships. Geographic mix measures the portion of our NOI that relates to our current top five states (or international equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,

2016

2016

2016

2016

2017

2017

2017
Property mix:⁽¹⁾

Triple-net

52%

50%

51%

48%

45%

44%

43%

Seniors housing operating

32%

34%

33%

36%

38%

39%

40%

Outpatient medical

16%

16%

16%

16%

17%

17%

17%

Relationship mix:⁽¹⁾

Sunrise Senior Living⁽²⁾

13%

14%

12%

13%

14%

14%

14%

Genesis Healthcare

17%

16%

16%

13%

9%

9%

9%

Revera⁽²⁾

6%

6%

6%

7%

7%

7%

7%

Brookdale Senior Living

7%

7%

7%

7%

7%

7%

7%

Benchmark Senior Living

4%

4%

4%

4%

4%

5%

5%

Remaining relationships

53%

53%

55%

56%

59%

58%

58%

Geographic mix:⁽¹⁾

California

10%

10%

10%

12%

13%

14%

13%

United Kingdom

8%

8%

7%

7%

9%

9%

9%

Canada

7%

7%

7%

8%

8%

8%

8%

New Jersey

8%

8%

8%

8%

7%

8%

8%

Texas

6%

6%

7%

7%

7%

7%

7%

Remaining geographic areas

61%

61%

61%

58%

56%

54%

55%

(1) Excludes our share of investments in unconsolidated entities. Entities in which the company has a joint venture with a minority partner are shown at 100% of the joint venture amount.

(2) Revera owns a controlling interest in Sunrise Senior Living.

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

Three Months Ended
March 31, June 30, September 30, December 31, March 31, June 30,
2018 2018 2018 2018 2019 2019
Property mix:⁽¹⁾

Seniors Housing Operating 42% 43% 46% 43% 44% 45%
Triple-net 41% 40% 38% 40% 39% 37%
Outpatient Medical 17% 17% 16% 17% 17% 18%

Relationship mix:⁽¹⁾

Sunrise Senior Living⁽²⁾
15% 15% 15% 14% 15% 14%
ProMedica —% —% 7% 9% 9% 9%
Revera⁽²⁾
7% 7% 7% 6% 6% 6%
Genesis HealthCare 6% 6% 6% 6% 5% 5%
Benchmark Senior Living⁽³⁾
4% 5% 4% 4% 4% 5%
Remaining relationships 68% 67% 61% 61% 61% 61%

Geographic mix:⁽¹⁾

California 14% 14% 13% 13% 13% 13%
United Kingdom 10% 9% 9% 9% 9% 8%
Texas 8% 8% 7% 8% 8% 8%
Canada 9% 8% 8% 8% 7% 7%
New Jersey 8% 7% 7% 7% 7% 7%
Remaining geographic areas 51% 54% 56% 55% 56% 57%

⁽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⁾ Revera owns a controlling interest in Sunrise Senior Living.
⁽³⁾ The Benchmark Senior Living portfolio was sold in July 2019.

Lease ~~Expirations.~~ Expirations The following table sets forth information regarding lease expirations for certain portions of our portfolio as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

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



	Expiration Year⁽¹⁾
	2019			2020			2021			2022			2023			2024			2025			2026			2027			2028			Thereafter
Triple-net:
Properties	30			—			7			11			—			4			48			93			19			19			417
Base rent⁽²⁾	$	34,168		$	—		$	12,254		$	9,023		$	—		$	11,096		$	52,542		$	123,519		$	35,571		$	22,128		$	466,866
% of base rent	4.5		%	—		%	1.6		%	1.2		%	—		%	1.4		%	6.8		%	16.1		%	4.6		%	2.9		%	60.9		%
Units/beds	2,540			—			1,316			1,182			—			692			3,033			7,452			2,401			1,979			43,890
% of Units/beds	3.9		%	—		%	2.0		%	1.8		%	—		%	1.1		%	4.7		%	11.6		%	3.7		%	3.1		%	68.1		%

Outpatient Medical:
Square feet	902,986			1,669,510			1,988,685			2,106,936			2,116,845			2,003,818			1,129,172			1,448,787			817,114			880,070			5,746,479
Base rent⁽²⁾	$	25,166		$	45,925		$	54,771		$	57,230		$	57,127		$	58,855		$	29,965		$	36,921		$	20,315		$	23,309		$	120,638
% of base rent	4.7		%	8.7		%	10.3		%	10.8		%	10.8		%	11.1		%	5.7		%	7.0		%	3.8		%	4.4		%	22.8		%
Leases	255			412			404			397			426			294			176			190			112			102			266
% of Leases	8.3		%	13.6		%	13.3		%	13.1		%	14.0		%	9.7		%	5.8		%	6.3		%	3.7		%	3.4		%	8.8		%

(1) Excludes 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.

Expiration Year ⁽¹⁾

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Thereafter

Triple-net:

Properties

3

51

-

14

14

11

4

5

59

32

364

Base rent⁽²⁾

$
4,530

$
38,233

$
-

$
17,740

$
25,239

$
9,107

$
4,175

$
10,597

$
74,402

$
65,545

$
632,492

% of base rent

0.5%

4.3%

0.0%

2.0%

2.9%

1.0%

0.5%

1.2%

8.4%

7.4%

71.8%

Units/beds

367

3,151

-

1,225

2,289

1,042

317

692

4,489

3,724

36,207

% of Units/beds

0.7%

5.9%

0.0%

2.3%

4.3%

1.9%

0.6%

1.3%

8.4%

7.0%

67.6%

Outpatient medical:

Square feet

519,045

802,423

1,198,264

1,272,329

1,488,146

2,504,590

1,261,361

1,422,735

717,500

1,130,877

4,390,075

Base rent⁽²⁾

$
13,437

$
21,836

$
32,704

$
34,331

$
40,184

$
54,993

$
31,857

$
39,582

$
20,640

$
28,656

$
102,135

% of base rent

3.2%

5.2%

7.8%

8.2%

9.6%

13.1%

7.6%

9.4%

4.9%

6.8%

24.2%

Leases

134

252

313

306

263

291

199

118

103

125

210

% of Leases

5.8%

10.9%

13.5%

13.2%

11.4%

12.6%

8.6%

5.1%

4.5%

5.4%

9.0%

(1) Excludes investments in unconsolidated entities. Investments classified as held for sale are included in the current year.
(2) The most recent monthly base rent including straight-line for leases with fixed escalators or annual cash rents for leases with contingent escalators. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.

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, ~~2016,~~2018, under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these risk factors.

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, ~~resident fees and services,~~ borrowings under our ~~primary~~ 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, and general and administrative expenses. 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 (dollars in thousands):

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



	Six Months Ended						Change
	June 30, 2019			June 30, 2018			$			%
Cash, cash equivalents and restricted cash at beginning of period	$	316,129		$	309,303		$	6,826		2	%
Cash provided from (used in) operating activities	854,482			838,424			16,058			2	%
Cash provided from (used in) investing activities	(2,531,364		)	130,251			(2,661,615		)	-2,043	%
Cash provided from (used in) financing activities	1,720,804			(1,000,290		)	2,721,094			272	%
Effect of foreign currency translation	(333		)	(5,305		)	4,972			94	%
Cash, cash equivalents and restricted cash at end of period	$	359,718		$	272,383		$	87,335		32	%

Nine Months Ended

Change

September 30, 2017

September 30, 2016

$

%

Cash and cash equivalents at beginning of period

$
419,378

$
360,908

$
58,470

16%
   Cash provided from (used in) operating activities

1,162,464

1,280,168

(117,704)

-9%
   Cash provided from (used in) investing activities

529,196

(1,291,136)

1,820,332

n/a
   Cash provided from (used in) financing activities

(1,899,107)

88,367

(1,987,474)

n/a
Effect of foreign currency translation

24,316

(9,690)

34,006

n/a
Cash and cash equivalents at end of period

$
236,247

$
428,617

$
(192,370)

-45%

Operating Activities. The change in net cash provided from operating activities was immaterial. Please see “Results of Operations” for discussion of net income fluctuations. For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016,~~2018, cash flow 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 ~~an increase~~changes in acquisition and dispositions, which are summarized above in “Key ~~Transactions in 2017”~~Transactions” and Notes 53 and 65 of our unaudited consolidated financial statements. The following is a summary of cash used in non-acquisition capital improvement activities (dollars in thousands):

Nine Months Ended

Change

September 30,

September 30,

2017

2016

$

%
New development

$
198,068

$
325,372

$
(127,304)

-39%
Recurring capital expenditures, tenant improvements and lease commissions

45,777

48,055

(2,278)

-5%
Renovations, redevelopments and other capital improvements

113,365

93,145

20,220

22%
Total

$
357,210

$
466,572

$
(109,362)

-23%



	Six Months Ended				Change
	June 30, 2019		June 30, 2018		$			%
New development	$	155,409	$	62,978	$	92,431		147	%
Recurring capital expenditures, tenant improvements and lease commissions	49,925		35,116		14,809			42	%
Renovations, redevelopments and other capital improvements	74,251		76,216		(1,965		)	-3	%
Total	$	279,585	$	174,310	$	105,275		60	%

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. ~~Generally, these expenditures have increased as a result of acquisitions, primarily in our seniors housing operating segment.~~

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 issuance/redemption of common and preferred stock and dividend ~~payments.~~payments which are summarized above in "Key Transactions". Please refer to Notes 9, 10, 11 and 1314 of our unaudited consolidated financial statements for additional information.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Off-Balance Sheet Arrangements

At ~~September~~June 30, ~~2017,~~2019, we had investments in unconsolidated entities with our ownership interests ranging from 10% to 50%. ~~Please see Note 7 to our unaudited consolidated financial statements for additional information.~~ We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. ~~Please see Note 11 to our unaudited consolidated financial statements for additional information.~~ At ~~September~~June 30, ~~2017,~~2019, we had 14 outstanding letter of credit obligations. Please see ~~Note~~Notes 8, 12 and 13 to our unaudited consolidated financial statements for additional information.

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

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of ~~September~~June 30, ~~2017~~2019 (in thousands):

Payments Due by Period
Contractual Obligations

Total

2017

2018-2019

2020-2021

Thereafter
Unsecured revolving credit facility⁽¹⁾

$
420,000

$
-

$
-

$
420,000

$
-
Senior unsecured notes and term credit facilities:⁽²⁾


     U.S. Dollar senior unsecured notes

6,050,000

-

1,050,000

900,000

4,100,000
     Canadian Dollar senior unsecured notes⁽³⁾

239,827

-

-

239,827

-
     Pounds Sterling senior unsecured notes⁽³⁾

1,407,210

-

-

-

1,407,210
     U.S. Dollar term credit facility

507,500

-

-

507,500

-
     Canadian Dollar term credit facility⁽³⁾

199,856

-

-

199,856

-
Secured debt:^(2,3)

     Consolidated

2,720,002

121,412

918,669

406,002

1,273,919
     Unconsolidated

738,004

2,046

150,803

58,136

527,019
Contractual interest obligations:⁽⁴⁾

     Unsecured revolving credit facility

38,116

2,242

17,937

17,937

-
     Senior unsecured notes and term loans⁽³⁾

3,251,019

139,547

701,200

590,237

1,820,035
     Consolidated secured debt⁽³⁾

520,722

25,542

172,182

119,399

203,599
     Unconsolidated secured debt⁽³⁾

177,010

7,198

57,525

40,910

71,377
Capital lease obligations⁽⁵⁾

90,288

1,183

9,012

8,346

71,747
Operating lease obligations⁽⁵⁾

1,105,254

4,479

35,482

34,443

1,030,850
Purchase obligations⁽⁵⁾

333,595

121,949

211,646

-

-
Other long-term liabilities⁽⁶⁾

3,073

369

2,704

-

-
Total contractual obligations

$
17,801,476

$
425,967

$
3,327,160

$
3,542,593

$
10,505,756

(1) Relates to unsecured revolving credit facility with an aggregate commitment of $3,000,000,000. See Note 9 to our unaudited consolidated financial statements for additional information.
(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(3) Based on foreign currency exchange rates in effect as of balance sheet date.
(4) Based on variable interest rates in effect as of balance sheet date.
(5) See Note 12 to our unaudited consolidated financial statements for additional information.
(6) Primarily relates to payments to be made under our Supplemental Executive Retirement Plan.

Payments Due by Period
Contractual Obligations Total 2019 2020-2021 2022-2023 Thereafter
Unsecured credit facility and commercial paper^(1,2)
$ 1,870,000
$ 935,000
$ —
$ 935,000
$ —
Senior unsecured notes and term credit facilities:⁽²⁾

U.S. Dollar senior unsecured notes 8,450,000
—
1,450,000
1,700,000
5,300,000
Canadian Dollar senior unsecured notes⁽³⁾
229,165
—
229,165
—
—
Pounds Sterling senior unsecured notes⁽³⁾
1,333,920
—
—
—
1,333,920
U.S. Dollar term credit facility 507,500
—
7,500
500,000
—
Canadian Dollar term credit facility⁽³⁾
190,971
—
—
190,971
—
Secured debt:^(2,3)

Consolidated 2,689,982
312,291
527,943
682,908
1,166,840
Unconsolidated 770,687
31,538
68,069
53,943
617,137
Contractual interest obligations:⁽⁴⁾

Unsecured credit facility and commercial paper 120,634
15,079
60,317
45,238
—
Senior unsecured notes and term loans⁽³⁾
4,038,896
259,830
826,444
711,116
2,241,506
Consolidated secured debt⁽³⁾
502,618
49,625
159,559
110,554
182,880
Unconsolidated secured debt⁽³⁾
196,781
14,745
52,201
48,783
81,052
Financing lease liabilities⁽⁵⁾
184,511
4,461
17,196
76,773
86,081
Operating lease liabilities⁽⁵⁾
1,542,933
8,637
33,843
31,797
1,468,656
Purchase obligations⁽⁶⁾
491,686
224,234
222,195
41,113
4,144
Other long-term liabilities 492
492
—
—
—
Total contractual obligations $ 23,120,776
$ 1,855,932
$ 3,654,432
$ 5,128,196
$ 12,482,216

⁽¹⁾ Relates to our unsecured credit facility and commercial paper with an aggregate commitment of $3,000,000,000. See Note 10 to our unaudited consolidated financial statements for additional information.
⁽²⁾ Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
⁽³⁾ Based on foreign currency exchange rates in effect as of balance sheet date.
⁽⁴⁾ Based on variable interest rates in effect as of balance sheet date.
⁽⁵⁾ See Note 6 to our unaudited consolidated financial statements for additional information.
⁽⁶⁾ See Note 13 to our unaudited consolidated financial statements for additional information.

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~~June 30, ~~2017,~~2019, we were in compliance with all of 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 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 in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On May ~~1, 2015,~~17, 2018, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan (“DRIP”) under which we may issue up to 15,000,000 shares of common stock. As of ~~October 31, 2017, 3,437,349~~July 19, 2019, 4,300,170 shares of common

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

stock remained available for issuance under the DRIP registration statement. ~~We have~~On February 25, 2019 we entered into separate amended and restated equity distribution agreements with each of ~~Morgan Stanley~~Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, ~~Goldman Sachs~~Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to ~~$1,000,000,000~~$1,500,000,000 aggregate amount of our common stock (“Equity Shelf Program”). The Equity Shelf Program also allows us to enter into forward sale

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

agreements. We expect that, if entered into, we will physically settle each forward sale agreement on one or more dates on or prior to the maturity date of that particular forward sale agreement, in which case we will expect to receive per share cash proceeds at settlement equal to the forward sale price under the relevant forward sale agreement. However, we may also elect to cash settle or net share settle a forward sale agreement. As of ~~October 31, 2017,~~July 19, 2019, we had ~~$784,083,000~~$1,360,820,000 of remaining capacity under the Equity Shelf Program, ~~and there were no outstanding~~which excludes forward sales ~~agreements.~~agreements outstanding for the sale of 2,556,481 shares with maturity dates in the fourth quarter. We expect to physically settle the forward sales for cash proceeds. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our ~~primary~~ unsecured revolving credit ~~facility.~~

facility and Commercial Paper Program.

Results of Operations

Summary

Our primary sources of revenue include ~~rent and~~ resident fees and ~~services.~~services, rent and interest income. Our primary expenses include ~~interest expense,~~ depreciation and amortization, interest expense, property operating expenses, ~~and~~ general and administrative expenses and other expenses. We evaluate our business and make resource allocations on our three business segments: ~~triple-net, seniors housing operating~~Seniors Housing Operating, Triple-net and ~~outpatient medical.~~Outpatient Medical. The primary performance measures for our properties are NOI and SSNOI, which are discussed below. Please see Non-GAAP Financial Measures for additional information and reconciliations. The following is a summary of our results of operations (dollars in thousands, except per share amounts):

Three Months Ended

Change

Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

Amount

%

2017

2016

Amount

%
NICS

$
74,043

$
334,910

$
(260,867)

-78%

$
575,118

$
679,353

$
(104,235)

-15%
FFO


295,722

401,870

(106,148)

-26%

986,352

1,210,108

(223,756)

-18%
EBITDA


442,684

702,196

(259,512)

-37%

1,665,488

1,796,729

(131,241)

-7%
NOI


567,486

605,453

(37,967)

-6%

1,676,362

1,820,690

(144,328)

-8%
SSNOI

464,062

446,955

17,107

4%

1,365,983

1,345,907

20,076

1%



Per share data (fully diluted):



NICS

$
0.20

$
0.93

$
(0.73)

-78%

$
1.56

$
1.89

$
(0.33)

-17%
FFO

$
0.80

$
1.11

$
(0.31)

-28%

$
2.68

$
3.37

$
(0.69)

-20%



Interest coverage ratio


3.63x

5.24x

-1.61x

-31%

4.63x

4.43x

0.20x

5%
Fixed charge coverage ratio


2.97x

4.17x

-1.20x

-29%

3.74x

3.52x

0.22x

6%

~~Triple-net~~



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			Amount			%		2019			2018			Amount			%
Net income	$	150,040		$	167,273		$	(17,233	)	-10	%	$	442,342		$	620,828		$	(178,486	)	-29	%
NICS	137,762			154,432			(16,670		)	-11	%	418,232			592,103			(173,871		)	-29	%
FFO	390,021			378,725			11,296			3	%	748,404			731,945			16,459			2	%
EBITDA	541,027			528,805			12,222			2	%	1,224,715			1,334,924			(110,209		)	-8	%
NOI	618,979			557,161			61,818			11	%	1,220,417			1,097,661			122,756			11	%
SSNOI	409,789			417,399			(7,610		)	-1.8	%	826,471			825,012			1,459			0.2	%
Per share data (fully diluted):
NICS	$	0.34		$	0.41		$	(0.07	)	-17	%	$	1.05		$	1.59		$	(0.54	)	-34	%
FFO	$	0.96		$	1.02		$	(0.06	)	-6	%	$	1.87		$	1.96		$	(0.09	)	-5	%

Interest coverage ratio	3.74		x	4.34		x	(0.60		)x	-14	%	4.27		x	5.50		x	(1.23		)x	-22	%
Fixed charge coverage ratio	3.42		x	3.58		x	(0.16		)x	-4	%	3.90		x	4.53		x	(0.63		)x	-14	%

Seniors Housing Operating

The following is a summary of our NOI and SSNOI for the ~~triple-net~~Seniors Housing Operating segment (dollars in thousands):

Three Months Ended

Change
Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

$

%

2017

2016

$

%
NOI

$
244,916

$
310,864

$
(65,948)

-21%

$
735,998

$
929,343

$
(193,345)

-21%
Non SSNOI attributable to same store properties

(9,097)

(11,325)

2,228

-20%

(28,691)

(36,190)

7,499

-21%
NOI attributable to non same store properties⁽¹⁾

(61,543)

(131,847)

70,304

-53%

(192,013)

(393,989)

201,976

-51%
SSNOI⁽²⁾

$
174,276

$
167,692

$
6,584

4%

$
515,294

$
499,164

$
16,130

3%

(1) Change is primarily due to the acquisition of 26 properties and the conversion of 15 construction projects into revenue-generating properties subsequent to January 1, 2016.
(2) Relates to 511 same store properties.



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			$			%		2019			2018			$			%
NOI	$	278,212		$	239,505		$	38,707		16.2	%	$	542,912		$	464,731		$	78,181		16.8	%
Non SSNOI attributable to same store properties	1,384			358			1,026			286.6	%	3,299			627			2,672			426.2	%
NOI attributable to non same store properties⁽¹⁾	(88,898		)	(45,907		)	(42,991		)	-93.6	%	(159,122		)	(80,572		)	(78,550		)	-97.5	%
SSNOI⁽²⁾	$	190,698		$	193,956		$	(3,258	)	-1.7	%	$	387,089		$	384,786		$	2,303		0.6	%

⁽¹⁾ Change is primarily due to the acquisition of 63 properties subsequent to January 1, 2018 and the transition of 81 properties from Triple-net to Seniors Housing Operating.

⁽²⁾ Relates to 365 same store properties.

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

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



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			$			%		2019			2018			$			%
Revenues:
Resident fees and services	$	914,085		$	763,345		$	150,740		20	%	$	1,782,370		$	1,499,279		$	283,091		19	%
Interest income	—			172			(172		)	-100	%	—			257			(257		)	-100	%
Other income	1,444			1,650			(206		)	-12	%	5,545			2,798			2,747			98	%
Total revenues	915,529			765,167			150,362			20	%	1,787,915			1,502,334			285,581			19	%
Property operating expenses	637,317			525,662			111,655			21	%	1,245,003			1,037,603			207,400			20	%
NOI⁽¹⁾	278,212			239,505			38,707			16	%	542,912			464,731			78,181			17	%
Other expenses:
Depreciation and amortization	136,551			134,779			1,772			1	%	268,126			260,548			7,578			3	%
Interest expense	17,572			16,971			601			4	%	35,823			33,906			1,917			6	%
Loss (gain) on extinguishment of debt, net	—			299			(299		)	-100	%	—			110			(110		)	-100	%
Impairment of assets	—			2,212			(2,212		)	-100	%	—			4,513			(4,513		)	-100	%
Other expenses	11,857			6,167			5,690			92	%	14,803			5,979			8,824			148	%
	165,980			160,428			5,552			3	%	318,752			305,056			13,696			4	%
Income (loss) from continuing operations before income taxes and other items	112,232			79,077			33,155			42	%	224,160			159,675			64,485			40	%
Income tax benefit (expense)	375			(2,617		)	2,992			114	%	(244		)	(2,455		)	2,211			90	%
Income (loss) from unconsolidated entities	(17,453		)	(5,204		)	(12,249		)	-235	%	(34,033		)	(14,684		)	(19,349		)	-132	%
Gain (loss) on real estate dispositions, net	(550		)	(1		)	(549		)	-54,900	%	(710		)	4			(714		)	-17,850	%
Income from continuing operations	94,604			71,255			23,349			33	%	189,173			142,540			46,633			33	%
Net income (loss)	94,604			71,255			23,349			33	%	189,173			142,540			46,633			33	%
Less: Net income (loss) attributable to noncontrolling interests	2,236			(766		)	3,002			392	%	3,977			(1,664		)	5,641			339	%
Net income (loss) attributable to common stockholders	$	92,368		$	72,021		$	20,347		28	%	$	185,196		$	144,204		$	40,992		28	%

⁽¹⁾ See Non-GAAP Financial Measures.

Fluctuations in revenues and property operating expenses are primarily a result of acquisitions, segment transitions and the movement of U.S. and foreign currency exchange rates. The fluctuations in depreciation and amortization are due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

During the three and six months ended June 30, 2018, we recorded impairment charges on certain held for sale properties as the carrying value exceeded the estimated fair value less costs to sell. Changes in the gain/loss on sale of properties are related to the volume of property sales and sales prices. Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The increase in other expenses is primarily due to additional noncapitalizable transactions costs from acquisitions and operator transitions.

During the six months ended June 30, 2019, we completed two seniors housing operating construction projects representing $28,117,000 or $109,405 per unit. The following is a summary of our seniors housing operating construction projects, excluding expansions, pending as of June 30, 2019 (dollars in thousands):



Location	Units	Commitment		Balance		Est. Completion
Taylor, PA	113	$	14,272	$	8,801	4Q19
Wandsworth, UK	97	74,890		51,699		1Q20
Beavercreek, OH	100	12,032		8,361		1Q20
Potomac, MD	120	56,720		11,881		4Q20
	430	$	157,914	80,742
Toronto, ON	Project in planning stage			42,486
Hendon, UK	Project in planning stage			27,539
Barnet, UK	Project in planning stage			24,310
Washington, DC	Project in planning stage			16,412
				$	191,489

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

Interest expense represents secured debt interest expense which fluctuates based on the net effect and timing of assumptions, segment transitions, fluctuations in currency rates, extinguishments and principal amortizations. The following is a summary of our Seniors Housing Operating segment secured debt principal activity (dollars in thousands):



	Three Months Ended										Six Months Ended
	June 30, 2019					June 30, 2018					June 30, 2019					June 30, 2018
				Wtd. Avg.					Wtd. Avg.					Wtd. Avg.					Wtd. Avg.
	Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate
Beginning balance	$	1,995,343		3.79	%	$	1,931,401		3.68	%	$	1,810,587		3.87	%	$	1,988,700		3.66	%
Debt issued	48,806			2.94	%	24,280			3.06	%	295,969			3.52	%	44,606			3.38	%
Debt assumed	—			0.00	%	—			0.00	%	42,000			4.62	%	85,192			4.40	%
Debt extinguished	(36,903		)	2.74	%	(13,165		)	3.57	%	(151,473		)	4.42	%	(131,175		)	4.85	%
Principal payments	(11,225		)	3.49	%	(12,062		)	3.57	%	(22,430		)	3.44	%	(24,001		)	3.56	%
Foreign currency	22,159			3.31	%	(21,039		)	3.30	%	43,527			3.33	%	(53,907		)	3.29	%
Ending balance	$	2,018,180		3.80	%	$	1,909,415		3.73	%	$	2,018,180		3.80	%	$	1,909,415		3.73	%

Monthly averages	$	1,996,642		3.80	%	$	1,922,640		3.71	%	$	1,950,546		3.82	%	$	1,932,618		3.68	%

The majority of our Seniors Housing Operating properties are formed through partnership interests. Losses from unconsolidated entities are largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures, as well as the disposal of an investment in an unconsolidated entity during the quarter ended June 30, 2019. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures.

Triple-net

The following is a summary of our NOI and SSNOI for the Triple-net segment (dollars in thousands):



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			$			%		2019			2018			$			%
NOI	$	227,935		$	224,284		$	3,651		1.6	%	$	461,221		$	447,022		$	14,199		3.2	%
Non SSNOI attributable to same store properties	(8,114		)	(4,068		)	(4,046		)	-99.5	%	(15,707		)	(14,796		)	(911		)	-6.2	%
NOI attributable to non same store properties⁽¹⁾	(87,819		)	(83,148		)	(4,671		)	-5.6	%	(180,659		)	(164,603		)	(16,056		)	-9.8	%
SSNOI⁽²⁾	$	132,002		$	137,068		$	(5,066	)	-3.7	%	$	264,855		$	267,623		$	(2,768	)	-1.0	%

⁽¹⁾ Change is primarily due to the acquisition of 237 properties, the transitioning/restructuring of six properties, and the conversion of seven construction projects into revenue-generating properties subsequent to January 1, 2018 and 30 held for sale properties at June 30, 2019.

⁽²⁾ Relates to 388 same store properties.

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

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

			Three Months Ended				Change			Nine Months Ended				Change
			September 30,		September 30,					September 30,		September 30,
			2017		2016		$		%	2017		2016		$		%
Revenues:
	Rental income		$	221,555	$	286,226	$	(64,671)	-23%	$	666,735	$	857,184	$	(190,449)	-22%
	Interest income			20,187		23,017		(2,830)	-12%		61,767		67,842		(6,075)	-9%
	Other income			3,174		1,621		1,553	96%		7,496		4,317		3,179	74%		Three Months Ended						Change					Six Months Ended						Change
		Total revenues		244,916		310,864		(65,948)	-21%		735,998		929,343		(193,345)	-21%		June 30,			June 30,								June 30,			June 30,
		NOI⁽¹⁾		244,916		310,864		(65,948)	-21%		735,998		929,343		(193,345)	-21%		2019			2018			$			%		2019			2018			$			%
Revenues:
Rental income																		$	222,362		$	197,961		$	24,401		12	%	$	454,394		$	404,792		$	49,602		12	%
Interest income																		17,118			13,247			3,871			29	%	32,064			27,798			4,266			15	%
Other income																		1,278			13,212			(11,934		)	-90	%	2,541			14,589			(12,048		)	-83	%
Total revenues																		240,758			224,420			16,338			7	%	488,999			447,179			41,820			9	%
Property operating expenses																		12,823			136			12,687			9,329	%	27,778			157			27,621			17,593	%
NOI⁽¹⁾																		227,935			224,284			3,651			2	%	461,221			447,022			14,199			3	%
Other expenses:	Other expenses:
Depreciation and amortization																		56,056			55,309			747			1	%	117,404			111,341			6,063			5	%
Interest expense																		3,225			3,800			(575		)	-15	%	6,665			7,242			(577		)	-8	%
Loss (gain) on derivatives and financial instruments, net																		1,913			(7,460		)	9,373			126	%	(574		)	(14,633		)	14,059			96	%
Loss (gain) on extinguishment of debt, net																		—			—			—			n/a		—			(32		)	32			100	%
Provision for loan losses																		—			—			—			n/a		18,690			—			18,690			n/a
Impairment of assets																		(940		)	2,420			(3,360		)	-139	%	(940		)	28,304			(29,244		)	-103	%
Other expenses																		5,560			957			4,603			481	%	8,589			2,077			6,512			314	%
	Interest expense			3,622		4,714		(1,092)	-23%		11,647		16,832		(5,185)	-31%		65,814			55,026			10,788			20	%	149,834			134,299			15,535			12	%
	Loss (gain) on derivatives, net			324		-		324	n/a		2,284		-		2,284	n/a
	Depreciation and amortization			62,891		74,296		(11,405)	-15%		182,672		229,906		(47,234)	-21%
	Transaction costs⁽²⁾			-		1,613		(1,613)	-100%		-		5,760		(5,760)	-100%
	Loss (gain) on extinguishment of debt, net			-		-		-	n/a		29,083		97		28,986	29882%
	Impairment of assets			-		5,070		(5,070)	-100%		4,846		19,384		(14,538)	-75%
	Other expenses⁽²⁾			89,236		-		89,236	n/a		96,425		-		96,425	n/a
		Total other expenses		156,073		85,693		70,380	82%		326,957		271,979		54,978	20%
Income from continuing operations before income taxes and income (loss) from unconsolidated entities				88,843		225,171		(136,328)	-61%		409,041		657,364		(248,323)	-38%
Income from continuing operations before income taxes and other items																		162,121			169,258			(7,137		)	-4	%	311,387			312,723			(1,336		)	—	%
Income tax (expense) benefit	Income tax (expense) benefit			(816)		(896)		80	-9%		(2,070)		(1,425)		(645)	45%		(1,361		)	(688		)	(673		)	-98	%	(2,312		)	(1,824		)	(488		)	-27	%
Income (loss) from unconsolidated entities	Income (loss) from unconsolidated entities			5,478		1,998		3,480	174%		14,983		8,097		6,886	85%		6,578			5,062			1,516			30	%	12,236			10,883			1,353			12	%
Gain (loss) on real estate dispositions, net																		(1,130		)	10,759			(11,889		)	-111	%	166,444			134,156			32,288			24	%
Income from continuing operations	Income from continuing operations			93,505		226,273		(132,768)	-59%		421,954		664,036		(242,082)	-36%		166,208			184,391			(18,183		)	-10	%	487,755			455,938			31,817			7	%
Gain (loss) on real estate dispositions, net⁽³⁾				(185)		163,579		(163,764)	n/a		273,051		165,109		107,942	65%
Net income	Net income			93,320		389,852		(296,532)	-76%		695,005		829,145		(134,140)	-16%		166,208			184,391			(18,183		)	-10	%	487,755			455,938			31,817			7	%
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests			1,539		926		613	66%		3,112		1,357		1,755	129%		9,230			1,253			7,977			637	%	18,326			3,216			15,110			470	%
Net income attributable to common stockholders	Net income attributable to common stockholders		$	91,781	$	388,926	$	(297,145)	-76%	$	691,893	$	827,788	$	(135,895)	-16%		$	156,978		$	183,138		$	(26,160	)	-14	%	$	469,429		$	452,722		$	16,707		4	%

(1) See Non-GAAP Financial Measures.	(1) See Non-GAAP Financial Measures.																⁽¹⁾ See Non-GAAP Financial Measures.
(2) See Note 3 to our unaudited consolidated financial statements.
(3) See Note 5 to our unaudited consolidated financial statements.

The ~~decrease~~increase in rental income is primarily attributable to acquisitions including Quality Care Properties Inc. ("QCP") in July 2018, partially offset by the disposition or segment transition of ~~properties exceeding new acquisitions.~~various properties. In addition, we have recorded certain real estate property taxes on a gross basis, with the offset to property operating expenses, as a result of our ASC 842 adoption on January 1, 2019. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. For the three months ended ~~September~~June 30, ~~2017,~~2019, we had 3211 leases with rental rate increasers ranging from ~~0.07%~~0.13% to ~~0.58%~~0.70% in our ~~triple-net~~Triple-net portfolio. The decrease in ~~interest~~other income is ~~directly related~~primarily due to $10,805,000 of net lease termination fees recognized during the ~~volume of loan payoffs during 2016 and 2017.~~

three months ended June 30, 2018.

Depreciation and amortization ~~decreased~~increased primarily as a result of the ~~disposition~~acquisitions of triple-net ~~properties.~~properties exceeding dispositions. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain real estate loans receivable that are no longer deemed collectible. During the ~~nine~~three and six months ended ~~September~~June 30, ~~2017 and 2016,~~2018, we recorded impairment charges on certain ~~held-for-sale~~held for sale triple-net properties as the carrying values exceeded the estimated fair value less costs to sell. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices.

Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The increase in other expenses is primarily due to additional noncapitalizable transaction costs from acquisitions and operator transitions.

The following is a summary of Triple-net construction projects, excluding expansions, pending as of June 30, 2019 (dollars in thousands):

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

For the three months ended September 30, 2017, the increase in other expenses represents non-capitalizable transaction costs primarily related to a joint venture transaction with an existing seniors housing operator, including the conversion of properties from triple-net to seniors housing operating, an exchange of PropCo/OpCo interests and termination/restructuring of pre-existing relationships.

During the nine months ended September 30, 2017, we completed ten triple-net construction projects totaling $283,472,000 or $347,818 per bed/unit. The following is a summary of triple-net construction projects pending as of September 30, 2017 (dollars in thousands):

Location

Units/Beds

Commitment

Balance

Est. Completion
Alexandria, VA

116

$
60,156

$
40,405

2Q18
Exton, PA

120

34,175

12,779

2Q18
Westerville, OH

90

22,800

3,387

4Q18

326

$
117,131

56,571

Raleigh, NC

Project in planning stage

7,095

Total

$
63,666



Location	Units/Beds	Commitment		Balance		Est. Completion
Westerville, OH	90	$	22,800	$	13,925	3Q19
Union, KY	162	34,600		18,000		1Q20
Droitwich, UK	70	16,090		6,870		2Q20
Thousand Oaks, CA	82	24,763		6,256		4Q20
	404	$	98,253	$	45,051

Interest expense ~~for the nine months ended September 30, 2017 and 2016~~ represents secured debt interest expense and related fees. The change in interest expense is due to 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 fluctuation in ~~losses/gains~~loss (gain) on ~~debt extinguishment~~derivatives and financial instruments, net is primarily attributable to the ~~large volume of extinguishments in~~mark-to-market adjustment recorded on the ~~first quarter of 2017.~~ Genesis HealthCare available-for-sale investment. The following is a summary of our ~~triple-net~~Triple-net secured debt principal activity (dollars in thousands):


	Three Months Ended						Nine Months Ended						Three Months Ended										Six Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2019					June 30, 2018					June 30, 2019					June 30, 2018
			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.				Wtd. Avg.					Wtd. Avg.					Wtd. Avg.					Wtd. Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate
Beginning balance	$	345,866	3.532%	$	460,269	5.509%	$	594,199	4.580%	$	554,014	5.488%	$	292,258		3.62	%	$	347,342		3.50	%	$	288,386		3.63	%	$	347,474		3.55	%
Debt issued		13,000	4.570%		-	0.000%		13,000	4.570%		-	0.000%
Debt extinguished		-	0.000%		(14,565)	5.865%		(255,553)	5.923%		(107,577)	5.028%	—			0.00	%	—			0.00	%	—			0.00	%	(4,107		)	4.94	%
Principal payments													(952		)	5.25	%	(1,055		)	5.57	%	(1,909		)	5.25	%	(2,071		)	5.49	%
Foreign currency		7,707	3.134%		(503)	5.428%		18,525	2.954%		4,550	5.303%	(3,354		)	3.21	%	(12,254		)	2.72	%	1,475			4.77	%	(7,263		)	3.59	%
Principal payments		(1,126)	5.559%		(2,514)	5.608%		(4,724)	5.684%		(8,300)	5.635%
Ending balance	$	365,447	5.554%	$	442,687	5.515%	$	365,447	3.554%	$	442,687	5.515%	$	287,952		3.63	%	$	334,033		3.53	%	$	287,952		3.63	%	$	334,033		3.53	%

Monthly averages	$	358,425	3.560%	$	455,044	5.511%	$	424,583	3.996%	$	498,934	5.496%	$	289,328		3.62	%	$	340,332		3.37	%	$	291,073		3.62	%	$	343,820		3.44	%

A portion of our ~~triple-net~~Triple-net properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses ~~related to unconsolidated investments.~~from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interest represents our partners’ share of net income relating to those partnerships where we are the controlling partner.

~~Seniors Housing Operating~~

Increases in net income attributable to noncontrolling interest is due primarily to the ProMedica joint venture formed as part of the QCP acquisition.

Outpatient Medical

The following is a summary of our NOI and SSNOI for the ~~seniors housing operating~~Outpatient Medical segment (dollars in thousands):



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			$			%		2019			2018			$			%
NOI	$	112,378		$	92,874		$	19,504		21.0	%	$	213,673		$	185,042		$	28,631		15.5	%
Non SSNOI on same store properties	(1,204		)	(1,397		)	193			13.8	%	(2,767		)	(2,663		)	(104		)	-3.9	%
NOI attributable to non same store properties⁽¹⁾	(24,085		)	(5,102		)	(18,983		)	-372.1	%	(36,379		)	(9,776		)	(26,603		)	-272.1	%
SSNOI⁽²⁾	$	87,089		$	86,375		$	714		0.8	%	$	174,527		$	172,603		$	1,924		1.1	%

⁽¹⁾ Change is primarily due to acquisitions of 102 properties and the conversion of 12 construction projects into revenue-generating properties subsequent to

January 1, 2018.

⁽²⁾ Relates to 227 same store properties.

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

Three Months Ended

Change

Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

$

%

2017

2016

$

%
NOI

$
225,100

$
199,495

$
25,605

13%

$
653,518

$
603,219

$
50,299

8%
Non SSNOI attributable to same store properties

206

1,269

(1,063)

-84%

918

1,759

(841)

-48%
NOI attributable to non same store properties⁽¹⁾

(20,894)

(5,803)

(15,091)

260%

(57,501)

(11,596)

(45,905)

396%
SSNOI⁽²⁾

$
204,412

$
194,961

$
9,451

5%

$
596,935

$
593,382

$
3,553

1%

(1) Change is primarily due to the acquisition of 50 properties subsequent to January 1, 2016.
(2) Relates to 373 same store properties.

~~The following is a summary of our seniors housing operating results of operations (dollars in thousands):~~

Three Months Ended

Change

Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

$

%

2017

2016

$

%
Revenues:

Resident fees and services

$
702,380

$
630,017

$
72,363

11%

$
2,049,757

$
1,847,386

$
202,371

11%

Interest income

-

1,054

(1,054)

-100%

69

3,126

(3,057)

-98%

Other income

1,497

716

781

109%

4,005

11,889

(7,884)

-66%

Total revenues

703,877

631,787

72,090

11%

2,053,831

1,862,401

191,430

10%
Property operating expenses

478,777

432,292

46,485

11%

1,400,313

1,259,182

141,131

11%

NOI⁽¹⁾

225,100

199,495

25,605

13%

653,518

603,219

50,299

8%
Other expenses:





Interest expense


16,369

20,360

(3,991)

-20%


47,587

61,157

(13,570)

-22%

Depreciation and amortization


119,089

97,210

21,879

23%


356,023

301,354

54,669

18%

Transaction costs⁽²⁾

-

18,083

(18,083)

-100%

-

25,259

(25,259)

-100%

Loss (gain) on extinguishment of debt, net

-

-

-

n/a

3,414

(88)

3,502

n/a

Impairment of assets

-

-

-

n/a

14,191

-

14,191

n/a

Other expenses⁽²⁾

5,157

-

5,157

n/a

8,100

-

8,100

n/a

Total other expenses


140,615

135,653

4,962

4%


429,315

387,682

41,633

11%
Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities


84,485

63,842

20,643

32%


224,203

215,537

8,666

4%
Income tax benefit (expense)

(1,519)

515

(2,034)

n/a

9,133

5,304

3,829

72%
Income (loss) from unconsolidated entities


(2,886)

(3,891)

1,005

-26%


(40,527)

(15,713)

(24,814)

158%
Income from continuing operations

80,080

60,466

19,614

32%

192,809

205,128

(12,319)

-6%
Gain (loss) on real estate dispositions, net⁽³⁾

(197)

-

(197)

n/a

12,814

-

12,814

n/a
Net income (loss)

79,883

60,466

19,417

32%

205,623

205,128

495

0%
Less: Net income (loss) attributable to noncontrolling interests


1,008

1,556

(548)

-35%


1,199

1,739

(540)

-31%
Net income (loss) attributable to common stockholders

$
78,875

$
58,910

$
19,965

34%

$
204,424

$
203,389

$
1,035

1%

(1) See Non-GAAP Financial Measures.
(2) See Note 3 to our unaudited consolidated financial statements.
(3) See Note 5 to our unaudited consolidated financial statements.

Fluctuations in revenues and property operating expenses are primarily a result of acquisitions and the movement of U.S. and foreign currency exchange rates. The fluctuations in depreciation and amortization are due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

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

During the nine month period ended September 30, 2017, we recorded an impairment charge related to two held-for-sale properties for which our carrying value exceeded the estimated fair value less costs to sell. During the nine month period ended September 30, 2017, we recorded a gain on sale related to the sale of one property previously classified as held-for-sale.

During the nine month period ended September 30, 2017, we completed one seniors housing operating construction project representing $3,634,000 or $302,833 per unit. The following is a summary of our seniors housing operating construction projects, excluding expansions, pending as of September 30, 2017 (dollars in thousands):

Location

Units

Commitment

Balance

Est. Completion
Chertsey, UK

94

$
41,814

$
32,103

1Q18
Bushey, UK

95

54,613

30,681

3Q18

189

$
96,427

62,784

New York, NY

Project in planning stage

136,327

London, UK

Project in planning stage

28,433

Total

$
227,544

~~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 seniors housing operating property secured debt principal activity (dollars in thousands):~~

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Weighted Avg.

Weighted Avg.

Weighted Avg.

Weighted Avg.

Amount

Interest Rate

Amount

Interest Rate

Amount

Interest Rate

Amount

Interest Rate
Beginning balance

$
2,040,985

3.556%

$
2,393,628

3.923%

$
2,463,249

3.936%

$
2,290,552

3.958%
Debt issued

15,659

3.458%

31,549

3.036%

177,459

2.595%

193,541

3.053%
Debt assumed

-

0.000%

47,156

4.132%

-

0.000%

47,156

4.132%
Debt extinguished

(15,449)

2.883%

(29,724)

3.655%

(610,403)

4.918%

(121,337)

3.609%
Foreign currency

39,696

3.180%

(7,980)

3.394%

73,737

3.257%

49,086

3.476%
Principal payments

(11,857)

3.573%

(12,326)

3.860%

(35,008)

3.629%

(36,695)

3.908%
Ending balance

$
2,069,034

3.633%

$
2,422,303

3.926%

$
2,069,034

3.633%

$
2,422,303

3.926%

Monthly averages

$
2,065,572

3.605%

$
2,413,116

3.910%

$
2,082,662

3.662%

$
2,371,211

3.940%

The majority of our seniors housing operating properties are formed through partnership interests. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures. The fluctuations in income (loss) from unconsolidated entities is primarily due to the recognition of goodwill and intangible asset impairments as well as non-recurring income tax expense adjustments related to our investments in unconsolidated ~~entities during the nine month period ended September 30, 2017.~~ ~~During the nine months ended September 30, 2017, we recognized a $7,916,000 deferred tax benefit arising from basis difference generated by the aforementioned unconsolidated entities’ adjustments.~~

~~Outpatient Medical~~

~~The following is a summary of our NOI and SSNOI for the outpatient medical segment (dollars in thousands):~~

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

Three Months Ended

Change

Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

$

%

2017

2016

$

%
NOI

$
96,772

$
94,905

$
1,867

2%

$
285,675

$
287,423

$
(1,748)

-1%
Non SSNOI on same store properties

(1,827)

(2,636)

809

-31%

(6,745)

(7,620)

875

-11%
NOI attributable to non same store properties⁽¹⁾

(9,571)

(7,967)

(1,604)

20%

(25,176)

(26,442)

1,266

-5%
SSNOI⁽²⁾

$
85,374

$
84,302

$
1,072

1%

$
253,754

$
253,361

$
393

0%

(1) Change is primarily due to a nonrecurring cash receipt during the three months ended June 30, 2016, offset by acquisitions of seven properties subsequent to January 1, 2016.
(2) Relates to 235 same store properties.

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

			Three Months Ended				Change			Nine Months Ended				Change
			September 30,		September 30,					September 30,		September 30,
			2017		2016		$		%	2017		2016		$		%
Revenues:
	Rental income		$	141,325	$	134,926	$	6,399	5%	$	418,886	$	402,258	$	16,628	4%
	Interest income			-		1,009		(1,009)	-100%		-		3,307		(3,307)	-100%
	Other income			667		358		309	86%		2,497		4,824		(2,327)	-48%
		Total revenues		141,992		136,293		5,699	4%		421,383		410,389		10,994	3%
Property operating expenses				45,220		41,388		3,832	9%		135,708		122,966		12,742	10%
	NOI⁽¹⁾			96,772		94,905		1,867	2%		285,675		287,423		(1,748)	-1%
Other expenses:
	Interest expense			2,929		3,986		(1,057)	-27%		7,342		15,132		(7,790)	-51%
	Depreciation and amortization			48,158		46,555		1,603	3%		144,567		142,066		2,501	2%
	Transaction costs⁽²⁾			-		146		(146)	-100%		-		2,188		(2,188)	-100%		Three Months Ended						Change						Six Months Ended						Change
	Impairment of assets			-		4,635		(4,635)	-100%		5,625		4,635		990	21%		June 30,			June 30,									June 30,			June 30,
	Loss (gain) on extinguishment of debt, net			-		-		-	n/a		4,373		-		4,373	n/a		2019			2018			$			%			2019			2018			$			%
Revenues:
Rental income																		$	163,224		$	135,640		$	27,584		20	%		$	312,276		$	272,178		$	40,098		15	%
Interest income																		238			43			195			453	%		411			55			356			647	%
Other income																		(97		)	144			(241		)	-167	%		139			265			(126		)	-48	%
Total revenues																		163,365			135,827			27,538			20	%		312,826			272,498			40,328			15	%
Property operating expenses																		50,987			42,953			8,034			19	%		99,153			87,456			11,697			13	%
NOI⁽¹⁾																		112,378			92,874			19,504			21	%		213,673			185,042			28,631			15	%
Other expenses:
Depreciation and amortization																		55,445			46,187			9,258			20	%		106,454			92,587			13,867			15	%
Interest expense																		3,386			1,656			1,730			104	%		6,734			3,332			3,402			102	%
Loss (gain) on extinguishment of debt, net																		—			—			—			n/a			—			11,928			(11,928		)	-100	%
Impairment of assets																		10,879			—			10,879			n/a			10,879			—			10,879			n/a
Other expenses																		(4		)	2,095			(2,099		)	-100	%		750			2,693			(1,943		)	-72	%
	Other expenses⁽²⁾			530		-		530	n/a		2,201		-		2,201	n/a		69,706			49,938			19,768			40	%		124,817			110,540			14,277			13	%
		Total other expenses		51,617		55,322		(3,705)	-7%		164,108		164,021		87	0%
Income from continuing operations before income taxes and income from unconsolidated entities				45,155		39,583		5,572	14%		121,567		123,402		(1,835)	-1%
Income (loss) from continuing operations before income taxes and other items																		42,672			42,936			(264		)	-1	%		88,856			74,502			14,354			19	%
Income tax (expense) benefit	Income tax (expense) benefit			(366)		417		(783)	n/a		(655)		(59)		(596)	1010%		(586		)	(378		)	(208		)	-55	%		(951		)	(806		)	(145		)	-18	%
Income from unconsolidated entities	Income from unconsolidated entities			816		144		672	467%		1,868		88		1,780	2023%		1,826			1,391			435			31	%		3,549			2,621			928			35	%
Gain (loss) on real estate dispositions, net⁽³⁾																	Gain (loss) on real estate dispositions, net⁽³⁾			(2	)		(3	)		1			33	%		(7	)		214,779			(214,786	)		-100	%
Income from continuing operations	Income from continuing operations			45,605		40,144		5,461	14%		122,780		123,431		(651)	-1%		43,910			43,946			(36		)	—	%		91,447			291,096			(199,649		)	-69	%
Gain (loss) on real estate dispositions, net⁽³⁾				2,004		(1,228)		3,232.00	n/a		2,004		(1,228)		3,232.00	n/a
Net income (loss)	Net income (loss)			47,609		38,916		8,693	22%		124,784		122,203		2,581	2%		43,910			43,946			(36		)	—	%		91,447			291,096			(199,649		)	-69	%
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests			1,032		997		35	4%		3,424		(529)		3,953	n/a		812			678			134			20	%		1,807			3,821			(2,014		)	-53	%
Net income (loss) attributable to common stockholders	Net income (loss) attributable to common stockholders		$	46,577	$	37,919	$	8,658	23%	$	121,360	$	122,732	$	(1,372)	-1%		$	43,098		$	43,268		$	(170	)	—	%		$	89,640		$	287,275		$	(197,635	)	-69	%

(1) See Non-GAAP Financial Measures.	(1) See Non-GAAP Financial Measures.																⁽¹⁾ See Non-GAAP Financial Measures.
(2) See Note 3 to our unaudited consolidated financial statements.
(3) See Note 5 to our unaudited consolidated financial statements.

The increase in rental income is primarily attributable to ~~the~~ acquisitions ~~of new properties~~ and ~~the conversion~~development conversions, partially offset by dispositions of ~~newly constructed~~ outpatient medical ~~properties from which we receive rent.~~properties. 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. Sales of real property would offset revenue increases and, to the extent that they exceed

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

new acquisitions, could result in decreased revenues. Our leases could renew above or below current ~~rent~~rental rates, resulting in an increase or decrease in rental income. For the three months ended ~~September~~June 30, ~~2017,~~2019, our consolidated outpatient medical portfolio signed ~~98,116~~138,399 square feet of new leases and ~~240,234~~332,299 square feet of renewals. The weighted-average term of these leases was seven years, with a rate of ~~$33.97~~$36.64 per square foot and tenant improvement and lease commission costs of ~~$20.72~~$21.40 per square foot. Substantially all of these leases ~~during the referenced quarter~~ contain an annual fixed or contingent escalation rent structure ranging from 0%1.5% to 5%3.9%.

The fluctuation in property operating expenses is primarily attributable to acquisitions and construction conversions of new outpatient medical facilities, ~~for which we incur certain property operating expenses.~~partially offset by dispositions.The ~~fluctuations~~fluctuation in depreciation and amortization ~~are~~is primarily due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

Changes in the gain/loss on sale of properties are related to the volume and timing of property sales and sales prices. During the ~~nine~~three months ended ~~September~~June 30, ~~2017 and 2016,~~2019 we recorded an impairment ~~charges related to~~charge on certain ~~held-for-sale~~held for sale outpatient medical properties as the carrying values exceeded the estimated fair ~~values~~value less costs to sell.

~~During the nine months ended September 30, 2017, we completed four outpatient medical construction projects representing $63,036,000 or $310 per square foot.~~

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

The following is a summary of the ~~outpatient medical~~Outpatient Medical construction projects, excluding expansions, pending as of ~~September~~June 30, ~~2017~~2019 (dollars in thousands):

Location

Square Feet

Commitment

Balance

Est. Completion
Palmer. AK

38,676

$
12,345

$
466

3Q18
Brooklyn, NY

140,955

105,177

48,165

3Q19

179,631

$
117,522

$
48,631



Location	Square Feet	Commitment		Balance		Est. Completion
Lowell, MA	50,668	$	8,300	$	3,599	4Q19
Houston, TX	73,500	23,455		12,230		4Q19
Brooklyn, NY	140,955	105,306		72,435		1Q20
Porter, TX	55,000	20,800		8,737		1Q20
Katy, TX	36,500	12,028		170		2Q20
Total	356,623	$	169,889	$	97,171

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 fluctuation in losses/gains on debt extinguishment is primarily attributable to the ~~large volume of~~prepayment penalties paid on certain extinguishments in ~~2017.~~ the first quarter of 2018.

The following is a summary of our outpatient medical secured debt principal activity (dollars in thousands):


	Three Months Ended						Nine Months Ended						Three Months Ended										Six Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2019					June 30, 2018					June 30, 2019					June 30, 2018
			Weighted Avg.			Weighted Avg.			Weighted Avg.			Weighted Avg.				Wtd. Ave					Wtd. Ave					Wtd. Ave					Wtd. Ave
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate		Amount			Interest Rate
Beginning balance	$	284,918	4.617%	$	563,232	5.129%	$	404,079	4.846%	$	627,689	5.177%	$	385,357		4.25	%	$	217,697		4.14	%	$	386,738		4.20	%	$	279,951		4.72	%
Debt assumed		-	0.000%		-	0.000%		23,094	6.670%		-	0.000%
Debt extinguished		-	0.000%		(128,406)	5.847%		(137,416)	5.990%		(185,914)	5.892%	—			—	%	—			—	%	—			—	%	(61,291		)	7.43	%
Principal payments		(2,000)	6.633%		(3,014)	5.373%		(6,839)	6.762%		(9,963)	5.471%	(1,507		)	5.02	%	(690		)	5.90	%	(2,888		)	5.06	%	(1,653		)	6.08	%
Ending balance	$	282,918	4.693%	$	431,812	4.929%	$	282,918	4.693%	$	431,812	4.929%	$	383,850		4.22	%	$	217,007		4.35	%	$	383,850		4.22	%	$	217,007		4.35	%

Monthly averages	$	283,885	4.676%	$	521,636	5.077%	$	298,933	4.607%	$	571,466	5.152%	$	384,603		4.24	%	$	217,352		4.27	%	$	386,088		4.24	%	$	226,493		4.30	%

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 ~~related to certain unconsolidated property investments.~~from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner.

Non-Segment/Corporate

The following is a summary of our results of operations for the ~~non-segment/corporate~~Non-Segment/Corporate activities (dollars in thousands):



	Three Months Ended						Change					Six Months Ended						Change
	June 30,			June 30,								June 30,			June 30,
	2019			2018			$			%		2019			2018			$			%
Revenues:
Other income	$	454		$	498		$	(44	)	-9	%	$	2,611		$	866		$	1,745		202	%
Total revenue	454			498			(44		)	-9	%	2,611			866			1,745			202	%
Expenses:
Interest expense	117,153			98,989			18,164			18	%	237,346			199,711			37,635			19	%
General and administrative expenses	33,741			32,831			910			3	%	69,023			66,536			2,487			4	%
Loss (gain) on extinguishment of debt, net	—			—			—			n/a		15,719			—			15,719			n/a
Other expenses	4,215			839			3,376			402	%	6,242			3,021			3,221			107	%
	155,109			132,659			22,450			17	%	328,330			269,268			59,062			22	%
Loss from continuing operations before income taxes and other items	(154,655		)	(132,161		)	(22,494		)	-17	%	(325,719		)	(268,402		)	(57,317		)	-21	%
Income tax (expense) benefit	(27		)	(158		)	131			83	%	(314		)	(344		)	30			9	%
Loss from continuing operations	(154,682		)	(132,319		)	(22,363		)	-17	%	(326,033		)	(268,746		)	(57,287		)	-21	%
Less: Preferred stock dividends	—			11,676			(11,676		)	-100	%	—			23,352			(23,352		)	-100	%
Net loss attributable to common stockholders	$	(154,682	)	$	(143,995	)	$	(10,687	)	-7	%	$	(326,033	)	$	(292,098	)	$	(33,935	)	-12	%

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

Three Months Ended

Change

Nine Months Ended

Change

September 30,

September 30,

September 30,

September 30,

2017

2016

$

%

2017

2016

$

%
Revenues:



Other income

$
698

$
189

$
509

269%

$
1,171

$
705

$
466

66%
Expenses:



Interest expense


99,658

100,639

(981)

-1%

290,829

301,864

(11,035)

-4%

Loss (gain) on derivatives, net


-

(2,516)

2,516

-100%

-

(2,516)

2,516

-100%

General and administrative


29,913

36,828

(6,915)

-19%

93,643

122,434

(28,791)

-24%

Other expenses

4,672

-

4,672

n/a

10,882

3,161

7,721

244%

Total expenses


134,243

134,951

(708)

-1%

395,354

424,943

(29,589)

-7%
Loss from continuing operations before income taxes


(133,545)

(134,762)

1,217

-1%

(394,183)

(424,238)

30,055

-7%
Income tax (expense) benefit


2,032

269

1,763

655%

(873)

(1,277)

404

-32%
Loss from continuing operations


(131,513)

(134,493)

2,980

-2%

(395,056)

(425,515)

30,459

-7%
Less: Preferred stock dividends


11,676

16,352

(4,676)

-29%

37,734

49,055

(11,321)

-23%
Less: Preferred stock redemption charge


-

-

-

n/a

9,769

-

9,769

n/a
Net loss attributable to common stockholders

$
(143,189)

$
(150,845)

$
7,656

-5%

$
(442,559)

$
(474,570)

$
32,011

-7%

The following is a summary of our ~~non-segment/corporate~~Non-Segment/Corporate interest expense (dollars in thousands):


	Three Months Ended				Change			Nine Months Ended				Change			Three Months Ended				Change					Six Months Ended				Change
	September 30,		September 30,					September 30,		September 30,					June 30,		June 30,							June 30,		June 30,
	2017		2016		$		%	2017		2016		$		%	2019		2018		$			%		2019		2018		$			%
Senior unsecured notes	$	92,296	$	92,005	$	291	0%	$	267,444	$	279,901	$	(12,457)	-4%	$	98,475	$	89,986	$	8,489		9	%	$	207,231	$	183,399	$	23,832		13	%
Secured debt		49		69		(20)	-29%		164		245		(81)	-33%	—		32		(32		)	-100	%	—		70		(70		)	-100	%
Primary unsecured credit facility		3,906		5,137		(1,231)	-24%		13,179		12,142		1,037	9%
Unsecured revolving credit facility and commercial paper note program															15,160		5,768		9,392			163	%	22,678		9,782		12,896			132	%
Loan expense		3,407		3,428		(21)	-1%		10,042		9,576		466	5%	3,518		3,203		315			10	%	7,437		6,460		977			15	%
Totals	$	99,658	$	100,639	$	(981)	-1%	$	290,829	$	301,864	$	(11,035)	-4%	$	117,153	$	98,989	$	18,164		18	%	$	237,346	$	199,711	$	37,635		19	%

The change in interest expense on senior unsecured notes is due to the net effect of issuances and ~~extinguishments. The year-to-date decrease in interest expense is attributed primarily to~~extinguishments, as well as the ~~$450,000,000~~movement of ~~4.70% senior unsecured notes extinguished in December 2016.~~foreign exchange rates and related hedge activity. Please refer to Note ~~10 to our unaudited consolidated financial statements~~11 for additional information. Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. Loan expense changes are due to amortization of charges for costs incurred in connection with senior unsecured note issuances. The change in interest expense on the ~~primary~~ 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 910 of our unaudited consolidated financial statements for additional information regarding our ~~primary~~ unsecured revolving credit ~~facility.~~

facility and Commercial Paper Program. The loss on extinguishment recognized during the six months ended June 30, 2019 is due to the early extinguishment of the $600,000,000 of 4.125% senior unsecured notes due 2019 and the $450,000,000 of 6.125% senior unsecured notes due 2020.

General and administrative expenses as a percentage of consolidated revenues for the three months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were ~~2.74%~~2.56% and ~~3.41%~~2.92%, respectively. The decrease in general and administrative expenses is primarily related to a reduction in professional service fees for tax and legal consulting and compensation costs as a result of execution of our strategic initiatives. Other expenses primarily represent severance-related costs associated with the departure of ~~certain~~an executive ~~officers~~officer and other key employees.

The decrease in preferred dividends is due to the conversion of all outstanding Series I Cumulative Convertible Perpetual Preferred Stock during the six months ended June 30, 2019.

Other

~~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 (“NICS”), 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.

Consolidated net operating income (“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 ~~seniors housing operating and medical facility~~ properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property ~~operations or transaction costs.~~operations. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. Same store NOI (“SSNOI”) is used to evaluate the operating performance of our properties ~~under~~using a consistent population which ~~eliminates~~controls for changes in the composition of our portfolio. As used herein, same store is generally defined as those revenue-generating properties in the portfolio for the reporting period subsequent to January 1, ~~2016.~~2018. Land parcels, loans, ~~sub-leases~~ and ~~major capital restructurings~~sub-leases as well as any properties acquired, developed/redeveloped, transitioned, sold or classified as held for sale during that period are excluded from the same store amounts. 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.

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

EBITDA stands for earnings (net income) before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends. Covenants in our senior unsecured notes contain a financial ratios based on a definition of EBITDA that is specific to those agreements. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial covenants, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above excluding unconsolidated entities and adjusted for items per our covenant. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge coverage ratio of at least 1.50 times.

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.



	Three Months Ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,
NOI Reconciliations:	2018			2018			2018			2018			2019			2019
Net income (loss)	$	453,555		$	167,273		$	84,226		$	124,696		$	292,302		$	150,040
Loss (gain) on real estate dispositions, net	(338,184		)	(10,755		)	(24,723		)	(41,913		)	(167,409		)	1,682
Loss (income) from unconsolidated entities	2,429			(1,249		)	(344		)	(195		)	9,199			9,049
Income tax expense (benefit)	1,588			3,841			1,741			1,504			2,222			1,599
Other expenses	3,712			10,058			88,626			10,502			8,756			21,628
Impairment of assets	28,185			4,632			6,740			76,022			—			9,939
Provision for loan losses	—			—			—			—			18,690			—
Loss (gain) on extinguishment of debt, net	11,707			299			4,038			53			15,719			—
Loss (gain) on derivatives and financial instruments, net	(7,173		)	(7,460		)	8,991			1,626			(2,487		)	1,913
General and administrative expenses	33,705			32,831			28,746			31,101			35,282			33,741
Depreciation and amortization	228,201			236,275			243,149			242,834			243,932			248,052
Interest expense	122,775			121,416			138,032			144,369			145,232			141,336
Consolidated net operating income (NOI)	$	540,500		$	557,161		$	579,222		$	590,599		$	601,438		$	618,979

NOI by segment:
Seniors Housing Operating	$	225,226		$	239,505		$	265,846		$	254,445		$	264,700		$	278,212
Triple-net	222,738			224,284			218,684			234,343			233,286			227,935
Outpatient Medical	92,168			92,874			93,997			101,097			101,295			112,378
Non-segment/corporate	368			498			695			714			2,157			454
Total NOI	$	540,500		$	557,161		$	579,222		$	590,599		$	601,438		$	618,979

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

~~The following tables reflect the reconciliations of NOI and SSNOI to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Dollars are in thousands.~~

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,
NOI Reconciliations:

2016

2016

2016

2016

2017

2017

2017
Net income

$
165,474

$
210,749

$
354,741

$
351,108

$
337,610

$
203,441

$
89,299
Loss (gain) on real estate dispositions, net

-

(1,530)

(162,351)

(200,165)

(244,092)

(42,155)

(1,622)
Loss (income) from unconsolidated entities

3,820

1,959

1,749

2,829

23,106

3,978

(3,408)
Income tax expense (benefit)

(1,725)

(513)

(305)

(16,585)

2,245

(8,448)

669
Other expenses

-

3,161

-

8,838

11,675

6,339

99,595
Impairment of assets

14,314

-

9,705

13,187

11,031

13,631

-
Provision for loan losses

-

-

-

10,215

-

-

-
Loss (gain) on extinguishment of debt, net

(24)

33

-

17,204

31,356

5,515

-
Loss (gain) on derivatives, net

-

-

(2,516)

68

1,224

736

324
Transaction costs

8,208

5,157

19,842

9,704

-

-

-
General and administrative expenses

45,691

39,914

36,828

32,807

31,101

32,632

29,913
Depreciation and amortization

228,696

226,569

218,061

227,916

228,276

224,847

230,138
Interest expense

132,960

132,326

129,699

126,360

118,597

116,231

122,578
Consolidated net operating income (NOI)

$
597,414

$
617,825

$
605,453

$
583,486

$
552,129

$
556,747

$
567,486

NOI by segment:

Triple-net

$
308,168

$
310,311

$
310,864

$
279,516

$
249,735

$
241,347

$
244,916

Seniors housing operating

196,475

207,255

199,495

210,895
��

209,442

218,978

225,100

Outpatient medical

92,713

99,805

94,905

92,841

92,719

96,183

96,772

Non-segment/corporate

58

454

189

234

233

239

698

Total NOI

$
597,414

$
617,825

$
605,453

$
583,486

$
552,129

$
556,747

$
567,486

Nine Months Ended

September 30,

September 30,
NOI Reconciliations:

2016

2017
Net income

$
730,961

$
630,356
Loss (gain) on real estate dispositions, net

(163,881)

(287,869)
Loss (income) from unconsolidated entities

7,528

23,676
Income tax expense (benefit)

(2,543)

(5,535)
Other expenses

3,161

117,608
Impairment of assets

24,019

24,662
Loss (gain) on extinguishment of debt, net

9

36,870
Loss (gain) on derivatives, net

(2,516)

2,284
Transaction costs

33,207

-
General and administrative expenses

122,434

93,643
Depreciation and amortization

673,326

683,262
Interest expense

394,985

357,405
Consolidated net operating income (NOI)

$
1,820,690

$
1,676,362

NOI by segment:

Triple-net

$
929,343

$
735,998

Seniors housing operating

603,219

653,518

Outpatient medical

287,423

285,675

Non-segment/corporate

705

1,171

Total NOI
$
1,820,690

$
1,676,362



			Three Months Ended
			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,
SSNOI Reconciliations:			2018			2018			2018			2018			2019			2019
NOI:
Seniors Housing Operating			$	225,226		$	239,505		$	265,846		$	254,445		$	264,700		$	278,212
Triple-net			222,738			224,284			218,684			234,343			233,286			227,935
Outpatient Medical			92,168			92,874			93,997			101,097			101,295			112,378
Total			540,132			556,663			578,527			589,885			599,281			618,525
Adjustments:
Seniors Housing Operating:
Non SSNOI on same store properties			269			358			211			337			1,915			1,384
NOI attributable to non same store properties			(34,665		)	(45,907		)	(73,739		)	(65,131		)	(70,224		)	(88,898		)
Subtotal			(34,396		)	(45,549		)	(73,528		)	(64,794		)	(68,309		)	(87,514		)
Triple-net:
Non SSNOI on same store properties			(10,728		)	(4,068		)	(5,445		)	(6,384		)	(7,593		)	(8,114		)
NOI attributable to non same store properties			(81,455		)	(83,148		)	(79,874		)	(96,535		)	(92,840		)	(87,819		)
Subtotal			(92,183		)	(87,216		)	(85,319		)	(102,919		)	(100,433		)	(95,933		)
Outpatient Medical:
Non SSNOI on same store properties			(1,266		)	(1,397		)	(1,635		)	(5,706		)	(1,563		)	(1,204		)
NOI attributable to non same store properties			(4,674		)	(5,102		)	(5,776		)	(7,779		)	(12,294		)	(24,085		)
Subtotal			(5,940		)	(6,499		)	(7,411		)	(13,485		)	(13,857		)	(25,289		)
SSNOI:	Properties
Seniors Housing Operating	365		190,830			193,956			192,318			189,651			196,391			190,698
Triple-net	388		130,555			137,068			133,365			131,424			132,853			132,002
Outpatient Medical	227		86,228			86,375			86,586			87,612			87,438			87,089
Total	980		$	407,613		$	417,399		$	412,269		$	408,687		$	416,682		$	409,789
SSNOI Property Reconciliation:
Total properties	1,598
Acquisitions	(402	)
Developments	(30	)
Held for sale	(89	)
Transitions/restructurings	(87	)
Other⁽¹⁾	(10	)
Same store properties	980

⁽¹⁾ Includes nine land parcels and one loan.

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

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,

SSNOI Reconciliations:

2016

2016

2016

2016

2017

2017

2017

NOI:

Triple-net

$
308,168

$
310,311

$
310,864

$
279,516

$
249,735

$
241,347

$
244,916

Seniors housing operating

196,475

207,255

199,495

210,895

209,442

218,978

225,100

Outpatient medical

92,713

99,805

94,905

92,841

92,719

96,183

96,772

Total

597,356

617,371

605,264

583,252

551,896

556,508

566,788

Adjustments:

Triple-net:

Non SSNOI on same store properties

(13,461)

(11,404)

(11,325)

(11,151)

(10,301)

(9,293)

(9,097)

NOI attributable to non same store properties

(131,095)

(131,047)

(131,847)

(100,819)

(70,397)

(60,073)

(61,543)

Subtotal

(144,556)

(142,451)

(143,172)

(111,970)

(80,698)

(69,366)

(70,640)

Seniors housing operating:

Non SSNOI on same store properties

248

242

1,269

231

231

481

206

NOI attributable to non same store properties

(2,909)

(2,884)

(5,803)

(20,413)

(18,754)

(17,853)

(20,894)

Subtotal

(2,661)

(2,642)

(4,534)

(20,182)

(18,523)

(17,372)

(20,688)

Outpatient medical:

Non SSNOI on same store properties

(2,373)

(2,611)

(2,636)

(1,974)

(2,214)

(2,704)

(1,827)

NOI attributable to non same store properties

(6,467)

(12,007)

(7,967)

(5,036)

(6,252)

(9,352)

(9,571)

Subtotal

(8,840)

(14,618)

(10,603)

(7,010)

(8,466)

(12,056)

(11,398)

SSNOI:

Properties

Triple-net

511

163,612

167,860

167,692

167,546

169,037

171,981

174,276

Seniors housing operating

373

193,814

204,613

194,961

190,713

190,919

201,606

204,412

Outpatient medical

235

83,873

85,187

84,302

85,831

84,253

84,127

85,374

Total

1,119

$
441,299

$
457,660

$
446,955

$
444,090

$
444,209

$
457,714

$
464,062

SSNOI Property Reconciliation:

Total properties

1,278

Acquisitions

(83)

Developments

(30)

Held-for-sale

(8)

Transitions/restructurings

(29)

Other⁽¹⁾

(9)

Same store properties

1,119

(1) Includes eight land parcels and one loan.

Nine Months Ended

September 30,

September 30,
SSNOI Reconciliations:

2016

2017
NOI:

Triple-net

$
929,343

$
735,998

Seniors housing operating

603,219

653,518

Outpatient medical

287,423

285,675

Total

1,819,985

1,675,191
Adjustments:

Triple-net:

Non SSNOI on same store properties

(36,190)

(28,691)

NOI attributable to non same store properties

(393,989)

(192,013)

Subtotal

(430,179)

(220,704)

Seniors housing operating:

Non SSNOI on same store properties

1,759

918

NOI attributable to non same store properties

(11,596)

(57,501)

Subtotal

(9,837)

(56,583)

Outpatient medical

Non SSNOI on same store properties

(7,620)

(6,745)

NOI attributable to non same store properties

(26,442)

(25,176)

Subtotal

(34,062)

(31,921)
SSNOI:

Properties

Triple-net

511

499,164

515,294

Seniors housing operating

373

593,382

596,935

Outpatient medical

235

253,361

253,754

Total

1,119

$
1,345,907

$
1,365,983



	Six Months Ended
	June 30,			June 30,
	2018			2019
NOI Reconciliations:
Net income (loss)	$	620,828		$	442,342
Loss (gain) on real estate dispositions, net	(348,939		)	(165,727		)
Loss (income) from unconsolidated entities	1,180			18,248
Income tax expense (benefit)	5,429			3,821
Other expenses	13,770			30,384
Impairment of assets	32,817			9,939
Provision for loan losses	—			18,690
Loss (gain) on extinguishment of debt, net	12,006			15,719
Loss (gain) on derivatives and financial instruments, net	(14,633		)	(574		)
General and administrative expenses	66,536			69,023
Depreciation and amortization	464,476			491,984
Interest expense	244,191			286,568
Consolidated net operating income (NOI)	$	1,097,661		$	1,220,417

NOI by segment:
Seniors Housing Operating	$	464,731		$	542,912
Triple-net	447,022			461,221
Outpatient Medical	185,042			213,673
Non-segment/corporate	866			2,611
Total NOI	$	1,097,661		$	1,220,417



		Six Months Ended
		June 30,			June 30,
SSNOI Reconciliations:		2018			2019
NOI:
Seniors Housing Operating		$	464,731		$	542,912
Triple-net		447,022			461,221
Outpatient Medical		185,042			213,673
Total		1,096,795			1,217,806
Adjustments:
Seniors Housing Operating:
Non SSNOI on same store properties		627			3,299
NOI attributable to non same store properties		(80,572		)	(159,122		)
Subtotal		(79,945		)	(155,823		)
Triple-net:
Non SSNOI on same store properties		(14,796		)	(15,707		)
NOI attributable to non same store properties		(164,603		)	(180,659		)
Subtotal		(179,399		)	(196,366		)
Outpatient Medical:
Non SSNOI on same store properties		(2,663		)	(2,767		)
NOI attributable to non same store properties		(9,776		)	(36,379		)
Subtotal		(12,439		)	(39,146		)
SSNOI:	Properties
Seniors Housing Operating	365	384,786			387,089
Triple-net	388	267,623			264,855
Outpatient Medical	227	172,603			174,527
Total	980	$	825,012		$	826,471

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

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

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,
FFO Reconciliations:

2016

2016

2016

2016

2017

2017

2017
NICS

$
148,969

$
195,474

$
334,910

$
333,042

$
312,639

$
188,429

$
74,043
Depreciation and amortization


228,696

226,569

218,061

227,916

228,276

224,847

230,138
Impairment of assets

14,314

-

9,705

13,187

11,031

13,631

-
Loss (gain) on sales of properties, net


-

(1,530)

(162,351)

(200,165)

(244,092)

(42,155)

(1,622)
Noncontrolling interests

(17,319)

(20,616)

(15,695)

(17,897)

(18,107)

(16,955)

(16,826)
Unconsolidated entities


16,604

17,077

17,240

16,746

16,484

16,593

9,989
FFO

$
391,264

$
416,974

$
401,870

$
372,829

$
306,231

$
384,390

$
295,722



Average common shares outstanding:

Basic


355,076

356,646

358,932

362,088

362,534

366,524

369,089

Diluted


356,051

358,891

361,237

364,369

364,652

368,149

370,740



Per share data:


NICS


Basic

$
0.42

$
0.55

$
0.93

$
0.92

$
0.86

$
0.51

$
0.20

Diluted


0.42

0.54

0.93

0.91

0.86

0.51

0.20



FFO


Basic

$
1.10

$
1.17

$
1.12

$
1.03

$
0.84

$
1.05

$
0.80

Diluted


1.10

1.16

1.11

1.02

0.84

1.04

0.80

Nine Months Ended

September 30,

September 30,
FFO Reconciliations:

2016

2017
NICS

$
679,353

$
575,118
Depreciation and amortization


673,326

683,262
Impairment of assets

24,019

24,662
Loss (gain) on sales of properties, net


(163,881)

(287,869)
Noncontrolling interests

(53,630)

(51,887)
Unconsolidated entities


50,921

43,066
FFO

$
1,210,108

$
986,352



Average common shares outstanding:

Basic


356,911

366,096

Diluted


358,752

367,894



Per share data:


NICS


Basic

$
1.90

$
1.57

Diluted


1.89

1.56



FFO


Basic

$
3.39

$
2.69

Diluted


3.37

2.68



	Three Months Ended
		March 31,			June 30,			September 30,			December 31,			March 31,			June 30,
FFO Reconciliations:		2018			2018			2018			2018			2019			2019
Net income attributable to common stockholders		$	437,671		$	154,432		$	64,384		$	101,763		$	280,470		$	137,762
Depreciation and amortization		228,201			236,275			243,149			242,834			243,932			248,052
Impairment of assets		28,185			4,632			6,740			76,022			—			9,939
Loss (gain) on real estate dispositions, net		(338,184		)	(10,755		)	(24,723		)	(41,913		)	(167,409		)	1,682
Noncontrolling interests		(16,353		)	(17,692		)	(17,498		)	(17,650		)	(17,760		)	(18,889		)
Unconsolidated entities		13,700			11,833			13,220			13,910			19,150			11,475
FFO		$	353,220		$	378,725		$	285,272		$	374,966		$	358,383		$	390,021

Average common shares outstanding:
Basic		371,426			371,640			373,023			378,240			391,474			404,607
Diluted		373,257			373,075			374,487			380,002			393,452			406,673

Per share data:
Net income attributable to common stockholders:
Basic		$	1.18		$	0.42		$	0.17		$	0.27		$	0.72		$	0.34
Diluted		1.17			0.41			0.17			0.27			0.71			0.34

FFO
Basic		$	0.95		$	1.02		$	0.76		$	0.99		$	0.92		$	0.96
Diluted		0.95			1.02			0.76			0.99			0.91			0.96



	Six Months Ended
	June 30,			June 30,
FFO Reconciliations:	2018			2019
NICS	$	592,103		$	418,232
Depreciation and amortization	464,476			491,984
Impairment of assets	32,817			9,939
Loss (gain) on real estate dispositions, net	(348,939		)	(165,727		)
Noncontrolling interests	(34,045		)	(36,649		)
Unconsolidated entities	25,533			30,625
FFO	$	731,945		$	748,404

Average common shares outstanding:
Basic	371,552			398,073
Diluted	373,186			400,096

Per share data:
NICS
Basic	$	1.59		$	1.05
Diluted	1.59			1.05

FFO
Basic	$	1.97		$	1.88
Diluted	1.96			1.87

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

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

Three Months Ended

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,
EBITDA Reconciliations:

2016

2016

2016

2016

2017

2017

2017
Net income

$
165,474

$
210,749

$
354,741

$
351,108

$
337,610

$
203,441

$
89,299
Interest expense


132,960


132,326


129,699


126,360


118,597


116,231

122,578
Income tax expense (benefit)


(1,725)


(513)


(305)


(16,585)


2,245


(8,448)

669
Depreciation and amortization


228,696


226,569


218,061


227,916


228,276


224,847

230,138
EBITDA

$
525,405

$
569,131

$
702,196

$
688,799

$
686,728

$
536,071

$
442,684













Interest Coverage Ratio:













Interest expense

$
132,960

$
132,326

$
129,699

$
126,360

$
118,597

$
116,231

$
122,578
Non-cash interest expense


599


(1,519)


(543)


(216)


(1,679)


(2,946)

(3,199)
Capitalized interest


3,037


4,306


4,766


4,834


4,129


3,358

2,545

Total interest


136,596


135,113


133,922


130,978


121,047


116,643

121,924
EBITDA

$
525,405

$
569,131

$
702,196

$
688,799

$
686,728

$
536,071

$
442,684

Interest coverage ratio


3.85x


4.21x


5.24x


5.26x


5.67x


4.60x

3.63x













Fixed Charge Coverage Ratio:













Total interest

$
136,596

$
135,113

$
133,922

$
130,978

$
121,047

$
116,643

$
121,924
Secured debt principal payments


18,642


19,096


18,151


18,577


16,249

15,958

15,300
Preferred dividends


16,352


16,352


16,352


16,352


14,379

11,680

11,676

Total fixed charges


171,590


170,561


168,425


165,907


151,675


144,281

148,900
EBITDA

$
525,405

$
569,131

$
702,196

$
688,799

$
686,728

$
536,071

$
442,684

Fixed charge coverage ratio


3.06x

3.34x

4.17x

4.15x

4.53x

3.72x

2.97x

Nine Months Ended

September 30,

September 30,
EBITDA Reconciliations:

2016

2017
Net income

$
730,961

$
630,356
Interest expense


394,985

357,405
Income tax expense (benefit)


(2,543)

(5,535)
Depreciation and amortization


673,326

683,262
EBITDA

$
1,796,729

$
1,665,488



Interest Coverage Ratio:



Interest expense

$
394,985

$
357,405
Non-cash interest expense


(1,465)

(7,825)
Capitalized interest


12,109

10,033

Total interest


405,629

359,613
EBITDA

$
1,796,729

$
1,665,488

Interest coverage ratio


4.43x

4.63x



Fixed Charge Coverage Ratio:



Total interest

$
405,629

$
359,613
Secured debt principal payments


55,889

47,507
Preferred dividends


49,055

37,734

Total fixed charges


510,573

444,854
EBITDA

$
1,796,729

$
1,665,488

Fixed charge coverage ratio

3.52x

3.74x



	Three Months Ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,
EBITDA Reconciliations:	2018			2018			2018			2018			2019			2019
Net income (loss)	$	453,555		$	167,273		$	84,226		$	124,696		$	292,302		$	150,040
Interest expense	122,775			121,416			138,032			144,369			145,232			141,336
Income tax expense (benefit)	1,588			3,841			1,741			1,504			2,222			1,599
Depreciation and amortization	228,201			236,275			243,149			242,834			243,932			248,052
EBITDA	$	806,119		$	528,805		$	467,148		$	513,403		$	683,688		$	541,027

Interest Coverage Ratio:
Interest expense	$	122,775		$	121,416		$	138,032		$	144,369		$	145,232		$	141,336
Non-cash interest expense	(4,179		)	(1,716		)	(1,658		)	(3,307		)	(5,171		)	(752		)
Capitalized interest	2,336			2,100			1,921			1,548			2,327			3,929
Total interest	120,932			121,800			138,295			142,610			142,388			144,513
EBITDA	$	806,119		$	528,805		$	467,148		$	513,403		$	683,688		$	541,027
Interest coverage ratio	6.67		x	4.34		x	3.38		x	3.60		x	4.80		x	3.74		x

Fixed Charge Coverage Ratio:
Total interest	$	120,932		$	121,800		$	138,295		$	142,610		$	142,388		$	144,513
Secured debt principal payments	14,247			14,139			13,908			13,994			13,543			13,684
Preferred dividends	11,676			11,676			11,676			11,676			—			—
Total fixed charges	146,855			147,615			163,879			168,280			155,931			158,197
EBITDA	$	806,119		$	528,805		$	467,148		$	513,403		$	683,688		$	541,027
Fixed charge coverage ratio	5.49		x	3.58		x	2.85		x	3.05		x	4.38		x	3.42		x



	Six Months Ended
	June 30,			June 30,
EBITDA Reconciliations:	2018			2019
Net income (loss)	$	620,828		$	442,342
Interest expense	244,191			286,568
Income tax expense (benefit)	5,429			3,821
Depreciation and amortization	464,476			491,984
EBITDA	$	1,334,924		$	1,224,715

Interest Coverage Ratio:
Interest expense	$	244,191		$	286,568
Non-cash interest expense	(5,895		)	(5,923		)
Capitalized interest	4,436			6,256
Total interest	242,732			286,901
EBITDA	$	1,334,924		$	1,224,715
Interest coverage ratio	5.50		x	4.27		x

Fixed Charge Coverage Ratio:
Total interest	$	242,732		$	286,901
Secured debt principal payments	28,385			27,227
Preferred dividends	23,352			—
Total fixed charges	294,469			314,128
EBITDA	$	1,334,924		$	1,224,715
Fixed charge coverage ratio	4.53		x	3.90		x

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

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

Twelve Months Ended
Adjusted EBITDA

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,
Reconciliations:

2016

2016

2016

2016

2017

2017

2017
Net income

$
844,606

$
724,894

$
880,380

$
1,082,070

$
1,254,208

$
1,246,899

$
981,458
Interest expense


504,048

517,512

526,082

521,345

506,982

490,886

483,765
Income tax expense (benefit)


5,030

(2,899)

139

(19,128)

(15,158)

(23,093)

(22,119)
Depreciation and amortization


866,106

883,873

896,135

901,242

900,822

899,100

911,180

EBITDA

2,219,790

2,123,380

2,302,736

2,485,529

2,646,854

2,613,792

2,354,284
Loss (income) from unconsolidated entities

12,676

11,682

10,801

10,357

29,643

31,662

26,505
Transaction costs

70,579

63,245

73,754

42,910

34,702

29,545

9,704
Stock-based compensation expense⁽¹⁾

29,976

25,883

25,807

28,869

25,588

23,321

24,710
Loss (gain) on extinguishment of debt, net

19,252

398

(186)

17,214

48,593

54,074

54,074
Losses/impairments (gain) on sale of properties, net


(209,228)

(20,647)

(171,246)

(326,839)

(574,216)

(601,209)

(450,185)
Provision for loan losses


-

-

-

10,215

10,215

10,215

10,215
Loss (gain) on derivatives, net

-

-

(2,516)

(2,448)

(1,225)

(489)

2,351
Other expenses⁽¹⁾

40,636

37,386

37,386

7,721

19,396

23,997

122,211
Additional other income


(2,144)

(13,955)

(11,811)

(16,664)

(16,664)

(4,853)

(4,853)
Adjusted EBITDA

$
2,181,537

$
2,227,372

$
2,264,725

$
2,256,864

$
2,222,886

$
2,180,055

$
2,149,016















Adjusted Fixed Charge Coverage Ratio:

Interest expense

$
504,048

$
517,512

$
526,082

$
521,345

$
506,982

$
490,886

$
483,765
Capitalized interest


9,320


11,566


14,467


16,943


18,035


17,087


14,866
Non-cash interest expense


(1,868)


(7,589)


(4,341)


(1,681)


(3,958)


(5,386)


(8,041)

Total interest

511,500

521,489

536,208

536,607

521,059

502,587

490,590
Adjusted EBITDA

$
2,181,537

$
2,227,372

$
2,264,725

$
2,256,864

$
2,222,886

$
2,180,055

$
2,149,016

Adjusted interest coverage ratio

4.26x

4.27x

4.22x

4.21x

4.27x

4.34x

4.38x

Total interest

$
511,500

$
521,489

$
536,208

$
536,607

$
521,059

$
502,587

$
490,590
Secured debt principal payments


70,076


71,836


74,170


74,466


72,073


68,935


66,084
Preferred dividends


65,408


65,408


65,407


65,406


63,434


58,762


54,086

Total fixed charges


646,984


658,733


675,785


676,479


656,566


630,284


610,760
Adjusted EBITDA

$
2,181,537

$
2,227,372

$
2,264,725

$
2,256,864

$
2,222,886

$
2,180,055

$
2,149,016

Adjusted fixed charge coverage ratio


3.37x

3.38x

3.35x

3.34x

3.39x

3.46x

3.52x

(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses.



	Twelve Months Ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,
Adjusted EBITDA Reconciliations:	2018			2018			2018			2018			2019			2019
Net income	$	656,551		$	620,384		$	615,311		$	829,750		$	668,497		$	651,264
Interest expense	488,800			493,986			509,440			526,592			549,049			568,969
Income tax expense (benefit)	19,471			31,761			32,833			8,674			9,308			7,066
Depreciation and amortization	921,645			933,072			946,083			950,459			966,190			977,967
EBITDA	2,086,467			2,079,203			2,103,667			2,315,475			2,193,044			2,205,266
Loss (income) from unconsolidated entities	62,448			57,221			60,285			641			7,411			17,709
Stock-based compensation expense⁽¹⁾	25,753			26,158			25,443			27,646			23,618			26,113
Loss (gain) on extinguishment of debt, net	17,593			12,377			16,415			16,097			20,109			19,810
Loss (gain) on real estate dispositions, net	(438,342		)	(406,942		)	(430,043		)	(415,575		)	(244,800		)	(232,363		)
Impairment of assets	141,637			132,638			139,378			115,579			87,394			92,701
Provision for loan losses	62,966			62,966			62,966			—			18,690			18,690
Loss (gain) on derivatives and financial instruments, net	(6,113		)	(14,309		)	(5,642		)	(4,016		)	670			10,043
Other expenses⁽¹⁾	167,524			171,243			161,655			111,990			117,942			126,994
Additional other income	—			(10,805		)	(10,805		)	(14,832		)	(14,832		)	(4,027		)
Adjusted EBITDA	$	2,119,933		$	2,109,750		$	2,123,319		$	2,153,005		$	2,209,246		$	2,280,936

Adjusted Fixed Charge Coverage Ratio:
Interest expense	$	488,800		$	493,986		$	509,440		$	526,592		$	549,049		$	568,969
Capitalized interest	11,696			10,437			9,813			7,905			7,896			9,725
Non-cash interest expense	(12,858		)	(11,628		)	(10,087		)	(10,860		)	(11,852		)	(10,888		)
Total interest	487,638			492,795			509,166			523,637			545,093			567,806
Adjusted EBITDA	$	2,119,933		$	2,109,750		$	2,123,319		$	2,153,005		$	2,209,246		$	2,280,936
Adjusted interest coverage ratio	4.35		x	4.28		x	4.17		x	4.11		x	4.05		x	4.02		x

Total interest	$	487,638		$	492,795		$	509,166		$	523,637		$	545,093		$	567,806
Secured debt principal payments	62,077			60,258			58,866			56,288			55,584			55,129
Preferred dividends	46,707			46,704			46,704			46,704			35,028			23,352
Total fixed charges	596,422			599,757			614,736			626,629			635,705			646,287
Adjusted EBITDA	$	2,119,933		$	2,109,750		$	2,123,319		$	2,153,005		$	2,209,246		$	2,280,936
Adjusted fixed charge coverage ratio	3.55		x	3.52		x	3.45		x	3.44		x	3.48		x	3.53		x

⁽¹⁾ Certain severance-related costs are included in stock-based compensation and excluded from other expenses.

Our leverage ratios include book capitalization, undepreciated book capitalization and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt less cash and cash equivalents and any IRC ~~section~~Section 1031 deposits), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization. The table below reflects the reconciliation of our leverage ratios to our balance sheets for the periods presented. Amounts are in thousands, except share price.

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

As of

March 31,

June 30,

September 30,

December 31,

March 31,

June 30,

September 30,

2016

2016

2016

2016

2017

2017

2017
Book capitalization:

Borrowings under primary unsecured credit facility

$
645,000

$
745,000

$
1,350,000

$
645,000

$
522,000

$
385,000

$
420,000
Long-term debt obligations⁽¹⁾

12,418,198

12,228,727

12,080,888

11,713,245

10,932,185

10,994,946

11,101,592
Cash & cash equivalents⁽²⁾

(355,949)

(466,585)

(456,420)

(557,659)

(380,360)

(442,284)

(250,776)
Total net debt

12,707,249

12,507,142

12,974,468

11,800,586

11,073,825

10,937,662

11,270,816
Total equity

14,999,794

14,868,568

15,264,238

15,281,472

15,110,263

15,313,523

15,244,664
Redeemable noncontrolling interest

359,656

394,126

393,530

398,433

385,418

388,876

386,748
Book capitalization

$
28,066,699

$
27,769,836

$
28,632,236

$
27,480,491

$
26,569,506

$
26,640,061

$
26,902,228

Net debt to book capitalization ratio

45%

45%

45%

43%

42%

41%

42%

Undepreciated book capitalization:

Total net debt

$
12,707,249

$
12,507,142

$
12,974,468

$
11,800,586

$
11,073,825

$
10,937,662

$
11,270,816
Accumulated depreciation and amortization

4,032,726

4,109,585

4,243,038

4,093,494

4,335,160

4,568,408

4,826,418
Total equity

14,999,794

14,868,568

15,264,238

15,281,472

15,110,263

15,313,523

15,244,664
Redeemable noncontrolling interest

359,656

394,126

393,530

398,433

385,418

388,876

386,748
Undepreciated book capitalization

$
32,099,425

$
31,879,421

$
32,875,274

$
31,573,985

$
30,904,666

$
31,208,469

$
31,728,646

Net debt to undepreciated book capitalization ratio

40%

39%

39%

37%

36%

35%

36%

Market capitalization:

Common shares outstanding

356,773

357,690

362,425

362,602

364,564

368,878

370,342
Period end share price

$
69.34

$
76.17

$
74.77

$
66.93

$
70.82

$
74.85

$
70.28
Common equity market capitalization

$
24,738,640

$
27,245,247

$
27,098,517

$
24,268,952

$
25,818,422

$
27,610,518

$
26,027,636
Total net debt

12,707,249

12,507,142

12,974,468

11,800,586

11,073,825

10,937,662

11,270,816
Noncontrolling interests⁽³⁾

839,856

869,320

867,923

873,512

859,478

873,567

901,487
Preferred stock

1,006,250

1,006,250

1,006,250

1,006,250

718,750

718,750

718,503
Enterprise value

$
39,291,995

$
41,627,959

$
41,947,158

$
37,949,300

$
38,470,475

$
40,140,497

$
38,918,442

Net debt to market capitalization ratio

32%

30%

31%

31%

29%

27%

29%

(1) Amounts include senior unsecured notes, secured debt and capital lease obligations as reflected on our consolidated balance sheet.
(2) Inclusive of IRC section 1031 deposits, if any.
(3) Includes all noncontrolling interests (redeemable and permanent) as reflected on our consolidated balance sheet.

As of
March 31, June 30, September 30, December 31, March 31, June 30,
2018 2018 2018 2018 2019 2019
Book capitalization:
Unsecured credit facility and commercial paper $ 865,000
$ 540,000
$ 1,312,000
$ 1,147,000
$ 419,293
$ 1,869,188
Long-term debt obligations⁽¹⁾
10,484,840
10,895,559
12,192,060
12,150,144
12,371,729
13,390,344
Cash & cash equivalents⁽²⁾
(202,824 ) (215,120 ) (191,199 ) (215,376 ) (249,127 ) (268,666 )
Total net debt 11,147,016
11,220,439
13,312,861
13,081,768
12,541,895
14,990,866
Total equity and noncontrolling interests⁽³⁾
15,448,201
15,198,644
15,670,065
16,010,645
16,498,376
16,452,806
Book capitalization $ 26,595,217
$ 26,419,083
$ 28,982,926
$ 29,092,413
$ 29,040,271
$ 31,443,672
Net debt to book capitalization ratio 42 % 42 % 46 % 45 % 43 % 48 %

Undepreciated book capitalization:
Total net debt $ 11,147,016
$ 11,220,439
$ 13,312,861
$ 13,081,768
$ 12,541,895
$ 14,990,866
Accumulated depreciation and amortization 4,990,780
5,113,928
5,394,274
5,499,958
5,670,111
5,539,435
Total equity and noncontrolling interests⁽³⁾
15,448,201
15,198,644
15,670,065
16,010,645
16,498,376
16,452,806
Undepreciated book capitalization $ 31,585,997
$ 31,533,011
$ 34,377,200
$ 34,592,371
$ 34,710,382
$ 36,983,107
Net debt to undepreciated book
capitalization ratio
35 % 36 % 39 % 38 % 36 % 41 %

Market capitalization:
Common shares outstanding 371,971
372,030
375,577
383,675
403,740
405,254
Period end share price $ 54.43
$ 62.69
$ 64.32
$ 69.41
$ 77.60
$ 81.53
Common equity market capitalization $ 20,246,382
$ 23,322,561
$ 24,157,113
$ 26,630,882
$ 31,330,224
$ 33,040,359
Total net debt 11,147,016
11,220,439
13,312,861
13,081,768
12,541,895
14,990,866
Noncontrolling interests⁽³⁾
889,766
856,721
1,362,380
1,378,311
1,419,885
1,458,351
Preferred stock 718,498
718,498
718,498
718,498
—
—
Enterprise value $ 33,001,662
$ 36,118,219
$ 39,550,852
$ 41,809,459
$ 45,292,004
$ 49,489,576
Net debt to market capitalization ratio 34 % 31 % 34 % 31 % 28 % 30 %

⁽¹⁾ Amounts include senior unsecured notes, secured debt and lease liabilities related to financing leases, as reflected on our Consolidated Balance Sheet. Operating lease liabilities related to the ASC 842 adoption are excluded.
⁽²⁾ Inclusive of IRC Section 1031 deposits, if any.
⁽³⁾ Includes all noncontrolling interests (redeemable and permanent) as reflected on our Consolidated Balance Sheet.

Critical Accounting Policies

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 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 the financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 for further information regarding significant accounting policies that impact us. There have been no material changes to these policies in ~~2017.~~

2019.

Item 2. ~~Management’s~~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 the ~~company~~Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to the ~~company’s~~Company’s opportunities to acquire, develop or sell properties; the ~~company’s~~Company’s ability to close its anticipated acquisitions, investments or dispositions on currently anticipated terms or within currently anticipated timeframes; the expected performance of the ~~company’s~~Company’s operators/tenants and properties; the ~~company’s~~Company’s expected occupancy rates; the ~~company’s~~Company’s ability to declare and to make distributions to shareholders; the ~~company’s~~Company’s investment and financing opportunities and plans; the ~~company’s~~Company’s continued qualification as a real estate investment trust (“REIT”); the ~~company’s~~Company’s ability to access capital markets or other sources of funds; and the ~~company’s~~Company’s ability to meet its earnings guidance. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the ~~company’s~~Company’s actual results to differ materially from the ~~company’s~~Company’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; uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmark; 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; the ~~company’s~~Company’s ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting the ~~company’s~~Company’s properties; the ~~company’s~~Company’s ability to re-lease space at similar rates as vacancies occur; the ~~company’s~~Company’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 the ~~company’s~~Company’s properties; changes in rules or practices governing the ~~company’s~~Company’s financial reporting; the movement of U.S. and foreign currency exchange rates; the ~~company’s~~Company’s ability to maintain its qualification as a REIT; and key management personnel recruitment and retention. Other important factors are identified in the ~~company’s~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Finally, the ~~company~~Company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

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

We historically borrow on our ~~primary~~ 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 ~~primary~~ unsecured revolving credit ~~facility.~~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 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):

September 30, 2017

December 31, 2016

Principal

Change in

Principal

Change in

balance

fair value

balance

fair value
Senior unsecured notes

$
7,697,037

$
(506,781)

$
7,568,832

$
(521,203)
Secured debt

1,791,932

(65,900)

2,489,276

(73,944)
Totals

$
9,488,969

$
(572,681)

$
10,058,108

$
(595,147)



	June 30, 2019					December 31, 2018
	Principal		Change in			Principal		Change in
	balance		fair value			balance		fair value
Senior unsecured notes	$	9,013,085	$	(635,567	)	$	9,009,159	$	(548,558	)
Secured debt	1,536,274		(60,281		)	1,639,983		(59,522		)
Totals	$	10,549,359	$	(695,848	)	$	10,649,142	$	(608,080	)

Our variable rate debt, including our ~~primary~~ unsecured revolving credit facility and Commercial Paper Program, is reflected at fair value. At ~~September~~June 30, ~~2017,~~2019, we had ~~$2,055,426,000~~$4,722,179,000 outstanding related to our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would result in increased annual interest expense of ~~$20,554,000.~~$47,222,000. At December 31, ~~2016,~~2018, we had ~~$2,311,996,000~~$2,683,553,000 outstanding under our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would have resulted in increased annual interest expense of ~~$23,120,000.~~

$26,836,000.

We are subject to currency fluctuations that may, from time to time, affect our financial condition and results of operations. Increases or decreases in the value of the Canadian Dollar or Pounds Sterling relative to the U.S. Dollar impact the amount of net income we earn from our investments in Canada and the United Kingdom. Based solely on our results for the three months ended ~~September~~June 30, ~~2017,~~2019, including the impact of existing hedging arrangements, if these exchange rates were to increase or decrease by 10%, our net income from these investments would increase or decrease, as applicable, by less than ~~$4,500,000.~~$12,000,000. We will continue to mitigate these underlying foreign currency exposures with non-U.S. denominated borrowings and gains and losses on derivative contracts. If we increase our international presence through investments in, or acquisitions or development of, seniors housing and health care properties outside the U.S., we may also decide to transact additional business or borrow funds in currencies other than U.S. Dollars, Canadian Dollars or Pounds Sterling. To illustrate the impact of changes in foreign currency markets, we performed a sensitivity analysis on our derivative portfolio whereby we modeled the change in net present values arising from a hypothetical 1% increase in foreign currency exchange rates to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

September 30, 2017

December 31, 2016

Carrying

Change in

Carrying

Change in

Value

fair value

Value

fair value
Foreign currency forward contracts

$
42,036

$
13,778

$
87,962 ⁽¹⁾

$
722 ⁽¹⁾
Debt designated as hedges

1,607,066

16,071

1,481,591

13,000
Totals

$
1,649,102

$
29,849

$
1,569,553

$
13,722

(1) Amounts exclude cross currency hedge activity.



	June 30, 2019				December 31, 2018
	Carrying		Change in		Carrying		Change in
	Value		fair value		Value		fair value
Foreign currency forward contracts	$	59,041	$	12,683	$	23,620	$	16,163
Debt designated as hedges	1,524,891		15,249		1,559,159		15,592
Totals	$	1,583,932	$	27,932	$	1,582,779	$	31,755

For additional information regarding fair values of financial instruments, see “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and Notes 1112 and 1617 to our unaudited consolidated financial statements.

Item 4.Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in the reports we file with or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. No changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, there are various legal proceedings pending against us that arise in the ordinary course of our business.

Management does not believe that the resolution of any of these legal proceedings either individually or in the aggregate will have a material adverse effect on our business, results of operations or financial condition. ~~Despite management’s view of the ultimate resolution of these legal proceedings, we may have significant legal expenses and costs associated with the defense of such matters.~~ Further, management cannot predict the outcome of these legal proceedings and if management’s expectation regarding such matters is not correct, such proceedings could have a material adverse effect on our business, results of operations or financial condition.

~~From~~from time to time, we are party to certain legal proceedings for which third parties, such as tenants, operators and/or managers are contractually obligated to indemnify, defend and hold us harmless. In some of these matters, the indemnitors have insurance for the potential damages. In other matters, we are being defended by tenants and other obligated third parties and these indemnitors may not have sufficient insurance, assets, income or resources to satisfy their defense and indemnification obligations to us. The unfavorable resolution of such legal

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

proceedings could, individually or in the aggregate, materially adversely affect the indemnitors’ ability to satisfy their respective obligations to us, which, in turn, could have a material adverse effect on our business, results of operations or financial condition. It is management’s opinion that there are currently no such legal proceedings pending that will, individually or in the aggregate, have such a material adverse effect.

Despite management’s view of the ultimate resolution of these legal proceedings, we may have significant legal expenses and costs associated with the defense of such matters. Further, management cannot predict the outcome of these legal proceedings and if management’s expectation regarding such matters is not correct, such proceedings could have a material adverse effect on our business, results of operations or financial condition.

Item 1A.Risk Factors

There have been no material changes from the risk factors identified under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2018.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
Period

Total Number of Shares Purchased⁽¹⁾

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2017 through July 31, 2017

-

$
-

August 1, 2017 through August 31, 2017

56

71.93

September 1, 2017 through September 30, 2017

-

-

Totals

56

$
71.93

(1) During the three months ended September 30, 2017, the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.

Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased⁽¹⁾
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2019 through April 30, 2019 282
$ 74.10

May 1, 2019 through May 31, 2019 —
—

June 1, 2019 through June 30, 2019 —
—

Totals 282
$ 74.10

⁽¹⁾ During the three months ended June 30, 2019, the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
⁽²⁾ No shares were purchased as part of publicly announced plans or programs.

Item 5.Other Information

None.

Item 6.Exhibits

~~10.1~~ Resignation Agreement, dated October 3, 2017, by and between Scott A. Estes and Welltower Inc.*

~~10.2~~ Welltower Inc. 2017-2019 Long-Term Incentive Program – Bridge 1.*

~~10.3~~ Welltower Inc. 2017-2019 Long-Term Incentive Program – Bridge 2.*

12 ~~Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited).~~

~~31.1~~ ~~Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.~~

~~31.2~~ ~~Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.~~

~~32.1~~ ~~Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer.~~

~~32.2~~ ~~Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.~~

101.INS XBRL Instance Document**

101.SCH XBRL Taxonomy Extension Schema Document**

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**

101.LAB XBRL Taxonomy Extension Label Linkbase Document**

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document**

101.DEF XBRL Taxonomy Extension Definition Linkbase Document**

* **
		~~Management Contract or Compensatory Plan or Arrangement~~ ~~Attached~~
3.1		Seventh Amended and Restated By-laws of Welltower Inc., (filed with the Commission as Exhibit ~~101~~3.1 to ~~this~~the Company's Form 8-K filed May 6, 2019 (File No. 001-08923), and incorporated herein by reference thereto).
10.1		Resignation Agreement, dated July 1, 2019, by and between Mercedes T. Kerr and Welltower Inc. *
10.2		Summary of Director Compensation *
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1		Certification pursuant to 18 U.S.C. Section 1350 by Chairman and Chief Executive Officer.
32.2		Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.
101.INS		XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
104		The cover page from the Company's Quarterly Report on Form 10-Q ~~are~~for the ~~following materials,~~quarter ended June 30, 2019, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (ii) the Consolidated Statements of Comprehensive Income for the nine months ended September 30, 2017 and 2016, (iii) the Consolidated Statements of Equity for the nine months ended September 30, 2017 and 2016, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 and (v) the Notes to Unaudited Consolidated Financial Statements.

*		Management contract or Compensatory Plan or Arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~WELLTOWER INC.~~
~~Date: November 7, 2017~~		WELLTOWER INC.
Date:	August 1, 2019	By:	/s/THOMAS J. DEROSA
		Thomas J. DeRosa,
		Chairman and Chief Executive Officer (Principal Executive Officer)


Date: ~~November 7, 2017~~	August 1, 2019	By:	/s/JOHN A. GOODEY
		John A. Goodey,
		Executive Vice President -& Chief Financial Officer (Principal Financial Officer)


Date: ~~November 7, 2017~~	August 1, 2019	By:	/s/ P~~AUL D. NUNGESTER, JR.~~ JOSHUA T. FIEWEGER
	~~Paul D. Nungester, Jr.,~~	Joshua T. Fieweger,
		Senior Vice President & Controller (Principal Accounting Officer)

		Three Months Ended September 30,				Nine Months Ended September 30,
		2017		2016		2017		2016
Net income		$	89,299	$	354,741	$	630,356	$	730,961

Other comprehensive income (loss):
	Unrecognized gain (loss) on equity investments		(3,808)		5,908		(20,285)		(5,252)
	Change in net unrealized gains (losses) on cash flow hedges:
	Unrealized gains (losses) on cash flow hedges		2		401		2		1,371
	Unrecognized actuarial gain (loss)		-		(2)		-		-
	Foreign currency translation gain (loss)		37,343		516		70,769		(48,496)
Total other comprehensive income (loss)			33,537		6,823		50,486		(52,377)

Total comprehensive income (loss)			122,836		361,564		680,842		678,584
Less: Total comprehensive income (loss) attributable to noncontrolling interests⁽¹⁾			14,732		1,846		29,930		13,117
Total comprehensive income (loss) attributable to common stockholders		$	108,104	$	359,718	$	650,912	$	665,467

(1) Includes amounts attributable to redeemable noncontrolling interests.

	Senior		Secured
	Unsecured Notes^(1,2)		Debt ^(1,3)		Totals
2017	$	-	$	121,412	$	121,412
2018		450,000		426,728		876,728
2019		600,000		491,941		1,091,941
2020⁽⁴⁾		697,327		184,281		881,608
2021^(5,6)		1,149,856		221,721		1,371,577
Thereafter^(7,8,9,10)		5,507,210		1,273,919		6,781,129
Totals	$	8,404,393	$	2,720,002	$	11,124,395

(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the balance sheet.
(2) Annual interest rates range from 1.9% to 6.5%.
(3) Annual interest rates range from 1.45% to 7.98%. Carrying value of the properties securing the debt totaled $5,766,501,000 at September 30, 2017.
(4) In November 2015, one of our wholly-owned subsidiaries issued and we guaranteed $300,000,000 of Canadian-denominated 3.35% senior unsecured notes due 2020 (approximately $239,827,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2017).
(5) On May 13, 2016, we refinanced the funding on a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $199,856,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2017). The loan matures on May 13, 2021 and bears interest at the Canadian Dealer Offered Rate plus 95 basis points (2.30% at September 30, 2017).
(6) On May 13, 2016, we refinanced the funding on a $500,000,000 unsecured term credit facility. The loan matures on May 13, 2021 and bears interest at LIBOR plus 95 basis points (2.19% at September 30, 2017).
(7) On November 20, 2013, we completed the sale of £550,000,000 (approximately $737,110,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2017) of 4.8% senior unsecured notes due 2028.
(8) On November 25, 2014, we completed the sale of £500,000,000 (approximately $670,100,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2017) of 4.5% senior unsecured notes due 2034.
(9) In May 2015, we issued $750,000,000 of 4.0% senior unsecured notes due 2025. In October 2015, we issued an additional $500,000,000 of these notes under a re-opening of the offer.
(10) In March 2016, we issued $700,000,000 of 4.25% senior unsecured notes due 2026.


		Unrecognized gains (losses) related to:
		Foreign Currency Translation		Available for Sale Securities		Actuarial Losses		Cash Flow Hedges		Total
Balance at December 31, 2016	$	(173,496)	$	5,120	$	(1,153)	$	(2)	$	(169,531)
Other comprehensive income before reclassification adjustments		48,574		(20,285)		-		2		28,291
Net current-period other comprehensive income		48,574		(20,285)		-		2		28,291
Balance at September 30, 2017	$	(124,922)	$	(15,165)	$	(1,153)	$	-	$	(141,240)

Balance at December 31, 2015	$	(85,484)	$	-	$	(1,343)	$	(1,416)	$	(88,243)
Other comprehensive income before reclassification adjustments		(59,060)		(5,252)		-		11		(64,301)
Reclassification amount to net income		-		-		-		1,360 ⁽¹⁾		1,360
Net current-period other comprehensive income		(59,060)		(5,252)		-		1,371		(62,941)
Balance at September 30, 2016	$	(144,544)	$	(5,252)	$	(1,343)	$	(45)	$	(151,184)

(1) Please see Note 11 for additional information.


		September 30, 2017				December 31, 2016
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
	Mortgage loans receivable	$	377,283	$	413,221	$	485,735	$	521,773
	Other real estate loans receivable		119,567		124,408		136,893		138,050
	Available-for-sale equity investments		7,615		7,615		27,899		27,899
	Cash and cash equivalents		236,247		236,247		419,378		419,378
	Foreign currency forward contracts		13,682		13,682		135,561		135,561

Financial liabilities:
	Borrowings under unsecured credit facilities	$	420,000	$	420,000	$	645,000	$	645,000
	Senior unsecured notes		8,315,395		9,186,768		8,161,619		8,879,176
	Secured debt		2,713,513		2,750,467		3,477,699		3,558,378
	Foreign currency forward contracts		55,264		55,264		4,342		4,342

Redeemable OP unitholder interests		$	104,363	$	104,363	$	110,502	$	110,502

Three Months Ended September 30, 2017:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	221,555	$	-	$	141,325	$	-	$	362,880
Resident fees and services		-		702,380		-		-		702,380
Interest income		20,187		-		-		-		20,187
Other income		3,174		1,497		667		698		6,036
Total revenues		244,916		703,877		141,992		698		1,091,483

Property operating expenses		-		478,777		45,220		-		523,997
Consolidated net operating income		244,916		225,100		96,772		698		567,486


Interest expense		3,622		16,369		2,929		99,658		122,578
Loss (gain) on derivatives, net		324		-		-		-		324
Depreciation and amortization		62,891		119,089		48,158		-		230,138
General and administrative		-		-		-		29,913		29,913
Other expenses		89,236 ⁽¹⁾		5,157		530		4,672		99,595
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		88,843		84,485		45,155		(133,545)		84,938
Income tax (expense) benefit		(816)		(1,519)		(366)		2,032		(669)
Income (loss) from unconsolidated entities		5,478		(2,886)		816		-		3,408
Income (loss) from continuing operations		93,505		80,080		45,605		(131,513)		87,677
Gain (loss) on real estate dispositions, net		(185)		(197)		2,004		-		1,622
Net income (loss)	$	93,320	$	79,883	$	47,609	$	(131,513)	$	89,299

Total assets	$	9,463,910	$	13,538,090	$	4,992,534	$	185,845	$	28,180,379

(1) Represents non-capitalizable transaction costs primarily related to a joint venture transaction with an existing seniors housing operator including the conversion of properties from triple-net to seniors housing operating, an exchange of PropCo/OpCo interests, and termination/restructuring of pre-existing relationships.


Three Months Ended September 30, 2016:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	286,226	$	-	$	134,926	$	-	$	421,152
Resident fees and services		-		630,017		-		-		630,017
Interest income		23,017		1,054		1,009		-		25,080
Other income		1,621		716		358		189		2,884
Total revenues		310,864		631,787		136,293		189		1,079,133

Property operating expenses		-		432,292		41,388		-		473,680
Consolidated net operating income		310,864		199,495		94,905		189		605,453


Interest expense		4,714		20,360		3,986		100,639		129,699
Loss (gain) on derivatives, net		-		-		-		(2,516)		(2,516)
Depreciation and amortization		74,296		97,210		46,555		-		218,061
General and administrative		-		-		-		36,828		36,828
Transaction costs		1,613		18,083		146		-		19,842
Impairment of assets		5,070		-		4,635		-		9,705
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		225,171		63,842		39,583		(134,762)		193,834
Income tax (expense) benefit		(896)		515		417		269		305
Income (loss) from unconsolidated entities		1,998		(3,891)		144		-		(1,749)
Income (loss) from continuing operations		226,273		60,466		40,144		(134,493)		192,390
Gain (loss) on real estate dispositions, net		163,579		-		(1,228)		-		162,351
Net income (loss)	$	389,852	$	60,466	$	38,916	$	(134,493)	$	354,741


Nine Months Ended September 30, 2016:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	857,184	$	-	$	402,258	$	-	$	1,259,442
Resident fees and services		-		1,847,386		-		-		1,847,386
Interest income		67,842		3,126		3,307		-		74,275
Other income		4,317		11,889		4,824		705		21,735
Total revenues		929,343		1,862,401		410,389		705		3,202,838

Property operating expenses		-		1,259,182		122,966		-		1,382,148
Consolidated net operating income		929,343		603,219		287,423		705		1,820,690


Interest expense		16,832		61,157		15,132		301,864		394,985
Loss (gain) on derivatives, net		-		-		-		(2,516)		(2,516)
Depreciation and amortization		229,906		301,354		142,066		-		673,326
General and administrative		-		-		-		122,434		122,434
Transaction costs		5,760		25,259		2,188		-		33,207
Loss (gain) on extinguishment of debt, net		97		(88)		-		-		9
Impairment of assets		19,384		-		4,635		-		24,019
Other expenses		-		-		-		3,161		3,161
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		657,364		215,537		123,402		(424,238)		572,065
Income tax expense		(1,425)		5,304		(59)		(1,277)		2,543
(Loss) income from unconsolidated entities		8,097		(15,713)		88		-		(7,528)
Income (loss) from continuing operations		664,036		205,128		123,431		(425,515)		567,080
Gain (loss) on real estate dispositions, net		165,109		-		(1,228)		-		163,881
Net income (loss)	$	829,145	$	205,128	$	122,203	$	(425,515)	$	730,961

			Percentage of	Number of
Type of Property	NOI⁽¹⁾		NOI	Properties
Triple-net	$	244,916	43.2%	570
Seniors housing operating		225,100	39.7%	442
Outpatient medical		96,772	17.1%	266
Totals	$	566,788	100.0%	1,278

(1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

	Properties		Investment Amount⁽¹⁾	Capitalization Rates⁽²⁾		Book Amount⁽³⁾
Triple-net	7	$	127,653	6.5%	$	238,858
Seniors housing operating	7		320,400	6.5%		468,581
Outpatient medical	4		71,395	6.7%		95,796
Totals	18	$	519,448	6.5%	$	803,235

(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected income to be received in cash divided by investment amounts.
(3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our unaudited consolidated financial statements for additional information.

	Properties		Proceeds⁽¹⁾	Capitalization Rates⁽²⁾		Book Amount⁽³⁾
Triple-net	58	$	1,160,191	6.8%	$	899,104
Seniors housing operating	2		29,715	4.4%		16,206
Outpatient medical	1		15,940	9.1%		12,202
Totals	61	$	1,205,846	6.8%	$	927,512

(1) Represents pro rata proceeds received upon disposition including any seller financing.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.

			Expiration Year ⁽¹⁾
			2017		2018		2019		2020		2021		2022		2023		2024		2025		2026		Thereafter

Triple-net:
	Properties		3		51		-		14		14		11		4		5		59		32		364
	Base rent⁽²⁾	$	4,530	$	38,233	$	-	$	17,740	$	25,239	$	9,107	$	4,175	$	10,597	$	74,402	$	65,545	$	632,492
	% of base rent		0.5%		4.3%		0.0%		2.0%		2.9%		1.0%		0.5%		1.2%		8.4%		7.4%		71.8%
	Units/beds		367		3,151		-		1,225		2,289		1,042		317		692		4,489		3,724		36,207
	% of Units/beds		0.7%		5.9%		0.0%		2.3%		4.3%		1.9%		0.6%		1.3%		8.4%		7.0%		67.6%



Outpatient medical:
	Square feet		519,045		802,423		1,198,264		1,272,329		1,488,146		2,504,590		1,261,361		1,422,735		717,500		1,130,877		4,390,075
	Base rent⁽²⁾	$	13,437	$	21,836	$	32,704	$	34,331	$	40,184	$	54,993	$	31,857	$	39,582	$	20,640	$	28,656	$	102,135
	% of base rent		3.2%		5.2%		7.8%		8.2%		9.6%		13.1%		7.6%		9.4%		4.9%		6.8%		24.2%
	Leases		134		252		313		306		263		291		199		118		103		125		210
	% of Leases		5.8%		10.9%		13.5%		13.2%		11.4%		12.6%		8.6%		5.1%		4.5%		5.4%		9.0%

(1) Excludes investments in unconsolidated entities. Investments classified as held for sale are included in the current year.
(2) The most recent monthly base rent including straight-line for leases with fixed escalators or annual cash rents for leases with contingent escalators. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.

	Payments Due by Period
Contractual Obligations	Total		2017		2018-2019		2020-2021		Thereafter
Unsecured revolving credit facility⁽¹⁾	$	420,000	$	-	$	-	$	420,000	$	-
Senior unsecured notes and term credit facilities:⁽²⁾
U.S. Dollar senior unsecured notes		6,050,000		-		1,050,000		900,000		4,100,000
Canadian Dollar senior unsecured notes⁽³⁾		239,827		-		-		239,827		-
Pounds Sterling senior unsecured notes⁽³⁾		1,407,210		-		-		-		1,407,210
U.S. Dollar term credit facility		507,500		-		-		507,500		-
Canadian Dollar term credit facility⁽³⁾		199,856		-		-		199,856		-
Secured debt:^(2,3)
Consolidated		2,720,002		121,412		918,669		406,002		1,273,919
Unconsolidated		738,004		2,046		150,803		58,136		527,019
Contractual interest obligations:⁽⁴⁾
Unsecured revolving credit facility		38,116		2,242		17,937		17,937		-
Senior unsecured notes and term loans⁽³⁾		3,251,019		139,547		701,200		590,237		1,820,035
Consolidated secured debt⁽³⁾		520,722		25,542		172,182		119,399		203,599
Unconsolidated secured debt⁽³⁾		177,010		7,198		57,525		40,910		71,377
Capital lease obligations⁽⁵⁾		90,288		1,183		9,012		8,346		71,747
Operating lease obligations⁽⁵⁾		1,105,254		4,479		35,482		34,443		1,030,850
Purchase obligations⁽⁵⁾		333,595		121,949		211,646		-		-
Other long-term liabilities⁽⁶⁾		3,073		369		2,704		-		-
Total contractual obligations	$	17,801,476	$	425,967	$	3,327,160	$	3,542,593	$	10,505,756

(1) Relates to unsecured revolving credit facility with an aggregate commitment of $3,000,000,000. See Note 9 to our unaudited consolidated financial statements for additional information.
(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(3) Based on foreign currency exchange rates in effect as of balance sheet date.
(4) Based on variable interest rates in effect as of balance sheet date.
(5) See Note 12 to our unaudited consolidated financial statements for additional information.
(6) Primarily relates to payments to be made under our Supplemental Executive Retirement Plan.


		Twelve Months Ended
Adjusted EBITDA		March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
Reconciliations:		2016		2016		2016		2016		2017		2017		2017
Net income		$	844,606	$	724,894	$	880,380	$	1,082,070	$	1,254,208	$	1,246,899	$	981,458
Interest expense			504,048		517,512		526,082		521,345		506,982		490,886		483,765
Income tax expense (benefit)			5,030		(2,899)		139		(19,128)		(15,158)		(23,093)		(22,119)
Depreciation and amortization			866,106		883,873		896,135		901,242		900,822		899,100		911,180
	EBITDA		2,219,790		2,123,380		2,302,736		2,485,529		2,646,854		2,613,792		2,354,284
Loss (income) from unconsolidated entities			12,676		11,682		10,801		10,357		29,643		31,662		26,505
Transaction costs			70,579		63,245		73,754		42,910		34,702		29,545		9,704
Stock-based compensation expense⁽¹⁾			29,976		25,883		25,807		28,869		25,588		23,321		24,710
Loss (gain) on extinguishment of debt, net			19,252		398		(186)		17,214		48,593		54,074		54,074
Losses/impairments (gain) on sale of properties, net			(209,228)		(20,647)		(171,246)		(326,839)		(574,216)		(601,209)		(450,185)
Provision for loan losses			-		-		-		10,215		10,215		10,215		10,215
Loss (gain) on derivatives, net			-		-		(2,516)		(2,448)		(1,225)		(489)		2,351
Other expenses⁽¹⁾			40,636		37,386		37,386		7,721		19,396		23,997		122,211
Additional other income			(2,144)		(13,955)		(11,811)		(16,664)		(16,664)		(4,853)		(4,853)
Adjusted EBITDA		$	2,181,537	$	2,227,372	$	2,264,725	$	2,256,864	$	2,222,886	$	2,180,055	$	2,149,016

Adjusted Fixed Charge Coverage Ratio:
Interest expense		$	504,048	$	517,512	$	526,082	$	521,345	$	506,982	$	490,886	$	483,765
Capitalized interest			9,320		11,566		14,467		16,943		18,035		17,087		14,866
Non-cash interest expense			(1,868)		(7,589)		(4,341)		(1,681)		(3,958)		(5,386)		(8,041)
	Total interest		511,500		521,489		536,208		536,607		521,059		502,587		490,590
Adjusted EBITDA		$	2,181,537	$	2,227,372	$	2,264,725	$	2,256,864	$	2,222,886	$	2,180,055	$	2,149,016
	Adjusted interest coverage ratio		4.26x		4.27x		4.22x		4.21x		4.27x		4.34x		4.38x

Total interest		$	511,500	$	521,489	$	536,208	$	536,607	$	521,059	$	502,587	$	490,590
Secured debt principal payments			70,076		71,836		74,170		74,466		72,073		68,935		66,084
Preferred dividends			65,408		65,408		65,407		65,406		63,434		58,762		54,086
	Total fixed charges		646,984		658,733		675,785		676,479		656,566		630,284		610,760
Adjusted EBITDA		$	2,181,537	$	2,227,372	$	2,264,725	$	2,256,864	$	2,222,886	$	2,180,055	$	2,149,016
	Adjusted fixed charge coverage ratio		3.37x		3.38x		3.35x		3.34x		3.39x		3.46x		3.52x

(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses.

Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2017 through July 31, 2017	-	$	-
August 1, 2017 through August 31, 2017	56		71.93
September 1, 2017 through September 30, 2017	-		-
Totals	56	$	71.93

(1) During the three months ended September 30, 2017, the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.