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OFFON

WELLTOWER INC.

(WELL)
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WELLTOWER : Management's Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE SUMMARY (form 10-Q)

07/30/2021 | 08:38am EDT
Company Overview                                                29
    Business Strategy                                               30
    Key Transactions                                                31
    Key Performance Indicators, Trends and Uncertainties            31
    Corporate Governance                                            34

                        LIQUIDITY AND CAPITAL RESOURCES

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

                             RESULTS OF OPERATIONS

    Summary                                                         36
    Seniors Housing Operating                                       37
    Triple-net                                                      39
    Outpatient Medical                                              41
    Non-Segment/Corporate                                           43

                                     OTHER

    Non-GAAP Financial Measures                                     44
    Critical Accounting Policies                                    51
    Cautionary Statement Regarding Forward-Looking Statements       52


                                       28
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis is 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, 2020, 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" refer to Welltower Inc. and its subsidiaries
unless specifically noted otherwise.
Executive Summary
Company Overview
Welltower Inc. (NYSE:WELL), an S&P 500 company headquartered in Toledo, Ohio, is
driving the transformation of health care infrastructure. The 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.
The following table summarizes our consolidated portfolio for the three months
ended June 30, 2021 (dollars in thousands):
                                                                                    Percentage of                 Number of
                Type of Property                            NOI (1)                      NOI                     Properties
Seniors Housing Operating                              $      160,188                           32.0  %                581
Triple-net                                                    226,314                           45.3  %                643
Outpatient Medical                                            113,577                           22.7  %                292
Totals                                                 $      500,079                          100.0  %              1,516

(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.



The COVID-19 pandemic has had and may continue to have material and adverse
effects on our financial condition, results of operations and cash flows in the
future. The extent to which the COVID-19 pandemic impacts our operations and
those of our operators and tenants will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the scope,
severity and duration of the pandemic, the effectiveness of vaccines, the
actions taken to contain the pandemic or mitigate its impact and the direct and
indirect economic effects of the pandemic and containment measures, the overall
pace of recovery, among others.
Our Seniors Housing Operating revenues are dependent on occupancy. Spot
occupancy has declined since the beginning of the pandemic, reaching a low of
72.3% on March 12, 2021. Virtually all communities are now accepting new
residents, resulting in an increase in move-in activity and occupancy rates of
230 basis points since the low point to 74.6% as of June 30, 2021. Additionally,
rapid distribution and a high acceptance rate of COVID-19 vaccinations by
residents within assisted living and memory care facilities in the U.S. and U.K.
has resulted in a significant decrease in total resident case counts across the
portfolio.
We have incurred increased operational costs as a result of the introduction of
public health measures and other regulations affecting our properties, as well
as additional health and safety measures adopted by us and our operators related
to the COVID-19 pandemic, including increases in labor, personal protective
equipment and sanitation. We expect total Seniors Housing Operating expenses to
remain elevated during the pandemic and potentially beyond as these additional
health and safety measures become standard practice.
Our Triple-net operators are experiencing similar trends related to occupancy
and operating costs as described above with respect to our Seniors Housing
Operating properties. However, long-term/post-acute care facilities are
generally experiencing a higher degree of occupancy declines. These factors may
continue to impact the ability of our Triple-net operators to make contractual
rent payments to us in the future. Many of our Triple-net operators received
funds under the Coronavirus Aid Relief, and Economic Security Act ("CARES Act")
Paycheck Protection Program. In addition, operators of long-term/post-acute care
facilities have generally received funds from Phase 1 of the Provider Relief
Fund and operators of assisted living facilities have generally received funds
from Phase 2 and Phase 3 of the Provider Relief Fund.
During the six months ended June 30, 2021, we collected approximately 95% of
rent due from operators under Triple-net lease agreements (primarily seniors
housing and post-acute care facilities). No significant rent deferrals or rent
concessions have been made during the six months ended June 30, 2021. We
evaluate leases individually and recognize rent on a cash basis if
collectibility of substantially all contractual rent payments is not probable.
To the extent the prolonged impact of the COVID-19 pandemic causes operators or
tenants to seek further modifications of their lease agreements, we may
recognize reductions in revenue and increases in uncollectible receivables.
                                       29
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 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 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 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. 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 generally
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 management and research efforts, we also aim to
structure our relevant investments to mitigate payment risk. Operating leases
and loans are normally credit enhanced by guarantees and/or letters of credit.
In addition, operating leases are 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 six months ended June 30, 2021, resident fees and services and rental
income represented 67% and 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, borrowings under our unsecured revolving credit facility and
commercial paper program, public issuances of debt and equity securities,
proceeds from investment dispositions and principal payments on loans
receivable. Our primary uses of cash include dividend distributions, debt
service payments (including principal and interest), real property investments
(including acquisitions, capital expenditures, construction advances and
transaction costs), loan advances, property operating expenses 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 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 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 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 unsecured
revolving credit facility and commercial paper program. At June 30, 2021, we had
$513,602,000 of cash and cash equivalents, $295,102,000 of restricted cash and
$4,000,000,000 of available borrowing capacity under our unsecured revolving
credit facility.

                                       30
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Key Transactions
Capital The following summarizes key capital transactions that occurred during
the six months ended June 30, 2021 and subsequent events:
•In March 2021, we completed the issuance of $750,000,000 senior unsecured notes
bearing interest at 2.80% with a maturity date of June 2031.
•In April 2021, we repaid our $339,128,000 of our 3.75% senior unsecured notes
due March 2023, $334,624,000 of our 3.95% senior unsecured notes due September
2023, and $15,000,000 of our term loan due April 2022.
•In May 2021, we entered into an amended and restated ATM Program (as defined
below) pursuant to which we may offer and sell up to $2,000,000,000 of common
stock from time to time. Since the beginning of the year, we sold 22,311,042
shares of common stock under our current and previous ATM Programs via forward
sale agreements which are expected to generate gross proceeds of approximately
$1,761,767,000, of which 5,015,673 shares have been settled resulting in
$371,937,000 of gross proceeds during the six months ended June 30, 2021.
•In June 2021, we closed on a new $4,700,000,000 unsecured credit facility with
improved pricing across our line of credit and terminated the existing unsecured
credit facility. The credit facility includes $4,000,000,000 of revolving credit
capacity at a borrowing rate of 77.5 basis points over LIBOR, $500,000,000 of
USD term loan capacity at a borrowing rate of 90.0 basis points over LIBOR and
$250,000,000 CAD term loan capacity at 90.0 basis points over CDOR.
•In June 2021, we repaid the remaining $845,000,000 of our term loan due April
2022.
•In June 2021, we completed the issuance of $500,000,000 senior unsecured notes
bearing interest at 2.05% with a maturity date of January 2029.
•During the six months ended June 30, 2021, we extinguished $66,593,000 of
secured debt at a blended average interest rate of 6.01%.
Investments The following summarizes our property acquisitions and joint venture
investments completed during the six months ended June 30, 2021 (dollars in
thousands):
                                                     Properties              Book Amount (1)            Capitalization Rates (2)
Seniors Housing Operating                                         27       $        204,106                                  0.8  %
Triple-net                                                  14                      299,059                                  6.2  %
Outpatient Medical                                           3                      188,746                                  5.7  %
Totals                                                      44             $        691,911                                  4.5  %

(1) 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. (2) Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts.

Dispositions The following summarizes property dispositions completed during the six months ended June 30, 2021 (dollars in thousands):

                                               Properties             Proceeds (1)           Book Amount (2)          Capitalization Rates (3)
Seniors Housing Operating                                  12       $     118,590          $        112,809                              4.6  %
Triple-net                                                 11             133,704                    88,367                              7.2  %
Outpatient Medical                                         10             194,386                   137,890                              5.2  %
Totals                                               33             $     446,680          $        339,066                              5.7  %

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


Dividends Our Board of Directors declared a cash dividend for the quarter ended June 30, 2021 of $0.61 per share. On August 19, 2021, we will pay our 201st consecutive quarterly cash dividend to stockholders of record on August 12, 2021.

                                       31
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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, credit strength and concentration risk. 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 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") and consolidated net operating income ("NOI");
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 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):
                                                                 Three Months Ended
                              June 30,      March 31,      December 31,       September 30,       June 30,       March 31,
                                2021          2021             2020                2020             2020           2020
Net income (loss)            $ 45,757      $  72,192      $     155,278      $      394,978      $ 159,216      $ 329,380
NICS                           26,257         71,546            163,729             325,585        179,246        310,284
FFO                           248,840        287,167            225,827             185,014        335,597        356,124
NOI                           498,335        434,736            501,455             402,157        527,711        576,821


Credit 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 Internal Revenue
Code Section 1031 deposits. The coverage ratios indicate our ability to service
interest and fixed charges (interest and secured debt principal amortization).
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 reconciliation 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:
                                                                                                    Three Months Ended
                                                      June 30,            March 31,           December 31,           September 30,            June 30,            March 31,
                                                        2021                2021                  2020                    2020                  2020                2020

Net debt to book capitalization ratio                    43%                 42%                  41%                     41%                    43%                 44%
Net debt to undepreciated book
capitalization ratio                                     35%                 34%                  34%                     34%                    35%                 37%
Net debt to market capitalization ratio                  26%                 28%                  30%                     33%                    36%                 40%

Interest coverage ratio                                 3.30x               3.56x                4.20x                   6.23x                  4.29x               5.42x
Fixed charge coverage ratio                             2.93x               3.16x                3.72x                   5.52x                  3.84x               4.88x


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:
                                       32

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                                                                       Three Months Ended
                                                        June 30,            March 31,            December 31,           September 30,             June 30,            March 31,
                                                          2021                 2021                  2020                    2020                   2020                 2020
Property mix:(1)
Seniors Housing Operating                                 32%                  39%                   32%                     43%                    34%                  42%
Triple-net                                                45%                  36%                   45%                     27%                    42%                  34%
Outpatient Medical                                        23%                  25%                   23%                     30%                    24%                  24%

Relationship mix: (1)
ProMedica                                                 12%                  12%                   11%                     13%                    10%                   9%
Sunrise Senior Living (2)                                 10%                  14%                   12%                     15%                    10%                  14%
Revera (2)                                                 5%                   5%                    4%                      6%                     5%                   6%
Avery Healthcare                                           4%                   5%                    4%                      5%                     3%                   3%
Genesis Healthcare (3)                                     2%                   6%                    6%                    (16)%                    6%                   5%
Remaining relationships                                   67%                  58%                   63%                     77%                    66%                  63%

Geographic mix:(1)
United Kingdom                                            13%                  10%                   11%                     12%                     8%                   9%
California                                                12%                  15%                   12%                     17%                    14%                  15%
Texas                                                      9%                   7%                   10%                     12%                    10%                   7%
Canada                                                     7%                   7%                    5%                      8%                     6%                   7%
Pennsylvania                                               5%                   6%                    6%                      4%                     6%                   6%
Remaining geographic areas                                54%                  55%                   56%                     47%                    56%                  56%

(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) During the three months ended September 30, 2020, we reserved for straight-line rent receivable balances of $91,025,000 relating to Genesis Healthcare.



Lease Expirations The following table sets forth information regarding lease
expirations for certain portions of our portfolio as of June 30, 2021 (dollars
in thousands):
                                                                                                                                  Expiration Year (1)
                                     2021                2022                 2023                 2024               2025                2026                 2027               2028              2029                2030             Thereafter
Triple-net:
Properties                              79                   35                    3                    4                28                   66                   18                14                14                   23                 399
Base rent (2)                     $ 19,970          $     2,913          $     2,482          $    11,431          $  6,147          $    70,400          $    32,044          $ 16,839          $ 31,393          $    42,221          $  379,642
% of base rent                         3.2  %               0.5  %               0.4  %               1.9  %            1.0  %              11.4  %               5.2  %            2.7  %            5.1  %               6.9  %             61.7  %
Units/beds                          10,033                3,001                  304                  777             1,759                5,216                2,350             1,474             1,214                2,439              40,309
% of Units/beds                       14.6  %               4.4  %               0.4  %               1.1  %            2.6  %               7.6  %               3.4  %            2.1  %            1.8  %               3.5  %             58.5  %

Outpatient Medical:
Square feet                        716,895            1,632,054            1,750,297            1,986,690           993,235            1,423,668            1,011,592           947,862           727,697            1,423,987           4,415,518
Base rent (2)                     $ 21,867          $    48,606          $    49,071          $    60,206          $ 28,076          $    36,667          $    26,413          $ 25,172          $ 20,538          $    35,919          $  102,903
% of base rent                         4.8  %              10.7  %              10.8  %              13.2  %            6.2  %               8.1  %               5.8  %            5.5  %            4.5  %               7.9  %             22.5  %
Leases                                 189                  351                  362                  327               210                  241                  134               122                74                   97                 163
% of Leases                            8.3  %              15.5  %              15.9  %              14.4  %            9.3  %              10.6  %               5.9  %            5.4  %            3.3  %               4.3  %              7.1  %

(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.



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,
2020, under the headings "Business," "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations".

                                       33
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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, borrowings under our unsecured revolving credit facility and
commercial paper program, public issuances of debt and equity securities,
proceeds from investment dispositions and principal payments on loans
receivable. Our primary uses of cash include dividend distributions, debt
service payments (including principal and interest), real property investments
(including acquisitions, capital expenditures, construction advances and
transaction costs), loan advances, property operating expenses 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 for the
periods presented (dollars in thousands):
                                                                Six Months Ended                                Change
                                                      June 30, 2021           June 30, 2020                $                  %
Cash, cash equivalents and restricted cash at
beginning of period                                 $    2,021,043          $      385,766          $  1,635,277             424  %
Cash provided from (used in) operating
activities                                                 638,913                 811,616              (172,703)            (21) %
Cash provided from (used in) investing
activities                                              (1,205,134)              1,142,180            (2,347,314)           (206) %
Cash provided from (used in) financing
activities                                                (648,114)               (504,309)             (143,805)            (29) %
Effect of foreign currency translation                       1,996                  (9,010)               11,006             122  %
Cash, cash equivalents and restricted cash at
end of period                                       $      808,704          $    1,826,243          $ (1,017,539)            (56) %


Operating Activities The changes in net cash provided from operating activities
are primarily attributable to declines in revenue as a result of decreased
occupancy at our Seniors Housing Operating properties, straight-line receivable
reserves related to Triple-net leases during the six months ended June 30, 2021
and dispositions. Please see "Results of Operations" for discussion of net
income fluctuations. For the six months ended June 30, 2021 and 2020, cash flows
provided from operations exceeded cash distributions to stockholders.
Investing Activities The changes in net cash provided from/used in investing
activities are primarily attributable to net changes in real property
investments and dispositions, loans receivable and investments in unconsolidated
entities, which are summarized above in "Key Transactions" and Notes 3 and 5 of
our unaudited consolidated financial statements. The following is a summary of
cash used in non-acquisition capital improvement activities for the periods
presented (dollars in thousands):
                                                                            Six Months Ended                      Change
                                                                  June 30, 2021           June 30, 2020              $
New development                                                 $     

144,344 $ 93,031 $ 51,313 Recurring capital expenditures, tenant improvements and lease commissions

                                                       30,171                  40,939           (10,768)
Renovations, redevelopments and other capital
improvements                                                            64,312                  81,164           (16,852)
Total                                                           $      238,827          $      215,134          $ 23,693


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.
Financing Activities The changes in net cash provided from/used in financing
activities are primarily attributable to changes related to our long-term debt
arrangements, the issuances of common stock and dividend payments which are
summarized above in "Key Transactions". Please refer to Notes 10, 11 and 14 of
our unaudited consolidated financial statements for additional information.
                                       34
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In March 2021, we completed the issuance of $750,000,000 senior unsecured notes
with a maturity date of June 2031. In June 2021, we completed the issuance of
$500,000,000 senior unsecured notes with a maturity date of January 2029. Net
proceeds from these debt issuances were used to redeem the remaining
$339,128,000 of our 3.75% senior unsecured notes due 2023, $334,624,000 of our
3.95% senior unsecured notes due 2023, and $860,000,000 remaining on our term
loan due April 2022. In June 2021, we closed on a new $4,700,000,000 unsecured
credit facility. The credit facility includes $4,000,000,000 of revolving credit
capacity. As of June 30, 2021, we have total near-term available liquidity of
approximately $4.5 billion. However, we are unable to accurately predict the
full impact that the pandemic will have on our results from operations,
financial condition, liquidity and cash flows due to numerous factors discussed
in our Annual Report on Form 10-K for the year ended December 31, 2020,
including factors identified under the heading "Risk Factors".
Off-Balance Sheet Arrangements
At June 30, 2021, we had investments in unconsolidated entities with our
ownership generally ranging from 10% to 65%. We use financial derivative
instruments to hedge interest rate and foreign currency exchange rate exposure.
At June 30, 2021, we had 12 outstanding letter of credit obligations. Please see
Notes 8, 12 and 13 to our unaudited consolidated financial statements for
additional information.
Contractual Obligations
The following table summarizes our payment requirements under contractual
obligations as of June 30, 2021 (in thousands):
                                                                                        Payments Due by Period
Contractual Obligations                               Total                 2021              2022-2023            2024-2025            Thereafter

Senior unsecured notes and term credit
facilities: (1)
U.S. Dollar senior unsecured notes               $  8,850,000          $    

- $ - $ 2,600,000 $ 6,250,000 Canadian Dollar senior unsecured notes (2)

            241,830                    -                    -                    -               241,830
Pounds Sterling senior unsecured notes (2)          1,449,630                    -                    -                    -             1,449,630
U.S. Dollar term credit facility                      510,000                    -              510,000                    -                     -
Canadian Dollar term credit facility (2)              201,525                    -              201,525                    -                     -
Secured debt: (1,2)
Consolidated                                        2,311,128              253,459              976,108              366,767               714,794
Unconsolidated                                      1,197,017               46,642              249,822              620,367               280,186

Contractual interest obligations: (3)


Senior unsecured notes and term loans (2)           3,924,830              237,112              835,267              715,398             2,137,053
Consolidated secured debt (2)                         274,323               35,063               99,998               57,753                81,509
Unconsolidated secured debt (2)                       197,962               19,757               71,900               45,170                61,135
Financing lease liabilities (4)                       193,412                6,610               77,915                2,864               106,023
Operating lease liabilities (4)                       981,865               14,986               37,540               33,341               895,998
Purchase obligations (5,6)                          2,474,851            1,889,654              514,797               53,528                16,872

Total contractual obligations                    $ 22,808,373          $ 

2,503,283 $ 3,574,872 $ 4,495,188 $ 12,235,030


(1) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the
balance sheet.
(2) Based on foreign currency exchange rates in effect as of balance sheet date.
(3) Based on variable interest rates in effect as of balance sheet date.
(4) See Note 6 to our unaudited consolidated financial statements for additional information.
(5) See Note 13 to our unaudited consolidated financial statements for additional information.
(6) Purchase obligations at June 30, 2021, include $1,576,800,000 representing a definitive agreement to acquire 86 seniors housing properties from
Holiday Retirement, expected to close during the third quarter.


Capital Structure
Please refer to "Credit Strength" above for a discussion of our leverage and
coverage ratio trends. Our debt agreements contain various covenants,
restrictions and events of default. Certain agreements require us to maintain
financial ratios and minimum net worth and impose certain limits on our ability
to incur indebtedness, create liens and make investments or acquisitions. As of
June 30, 2021, we were in compliance in all material respects with the covenants
under our debt agreements. None of our debt agreements contain provisions for
acceleration which could be triggered by our debt ratings. However, under our
primary unsecured credit facility, the ratings on our senior unsecured notes are
used to determine the fees and interest charged. We plan to manage the company
to maintain compliance with our debt covenants and with a capital structure
consistent with our current profile. Any downgrades in terms of ratings or
outlook by any or all of the rating agencies could have a material adverse
impact on our cost and availability of capital, which could have a material
adverse impact on our consolidated results of operations, liquidity and/or
financial condition.
                                       35
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On May 4, 2021, we filed with the Securities and Exchange Commission (the "SEC")
(1) an open-ended automatic or "universal" shelf registration statement on Form
S-3 covering an indeterminate amount of future offerings of debt securities,
common stock, preferred stock, depositary shares, warrants and units to replace
our existing "universal" shelf registration statement filed with the SEC on May
17, 2018, 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 to replace our existing DRIP registration statement on
Form S-3 filed with the SEC on May 17, 2018. As of July 23, 2021, 15,000,000
shares of common stock remained available for issuance under the DRIP
registration statement. On May 4, 2021, we entered into (i) an equity
distribution agreement (the "EDA") with each of Robert W. Baird & Co.
Incorporated, Barclays Capital Inc., BMO Capital Markets Corp., BNY Mellon
Capital Markets, LLC, BofA Securities, Inc., BOK Financial Securities, Inc.,
Citigroup Global Markets Inc., Comerica Securities, Inc., Credit Agricole
Securities (USA) Inc., Deutsche Bank Securities Inc., Fifth Third Securities,
Inc., Goldman Sachs & Co. LLC, Jefferies LLC, J.P. Morgan Securities LLC,
KeyBanc Capital Markets Inc., Loop Capital Markets LLC, Mizuho Securities USA
LLC, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., Raymond James &
Associates, Inc., RBC Capital Markets, LLC, Scotia Capital (USA) Inc., SMBC
Nikko Securities America, Inc., Stifel, Nicolaus & Company, Incorporated, TD
Securities (USA) LLC, Truist Securities, Inc., UBS Securities LLC and Wells
Fargo Securities, LLC relating to the offer and sale from time to time of up to
$2,000,000,000 aggregate amount of our common stock and (ii) separate master
forward sale confirmations with each of Bank of America, N.A., Bank of Montreal,
The Bank of New York Mellon, Barclays Bank PLC, Citibank, N.A., Crédit Agricole
Corporate and Investment Bank, Deutsche Bank AG, London Branch, Goldman Sachs &
Co. LLC, Jefferies LLC, JPMorgan Chase Bank, National Association, KeyBanc
Capital Markets Inc., Mizuho Markets Americas LLC, Morgan Stanley & Co. LLC,
MUFG Securities EMEA plc, Raymond James & Associates, Inc., Royal Bank of
Canada, The Bank of Nova Scotia, The Toronto-Dominion Bank, Truist Bank, UBS AG,
London Branch and Wells Fargo Bank, National Association (together with the EDA,
the "ATM Program"), replacing the ATM Program entered into on February 25, 2019.
The ATM Program also allows us to enter into forward sale agreements. As of
July 23, 2021, we had $1,905,854,000 of remaining capacity under the ATM
Program, which excludes forward sales agreements outstanding for the sale of
17,295,369 shares or approximately $1,389,830,000 with maturity dates in 2022.
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
unsecured revolving credit facility and commercial paper program.
In connection with the filing of the new "universal" shelf registration
statement, the Company also filed with the SEC two prospectus supplements that
will continue offerings that were previously covered by prospectus supplements
and the accompanying prospectus to the prior registration statement relating to:
(i) the registration and possible issuance of up to 620,731 shares of the
Company's common stock (the "DownREIT Shares"), that may be issued from time to
time if, and to the extent that, certain holders of Class A units (the "DownREIT
Units") of HCN G&L DownREIT, LLC, a Delaware limited liability company (the
"DownREIT"), tender such DownREIT Units for redemption by the DownREIT, and HCN
DownREIT Member, LLC, a majority-owned indirect subsidiary of the Company
(including its permitted successors and assigns, the "Managing Member"), or a
designated affiliate of the Managing Member, elects to assume the redemption
obligations of the DownREIT and to satisfy all or a portion of the redemption
consideration by issuing DownREIT Shares to the holders instead of or in
addition to paying a cash amount; and (ii) the registration and possible
issuance of up to 475,327 shares common stock (the "DownREIT II Shares"), that
may be issued from time to time if, and to the extent that, certain holders of
Class A units (the "DownREIT II Units," and collectively with the DownREIT
Units, the "Units") of HCN G&L DownREIT II LLC, a Delaware limited liability
company (the "DownREIT II"), tender such DownREIT II Units for redemption by the
DownREIT II, and the Managing Member, or a designated affiliate of the Managing
Member, elects to assume the redemption obligations of the DownREIT II and to
satisfy all or a portion of the redemption consideration by issuing DownREIT II
Shares to the holders instead of or in addition to paying a cash amount.
Results of Operations
Summary
Our primary sources of revenue include resident fees and services, rent and
interest income. Our primary expenses include property operating expenses,
depreciation and amortization, interest expense, general and administrative
expenses and other expenses. We evaluate our business and make resource
allocations on our three business segments: Seniors Housing Operating,
Triple-net and Outpatient Medical. The primary performance measures for our
properties are NOI and same store NOI ("SSNOI"), and other supplemental measures
include FFO and EBITDA, which are further 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):
                                       36
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                                 WELLTOWER INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                     Three Months Ended                        Change                          Six Months Ended                          Change
                                June 30,           June 30,                                              June 30,           June 30,
                                  2021               2020              Amount              %               2021               2020               Amount              %
Net income                     $ 45,757          $ 159,216          $ (113,459)           (71) %       $ 117,949          $  488,596          $ (370,647)           (76) %
NICS                             26,257            179,246            (152,989)           (85) %          97,803             489,530            (391,727)           (80) %
FFO                             248,840            335,597             (86,757)           (26) %         536,007             691,721            (155,714)           (23) %
EBITDA                          406,762            553,177            (146,415)           (26) %         850,465           1,304,807            (454,342)           (35) %
NOI                             498,335            527,711             (29,376)            (6) %         933,071           1,104,532            (171,461)           (16) %
SSNOI                           391,695            410,232             (18,537)            (5) %         778,551             861,613             (83,062)           (10) %
Per share data (fully
diluted):
NICS                           $   0.06          $    0.42          $    (0.36)           (86) %       $    0.23          $     1.17          $    (0.95)           (81) %
FFO                            $   0.59          $    0.80          $    (0.21)           (26) %       $    1.28          $     1.66          $    (0.38)           (23) %

Interest coverage ratio            3.30  x            4.29  x            (0.99) x         (23) %            3.43  x             4.88  x            (1.45) x         (30) %
Fixed charge coverage
ratio                              2.93  x            3.84  x            (0.91) x         (24) %            3.04  x             4.37  x            (1.33) x         (30) %


Seniors Housing Operating
The following is a summary of our SSNOI at Welltower's Share for the Seniors
Housing Operating segment (dollars in thousands):
                                                              QTD Pool                                                                           YTD Pool
                                       Three Months Ended                              Change                              Six Months Ended                               Change
                              June 30, 2021           June 30, 2020              $                 %             June 30, 2021           June 30, 2020              $                 %
SSNOI (1)                   $      147,557          $      170,005          $ (22,448)          (13.2) %       $      303,978          $      388,474  

$ (84,496) (21.8) %



(1) For the QTD and YTD Pools, amounts relate to 528 and 519 same store
properties, respectively. Please see Non-GAAP Financial Measures for additional
information and reconciliations.
The following is a summary of our results of operations for the Seniors Housing
Operating segment (dollars in thousands):
                                              Three Months Ended                         Change                            Six Months Ended                             Change
                                          June 30,           June 30,                                                June 30,             June 30,
                                            2021               2020                $                 %                 2021                 2020                  $                 %
Revenues:
Resident fees and services              $ 740,891          $ 769,560          $ (28,669)              (4) %       $ 1,464,355          $ 1,619,532          $ (155,177)             (10) %
Interest income                               856                 88                768              873  %             1,975                  192               1,783              929  %
Other income                                  802              4,002             (3,200)             (80) %             2,621                5,054              (2,433)             (48) %
Total revenues                            742,549            773,650            (31,101)              (4) %         1,468,951            1,624,778            (155,827)             (10) %
Property operating expenses               582,361            595,513            (13,152)              (2) %         1,138,329            1,203,384             (65,055)              (5) %
NOI (1)                                   160,188            178,137            (17,949)             (10) %           330,622              421,394             (90,772)             (22) %
Other expenses:
Depreciation and amortization             131,035            139,163             (8,128)              (6) %           263,621              285,937             (22,316)              (8) %
Interest expense                           10,553             14,029             (3,476)             (25) %            21,971               30,463              (8,492)             (28) %
Loss (gain) on extinguishment of
debt, net                                   3,106               (492)             3,598              731  %            (1,537)                (492)             (1,045)            (212) %
Provision for loan losses                    (181)                 -               (181)                n/a                70                    -                  70                 n/a
Impairment of assets                       17,713             75,151            (57,438)             (76) %            22,317               78,646             (56,329)             (72) %
Other expenses                              3,709              5,251             (1,542)             (29) %             7,168                8,240              (1,072)             (13) %
                                          165,935            233,102            (67,167)             (29) %           313,610              402,794             (89,184)             (22) %
Income (loss) from continuing
operations before income taxes
and other items                            (5,747)           (54,965)            49,218               90  %            17,012               18,600              (1,588)              (9) %

Income (loss) from unconsolidated
entities                                  (12,938)            (6,787)            (6,151)             (91) %            (7,704)             (17,811)             10,107               57  %
Gain (loss) on real estate
dispositions, net                             (28)            14,465            (14,493)            (100) %             5,167               14,316              (9,149)             (64) %
Income from continuing operations         (18,713)           (47,287)            28,574               60  %            14,475               15,105                (630)              (4) %
Net income (loss)                         (18,713)           (47,287)            28,574               60  %            14,475               15,105                (630)              (4) %
Less: Net income (loss)
attributable to noncontrolling
interests                                   7,469            (26,156)            33,625              129  %             2,545              (28,088)             30,633              109  %
Net income (loss) attributable to
common stockholders                     $ (26,182)         $ (21,131)         $  (5,051)             (24) %       $    11,930          $    43,193          $  (31,263)             (72) %

(1) See Non-GAAP Financial Measures below.

                                       37
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Decreases in resident fees and services and property operating expenses are
primarily a result of decreases in occupancy across the portfolio due to the
COVID-19 pandemic and property dispositions. Spot occupancy has declined since
the beginning of the pandemic, reaching a low of 72.3% on March 12, 2021 before
beginning to recover resulting in occupancy of 74.6% as of June 30, 2021. Spot
occupancy rates through June 30, 2021 are as follows:
                                   December 2020              January 2021              February 2021              March 2021              April 2021              May 2021              June 2021
Spot occupancy (1)                           74.7  %                   73.3  %                    72.5  %                 72.6  %                 73.2  %               73.6  %                74.6  %
Sequential occupancy
change(2)                                                              (1.4) %                    (0.8) %                  0.1  %                  0.5  %                0.5  %                 0.9  %


(1) Spot occupancy represents approximate month end occupancy at our share for
592 properties in operation as of December 31, 2020, including unconsolidated
properties but excluding acquisitions, dispositions and development conversions
since this date.
(2) Sequential occupancy changes are based on actual spot occupancy and may not
recalculate due to rounding.
On a month-to-date basis, as of July 23, 2021, Seniors Housing Operating
occupancy has increased approximately 40 basis points. Occupancy continued to
strengthen in the U.S. and U.K. with gains of approximately 60 basis points and
30 basis points, respectively while occupancy in Canada remained flat over the
same period.
Property-level operating expenses associated with the COVID-19 pandemic relating
to our Seniors Housing Operating portfolio, net of reimbursements including
Provider Relief Funds and similar programs in the U.K. and Canada, resulted in a
net benefit of approximately $1,535,000 and $22,792,000 during the three and six
months ended June 30, 2021, respectively, as compared to a net expense of
$40,127,000 and $47,421,000 during the three and six months ended June 30, 2020,
respectively. These costs included higher labor expenses, coupled with
expenditures related to procurement of personal protective equipment and other
supplies, net of any reimbursements.
In 2020 applications were made for amounts under Phase 2 and Phase 3 of the
Provider Relief Fund related to our Seniors Housing Operating portfolio. During
the six months ended June 30, 2021, we received total Provider Relief Funds of
approximately $40,976,000, which was recognized as a reduction to COVID-19 costs
within property operating expenses.
The fluctuations in depreciation and amortization are due to acquisitions,
dispositions and transitions. To the extent that we acquire or dispose of
additional properties in the future, these amounts will change accordingly.
During the six months ended June 30, 2021, we recorded impairment charges of
$22,317,000 related to two held for use properties in which the carrying values
exceeded the estimated fair value. During the six months ended June 30, 2020, we
recorded impairment charges of $78,646,000 related to 12 held for sale
properties and one held for use property. Transaction costs related to asset
acquisitions are capitalized as a component of the purchase price. Changes in
the gain on sales of properties are related to the volume and timing of property
sales and the sales prices. The fluctuation in other expenses is primarily due
to the timing of noncapitalizable transaction costs associated with acquisitions
and operator transitions.
During the six months ended June 30, 2021, we completed one Seniors Housing
Operating construction project representing $58,844,000 or 490,367 per unit. The
following is a summary of our Seniors Housing Operating construction projects,
excluding expansions, pending as of June 30, 2021 (dollars in thousands):

                                       38
--------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Location                   Units                 Commitment       Balance       Est. Completion
Hendon, UK                        102           $   76,623      $  60,773            4Q21
Barnet, UK                        100                 71,515         51,621          4Q21
Beckenham, UK                     100                 65,026         55,712          4Q21
Georgetown, TX                    188                 36,215          5,401          2Q22
New Rochelle, NY                   72                 42,669          8,846          3Q22
Pflugerville, TX                  196                 39,500          4,944          3Q22
Sachse, TX                        188                 38,054          5,806          3Q22
Princeton, NJ                      80                 29,780         21,670          3Q22
Berea, OH                         120                 14,934          4,221          4Q22
Painesville, OH                   119                 14,462          3,563          4Q22
Beaver, PA                        116                 14,184          3,563          4Q22
                           1,381                $  442,962        226,120
Toronto, ON           Project in planning stage                    49,343
Brookline, MA         Project in planning stage                    26,845
Washington, DC        Project in planning stage                    26,295
Columbus, OH          Project in planning stage                    12,162
Raleigh, NC           Project in planning stage                     3,441
Brookhaven, GA        Project in planning stage                     7,808
                                                                $ 352,014


Interest expense represents secured debt interest expense which fluctuates based
on the net effect and timing of assumptions, segment transitions, fluctuations
in foreign currency rates, extinguishments and principal amortizations. The
fluctuations in loss (gain) on extinguishment of debt is primarily attributable
to the volume of extinguishments and terms of the related secured debt. The
following is a summary of our Seniors Housing Operating segment property secured
debt principal activity (dollars in thousands):
                                                                         Three Months Ended                                                                       Six Months Ended
                                                     June 30, 2021                                June 30, 2020                               June 30, 2021                               June 30, 2020
                                                                  Wtd. Avg.                                    Wtd. Avg.                                   Wtd. Avg.                                   Wtd. Avg.
                                             Amount             Interest Rate             Amount             Interest Rate            Amount             Interest Rate            Amount             Interest Rate
Beginning balance                        $  1,667,278                   2.89  %       $  2,044,926                  3.56  %       $  1,706,189                  3.05  %       $  2,115,037                  3.54  %

Debt issued                                         -                      -  %                  -                     -  %                  -                     -  %             44,921                  2.58  %

Debt extinguished                             (24,660)                  3.31  %           (290,198)                 2.81  %            (66,593)                 6.01  %           (306,238)                 2.90  %

Principal payments                            (11,986)                  3.06  %            (11,603)                 3.17  %            (24,246)                 3.11  %            (23,776)                 3.18  %
Foreign currency                               14,658                   2.74  %             36,500                  3.01  %             29,940                  2.77  %            (50,319)                 3.19  %
Ending balance                           $  1,645,290                   2.83  %       $  1,779,625                  2.91  %       $  1,645,290                  2.83  %       $  1,779,625                  2.91  %

Monthly averages                         $  1,670,234                   2.86  %       $  2,009,523                  3.17  %       $  1,679,223                  2.94  %       $  2,044,995                  3.33  %


The majority of our Seniors Housing Operating properties are formed through
partnership interests. Income from unconsolidated entities recognized during the
six months ended June 30, 2021 includes a gain on sale recognized from the sale
of a home health business owned by one of our unconsolidated entities, offset by
losses from unconsolidated entities largely attributable to depreciation and
amortization of short-lived intangible assets related to certain investments in
unconsolidated joint ventures. Net income attributable to noncontrolling
interests represents our partners' share of net income (loss) related to joint
ventures. The decrease during the three and six month periods ended June 30,
2020 relates primarily to our partners' share of impairment charges recognized,
offset by our partners' share of gains on real estate dispositions.
Triple-net
The following is a summary of our SSNOI at Welltower's Share for the Triple-net
segment (dollars in thousands):
                                                            QTD Pool                                                                         YTD Pool
                                       Three Months Ended                            Change                             Six Months Ended                              Change
                              June 30, 2021           June 30, 2020             $               %             June 30, 2021           June 30, 2020              $                %

SSNOI (1)                   $      144,369          $      142,383          $ 1,986            1.4  %       $      283,068          $      287,755          $ (4,687)           (1.6) %


(1) For the QTD and YTD Pools, amounts relate to 549 and 549 same store
properties, respectively. Please see Non-GAAP Financial Measures for additional
information and reconciliations.
The following is a summary of our results of operations for the Triple-net
segment (dollars in thousands):
                                       39

--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                  Three Months Ended                        Change                         Six Months Ended                         Change
                                              June 30,           June 30,                                             June 30,           June 30,
                                                2021               2020                $                %               2021               2020                $                %
Revenues:
Rental income                               $ 204,725          $ 217,492          $ (12,767)            (6) %       $ 357,188          $ 408,877          $ (51,689)          (13) %
Interest income                                32,861             15,520             17,341            112  %          47,783             30,191             17,592            58  %
Other income                                    1,355                607                748            123  %           2,452              2,280                172             8  %
Total revenues                                238,941            233,619              5,322              2  %         407,423            441,348            (33,925)           (8) %
Property operating expenses                    12,627             13,563               (936)            (7) %          25,468             26,865             (1,397)           (5) %
NOI (1)                                       226,314            220,056              6,258              3  %         381,955            414,483            (32,528)           (8) %
Other expenses:
Depreciation and amortization                  54,406             58,138             (3,732)            (6) %         111,073            115,832             (4,759)           (4) %
Interest expense                                1,704              2,746             (1,042)           (38) %           3,586              5,598             (2,012)          (36) %
Loss (gain) on derivatives and
financial instruments, net                       (359)             1,434             (1,793)          (125) %           1,575              9,085        

(7,510) (83) %


Provision for loan losses                      10,019              1,451              8,568            590  %          10,872              8,523              2,349            28  %
Impairment of assets                            3,768                  -              3,768               n/a          22,732             24,332             (1,600)           (7) %
Other expenses                                  4,110              3,500                610             17  %           9,093              4,013              5,080           127  %
                                               73,648             67,269              6,379              9  %         158,931            167,383             (8,452)           (5) %
Income (loss) from continuing
operations before income taxes and
other items                                   152,666            152,787               (121)             -  %         223,024            247,100        

(24,076) (10) %


Income (loss) from unconsolidated
entities                                        4,877              6,403             (1,526)           (24) %           9,784             12,199             (2,415)          (20) %
Gain (loss) on real estate
dispositions, net                              42,709              2,148             40,561               n/a          44,751             51,785             (7,034)          (14) %
Income from continuing operations             200,252            161,338             38,914             24  %         277,559            311,084            (33,525)          (11) %
Net income                                    200,252            161,338             38,914             24  %         277,559            311,084            (33,525)          (11) %
Less: Net income (loss) attributable
to noncontrolling interests                    11,405              9,103              2,302             25  %          14,805             27,678            (12,873)          (47) %
Net income attributable to common
stockholders                                $ 188,847          $ 152,235          $  36,612             24  %       $ 262,754          $ 283,406          $ (20,652)           (7) %

(1) See Non-GAAP Financial Measures below.



Continued decreases in rental income are primarily attributable to an increased
number of leases on a cash basis of recognition due to substantially all
contractual lease payments no longer deemed to be probable. Additionally, we
recorded reserves for straight-line rent receivables balances of $49,241,000 and
$34,110,000 during the six month periods ended June 30, 2021 and 2020,
respectively. 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
June 30, 2021, we had 15 leases with rental rate increases ranging from 0.98% to
11.31% in our Triple-net portfolio. Our Triple-net operators are experiencing
similar impacts on occupancy and operating costs due to the COVID-19 pandemic as
described above with respect to our Seniors Housing Operating properties.
However, long-term/post-acute facilities are generally experiencing a higher
degree of occupancy declines which may impact the ability of our Triple-net
operators to make contractual rent payments to us in the future. Many of our
Triple-net operators received funds under the CARES Act Paycheck Protection
Program. In addition, operators of long-term/post-acute facilities have
generally received funds from Phase 1 of the Provider Relief Fund and operators
of assisted living facilities have received funds from Phase 2 and Phase 3 of
the Provider Relief Fund. During the six months ended June 30, 2021, we
collected approximately 95% of rent due from operators under Triple-net lease
agreements (primarily seniors housing and post-acute care facilities). No
significant rent deferrals or rent concessions have been made. We evaluate
leases individually and recognize rent on a cash basis if collectibility of
substantially all contractual rent payments is not probable.
Depreciation and amortization fluctuates as a result of the acquisitions,
dispositions and transitions of triple-net properties. To the extent we acquire
or dispose of additional properties in the future, our provision for
depreciation and amortization will change accordingly.
During the six months ended June 30, 2021, we recognized a provision for loan
losses under the current expected credit losses accounting standard, primarily
related to the initial recognition of the £540 million of senior loan financing
to affiliates of Safanad as part of the recapitalization of its investment in
HC-One Group during the second quarter. The increase in interest income for the
three and six month periods ended June 30, 2021 is due to the increased loan
receivable balance driven primarily by the £540 million of senior loan financing
to affiliates of Safanad. Additionally, during March 2020, we recognized a
provision for loan losses of $6,898,000 to fully reserve for a non-real estate
loans receivable that was no longer deemed collectible. During the six months
ended June 30, 2021, we recorded impairment charges of $22,732,000 related to
three held for sale properties and two held for use properties. During the six
months ended June 30, 2020, we recorded impairment charges of $24,332,000
related to one held for use property. 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
                                       40
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
of purchase price. The fluctuation in other expenses is primarily due to
noncapitalizable transaction costs from acquisitions and segment transitions.
During the six months ended June 30, 2021, we completed one Triple-net
construction project representing $22,990,000 or $280,366 per unit. The
following is a summary of Triple-net construction projects, excluding
expansions, pending as of June 30, 2021 (dollars in thousands):
Location             Units/Beds       Commitment      Balance       Est. Completion
Redhill, UK                    76    $   21,952      $ 16,710            3Q21
Leicester, UK                  60          15,463         7,457          1Q22
London, UK                     82          44,546        22,974          2Q22
Wombourne, UK                  66          16,567         7,838          2Q22
Rugby, UK                      76          21,141         5,545          4Q22
Raleigh, NC                   191         154,256        26,300          2Q23
                        551          $  273,925      $ 86,824


Loss (gain) on derivatives and financial instruments, net is primarily
attributable to the mark-to-market adjustment recorded on our Genesis Healthcare
available for sale investment. Interest expense represents secured debt interest
expense and related fees. The change in secured debt interest expense is due to
the net effect and timing of assumptions, segment transitions, fluctuations in
foreign currency rates, extinguishments and principal amortizations. The
following is a summary of our Triple-net secured debt principal activity for the
periods presented (dollars in thousands):
                                                              Three Months Ended                                                                       Six Months Ended
                                           June 30, 2021                               June 30, 2020                               June 30, 2021                               June 30, 2020
                                                        Wtd. Avg.                                   Wtd. Avg.                                   Wtd. Avg.                                   Wtd. Avg.
                                    Amount            Interest Rate             Amount            Interest Rate             Amount            Interest Rate             Amount            Interest Rate
Beginning balance              $     123,139                 4.91  %       $     289,739                 3.55  %       $     123,652                 4.91  %       $     306,038                 3.60  %

Principal payments                    (1,246)                5.16  %              (1,042)                5.16  %              (2,467)                5.16  %              (2,102)                5.16  %
Foreign currency                         673                 5.43  %                 624                 4.12  %               1,381                 5.43  %             (14,615)                2.90  %
Ending balance                 $     122,566                 4.91  %       $     289,321                 3.27  %       $     122,566                 4.91  %       $     289,321                 3.27  %

Monthly averages               $     123,570                 4.92  %       $     286,599                 3.36  %       $     123,348                 4.92  %       $     293,300                 3.47  %


A portion of our Triple-net properties were formed through partnerships. Income
or loss from unconsolidated entities represents our share of net income or
losses from partnerships where we are the noncontrolling partner. Net income
attributable to noncontrolling interests represents our partners' share of net
income relating to those partnerships where we are the controlling partner. The
decrease during the six months ended June 30, 2021, relates primarily to our
partner's share of a gain on sale of certain properties in the prior year.
Outpatient Medical
The following is a summary of our SSNOI at Welltower Share for the Outpatient
Medical segment (dollars in thousands):
                                                            QTD Pool                                                                        YTD Pool
                                       Three Months Ended                            Change                             Six Months Ended                             Change
                              June 30, 2021           June 30, 2020             $               %             June 30, 2021           June 30, 2020             $               %
SSNOI (1)                   $       99,769          $       97,844          $ 1,925            2.0  %       $      191,505          $      185,384          $ 6,121            3.3  %


(1) For the QTD and YTD Pools, amounts relate to 350 and 333 same store
properties, respectively. Please see Non-GAAP Financial Measures for additional
information and reconciliations.
The following is a summary of our results of operations for the Outpatient
Medical segment for the periods presented (dollars in thousands):
                                       41

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                 Three Months Ended                         Change                          Six Months Ended                          Change
                                             June 30,           June 30,                                               June 30,           June 30,
                                               2021               2020                 $                 %               2021               2020                 $                 %
Revenues:
Rental income                              $ 149,998          $ 178,813          $  (28,815)            (16) %       $ 300,378          $ 377,388          $  (77,010)            (20) %
Interest income                                4,731                461               4,270             926  %           8,269                927               7,342             792  %
Other income                                   4,343              1,557               2,786             179  %           6,648              1,845               4,803             260  %
Total revenues                               159,072            180,831             (21,759)            (12) %         315,295            380,160             (64,865)            (17) %
Property operating expenses                   45,495             51,688              (6,193)            (12) %          92,358            112,296             (19,938)            (18) %
NOI (1)                                      113,577            129,143             (15,566)            (12) %         222,937            267,864             (44,927)            (17) %
Other expenses:
Depreciation and amortization                 55,444             68,070             (12,626)            (19) %         110,617            138,403             (27,786)            (20) %
Interest expense                               3,907              4,326                (419)            (10) %           7,922              9,134              (1,212)            (13) %
Loss (gain) on extinguishment of
debt, net                                          -                741                (741)           (100) %               -                741                (741)           (100) %
Provision for loan losses                     (3,641)               (29)             (3,612)               n/a          (3,362)               (29)             (3,333)               n/a
Impairment of assets                           2,211                  -               2,211                n/a           2,211                  -               2,211                n/a
Other expenses                                 1,098              6,456              (5,358)            (83) %           1,810              7,463              (5,653)            (76) %
                                              59,019             79,564             (20,545)            (26) %         119,198            155,712             (36,514)            (23) %
Income (loss) from continuing
operations before income taxes and
other items                                   54,558             49,579               4,979              10  %         103,739            112,152              (8,413)             (8) %

Income (loss) from unconsolidated
entities                                          85              1,716              (1,631)            (95) %           2,993              3,252                (259)             (8) %
Gain (loss) on real estate
dispositions, net                              1,987            139,250            (137,263)            (99) %          53,830            352,586            (298,756)            (85) %
Income from continuing operations             56,630            190,545            (133,915)            (70) %         160,562            467,990            (307,428)            (66) %
Net income (loss)                             56,630            190,545            (133,915)            (70) %         160,562            467,990            (307,428)            (66) %
Less: Net income (loss) attributable
to noncontrolling interests                      629             (2,977)              3,606             121  %           2,799               (524)              3,323             634  %
Net income (loss) attributable to
common stockholders                        $  56,001          $ 193,522          $ (137,521)            (71) %       $ 157,763          $ 468,514          $ (310,751)            (66) %

(1) See Non-GAAP Financial Measures.



Rental income has decreased due primarily to significant dispositions that have
closed during 2020. Certain of our leases contain annual rental escalators that
are contingent upon changes in the Consumer Price Index. These escalators are
not fixed, so no straight-line rent is recorded; however, rental income is
recorded based on the contractual cash rental payments due for the period. If
the Consumer Price Index does not increase, a portion of our revenues may not
continue to increase. Our leases could renew above or below current rental
rates, resulting in an increase or decrease in rental income. For the three
months ended June 30, 2021, our consolidated outpatient medical portfolio signed
117,954 square feet of new leases and 286,868 square feet of renewals. The
weighted-average term of these leases was seven years, with a rate of $42.42 per
square foot and tenant improvement and lease commission costs of $23.02 per
square foot. Substantially all of these leases contain an annual fixed or
contingent escalation rent structure ranging from 1.0% to 4.0%.
We have collected virtually all rent due through the six months ended June 30,
2021, with uncollected amounts primarily attributable to local jurisdictions
with COVID-19 related ordinances providing temporary rent relief to tenants. We
evaluate leases individually and recognize rent on a cash basis if
collectibility of substantially all contractual rent payments is not probable.
The increase in interest income for the three and six months ended June 30, 2021
is due primarily to a $178,207,000 first mortgage loan initiated in August 2020
which was subsequently repaid in full in June of 2021.
The fluctuation in property operating expenses and depreciation and amortization
are primarily attributable to the significant dispositions that occurred in
2020. To the extent that we acquire or dispose of additional properties in the
future, these amounts will change accordingly. During the three months ended
June 30, 2021, we recognized an impairment charge of $2,211,000 related to one
held for sale property. Changes in gains/losses on sales of properties are
related to volume of property sales and the sales prices. Transaction costs
related to asset acquisitions are capitalized as a component of purchase price.
The fluctuation in other expenses is primarily due to noncapitalizable
transaction costs recognized during the three months ended June 30, 2020 from
acquisitions no longer expected to be consummated.
During the six months ended June 30, 2021, we completed one Outpatient Medical
construction project representing $101,867,000 or $722 per square foot. The
following is a summary of the Outpatient Medical construction projects,
excluding expansions, pending as of June 30, 2021 (dollars in thousands):
                                       42
--------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Location                  Square Feet       Commitment       Balance       Est. Completion
Kalamazoo, MI                    40,607    $    14,267      $  9,709            3Q21
College Station, TX              25,200            9,025         2,189          1Q22
Norman, OK                       47,082           21,707           745          3Q22
Tyler, TX                        85,214           35,369         3,722          4Q22
                          198,103          $    80,368      $ 16,365


Total interest expense represents secured debt interest expense. The change in
secured debt interest expense is primarily due to the net effect and timing of
assumptions, extinguishments and principal amortizations. The following is a
summary of our outpatient medical secured debt principal activity (dollars in
thousands):
                                                                   Three Months Ended                                                                         Six Months Ended
                                               June 30, 2021                                June 30, 2020                                June 30, 2021                                June 30, 2020
                                                             Wtd. Avg.                                    Wtd. Avg.                                    Wtd. Avg.                                    Wtd. Avg.
                                        Amount             Interest Rate             Amount             Interest Rate             Amount             Interest Rate             Amount             Interest Rate
Beginning balance                  $     545,755                  3.54  %       $     569,974                  3.94  %       $     548,229                  3.55  %       $     572,267                  3.97  %

Debt extinguished                              -                     -  %              (8,393)                 4.40  %                   -                     -  %              (8,393)                 4.40  %

Principal payments                        (2,483)                 4.47  %              (2,538)                 4.61  %              (4,957)                 4.47  %              (4,831)                 4.63  %

Ending balance                     $     543,272                  3.52  %       $     559,043                  3.59  %       $     543,272                  3.52  %       $     559,043                  3.59  %

Monthly averages                   $     544,109                  3.53  %       $     566,608                  3.75  %       $     545,361                  3.54  %       $     568,751                  3.85  %


A portion of our Outpatient Medical properties were formed through partnerships.
Income or loss from unconsolidated entities represents our share of net income
or losses from partnerships where we are the noncontrolling partner. Net income
attributable to noncontrolling interests represents our partners' share of net
income or loss relating to those partnerships where we are the controlling
partner.
Non-Segment/Corporate
The following is a summary of our results of operations for the
Non-Segment/Corporate activities for the periods presented (dollars in
thousands):
                                                   Three Months Ended                         Change                          Six Months Ended                          Change
                                              June 30,            June 30,                                              June 30,            June 30,
                                                2021                2020                 $                %               2021                2020                 $                %
Revenues:

Other income                                $      430          $      375          $      55             15  %       $    1,385          $      791          $     594             75  %
Total revenue                                      430                 375                 55             15  %            1,385                 791                594             75  %
Property operating expenses                      2,174                   -              2,174               n/a            3,828                   -              3,828               n/a
NOI (1)                                         (1,744)                375             (2,119)          (565) %           (2,443)                791             (3,234)          (409) %
Expenses:
Interest expense                               106,177             105,256                921              1  %          212,004             223,169            (11,165)            (5) %
General and administrative expenses             31,436              34,062             (2,626)            (8) %           61,362              69,543             (8,181)           (12) %
Loss (gain) on extinguishment of
debt, net                                       52,506                   -             52,506               n/a           52,506                   -             52,506               n/a
Other expenses                                   2,770               4,204             (1,434)           (34) %            4,610               5,987             (1,377)           (23) %
                                               192,889             143,522             49,367             34  %          330,482             298,699             31,783             11  %
Loss from continuing operations
before income taxes and other items           (194,633)           (143,147)           (51,486)           (36) %         (332,925)           (297,908)           (35,017)           (12) %
Income tax (expense) benefit                     2,221              (2,233)             4,454            199  %           (1,722)             (7,675)             5,953             78  %

Loss from continuing operations               (192,412)           (145,380)           (47,032)           (32) %         (334,647)           (305,583)           (29,064)           (10) %

Net loss attributable to common
stockholders                                $ (192,412)         $ (145,380)         $ (47,032)           (32) %       $ (334,647)         $ (305,583)         $ (29,064)           (10) %

(1) See Non-GAAP Financial Measures.



Property operating expenses represent insurance costs related to our captive
insurance company formed as of July 1, 2020 which acts as a direct insurer of
property level insurance coverage for our portfolio.
The following is a summary of our Non-Segment/Corporate interest expense for the
periods presented (dollars in thousands):
                                       43

--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                              Three Months Ended                       Change                       Six Months Ended                         Change
                                          June 30,           June 30,                                          June 30,           June 30,
                                            2021               2020               $               %              2021               2020                $                %
Senior unsecured notes                  $  99,923          $  98,141          $ 1,782             2  %       $ 200,136          $ 201,675          $  (1,539)           (1) %

Unsecured credit facility and
commercial paper program                    1,940              2,816             (876)          (31) %           3,120             12,984             (9,864)          (76) %
Loan expense                                4,314              4,299               15             -  %           8,748              8,510                238             3  %
Totals                                  $ 106,177          $ 105,256          $   921             1  %       $ 212,004          $ 223,169          $ (11,165)           (5) %


The change in interest expense on senior unsecured notes is due to the net
effect of issuances and extinguishments, as well as the movement in foreign
exchange rates and related hedge activity. Please refer to Note 11 for
additional information. The change in interest expense on our unsecured
revolving credit facility and commercial paper program is due primarily to the
net effect and timing of draws, paydowns and variable interest rate
changes. Please refer to Note 10 for additional information regarding our
unsecured revolving credit facility and commercial paper program. The loss on
extinguishment recognized during the six months ended June 30, 2021 is due
primarily to the early extinguishment of $339,128,000 of our 3.75% senior
unsecured notes due March 2023 and $334,624,000 of our 3.95% senior unsecured
notes due September 2023.
General and administrative expenses as a percentage of consolidated revenues for
the three months ended June 30, 2021 and 2020 were 2.76% and 2.87%,
respectively. The provision for income taxes primarily relates to state taxes,
foreign taxes and taxes based on income generated by entities that are
structured as TRSs. The fluctuation in the provision for income taxes is
primarily related to a revaluation of deferred taxes due to a change in the U.K.
tax rate and an adjustment to a deferred tax liability due to the recognition of
an impairment charge.
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 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. 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 using a consistent population which controls for
changes in the composition of our portfolio. We believe the drivers of property
level NOI for both consolidated properties and unconsolidated properties are
generally the same and therefore, we evaluate SSNOI based on our ownership
interest in each property ("Welltower Share"). To arrive at Welltower's Share,
NOI is adjusted by adding our minority ownership share related to unconsolidated
properties and by subtracting the minority partners' noncontrolling ownership
interests for consolidated properties. We do not control investments in
unconsolidated properties and while we consider disclosures at Welltower Share
to be useful, they may not accurately depict the legal and economic implications
of our joint venture arrangements and should be used with caution. As used
herein, same store is generally defined as those revenue-generating properties
in the portfolio for the relevant year-over-year reporting periods. Acquisitions
and development conversions are included in SSNOI five full quarters or six full
quarter after acquisition or being placed into service for the QTD Pool and YTD
Pool, respectively. Land parcels, loans and sub-leases, as well as any
properties sold or classified as held for sale during the respective periods are
excluded from SSNOI. Redeveloped properties (including major refurbishments of a
Seniors Housing Operating property where 20% or more of units are simultaneously
taken out of commission for 30 days or more or Outpatient Medical properties
undergoing a change in intended use) are excluded from SSNOI until five full
quarters or six full quarters post completion of the redevelopment for the QTD
Pool and YTD Pool, respectively. Properties undergoing operator transitions
and/or segment transitions are also excluded from SSNOI until five full quarters
or six full quarters post completion of the transition for the QTD Pool and YTD
Pool, respectively. In addition,
                                       44
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
properties significantly impacted by force majeure, acts of God, or other
extraordinary adverse events are excluded from SSNOI until five full quarters or
six full quarters after the properties are placed back into service for the QTD
Pool and YTD Pool, respectively. SSNOI excludes non-cash NOI and includes
adjustments to present consistent ownership percentages and to translate
Canadian properties and U.K. properties using a consistent exchange rate. We
believe NOI and SSNOI provide investors relevant and useful information because
they measure the operating performance of our properties at the property level
on an unleveraged basis. We use NOI and SSNOI to make decisions about resource
allocations and to assess the property level performance of our properties.
EBITDA is defined as earnings (net income) before interest, taxes, depreciation
and amortization. Adjusted EBITDA is defined as EBITDA excluding unconsolidated
entities and including adjustments for stock-based compensation expense,
provision for loan losses, gains/losses on extinguishment of debt,
gains/loss/impairments on properties, gains/losses on derivatives and financial
instruments, other expense, additional other income and other impairment
charges. We believe that EBITDA and Adjusted EBITDA, along with net income, are
important supplemental measures because they provide additional information to
assess and evaluate the performance of our operations. We primarily use these
measures to determine our interest coverage ratio, which represents EBITDA and
Adjusted EBITDA divided by total interest, and our fixed charge coverage ratio,
which represents EBITDA and Adjusted EBITDA divided by fixed charges. Fixed
charges include total interest and secured debt principal amortization.
Covenants in our unsecured senior notes and primary credit facility contain
financial ratios based on a definition of EBITDA and Adjusted EBITDA that is
specific to those agreements. Our leverage ratios are defined as the proportion
of net debt to total capitalization and include book capitalization,
undepreciated book capitalization and market capitalization. Book capitalization
represents the sum of net debt (defined as total long-term debt, excluding
operating lease liabilities, less cash and cash equivalents and any IRC 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 supplemental reporting measures and similarly entitled financial measures
are widely used by investors, equity and debt analysts and rating agencies in
the valuation, comparison, rating and investment recommendations of companies.
Management uses these financial measures to facilitate internal and external
comparisons to our historical operating results and in making operating
decisions. Additionally, these measures are utilized by the Board of Directors
to evaluate management. None of our supplemental measures represent net income
or cash flow provided from operating activities as determined in accordance with
U.S. GAAP and should not be considered as alternative measures of profitability
or liquidity. Finally, the supplemental measures, as defined by us, may not be
comparable to similarly entitled items reported by other real estate investment
trusts or other companies.
The table below reflects the reconciliation of FFO to NICS, the most directly
comparable U.S. GAAP measure, for the periods presented. Noncontrolling interest
and unconsolidated entity amounts represent adjustments to reflect our share of
depreciation and amortization, gains/loss on real estate dispositions and
impairment of assets. Amounts are in thousands except for per share data.
                                                                                                        Three Months Ended
                                                         June 30,          March 31,           December 31,           September 30,           June 30,          March 31,
FFO Reconciliation:                                        2021               2021                 2020                   2020                  2020               2020
Net income attributable to common
stockholders                                           $  26,257          $ 

71,546 $ 163,729 $ 325,585 $ 179,246

        $ 310,284
Depreciation and amortization                            240,885            244,426                242,733                 255,532            265,371            274,801
Impairment of assets                                      23,692             23,568                  9,317                  23,313             75,151             27,827
Loss (gain) on real estate dispositions,
net                                                      (44,668)           (59,080)              (185,464)               (484,304)          (155,863)  

(262,824)

Noncontrolling interests                                 (16,591)           (12,516)               (20,579)                 48,559            (42,539)  

(9,409)

Unconsolidated entities                                   19,265             19,223                 16,091                  16,329             14,231             15,445
FFO                                                    $ 248,840          $ 287,167          $     225,827          $      185,014          $ 335,597          $ 356,124

Average diluted shares outstanding                       419,305            419,079                418,753                 418,987            419,121   

412,420


Per diluted share data:
Net income attributable to common
stockholders(1)                                        $    0.06          $    0.17          $        0.39          $         0.77          $    0.42          $    0.75
FFO                                                    $    0.59          $    0.69          $        0.54          $         0.44          $    0.80          $    0.86

(1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders.

                                       45

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                                                   Six Months Ended
                                                                            June 30,              June 30,
FFO Reconciliations:                                                          2021                  2020
Net income attributable to common stockholders                           $     97,803          $    489,530
Depreciation and amortization                                                 485,311               540,172
Impairment of assets                                                           47,260               102,978
Loss (gain) on real estate dispositions, net                                 (103,748)             (418,687)
Noncontrolling interests                                                      (29,107)              (51,948)
Unconsolidated entities                                                        38,488                29,676
FFO                                                                      $  

536,007 $ 691,721


Average diluted common shares outstanding:                                    419,205                  415,775

Per diluted share data:
Net income attributable to common stockholders(1)                        $       0.23          $       1.17
FFO                                                                      $  

1.28 $ 1.66


(1) Includes adjustment to the numerator for income (loss) attributable to OP unitholders.



                                                                                                             Three Months Ended
                                                              June 30,          March 31,           December 31,           September 30,           June
30,          March 31,
NOI Reconciliations:                                            2021               2021                 2020                   2020                  2020               2020
Net income (loss)                                           $  45,757      

$ 72,192 $ 155,278 $ 394,978 $ 159,216 $ 329,380 Loss (gain) on real estate dispositions, net

                  (44,668)           (59,080)              (185,464)               (484,304)          (155,863)          (262,824)
Loss (income) from unconsolidated entities                      7,976            (13,049)                  (258)                  5,981             (1,332)             3,692
Income tax expense (benefit)                                   (2,221)             3,943                    290                   2,003              2,233              5,442
Other expenses                                                 11,687             10,994                 33,088                  11,544             19,411              6,292
Impairment of assets                                           23,692             23,568                  9,317                  23,313             75,151             27,827
Provision for loan losses                                       6,197              1,383                 83,085                   2,857              1,422              7,072
Loss (gain) on extinguishment of debt, net                     55,612             (4,643)                13,796                  33,004                249                  -
Loss (gain) on derivatives and financial
instruments, net                                                 (359)             1,934                    569                   1,395              1,434              7,651
General and administrative expenses                            31,436             29,926                 27,848                  31,003             34,062             35,481
Depreciation and amortization                                 240,885            244,426                242,733                 255,532            265,371            274,801
Interest expense                                              122,341            123,142                121,173                 124,851            126,357            142,007
Consolidated net operating income (NOI)                     $ 498,335       

$ 434,736 $ 501,455 $ 402,157 $ 527,711 $ 576,821


NOI by segment:
Seniors Housing Operating                                   $ 160,188          $ 170,434          $     159,797          $      174,361          $ 178,137          $ 243,257
Triple-net                                                    226,314            155,641                225,277                 108,361            220,056            194,427
Outpatient Medical                                            113,577            109,360                117,231                 119,976            129,143            138,721
Non-segment/corporate                                          (1,744)              (699)                  (850)                   (541)               375                416
Total NOI                                                   $ 498,335          $ 434,736          $     501,455          $      402,157          $ 527,711          $ 576,821



                                       46

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

                                                                                          Six Months Ended
                                                                                June 30, 2021           June 30, 2020
NOI Reconciliations:
Net income (loss)                                                             $      117,949          $      488,596
Loss (gain) on real estate dispositions, net                                        (103,748)               (418,687)
Loss (income) from unconsolidated entities                                            (5,073)                  2,360
Income tax expense (benefit)                                                           1,722                   7,675
Other expenses                                                                        22,681                  25,703
Impairment of assets                                                                  47,260                 102,978
Provision for loan losses                                                              7,580                   8,494
Loss (gain) on extinguishment of debt, net                                            50,969                     249
Loss (gain) on derivatives and financial instruments, net                              1,575                   9,085
General and administrative expenses                                                   61,362                  69,543
Depreciation and amortization                                                        485,311                 540,172
Interest expense                                                                     245,483                 268,364
Consolidated net operating income (NOI)                                       $      933,071          $    1,104,532

NOI by segment:
Seniors Housing Operating                                                     $      330,622          $      421,394
Triple-net                                                                           381,955                 414,483
Outpatient Medical                                                                   222,937                 267,864
Non-segment/corporate                                                                 (2,443)                    791
Total NOI                                                                     $      933,071          $    1,104,532



                                                                                                  QTD Pool                                                                                     YTD Pool
                                                            Seniors Housing                                                                              Seniors Housing
SSNOI Property Reconciliations:                                Operating              Triple-net           Outpatient Medical           Total               Operating              Triple-net           Outpatient Medical           Total
Consolidated properties                                             581                   643                      292                  1,516                    581                   643                      292                  1,516
Unconsolidated properties                                            91                    39                       79                    209                     91                    39                       79                    209
Total properties                                                    672                   682                      371                  1,725                    672                   682                      371                  1,725
Recent acquisitions/development conversions(1)                      (56)                  (29)                      (7)                   (92)                   (64)                  (29)                     (24)                  (117)
Under development                                                   (30)                   (5)                      (4)                   (39)                   (30)                   (5)                      (4)                   (39)
Under redevelopment(2)                                              (10)                   (1)                      (2)                   (13)                   (11)                   (1)                      (2)                   (14)
Current held for sale                                                (8)                  (54)                      (2)                   (64)                    (8)                  (54)                      (2)                   (64)
Land parcels, loans and subleases                                   (11)                  (19)                      (6)                   (36)                   (11)                  (19)                      (6)                   (36)
Transitions(3)                                                      (27)                  (23)                       -                    (50)                   (27)                  (23)                       -                    (50)
Other(4)                                                             (2)                   (2)                       -                     (4)                    (2)                   (2)                       -                     (4)
Same store properties                                               528                   549                      350                  1,427                    519                   549                      333                  1,401


(1) Acquisitions and development conversions will enter the QTD Pool and YTD Pool after five full quarters and six full quarters after acquisition or certificate of occupancy, respectively.
(2) Redevelopment properties will enter the QTD Pool and YTD Pool after five full quarters and six full quarters of operations post redevelopment completion, respectively.
(3) Transitioned properties will enter the QTD Pool and YTD Pool after five full quarters and six full quarters of operations with the new operator in place or under the new structure, respectively.
(4) Represents properties that are either closed or being closed.


                                       47

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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                                       QTD Pool                                        YTD Pool
                                                                  Three Months Ended                               Six Months Ended
SSNOI Reconciliations:                                   June 30, 2021           June 30, 2020           June 30, 2021           June 30, 2020

Seniors Housing Operating:
Consolidated NOI                                       $      160,188       

$ 178,137 $ 330,622 $ 421,394 NOI attributable to unconsolidated investments

                 11,305                  13,277                  23,209                  28,231
NOI attributable to noncontrolling interests                  (27,742)                (11,870)                (35,787)                (30,623)

NOI attributable to non-same store properties                  (7,405)                (12,476)                (24,548)                (36,352)
Non-cash NOI attributable to same store
properties                                                     12,338                    (957)                 11,516                  (1,835)
Currency and ownership adjustments (1)                         (1,127)                  3,894                  (1,034)                  7,659
SSNOI at Welltower Share                                      147,557                 170,005                 303,978                 388,474

Triple-net:
Consolidated NOI                                              226,314                 220,056                 381,955                 414,483
NOI attributable to unconsolidated investments                  4,887                   5,133                   9,775                  10,266
NOI attributable to noncontrolling interests                  (14,051)                (14,613)                (22,040)                (29,395)

NOI attributable to non-same store properties                 (64,857)                (58,367)               (115,541)                (87,080)
Non-cash NOI attributable to same store
properties                                                     (7,611)                (11,829)                 29,443                 (23,568)
Currency and ownership adjustments (1)                           (313)                  2,003                    (524)                  3,049
SSNOI at Welltower Share                                      144,369                 142,383                 283,068                 287,755

Outpatient Medical:
Consolidated NOI                                              113,577                 129,143                 222,937                 267,864
NOI attributable to unconsolidated investments                  4,988                   2,461                   9,712                   3,524
NOI attributable to noncontrolling interests                   (4,235)                 (3,764)                 (7,977)                 (8,366)

NOI attributable to non-same store properties                 (11,961)                (15,841)                (27,793)                (43,412)
Non-cash NOI attributable to same store
properties                                                     (2,533)                 (3,486)                 (4,156)                 (6,336)
Currency and ownership adjustments (1)                            (67)                (10,669)                 (1,218)                (27,890)
SSNOI at Welltower Share                                       99,769                  97,844                 191,505                 185,384

SSNOI at Welltower Share:
Seniors Housing Operating                                     147,557                 170,005                 303,978                 388,474
Triple-net                                                    144,369                 142,383                 283,068                 287,755
Outpatient Medical                                             99,769                  97,844                 191,505                 185,384
Total                                                  $      391,695          $      410,232          $      778,551          $      861,613

(1) Includes adjustments to reflect consistent property ownership percentages, to translate Canadian properties at a USD/CAD rate of 1.2658 and to translate U.K. properties at a GBP/USD rate of 1.38.



The tables below reflects the reconciliation of EBITDA to net income, the most
directly comparable U.S. GAAP measure, for the periods presented. Dollars are in
thousands.
                                       48

--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                                                                Three Months Ended
                                                  June 30,          March 31,          December 31,          September 30,           June 30,          March 31,
EBITDA Reconciliations:                             2021               2021                2020                   2020                 2020               2020
Net income (loss)                               $  45,757          $  72,192          $    155,278          $     394,978          $ 159,216          $ 329,380
Interest expense                                  122,341            123,142               121,173                124,851            126,357            142,007
Income tax expense (benefit)                       (2,221)             3,943                   290                  2,003              2,233              5,442
Depreciation and amortization                     240,885            244,426               242,733                255,532            265,371            274,801
EBITDA                                          $ 406,762          $ 443,703          $    519,474          $     777,364          $ 553,177          $ 751,630

Interest Coverage Ratio:
Interest expense                                $ 122,341          $ 123,142          $    121,173          $     124,851          $ 126,357          $ 142,007
Non-cash interest expense                          (3,972)            (2,991)               (1,739)                (3,973)            (1,914)            (8,125)
Capitalized interest                                4,862              4,496                 4,238                  3,947              4,541              4,746
Total interest                                    123,231            124,647               123,672                124,825            128,984            138,628
EBITDA                                          $ 406,762          $ 443,703          $    519,474          $     777,364          $ 553,177          $ 751,630
Interest coverage ratio                              3.30  x            3.56  x               4.20  x                6.23  x            4.29  x            5.42  x

Fixed Charge Coverage Ratio:
Total interest                                  $ 123,231          $ 124,647          $    123,672          $     124,825          $ 128,984          $ 138,628
Secured debt principal payments                    15,715             15,955                16,122                 15,876             15,183             15,526

Total fixed charges                               138,946            140,602               139,794                140,701            144,167            154,154
EBITDA                                          $ 406,762          $ 443,703          $    519,474          $     777,364          $ 553,177          $ 751,630
Fixed charge coverage ratio                          2.93  x            3.16  x               3.72  x                5.52  x            3.84  x            4.88  x



                                            Six Months Ended
                                       June 30,         June 30,
EBITDA Reconciliations:                  2021             2020
Net income (loss)                    $ 117,949       $   488,596
Interest expense                       245,483           268,364
Income tax expense (benefit)             1,722             7,675
Depreciation and amortization          485,311           540,172
EBITDA                               $ 850,465       $ 1,304,807

Interest Coverage Ratio:
Interest expense                     $ 245,483       $   268,364
Non-cash interest expense               (6,963)          (10,039)
Capitalized interest                     9,358             9,287
Total interest                         247,878           267,612
EBITDA                               $ 850,465       $ 1,304,807
Interest coverage ratio                   3.43  x           4.88  x

Fixed Charge Coverage Ratio:
Total interest                       $ 247,878       $   267,612
Secured debt principal payments         31,670            30,709

Total fixed charges                    279,548           298,321
EBITDA                               $ 850,465       $ 1,304,807
Fixed charge coverage ratio               3.04  x           4.37  x




                                       49
--------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The table below reflects the reconciliation of Adjusted EBITDA to net income,
the most directly comparable U.S. GAAP measure, for the periods presented.
Dollars are in thousands.
                                                                                                         Twelve Months Ended
                                                          June 30,            March 31,           December 31,         September 30,           June 30,            March 31,
Adjusted EBITDA Reconciliations:                            2021                 2021                 2020                 2020                  2020                 2020
Net income                                             $   668,205          

$ 781,664 $ 1,038,852 $ 1,123,710 $ 1,376,664

          $ 1,367,488
Interest expense                                           491,507              495,523              514,388               524,863              537,355              552,334
Income tax expense (benefit)                                 4,015                8,469                9,968                 4,846                6,811                6,177
Depreciation and amortization                              983,576            1,008,062            1,038,437             1,058,348            1,075,261            1,057,942
EBITDA                                                   2,147,303            2,293,718            2,601,645             2,711,767            2,996,091            2,983,941
Loss (income) from unconsolidated entities                     650               (8,658)               8,083               (49,079)             (58,322)             (47,941)
Stock-based compensation expense (1)                        24,278               26,811               28,318                25,485               24,229               24,601
Loss (gain) on extinguishment of debt, net                  97,769               42,406               47,049                35,865               68,685               68,436
Loss (gain) on real estate dispositions,
net                                                       (773,516)            (884,711)          (1,088,455)             (915,055)          (1,001,001)            (843,456)
Impairment of assets                                        79,890              131,349              135,608               126,389              121,172               55,960
Provision for loan losses                                   93,522               88,747               94,436                11,351                8,494                7,072
Loss (gain) on derivatives and financial
instruments, net                                             3,539                5,332               11,049                 5,411                5,260                5,739
Other expenses (1)                                          60,985               68,939               64,171                52,630               46,971               48,327
Other impairment (2)                                       161,639              163,481              146,508               146,508               34,110               32,268

Adjusted EBITDA                                        $ 1,896,059         

$ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689

$ 2,334,947


Adjusted Interest Coverage Ratio:
Interest expense                                       $   491,507          $   495,523          $   514,388          $    524,863          $   537,355          $   552,334
Capitalized interest                                        17,543               17,222               17,472                18,102               18,303               17,691
Non-cash interest expense                                  (12,675)             (10,617)             (15,751)              (14,746)             (12,761)             (11,599)
Total interest                                             496,375              502,128              516,109               528,219              542,897              558,426
Adjusted EBITDA                                        $ 1,896,059          

$ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689

          $ 2,334,947
Adjusted interest coverage ratio                              3.82  x              3.84  x              3.97  x               4.07  x              4.14  x              4.18  x

Adjusted Fixed Charge Coverage Ratio:
Total interest                                         $   496,375          

$ 502,128 $ 516,109 $ 528,219 $ 542,897

          $   558,426
Secured debt principal payments                             63,668               63,136               62,707                60,562               57,807               56,308

Total fixed charges                                        560,043              565,264              578,816               588,781              600,704              614,734
Adjusted EBITDA                                        $ 1,896,059         

$ 1,927,414 $ 2,048,412 $ 2,151,272 $ 2,245,689

          $ 2,334,947
Adjusted fixed charge coverage ratio                          3.39  x              3.41  x              3.54  x               3.65  x              3.74  x              3.80  x

(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses. (2) Represents reserve for straight-line rent receivable balances relating to leases placed on cash recognition.




Our leverage ratios include book capitalization, undepreciated book
capitalization and market capitalization. Book capitalization represents the sum
of net debt (defined as total long-term debt less cash and cash equivalents and
any IRC 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.
                                       50

--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                                                                                                    As of
                                                           June 30,              March 31,           December 31,          September 30,           June 30,              March 31,
                                                             2021                  2021                  2020                  2020                  2020                  2020
Book capitalization:
Unsecured credit facility and commercial
paper                                                   $          -        

$ - $ - $ - $

    -          $    844,985
Long-term debt obligations (1)                            13,572,816            14,618,713            13,905,822            13,889,030            14,543,485            13,228,433
Cash and cash equivalents (2)                               (763,921)           (2,513,156)           (1,968,765)           (2,096,571)           (1,766,819)             (303,423)
Total net debt                                            12,808,895            12,105,557            11,937,057            11,792,459            12,776,666            13,769,995
Total equity and noncontrolling
interests(3)                                              17,243,208            17,046,932            17,225,062            17,291,155            17,263,672            17,495,696
Book capitalization                                     $ 30,052,103        

$ 29,152,489 $ 29,162,119 $ 29,083,614 $ 30,040,338 $ 31,265,691 Net debt to book capitalization ratio

                             43  %                 42  %                 41  %                 41  %                 43  %                 44  %

Undepreciated book capitalization:
Total net debt                                          $ 12,808,895        

$ 12,105,557 $ 11,937,057 $ 11,792,459 $ 12,776,666 $ 13,769,995 Accumulated depreciation and amortization

                  6,415,676             6,212,432             6,104,297             6,002,775             6,001,177             5,910,979
Total equity and noncontrolling
interests(3)                                              17,243,208            17,046,932            17,225,062            17,291,155            17,263,672            17,495,696
Undepreciated book capitalization                       $ 36,467,779          $ 35,364,921          $ 35,266,416          $ 35,086,389          $ 36,041,515          $ 37,176,670
Net debt to undepreciated book
capitalization ratio                                              35  %                 34  %                 34  %                 34  %                 35  %                 37  %

Market capitalization:
Common shares outstanding                                    422,562               417,520               417,401               417,305               417,302               417,391
Period end share price                                  $      83.10        

$ 71.63 $ 64.62 $ 55.09 $ 51.75 $ 45.78 Common equity market capitalization

                     $ 35,114,902          $ 29,906,958          $ 26,972,453          $ 22,989,332          $ 21,595,379          $ 19,108,160
Total net debt                                            12,808,895            12,105,557            11,937,057            11,792,459            12,776,666            13,769,995
Noncontrolling interests(3)                                1,322,762             1,248,054             1,252,343             1,183,281             1,215,532             1,362,913
Market capitalization                                   $ 49,246,559        

$ 43,260,569 $ 40,161,853 $ 35,965,072 $ 35,587,577 $ 34,241,068 Net debt to market capitalization ratio

                           26  %                 28  %                 30  %                 33  %                 36  %                 40  %

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




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, 2020 for further information regarding
significant accounting policies that impact us. There have been no material
changes to these policies in 2021.
                                       51
--------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. When Welltower
uses words such as "may," "will," "intend," "should," "believe," "expect,"
"anticipate," "project," "pro forma," "estimate" or similar expressions that do
not relate solely to historical matters, Welltower is making forward-looking
statements. Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties that may cause Welltower's actual results to
differ materially from Welltower's expectations discussed in the forward-looking
statements. This may be a result of various factors, including, but not limited
to: the duration and scope of the COVID-19 pandemic; uncertainty regarding the
implementation and impact of the CARES Act and future stimulus or other COVID-19
relief legislation; the impact of the COVID-19 pandemic on occupancy rates and
on the operations of Welltower and its operators/tenants; actions governments
take in response to the COVID-19 pandemic, including the introduction of public
health measures and other regulations affecting Welltower's properties and the
operations of Welltower and its operators/tenants; the effects of health and
safety measures adopted by Welltower and its operators/tenants related to
the COVID-19 pandemic; increased operational costs as a result of health and
safety measures related to COVID-19; the impact of the COVID-19 pandemic on the
business and financial condition of operators/tenants and their ability to make
payments to Welltower; disruptions to Welltower's property acquisition and
disposition activity due to economic uncertainty caused by COVID-19; general
economic uncertainty in key markets as a result of the COVID-19 pandemic and a
worsening of global economic conditions or low levels of economic growth; 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; Welltower's ability to transition or
sell properties with profitable results; the failure to make new investments or
acquisitions as and when anticipated; natural disasters and other acts of God
affecting Welltower's properties; Welltower's ability to re-lease space at
similar rates as vacancies occur; Welltower's ability to timely reinvest sale
proceeds at similar rates to assets sold; operator/tenant or joint venture
partner bankruptcies or insolvencies; the cooperation of joint venture partners;
government regulations affecting Medicare and Medicaid reimbursement rates and
operational requirements; liability or contract claims by or against
operators/tenants; unanticipated difficulties and/or expenditures relating to
future investments or acquisitions; environmental laws affecting Welltower's
properties; changes in rules or practices governing Welltower's financial
reporting; the movement of U.S. and foreign currency exchange rates; Welltower's
ability to maintain Welltower's qualification as a REIT; key management
personnel recruitment and retention; and other risks described in Welltower's
reports filed from time to time with the SEC. Other important factors are
identified in the Company's Annual Report on Form 10-K for the year ended
December 31, 2020, 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 undertakes no obligation to
update or revise publicly any forward-looking statements, whether because of new
information, future events or otherwise, or to update the reasons why actual
results could differ from those projected in any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including the potential loss arising
from adverse changes in interest rates and foreign currency exchange rates. We
seek to mitigate the underlying foreign currency exposures with gains and losses
on derivative contracts hedging these exposures. We seek to mitigate the effects
of fluctuations in interest rates by matching the terms of new investments with
new long-term fixed rate borrowings to the extent possible. We may or may not
elect to use financial derivative instruments to hedge interest rate exposure.
These decisions are principally based on our policy to match our variable rate
investments with comparable borrowings, but are also based on the general trend
in interest rates at the applicable dates and our perception of the future
volatility of interest rates. This section is presented to provide a discussion
of the risks associated with potential fluctuations in interest rates and
foreign currency exchange rates.
We historically borrow on our unsecured revolving credit facility and commercial
paper program to acquire, construct or make loans relating to health care and
seniors housing properties. Then, as market conditions dictate, we will issue
equity or long-term fixed rate debt to repay the borrowings under our unsecured
revolving credit facility and commercial paper program. We are subject to risks
associated with debt financing, including the risk that existing indebtedness
may not be refinanced or that the terms of refinancing may not be as favorable
as the terms of current indebtedness. The majority of our borrowings were
completed under indentures or contractual agreements that limit the amount of
indebtedness we may incur. Accordingly, in the event that we are unable to raise
additional equity or borrow money because of these limitations, our ability to
acquire additional properties may be limited.

                                       52

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