WELLTOWER INC. - Interim / Quarterly Report 2019

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2019

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

For the transition period from to

Commission file number: 1-8923

WELLTOWER INC.

(Exact name of registrant as specified in its charter )

Delaware — (State or other jurisdiction of Incorporation)			34-1096634 — (IRS Employer Identification No.)
4500 Dorr Street	Toledo,	Ohio	43615
(Address of principal executive offices)			(Zip Code)
(419)			247-2800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

Large accelerated filer
(Do not check if a smaller reporting company)

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

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

As of October 21, 2019 , the registrant had 405,799,597 shares of common stock outstanding.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets	3
Consolidated Statements of Comprehensive Income	4
Consolidated Statements of Equity	6
Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	50
Item 4. Controls and Procedures	51
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	52
Item 1A. Risk Factors	52
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 5. Other Information	52
Item 6. Exhibits	53
Signatures	53

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

	September 30, 2019 (Unaudited)		December 31, 2018 (Note)
Assets:
Real estate investments:
Real property owned:
Land and land improvements	$ 3,370,841		$ 3,205,091
Buildings and improvements	28,798,241		28,019,502
Acquired lease intangibles	1,604,982		1,581,159
Real property held for sale, net of accumulated depreciation	336,649		590,271
Construction in progress	466,286		194,365
Less accumulated depreciation and amortization	( 5,769,843	)	( 5,499,958	)
Net real property owned	28,807,156		28,090,430
Right of use assets, net	536,689		—
Real estate loans receivable, net of allowance	361,530		330,339
Net real estate investments	29,705,375		28,420,769
Other assets:
Investments in unconsolidated entities	556,854		482,914
Goodwill	68,321		68,321
Cash and cash equivalents	265,788		215,376
Restricted cash	64,947		100,753
Straight-line rent receivable	432,616		367,093
Receivables and other assets	770,054		686,846
Total other assets	2,158,580		1,921,303
Total assets	$ 31,863,955		$ 30,342,072
Liabilities and equity
Liabilities:
Unsecured credit facility and commercial paper	$ 1,334,586		$ 1,147,000
Senior unsecured notes	9,730,047		9,603,299
Secured debt	2,623,010		2,476,177
Lease liabilities	454,538		70,668
Accrued expenses and other liabilities	1,025,704		1,034,283
Total liabilities	15,167,885		14,331,427
Redeemable noncontrolling interests	470,341		424,046
Equity:
Preferred stock	—		718,498
Common stock	406,498		384,465
Capital in excess of par value	19,796,676		18,424,368
Treasury stock	( 78,843	)	( 68,499	)
Cumulative net income	7,129,642		6,121,534
Cumulative dividends	( 11,870,244	)	( 10,818,557	)
Accumulated other comprehensive income (loss)	( 117,676	)	( 129,769	)
Other equity	12		294
Total Welltower Inc. stockholders’ equity	15,266,065		14,632,334
Noncontrolling interests	959,664		954,265
Total equity	16,225,729		15,586,599
Total liabilities and equity	$ 31,863,955		$ 30,342,072

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues:
Resident fees and services	$ 834,121		$ 875,171		$ 2,616,491		$ 2,374,450
Rental income	412,147		342,887		1,178,817		1,019,857
Interest income	15,637		14,622		48,112		42,732
Other income	4,228		3,699		15,064		22,217
Total revenues	1,266,133		1,236,379		3,858,484		3,459,256
Expenses:
Property operating expenses	655,588		657,157		2,027,522		1,782,373
Depreciation and amortization	272,445		243,149		764,429		707,625
Interest expense	137,343		138,032		423,911		382,223
General and administrative expenses	31,019		28,746		100,042		95,282
Loss (gain) on derivatives and financial instruments, net	1,244		8,991		670		( 5,642	)
Loss (gain) on extinguishment of debt, net	65,824		4,038		81,543		16,044
Provision for loan losses	—		—		18,690		—
Impairment of assets	18,096		6,740		28,035		39,557
Other expenses	6,186		88,626		36,570		102,396
Total expenses	1,187,745		1,175,479		3,481,412		3,119,858
Income (loss) from continuing operations before income taxes and other items	78,388		60,900		377,072		339,398
Income tax (expense) benefit	( 3,968	)	( 1,741	)	( 7,789	)	( 7,170	)
Income (loss) from unconsolidated entities	3,262		344		( 14,986	)	( 836	)
Gain (loss) on real estate dispositions, net	570,250		24,723		735,977		373,662
Income (loss) from continuing operations	647,932		84,226		1,090,274		705,054
Net income	647,932		84,226		1,090,274		705,054
Less: Preferred stock dividends	—		11,676		—		35,028
Less: Net income (loss) attributable to noncontrolling interests (1)	58,056		8,166		82,166		13,539
Net income (loss) attributable to common stockholders	$ 589,876		$ 64,384		$ 1,008,108		$ 656,487
Average number of common shares outstanding:
Basic	405,023		373,023		400,441		372,052
Diluted	406,891		374,487		402,412		373,638
Earnings per share:
Basic:
Income (loss) from continuing operations	$ 1.60		$ 0.23		$ 2.72		$ 1.90
Net income (loss) attributable to common stockholders	$ 1.46		$ 0.17		$ 2.52		$ 1.76
Diluted:
Income (loss) from continuing operations	$ 1.59		$ 0.22		$ 2.71		$ 1.89
Net income (loss) attributable to common stockholders	$ 1.45		$ 0.17		$ 2.51		$ 1.76
Dividends declared and paid per common share	$ 0.87		$ 0.87		$ 2.61		$ 2.61

(1) Includes amounts attributable to redeemable noncontrolling interests.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income	$ 647,932		$ 84,226		$ 1,090,274		$ 705,054
Other comprehensive income (loss):
Foreign currency translation gain (loss)	( 100,837	)	( 15,293	)	( 76,241	)	( 137,095	)
Derivative instruments gain (loss)	78,947		12,200		91,672		100,205
Total other comprehensive income (loss)	( 21,890	)	( 3,093	)	15,431		( 36,890	)
Total comprehensive income (loss)	626,042		81,133		1,105,705		668,164
Less: Total comprehensive income (loss) attributable to noncontrolling interests (1)	53,220		10,933		85,504		3,675
Total comprehensive income (loss) attributable to common stockholders	$ 572,822		$ 70,200		$ 1,020,201		$ 664,489
(1) Includes amounts attributable to redeemable noncontrolling interests.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Balances at December 31, 2018	Preferred Stock — $ 718,498		Common Stock — $ 384,465	Capital in Excess of Par Value — $ 18,424,368	$ ( 68,499	)	Cumulative Net Income — $ 6,121,534	Cumulative Dividends — $ ( 10,818,557	)	Accumulated Other Comprehensive Income (Loss) — $ ( 129,769	)	Other Equity — $ 294	$ 954,265		Total — $ 15,586,599
Comprehensive income:
Net income (loss)							280,470						10,785		291,255
Other comprehensive income										( 14,849	)		5,787		( 9,062	)
Total comprehensive income															282,193
Net change in noncontrolling interests				( 8,845	)								( 1,497	)	( 10,342	)
Amounts related to stock incentive plans, net of forfeitures			120	7,420	( 5,993	)						( 26	)		1,521
Proceeds from issuance of common stock			7,212	525,408											532,620
Conversion of preferred stock	( 718,498	)	12,712	705,786											—
Dividends paid:
Common stock dividends								( 344,760	)						( 344,760	)
Balances at March 31, 2019	$ —		$ 404,509	$ 19,654,137	$ ( 74,492	)	$ 6,402,004	$ ( 11,163,317	)	$ ( 144,618	)	$ 268	$ 969,340		$ 16,047,831
Comprehensive income:
Net income (loss)							137,762						11,349		149,111
Other comprehensive income										43,996			2,387		46,383
Total comprehensive income															195,494
Net change in noncontrolling interests				( 23,672	)								( 7,959	)	( 31,631	)
Amounts related to stock incentive plans, net of forfeitures			18	7,959	450							( 80	)		8,347
Proceeds from issuance of common stock			1,487	101,721											103,208
Dividends paid:
Common stock dividends								( 353,677	)						( 353,677	)
Balances at June 30, 2019	$ —		$ 406,014	$ 19,740,145	$ ( 74,042	)	$ 6,539,766	$ ( 11,516,994	)	$ ( 100,622	)	$ 188	$ 975,117		$ 15,969,572
Comprehensive income:
Net income (loss)							589,876						29,948		619,824
Other comprehensive income										( 17,054	)		( 4,836	)	( 21,890	)
Total comprehensive income															597,934
Net change in noncontrolling interests				13,038									( 40,565	)	( 27,527	)
Amounts related to stock incentive plans, net of forfeitures			4	5,100	( 4,801	)						( 176	)		127
Proceeds from issuance of common stock			480	38,393											38,873
Dividends paid:
Common stock dividends								( 353,250	)						( 353,250	)
Balances at September 30, 2019	$ —		$ 406,498	$ 19,796,676	$ ( 78,843	)	$ 7,129,642	$ ( 11,870,244	)	$ ( 117,676	)	$ 12	$ 959,664		$ 16,225,729

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

Balances at December 31, 2017	Preferred Stock — $ 718,503	$ 372,449	Capital in Excess of Par Value — $ 17,662,681	$ ( 64,559	)	Cumulative Net Income — $ 5,316,580	Cumulative Dividends — $ ( 9,471,712	)	Accumulated Other Comprehensive Income (Loss) — $ ( 111,465	)	Other Equity — $ 670	$ 502,305		Total — $ 14,925,452
Comprehensive income:
Net income (loss)						449,347						5,191		454,538
Other comprehensive income									20,212			( 3,886	)	16,326
Total comprehensive income														470,864
Net change in noncontrolling interests			( 13,157	)								( 2,719	)	( 15,876	)
Amounts related to stock incentive plans, net of forfeitures		150	11,085	( 4,137	)									7,098
Proceeds from issuance of common stock		130	7,060											7,190
Conversion of preferred stock	( 5	)	5											—
Dividends paid:
Common stock dividends							( 323,726	)						( 323,726	)
Preferred stock dividends							( 11,676	)						( 11,676	)
Balances at March 31, 2018	$ 718,498	$ 372,729	$ 17,667,674	$ ( 68,696	)	$ 5,765,927	$ ( 9,807,114	)	$ ( 91,253	)	$ 670	$ 500,891		$ 15,059,326
Comprehensive income:
Net income (loss)						166,108						2,355		168,463
Other comprehensive income									( 41,378	)		( 8,745	)	( 50,123	)
Total comprehensive income														118,340
Net change in noncontrolling interests			( 14,822	)								( 35,937	)	( 50,759	)
Amounts related to stock incentive plans, net of forfeitures		18	5,801	35							( 11	)		5,843
Proceeds from issuance of common stock		54	2,731											2,785
Dividends paid:
Common stock dividends							( 323,372	)						( 323,372	)
Preferred stock dividends							( 11,676	)						( 11,676	)
Balances at June 30, 2018	$ 718,498	$ 372,801	$ 17,661,384	$ ( 68,661	)	$ 5,932,035	$ ( 10,142,162	)	$ ( 132,631	)	$ 659	$ 458,564		$ 14,800,487
Comprehensive income:
Net income (loss)						76,060						7,847		83,907
Other comprehensive income									( 5,860	)		2,767		( 3,093	)
Total comprehensive income														80,814
Net change in noncontrolling interests			( 6,160	)								492,338		486,178
Amounts related to stock incentive plans, net of forfeitures		4	6,241	( 92	)						( 170	)		5,983
Proceeds from issuance of common stock		3,548	228,049											231,597
Dividends paid:
Common stock dividends							( 324,182	)						( 324,182	)
Preferred stock dividends							( 11,676	)						( 11,676	)
Balances at September 30, 2018	$ 718,498	$ 376,353	$ 17,889,514	$ ( 68,753	)	$ 6,008,095	$ ( 10,478,020	)	$ ( 138,491	)	$ 489	$ 961,516		$ 15,269,201

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

	Nine Months Ended
	September 30,
	2019		2018
Operating activities:
Net income	$ 1,090,274		$ 705,054
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization	764,429		707,625
Other amortization expenses	13,474		12,110
Provision for loan losses	18,690		—
Impairment of assets	28,035		39,557
Stock-based compensation expense	20,501		22,800
Loss (gain) on derivatives and financial instruments, net	670		( 5,642	)
Loss (gain) on extinguishment of debt, net	81,543		16,044
Loss (income) from unconsolidated entities	14,986		836
Rental income less than (in excess of) cash received	( 78,980	)	( 7,830	)
Amortization related to above (below) market leases, net	( 335	)	1,984
Loss (gain) on real estate dispositions, net	( 735,977	)	( 373,662	)
Distributions by unconsolidated entities	—		21
Increase (decrease) in accrued expenses and other liabilities	845		103,474
Decrease (increase) in receivables and other assets	( 8,255	)	( 11,223	)
Net cash provided from (used in) operating activities	1,209,900		1,211,148
Investing activities:
Cash disbursed for acquisitions	( 3,004,768	)	( 3,190,534	)
Cash disbursed for capital improvements to existing properties	( 206,413	)	( 173,635	)
Cash disbursed for construction in progress	( 258,113	)	( 88,146	)
Capitalized interest	( 10,404	)	( 6,357	)
Investment in real estate loans receivable	( 82,345	)	( 67,136	)
Principal collected on real estate loans receivable	32,130		149,592
Other investments, net of payments	( 13,304	)	( 49,572	)
Contributions to unconsolidated entities	( 194,490	)	( 42,697	)
Distributions by unconsolidated entities	98,880		61,253
Proceeds from (payments on) derivatives	( 20,569	)	65,438
Proceeds from sales of real property	2,601,071		1,208,501
Net cash provided from (used in) investing activities	( 1,058,325	)	( 2,133,293	)
Financing activities:
Net increase (decrease) in unsecured credit facility and commercial paper	187,586		593,000
Proceeds from issuance of senior unsecured notes	3,253,516		2,825,898
Payments to extinguish senior unsecured notes	( 3,107,500	)	( 1,450,000	)
Net proceeds from the issuance of secured debt	318,854		44,606
Payments on secured debt	( 233,952	)	( 238,867	)
Net proceeds from the issuance of common stock	686,105		242,411
Payments for deferred financing costs and prepayment penalties	( 82,249	)	( 29,701	)
Contributions by noncontrolling interests (1)	42,988		11,238
Distributions to noncontrolling interests (1)	( 138,270	)	( 86,462	)
Cash distributions to stockholders	( 1,047,968	)	( 1,006,274	)
Other financing activities	( 11,643	)	( 6,290	)
Net cash provided from (used in) financing activities	( 132,533	)	899,559
Effect of foreign currency translation on cash, cash equivalents and restricted cash	( 4,436	)	( 5,432	)
Increase (decrease) in cash, cash equivalents and restricted cash	14,606		( 28,018	)
Cash, cash equivalents and restricted cash at beginning of period	316,129		309,303
Cash, cash equivalents and restricted cash at end of period	$ 330,735		$ 281,285
Supplemental cash flow information:
Interest paid	$ 416,523		$ 312,452
Income taxes paid (received), net	4,784		3,195
(1) Includes amounts attributable to redeemable noncontrolling interests.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Welltower Inc. (the "Company"), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company 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.

2. Accounting Policies and Related Matters

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (such as normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2019 are not necessarily an indication of the results that may be expected for the year ending December 31, 2019. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 .

New Accounting Standards

• We adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASC 842") which requires lessees to recognize assets and liabilities on their consolidated balance sheet related to the rights and obligations created by most leases, while continuing to recognize expenses on their consolidated statement of comprehensive income over the lease term. We adopted ASC 842 as of January 1, 2019, using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits us to carry forward our prior conclusions for lease classification and initial direct costs on existing leases. We also made an accounting policy election to keep short-term leases less than twelve months off the balance sheet for all classes of underlying assets.

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

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

For leases in which the Company is the lessee, primarily consisting of ground leases and various office and equipment leases, we recognized upon adoption a right of use asset of $ 509,386,000 which included the present value of minimum leases payments, existing above and/or below market lease intangible values and existing straight-line rent liabilities

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

associated with such leases. We also recognized operating lease liabilities of $ 357,070,000 . The standard did not materially impact our Consolidated Statements of Comprehensive Income or our Consolidated Statement of Cash Flows. See Note 6 for additional details.

The following ASU has been issued but not yet adopted:

• In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under the new leases standard from the scope of the new credit losses standard. ASU 2016-13 is effective for the Company on January 1, 2020, with early adoption permitted beginning January 1, 2019. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

3. Real Property Acquisitions and Development

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

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

	Nine Months Ended
	September 30, 2019								September 30, 2018
	Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$ 107,945		$ 14,172		$ 187,301		$ 309,418		$ 47,865		$ 413,588		$ 18,496		$ 479,949
Buildings and improvements	1,138,484		125,763		1,324,371		2,588,618		535,436		2,239,422		79,205		2,854,063
Acquired lease intangibles	61,163		—		104,309		165,472		68,084		12,383		11,271		91,738
Construction in progress	36,174		—		—		36,174		—		—		—		—
Real property held for sale	17,435		—		—		17,435		—		396,265		22,032		418,297
Right of use assets, net	—		—		58,377		58,377		—		—		—		—
Receivables and other assets	6,742		—		419		7,161		1,255		1,322		6		2,583
Total assets acquired (1)	1,367,943		139,935		1,674,777		3,182,655		652,640		3,062,980		131,010		3,846,630
Secured debt	( 43,209	)	—		—		( 43,209	)	( 89,973	)	—		( 14,769	)	( 104,742	)
Lease liabilities	—		—		( 47,740	)	( 47,740	)	—		—		—		—
Accrued expenses and other liabilities	( 9,639	)	( 100	)	( 23,483	)	( 33,222	)	( 14,686	)	( 13,199	)	( 910	)	( 28,795	)
Total liabilities acquired	( 52,848	)	( 100	)	( 71,223	)	( 124,171	)	( 104,659	)	( 13,199	)	( 15,679	)	( 133,537	)
Noncontrolling interests (2)	( 39,570	)	( 1,056	)	( 1,201	)	( 41,827	)	( 9,818	)	( 512,741	)	—		( 522,559	)
Non-cash acquisition related activity (3)	( 11,889	)	—		—		( 11,889	)	—		—		—		—
Cash disbursed for acquisitions	1,263,636		138,779		1,602,353		3,004,768		538,163		2,537,040		115,331		3,190,534
Construction in progress additions	184,581		37,649		42,316		264,546		28,222		49,619		16,733		94,574
Less: Capitalized interest	( 5,972	)	( 1,565	)	( 2,867	)	( 10,404	)	( 2,608	)	( 1,932	)	( 1,817	)	( 6,357	)
Foreign currency translation	3,597		329		—		3,926		2,151		180		—		2,331
Accruals (4)	—		—		45		45		—		—		( 2,402	)	( 2,402	)
Cash disbursed for construction in progress	182,206		36,413		39,494		258,113		27,765		47,867		12,514		88,146
Capital improvements to existing properties	160,260		10,337		35,816		206,413		127,274		6,766		39,595		173,635
Total cash invested in real property, net of cash acquired	$ 1,606,102		$ 185,529		$ 1,677,663		$ 3,469,294		$ 693,202		$ 2,591,673		$ 167,440		$ 3,452,315

(1) Excludes $ 1,910,000 and $ 391,580,000 of unrestricted and restricted cash acquired during the nine months ended September 30, 2019 and 2018 , respectively.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests.

(3) Relates to the acquisition of assets previously recognized as investments in unconsolidated entities.

(4) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Construction Activity

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

	Nine Months Ended — September 30, 2019	September 30, 2018
Development projects:
Seniors Housing Operating	$ 28,117	$ 86,931
Triple-net	—	90,055
Outpatient Medical	—	11,358
Total development projects	28,117	188,344
Expansion projects	—	8,879
Total construction in progress conversions	$ 28,117	$ 197,223

4. Real Estate Intangibles

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

	September 30, 2019		December 31, 2018
Assets:
In place lease intangibles	$ 1,486,255		$ 1,410,725
Above market tenant leases	69,770		63,935
Below market ground leases (1)	—		64,513
Lease commissions	48,957		41,986
Gross historical cost	1,604,982		1,581,159
Accumulated amortization	( 1,206,227	)	( 1,197,336	)
Net book value	$ 398,755		$ 383,823
Weighted-average amortization period in years	9.5		16.0
Liabilities:
Below market tenant leases	$ 94,581		$ 81,676
Above market ground leases (1)	—		8,540
Gross historical cost	94,581		90,216
Accumulated amortization	( 47,521	)	( 44,266	)
Net book value	$ 47,060		$ 45,950
Weighted-average amortization period in years	8.2		14.7

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

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

	Three Months Ended September 30, — 2019		2018		Nine Months Ended September 30, — 2019		2018
Rental income related to (above)/below market tenant leases, net	$ 291		$ ( 294	)	$ 210		$ ( 978	)
Amortization related to in place lease intangibles and lease commissions	( 48,414	)	( 31,455	)	( 101,837	)	( 97,479	)

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

	Assets	Liabilities
2019	$ 37,833	$ 2,390
2020	103,599	8,868
2021	53,156	7,899
2022	36,057	7,163
2023	29,858	5,031
Thereafter	138,252	15,709
Total	$ 398,755	$ 47,060

5. Dispositions and Assets Held for Sale

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (i.e., property type, relationship or geography). During three months ended September 30, 2019 , we disposed of our Benchmark Senior Living portfolio for a gross sale price of $ 1.8 billion and a gain on sale of $ 520 million. Proceeds were used to extinguish the $ 1 billion unsecured term loan and $ 24 million of secured debt.

At September 30, 2019 , 12 Seniors Housing Operating, eight Triple-net, and five Outpatient Medical properties with an aggregate real estate balance of $ 336,649,000 were classified as held for sale. In addition, secured debt of $ 24,338,000 and net other assets and liabilities of $ 7,608,000 related to the held for sale properties. During the nine months ended September 30, 2019 , we recorded net impairment charges of $ 13,121,000 related to certain held for sale properties for which the carrying value exceeded the fair values, less estimated costs to sell, and $ 14,914,000 related to five held for use properties for which the carrying value exceeded the sum of the future undiscounted cash flows. The following is a summary of our real property disposition activity for the periods presented (in thousands):

	Nine Months Ended September 30, — 2019		2018
Real estate dispositions:
Seniors Housing Operating	$ 1,204,084		$ 2,200
Triple-net	660,885		604,480
Outpatient Medical	482		223,069
Total dispositions	1,865,451		829,749
Gain (loss) on real estate dispositions, net	735,977		373,662
Net other assets/liabilities disposed	( 357	)	5,090
Proceeds from real estate dispositions	$ 2,601,071		$ 1,208,501

Dispositions and Assets Held for Sale

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

	Three Months Ended September 30, — 2019	2018	Nine Months Ended September 30, — 2019	2018
Revenues:
Total revenues	$ 37,431	$ 126,386	$ 271,119	$ 381,440
Expenses:
Interest expense	455	643	1,716	2,144
Property operating expenses	22,576	79,989	172,738	233,858
Provision for depreciation	188	16,556	25,563	55,341
Total expenses	23,219	97,188	200,017	291,343
Income (loss) from real estate dispositions, net	$ 14,212	$ 29,198	$ 71,102	$ 90,097

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Leases

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

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

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

	Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$ 3,647		$ 18,326
Non-real estate lease expense	General and administrative expenses	516		1,286
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,304		6,549
Interest on lease liabilities	Interest expense	1,328		3,497
Sublease income	Rental income	( 1,043	)	( 3,130	)
Total		$ 6,752		$ 26,528

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

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

2019	Operating Leases — $ 5,040		Finance Leases — $ 2,511
2020	19,873		9,121
2021	19,781		8,787
2022	18,594		8,161
2023	18,559		69,244
Thereafter	1,107,479		94,590
Total lease payments	1,189,326		192,414
Less: Imputed interest	( 845,411	)	( 81,791	)
Total present value of lease liabilities	$ 343,915		$ 110,623

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases was as follows as of September 30, 2019 (in thousands, except lease terms and discount rate):

	Classification	September 30, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$ 372,831
Finance leases - real estate	Right of use assets, net	163,858
Real estate right of use assets, net		536,689
Operating leases - corporate	Receivables and other assets	4,711
Total right of use assets, net		$ 541,400
Lease liabilities:
Operating leases		$ 343,915
Financing leases		110,623
Total		$ 454,538
Weighted average remaining lease term (years):
Operating leases		48.0
Finance leases		16.3
Weighted average discount rate:
Operating leases		5.19 %
Finance leases		5.17 %

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

	Classification	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$ 4,858
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	( 4,949	)
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	8,241
Financing cash flows from finance leases	Other financing activities	( 2,487	)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our Outpatient Medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $ 1,178,817,000 of rental and other revenues related to operating leases, of which $ 147,815,000 was for variable lease payments, for the nine months ended September 30, 2019 , which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. The following table sets forth the future minimum lease payments receivable for leases in effect at September 30, 2019 (excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):

2019	$
2020	1,356,086
2021	1,324,256
2022	1,296,077
2023	1,239,804
Thereafter	9,576,700
Totals	$ 15,137,081

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. Real Estate Loans Receivable

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

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

Mortgage loans	September 30, 2019 — $ 320,989		December 31, 2018 — $ 317,443
Other real estate loans	108,913		81,268
Less allowance for losses on loans receivable	( 68,372	)	( 68,372	)
Totals	$ 361,530		$ 330,339

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


September 30, 2019				September 30, 2018
	Triple-net	Outpatient Medical	Totals	Seniors Housing Operating	Triple-net		Outpatient Medical	Totals
Advances on real estate loans receivable:
Investments in new loans	$ 25,000	$ 5,000	$ 30,000	$ 11,806	$ 10,628		$ 14,993	$ 37,427
Draws on existing loans	33,955	18,390	52,345	—	29,709		—	29,709
Net cash advances on real estate loans	58,955	23,390	82,345	11,806	40,337		14,993	67,136
Receipts on real estate loans receivable:
Loan payoffs	29,020	—	29,020	—	116,161		—	116,161
Principal payments on loans	3,110	—	3,110	—	33,431		—	33,431
Net cash receipts on real estate loans	32,130	—	32,130	—	149,592		—	149,592
Net cash advances (receipts) on real estate loans	$ 26,825	$ 23,390	$ 50,215	$ 11,806	$ ( 109,255	)	$ 14,993	$ ( 82,456	)

In 2016, we restructured real estate loans with Genesis HealthCare and recorded a loan loss charge in the amount of $ 6,935,000 on one of the loans as the present value of expected future cash flows was less than the carrying value of the loan. In 2017, we recorded an additional loan loss charge of $ 62,966,000 relating to real estate loans with Genesis HealthCare based on an estimation of expected future cash flows discounted at the effective interest rate of the loans. In March 2019, we recognized a provision for loan losses of $ 18,690,000 to fully reserve for certain Triple-net real estate loans receivable that were no longer deemed collectible. During the quarter ended June 30, 2019, these loans were written off. As of September 30, 2019 , the allowance for loan loss balance of $ 68,372,000 is deemed to be sufficient to absorb expected losses. At September 30, 2019 , we had one real estate loan with an outstanding balance of $ 2,534,000 on non-accrual status.

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

	Nine Months Ended — September 30, 2019	September 30, 2018
Balance of impaired loans at end of period	$ 188,043	$ 201,971
Allowance for loan losses	68,372	68,372
Balance of impaired loans not reserved	$ 119,671	$ 133,599
Average impaired loans for the period	$ 194,298	$ 230,645
Interest recognized on impaired loans (1)	12,082	13,361

(1) Represents cash interest recognized in the period since loans were identified as impaired.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Investments in Unconsolidated Entities

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

	Percentage Ownership (1)	September 30, 2019	December 31, 2018
Seniors Housing Operating	10% to 50%	$ 409,522	$ 344,982
Triple-net	10% to 49%	8,038	34,284
Outpatient Medical	43% to 50%	139,294	103,648
Total		$ 556,854	$ 482,914

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

At September 30, 2019 , the aggregate unamortized basis difference of our joint venture investments of $ 102,144,000 is primarily attributable to the difference between the amount for which we purchase our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the joint venture. This difference is being amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.

9. Credit Concentration

We use consolidated net operating income (“NOI”) as our credit concentration metric. See Note 18 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the nine months ended September 30, 2019 , excluding our share of NOI in unconsolidated entities (dollars in thousands):

	Number of	Total	Percent of
Concentration by relationship: (1,4)	Properties	NOI	NOI (2)
Sunrise Senior Living (3)	165	$ 257,372	14 %
ProMedica	218	161,313	9 %
Revera (3)	98	109,953	6 %
Genesis HealthCare	54	90,451	5 %
Belmont Village	21	59,763	3 %
Remaining portfolio	983	1,152,110	63 %
Totals	1,539	$ 1,830,962	100 %

(1) Genesis Healthcare and ProMedica are in our Triple-net segment. Sunrise Senior Living, Revera, and Belmont Village are in our Seniors Housing Operating segment.

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

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

(4) Excludes the Benchmark Senior Living portfolio which was disposed of in July 2019

10. Borrowings Under Credit Facilities and Commercial Paper Program

At September 30, 2019 , we had a primary unsecured credit facility with a consortium of 31 banks that includes a $ 3,000,000,000 unsecured revolving credit facility ( $ 500,000,000 outstanding at September 30, 2019 ), a $ 500,000,000 unsecured term credit facility and a $ 250,000,000 Canadian-denominated unsecured term credit facility. We have an option, through an accordion feature, to upsize the unsecured revolving credit facility and the $ 500,000,000 unsecured term credit facility by up to an additional $ 1,000,000,000 , in the aggregate, and the $ 250,000,000 Canadian-denominated unsecured term credit facility by up to an additional $ 250,000,000 . The primary unsecured credit facility also allows us to borrow up to $ 1,000,000,000 in alternate currencies ( none outstanding at September 30, 2019 ). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate ( 2.84 % at September 30, 2019). The applicable margin is based on our debt ratings and was 0.825 % at September 30, 2019 . In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on our debt ratings and was 0.15 % at September 30, 2019 . The term credit facilities mature on July 19, 2023 . The revolving credit facility is scheduled to mature on July 19, 2022 and can be extended for two successive terms of six months each at our option.

In January 2019, we established an unsecured commercial paper program (the "Commercial Paper Program"). Under the terms of the program, we may issue unsecured commercial paper notes with maturities that vary, but do not exceed 397 days from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of $ 1,000,000,000 . As of September 30,

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2019 , there was a balance of $ 834,586,000 outstanding on the Commercial Paper Program ( $ 835,000,000 in principal outstanding net of an unamortized discount of $ 414,000 ), which reduces the borrowing capacity on the unsecured revolving credit facility. The notes bear interest at various floating rates with a weighted average of 2.32 % as of September 30, 2019 and a weighted average maturity of eight days as of September 30, 2019 .

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

	Three Months Ended — September 30,		Nine Months Ended — September 30,
	2019	2018	2019	2018
Balance outstanding at quarter end	$ 1,335,000	$ 1,312,000	$ 1,335,000	$ 1,312,000
Maximum amount outstanding at any month end	$ 1,335,000	$ 2,148,000	$ 2,880,000	$ 2,148,000
Average amount outstanding (total of daily
principal balances divided by days in period)	$ 1,296,185	$ 1,519,000	$ 1,299,963	$ 819,516
Weighted average interest rate (actual interest
expense divided by average borrowings outstanding)	2.82 %	3.00 %	3.02 %	2.95 %

11. Senior Unsecured Notes and Secured Debt

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

	Senior Unsecured Notes (1,2)	Secured Debt (1,3)	Totals
2019	$ —	$ 256,322	$ 256,322
2020 (4)	226,501	160,897	387,398
2021	—	380,866	380,866
2022	10,000	353,548	363,548
2023 (5,6)	1,788,750	329,449	2,118,199
Thereafter (7,8)	7,792,025	1,157,933	8,949,958
Totals	$ 9,817,276	$ 2,639,015	$ 12,456,291

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

(2) Annual interest rates range from 2.79 % to 6.50 % .

(3) Annual interest rates range from 1.39 % to 12.00 % . Carrying value of the properties securing the debt totaled $ 5,922,479,000 at September 30, 2019 .

(4) Includes a $ 300,000,000 Canadian-denominated 3.35 % senior unsecured notes due 2020 (approximately $ 226,501,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2019 ).

(5) Includes a $ 250,000,000 Canadian-denominated unsecured term credit facility (approximately $ 188,750,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2019 ). The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.9 % ( 2.86 % at September 30, 2019 ).

(6) Includes a $ 500,000,000 unsecured term credit facility. The loan matures on July 19, 2023 and bears interest at LIBOR plus 0.9 % ( 2.96 % at September 30, 2019 ).

(7) Includes a £ 550,000,000 4.80 % senior unsecured notes due 2028 (approximately $ 676,775,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2019 ).

(8) Includes a £ 500,000,000 4.50 % senior unsecured notes due 2034 (approximately $ 615,250,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2019 ).

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

	Nine Months Ended
	September 30, 2019			September 30, 2018
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$ 9,699,984		4.48 %	$ 8,417,447		4.31 %
Debt issued	3,260,000		3.47 %	2,850,000		4.57 %
Debt extinguished	( 3,107,500	)	4.47 %	( 1,450,000	)	3.46 %
Foreign currency	( 35,208	)	4.35 %	( 63,751	)	4.30 %
Ending balance	$ 9,817,276		4.12 %	$ 9,753,696		4.45 %

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

	Nine Months Ended
	September 30, 2019			September 30, 2018
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$ 2,485,711		3.90 %	$ 2,618,408		3.76 %
Debt issued	318,854		3.51 %	44,606		3.38 %
Debt assumed	42,000		4.62 %	99,552		4.30 %
Debt extinguished	( 193,604	)	4.37 %	( 196,573	)	5.66 %
Principal payments	( 40,348	)	3.69 %	( 42,294	)	3.91 %
Foreign currency	26,402		3.20 %	( 43,944	)	3.29 %
Ending balance	$ 2,639,015		3.66 %	$ 2,479,755		3.79 %

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

12. Derivative Instruments

We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to our capital structure. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contracts, interest rate swaps, interest rate locks, and debt issued in foreign currencies to offset a portion of these risks.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

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

Cash Flow Hedges of Interest Rate Risk

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

Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to the consolidated statements of income.

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

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

During the nine months ended September 30, 2019 and 2018 , we settled certain net investment hedges generating cash proceeds of $ 6,716,000 and necessitating cash payments of $ 70,937,000 , respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.

Derivative Contracts Undesignated

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

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

	September 30, 2019			December 31, 2018
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	725,000		$	575,000
Denominated in Pounds Sterling	£	1,340,708		£	890,708
Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000		$	250,000
Denominated in Pounds Sterling	£	1,050,000		£	1,050,000
Interest rate swaps designated as cash flow hedges:
Denominated in U.S Dollars (1)	$	1,188,250		$	—
Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars	$	405,819		$	405,819
Forward purchase contracts denominated in Canadian Dollars	$	( 200,000	)	$	( 325,000	)
Forward sales contracts denominated in Canadian Dollars	$	237,000		$	405,000
Forward purchase contracts denominated in Pounds Sterling	£	( 125,000	)	£	( 350,000	)
Forward sales contracts denominated in Pounds Sterling	£	125,000		£	350,000

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

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

	Location	Three Months Ended September 30, — 2019	2018		Nine Months Ended September 30, — 2019		2018
Gain (loss) on derivative instruments designated as hedges recognized in income	Interest expense	$ 7,478	$ 4,185		$ 19,945		$ 8,008
Gain (loss) on derivative instruments not designated as hedges recognized in income	Interest expense	$ 600	$ ( 203	)	$ ( 2,065	)	$ 2,250
Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI	OCI	$ 78,947	$ 12,200		$ 91,672		$ 100,205

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13. Commitments and Contingencies

At September 30, 2019 , we had 14 outstanding letter of credit obligations totaling $ 50,418,000 and expiring between 2019 and 2024 . At September 30, 2019 , we had outstanding construction in progress of $ 466,286,000 and were committed to providing additional funds of approximately $ 460,810,000 to complete construction. Purchase obligations include contingent purchase obligations totaling $ 9,157,000 . These contingent purchase obligations relate to unfunded capital improvement obligations and contingent obligations on acquisitions. Rents due from the tenant are increased to reflect the additional investment in the property.

14. Stockholders’ Equity

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

	September 30, 2019	December 31, 2018
Preferred Stock:
Authorized shares	50,000,000	50,000,000
Issued shares	—	14,375,000
Outstanding shares	—	14,369,965
Common Stock, $1.00 par value:
Authorized shares	700,000,000	700,000,000
Issued shares	407,058,274	384,849,236
Outstanding shares	405,757,860	383,674,603

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

	Nine Months Ended
	September 30, 2019			September 30, 2018
			Weighted Avg.			Weighted Avg.
	Shares		Dividend Rate	Shares		Dividend Rate
Beginning balance	14,369,965		6.50 %	14,370,060		6.50 %
Shares converted	( 14,369,965	)	6.50 %	( 95	)	6.50 %
Ending balance	—		— %	14,369,965		6.50 %

During the nine months ended September 30, 2019 , we converted all of the outstanding Series I Preferred Stock. Each share was converted into 0.8857 shares of common stock.

Common Stock In February 2019, we entered into separate amended and restated equity distribution agreements whereby we can offer and sell up to $ 1,500,000,000 aggregate amount of our common stock ("Equity Shelf Program"). The Equity Shelf Program also allows us to enter into forward sale agreements. As of September 30, 2019 , we had $ 1,333,682,000 of remaining capacity under the Equity Shelf Program, which excludes forward sales agreements outstanding for the sale of 5,152,658 shares with maturity dates in the fourth quarter and 2020. We expect to physically settle the forward sales for cash proceeds.

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Shares Issued	Average Price	Gross Proceeds	Net Proceeds
2018 Dividend reinvestment plan issuances	1,755,446	$ 64.24	$ 112,770	$ 112,294
2018 Option exercises	32,120	39.94	1,283	1,283
2018 Equity shelf program issuances	1,944,511	66.72	129,744	128,834
2018 Preferred stock conversions	83		—	—
2018 Stock incentive plans, net of forfeitures	112,868		—	—
2018 Totals	3,845,028		$ 243,797	$ 242,411
2019 Dividend reinvestment plan issuances	4,438,787	$ 75.59	$ 335,535	$ 332,054
2019 Option exercises	10,736	51.32	551	551
2019 Equity Shelf Program issuances	4,729,045	75.24	355,803	353,500
2019 Preferred stock conversions	12,712,452		—	—
2019 Stock incentive plans, net of forfeitures	192,237		—	—
2019 Totals	22,083,257		$ 691,889	$ 686,105

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

	Nine Months Ended — September 30, 2019		September 30, 2018
	Per Share	Amount	Per Share	Amount
Common Stock	$ 2.6100	$ 1,051,687	$ 2.6100	$ 971,280
Series I Preferred Stock	—	—	2.4375	35,028
Totals		$ 1,051,687		$ 1,006,308

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

Foreign currency translation	September 30, 2019 — $ ( 947,585	)	December 31, 2018 — $ ( 868,006	)
Derivative instruments	830,449		738,777
Actuarial losses	( 540	)	( 540	)
Total accumulated other comprehensive loss	$ ( 117,676	)	$ ( 129,769	)

15. Stock Incentive Plans

Our 2016 Long-Term Incentive Plan (“2016 Plan”) authorizes up to 10,000,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Our non-employee directors, officers and key employees are eligible to participate in the 2016 Plan. The 2016 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock, deferred stock units, performance units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three to five years . Options expire ten years from the date of grant. Stock-based compensation expense totaled $ 5,309,000 and $ 20,501,000 for the three and nine months ended September 30, 2019 , respectfully, and $ 6,075,000 and $ 22,800,000 for the same periods in 2018 .

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

16. Earnings Per Share

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

	Three Months Ended — September 30,		Nine Months Ended — September 30,
	2019	2018	2019	2018
Numerator for basic and diluted earnings
per share - net income (loss) attributable
to common stockholders	$ 589,876	$ 64,384	$ 1,008,108	$ 656,487
Denominator for basic earnings per
share - weighted average shares	405,023	373,023	400,441	372,052
Effect of dilutive securities:
Employee stock options	—	6	—	12
Non-vested restricted shares	757	348	860	464
Redeemable shares	1,096	1,096	1,096	1,096
Employee stock purchase program	15	14	15	14
Dilutive potential common shares	1,868	1,464	1,971	1,586
Denominator for diluted earnings per
share - adjusted weighted average shares	406,891	374,487	402,412	373,638
Basic earnings per share	$ 1.46	$ 0.17	$ 2.52	$ 1.76
Diluted earnings per share	$ 1.45	$ 0.17	$ 2.51	$ 1.76

The Series I Cumulative Convertible Perpetual Preferred Stock were excluded from the 2018 calculation as the effect of the conversions were anti-dilutive. As of September 30, 2019 , forward sales agreements outstanding for the sale of 5,152,658 shares of common stock were not included in the computation of diluted earnings per share because such forward sales were anti-dilutive for the period.

17. Disclosure about Fair Value of Financial Instruments

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

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

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

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

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

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

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

Equity Securities — Equity securities are recorded at their fair value based on Level 1 publicly available trading prices.

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps — Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2).

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

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

	September 30, 2019 — Carrying Amount	Fair Value	December 31, 2018 — Carrying Amount	Fair Value
Financial assets:
Mortgage loans receivable	$ 252,617	$ 257,060	$ 249,071	$ 257,337
Other real estate loans receivable	108,913	109,400	81,268	82,742
Equity securities	10,617	10,617	11,286	11,286
Cash and cash equivalents	265,788	265,788	215,376	215,376
Restricted cash	64,947	64,947	100,753	100,753
Foreign currency forward contracts, interest rate swaps and cross currency swaps	153,179	153,179	94,729	94,729
Financial liabilities:
Unsecured revolving credit facility and commercial paper note program	$ 1,334,586	$ 1,334,586	$ 1,147,000	$ 1,147,000
Senior unsecured notes	9,730,047	10,229,289	9,603,299	10,043,797
Secured debt	2,623,010	2,688,384	2,476,177	2,499,130
Foreign currency forward contracts, interest rate swaps and cross currency swaps	59,120	59,120	71,109	71,109
Redeemable OP unitholder interests	$ 134,610	$ 134,610	$ 103,071	$ 103,071

Items Measured at Fair Value on a Recurring Basis

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

	Fair Value Measurements as of September 30, 2019 — Total	Level 1	Level 2	Level 3
Equity securities	$ 10,617	$ 10,617	$ —	$ —
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) (1)	94,059	—	94,059	—
Redeemable OP unitholder interests	134,610	—	134,610	—
Totals	$ 239,286	$ 10,617	$ 228,669	$ —

(1) Please see Note 12 for additional information.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 7 for impairments of real estate loans receivable) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally resides within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in asset acquisitions using current interest rates at which similar borrowings could be obtained on the transaction date.

18. Segment Reporting

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our three operating segments: Seniors Housing Operating, Triple-net and Outpatient Medical. Our seniors housing operating properties include assisted living, independent living/continuing care retirement communities, independent supportive living communities (Canada), care homes with and without nursing (U.K.) and combinations thereof that are owned and/or operated through RIDEA structures (see Note 19 ). Under the Triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our outpatient medical properties are typically leased to multiple tenants and generally require a certain level of property management by us.

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

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

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

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended September 30, 2019: — Resident fees and services	Seniors Housing Operating — $ 834,121		Triple-net — $ —		Outpatient Medical — $ —		Non-segment / Corporate — $ —		Total — $ 834,121
Rental income	—		227,499		184,648		—		412,147
Interest income	—		15,279		358		—		15,637
Other income	1,375		1,829		183		841		4,228
Total revenues	835,496		244,607		185,189		841		1,266,133
Property operating expenses	581,341		13,922		60,325		—		655,588
Consolidated net operating income	254,155		230,685		124,864		841		610,545
Depreciation and amortization	148,126		57,147		67,172		—		272,445
Interest expense	16,356		3,076		3,363		114,548		137,343
General and administrative expenses	—		—		—		31,019		31,019
Loss (gain) on derivatives and financial instruments, net	—		1,244		—		—		1,244
Loss (gain) on extinguishment of debt, net	1,450		—		—		64,374		65,824
Impairment of assets	2,599		12,314		3,183		—		18,096
Other expenses	4,274		( 2,496	)	524		3,884		6,186
Income (loss) from continuing operations before income taxes and other items	81,350		159,400		50,622		( 212,984	)	78,388
Income tax (expense) benefit	( 2,554	)	12		( 302	)	( 1,124	)	( 3,968	)
(Loss) income from unconsolidated entities	( 3,859	)	5,276		1,845		—		3,262
Gain (loss) on real estate dispositions, net	519,203		51,529		( 482	)	—		570,250
Income (loss) from continuing operations	594,140		216,217		51,683		( 214,108	)	647,932
Net income (loss)	$ 594,140		$ 216,217		$ 51,683		$ ( 214,108	)	$ 647,932
Total assets	$ 15,095,737		$ 9,350,606		$ 7,173,763		$ 243,849		$ 31,863,955

Three Months Ended September 30, 2018:	Seniors Housing Operating		Triple-net	Outpatient Medical		Non-segment / Corporate		Total
Resident fees and services	$ 875,171		$ —	$ —		$ —		$ 875,171
Rental income	—		203,039	139,848		—		342,887
Interest income	159		14,378	85		—		14,622
Other income	1,175		1,693	136		695		3,699
Total revenues	876,505		219,110	140,069		695		1,236,379
Property operating expenses	610,659		426	46,072		—		657,157
Consolidated net operating income	265,846		218,684	93,997		695		579,222
Depreciation and amortization	136,532		60,383	46,234		—		243,149
Interest expense	17,319		3,500	1,643		115,570		138,032
General and administrative expenses	—		—	—		28,746		28,746
Loss (gain) on derivatives and financial instruments, net	—		8,991	—		—		8,991
Loss (gain) on extinguishment of debt, net	—		—	—		4,038		4,038
Impairment of assets	562		6,178	—		—		6,740
Other expenses	( 811	)	87,076	1,055		1,306		88,626
Income (loss) from continuing operations before income taxes and other items	112,244		52,556	45,065		( 148,965	)	60,900
Income tax (expense) benefit	211		1,116	239		( 3,307	)	( 1,741	)
(Loss) income from unconsolidated entities	( 6,705	)	5,377	1,672		—		344
Gain (loss) on real estate dispositions, net	( 1	)	24,782	( 58	)	—		24,723
Income (loss) from continuing operations	105,749		83,831	46,918		( 152,272	)	84,226
Net income (loss)	$ 105,749		$ 83,831	$ 46,918		$ ( 152,272	)	$ 84,226

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2019 — Resident fees and services	Seniors Housing Operating — $ 2,616,491		Triple-net — $ —		Outpatient Medical — $ —		Non-segment / Corporate — $ —		Total — $ 2,616,491
Rental income	—		681,893		496,924		—		1,178,817
Interest income	—		47,343		769		—		48,112
Other income	6,920		4,370		322		3,452		15,064
Total revenues	2,623,411		733,606		498,015		3,452		3,858,484
Property operating expenses	1,826,344		41,700		159,478		—		2,027,522
Consolidated net operating income	797,067		691,906		338,537		3,452		1,830,962
Depreciation and amortization	416,252		174,551		173,626		—		764,429
Interest expense	52,179		9,741		10,097		351,894		423,911
General and administrative expenses	—		—		—		100,042		100,042
Loss (gain) on derivatives and financial instruments, net	—		670		—		—		670
Loss (gain) on extinguishment of debt, net	1,450		—		—		80,093		81,543
Provision for loan losses	—		18,690		—		—		18,690
Impairment of assets	2,599		11,374		14,062		—		28,035
Other expenses	19,077		6,093		1,274		10,126		36,570
Income (loss) from continuing operations before income taxes and other items	305,510		470,787		139,478		( 538,703	)	377,072
Income tax (expense) benefit	( 2,798	)	( 2,300	)	( 1,253	)	( 1,438	)	( 7,789	)
(Loss) income from unconsolidated entities	( 37,892	)	17,512		5,394		—		( 14,986	)
Gain (loss) on real estate dispositions, net	518,493		217,973		( 489	)	—		735,977
Income (loss) from continuing operations	783,313		703,972		143,130		( 540,141	)	1,090,274
Net income (loss)	$ 783,313		$ 703,972		$ 143,130		$ ( 540,141	)	$ 1,090,274

Nine Months Ended September 30, 2018 — Resident fees and services	Seniors Housing Operating — $ 2,374,450		Triple-net — $ —		Outpatient Medical — $ —		Non-segment / Corporate — $ —		Total — $ 2,374,450
Rental income	—		607,831		412,026		—		1,019,857
Interest income	416		42,176		140		—		42,732
Other income	3,973		16,282		401		1,561		22,217
Total revenues	2,378,839		666,289		412,567		1,561		3,459,256
Property operating expenses	1,648,262		583		133,528		—		1,782,373
Consolidated net operating income	730,577		665,706		279,039		1,561		1,676,883
Depreciation and amortization	397,080		171,724		138,821		—		707,625
Interest expense	51,225		10,742		4,975		315,281		382,223
General and administrative expenses	—		—		—		95,282		95,282
Loss (gain) on derivatives and financial instruments, net	—		( 5,642	)	—		—		( 5,642	)
Loss (gain) on extinguishment of debt, net	110		( 32	)	11,928		4,038		16,044
Impairment of assets	5,075		34,482		—		—		39,557
Other expenses	5,168		89,153		3,748		4,327		102,396
Income (loss) from continuing operations before income taxes and other items	271,919		365,279		119,567		( 417,367	)	339,398
Income tax (expense) benefit	( 2,244	)	( 708	)	( 567	)	( 3,651	)	( 7,170	)
(Loss) income from unconsolidated entities	( 21,389	)	16,260		4,293		—		( 836	)
Gain (loss) on real estate dispositions, net	3		158,938		214,721		—		373,662
Income (loss) from continuing operations	248,289		539,769		338,014		( 421,018	)	705,054
Net income (loss)	$ 248,289		$ 539,769		$ 338,014		$ ( 421,018	)	$ 705,054

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

	Three Months Ended — September 30, 2019		September 30, 2018		Nine Months Ended — September 30, 2019		September 30, 2018
Revenues:	Amount	%	Amount	%	Amount	%	Amount	%
United States	$ 1,039,016	82.1 %	$ 1,007,203	81.5 %	$ 3,175,059	82.3 %	$ 2,766,726	80.0 %
United Kingdom	110,303	8.7 %	111,503	9.0 %	335,368	8.7 %	340,059	9.8 %
Canada	116,814	9.2 %	117,673	9.5 %	348,057	9.0 %	352,471	10.2 %
Total	$ 1,266,133	100.0 %	$ 1,236,379	100.0 %	$ 3,858,484	100.0 %	$ 3,459,256	100.0 %
	As of
	September 30, 2019		December 31, 2018
Assets:	Amount	%	Amount	%
United States	$ 26,302,481	82.5 %	$ 24,884,292	82.0 %
United Kingdom	3,109,553	9.8 %	3,078,994	10.1 %
Canada	2,451,921	7.7 %	2,378,786	7.9 %
Total	$ 31,863,955	100.0 %	$ 30,342,072	100.0 %

19. Income Taxes and Distributions

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

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

Income taxes reflected in the financial statements primarily represents U.S. federal, state and local income taxes as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The provision for income taxes for the nine months ended September 30, 2019 and 2018 , was primarily due to operating income or losses, offset by certain discrete items at our TRS entities. In 2014, we established certain wholly-owned direct and indirect subsidiaries in Luxembourg and Jersey and transferred interests in certain foreign investments into this holding company structure. The structure includes a property holding company that is tax resident in the United Kingdom. No material adverse current tax consequences in Luxembourg, Jersey or the United Kingdom resulted from the creation of this holding company structure and most of the subsidiary entities in the structure are treated as disregarded entities of the company for U.S. federal income tax purposes. The company reflects current and deferred tax liabilities for any such withholding taxes incurred from this holding company structure in its consolidated financial statements. Generally, given current statutes of limitations, we are subject to audit by the foreign, federal, state and local taxing authorities under applicable local laws.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

20. Variable Interest Entities

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

	September 30, 2019	December 31, 2018
Assets:
Net real estate investments	$ 963,338	$ 973,813
Cash and cash equivalents	23,881	18,678
Receivables and other assets	16,929	14,600
Total assets (1)	$ 1,004,148	$ 1,007,091
Liabilities and equity:
Secured debt	$ 461,480	$ 465,433
Lease liabilities	1,326	—
Accrued expenses and other liabilities	22,521	18,229
Total equity	518,821	523,429
Total liabilities and equity	$ 1,004,148	$ 1,007,091

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

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

EXECUTIVE SUMMARY
Company Overview	30
Business Strategy	30
Key Transactions	31
Key Performance Indicators, Trends and Uncertainties	32
Corporate Governance	35
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash	35
Off-Balance Sheet Arrangements	35
Contractual Obligations	35
Capital Structure	35
RESULTS OF OPERATIONS
Summary	36
Seniors Housing Operating	36
Triple-net	38
Outpatient Medical	40
Non-Segment/Corporate	42
OTHER
Non-GAAP Financial Measures	43
Critical Accounting Policies	49
Cautionary Statement Regarding Forward-Looking Statements	50

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

The following discussion and analysis are 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, 2018 , including factors identified under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References herein to “we,” “us,” “our,” or the “Company” 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 September 30, 2019 (dollars in thousands):

Type of Property	NOI (1)	Percentage of — NOI	Number of — Properties
Seniors Housing Operating	$ 254,155	41.7 %	524
Triple-net	230,685	37.8 %	657
Outpatient Medical	124,864	20.5 %	358
Totals	$ 609,704	100.0 %	1,539
(1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation.

Business Strategy

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

Substantially all of our revenues are derived from operating lease rentals, resident fees and services and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our 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 guaranties 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 nine months ended September 30, 2019 , resident fees and services and rental income represented 68% and 31% , respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with

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

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 September 30, 2019 , we had $265,788,000 of cash and cash equivalents, $64,947,000 of restricted cash and $ 1,665,000,000 of available borrowing capacity under our unsecured revolving credit facility.

Key Transactions

Capital The following summarizes key capital transaction that occurred during the nine months ended September 30, 2019 :

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

• In February 2019, we completed the issuance of $500,000,000 of 3.625% senior unsecured notes due 2024 and $550,000,000 of 4.125% senior unsecured notes due 2029 for net proceeds of approximately $1,036,964,000. In August 2019, we completed the issuance of $750,000,000 of 3.10% senior unsecured notes due 2030 and a follow-on issuance of $450,000,000 of 3.625% senior unsecured notes due 2024 priced to yield 2.494%, for net proceeds of approximately $1,209,328,000 .

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

• During the nine months ended September 30, 2019 , we extinguished $193,604 ,000 of secured debt at a blended average interest rate of 4.37% . Additionally, in March 2019 we repaid our $600,000,000 of 4.125% senior unsecured notes due 2019 and $450,000,000 of 6.125% senior unsecured notes due 2020. In September 2019, we repaid our $450,000,000 of 4.95% senior unsecured notes due 2021 and $600,000,000 of 5.25% senior unsecured notes due 2022.

• In May 2019, we drew on a $1,000,000,000 unsecured term loan facility that matures on May 28, 2020 which was put in place to bridge the acquisition of the CNL Healthcare Properties portfolio. The unsecured term loan facility was subsequently extinguished in July 2019 with proceeds from the disposition of the Benchmark Senior Living portfolio.

• During the nine months ended September 30, 2019 , we entered into amended and restated Equity Shelf Program (as defined below) pursuant to which we may offer and sell up to $1,500,000,000 of common stock from time to time. We sold 14,321 ,000 shares of common stock under our ATM and DRIP programs, via both cash settle and forward sale agreements, generating expected gross proceeds of approximately $ 1,134,967 ,000.

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

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

	Properties	Investment Amount (1)	Capitalization Rates (2)	Book Amount (3)
Seniors Housing Operating	53	$ 1,225,771	5.1 %	$ 1,361,201
Triple-net	6	137,935	6.6 %	139,935
Outpatient Medical	75	1,591,807	5.7 %	1,674,358
Totals	134	$ 2,955,513	5.5 %	$ 3,175,494
(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts.
(3) Represents amounts recorded in net real estate investments including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our unaudited consolidated financial statements for additional information.

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

	Properties	Proceeds (1)	Capitalization Rates (2)	Book Amount (3)
Seniors Housing Operating (4)	51	$ 1,772,276	5.4 %	$ 1,204,084
Triple-net	57	902,731	7.9 %	660,885
Outpatient Medical (5)	—	—	— %	482
Totals	108	$ 2,675,007	6.3 %	$ 1,865,451
(1) Represents pro rata proceeds received upon disposition including any seller financing.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of net real estate assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.
(4) Includes the disposition of an unconsolidated real estate investment.
(5) Reflects the disposition of an excess land parcel.

Dividends Our Board of Directors announced the annual cash dividend of $3.48 per common share ($ 0.87 per share quarterly), consistent with 2018 . The dividend declared for the quarter ended September 30, 2019 represents the 194 th consecutive quarterly dividend payment.

Key Performance Indicators, Trends and Uncertainties

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

Operating Performance We believe that net income and net income attributable to common stockholders (“NICS”) per the 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 (and FFO per share amounts) are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands, except per share amounts):

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

	Three Months Ended — March 31,	June 30,	September 30,	December 31,	March 31,	June 30,	September 30,
	2018	2018	2018	2018	2019	2019	2019
Net income (loss)	$ 453,555	$ 167,273	$ 84,226	$ 124,696	$ 292,302	$ 150,040	$ 647,932
NICS	437,671	154,432	64,384	101,763	280,470	137,762	589,876
FFO	353,220	378,725	285,272	374,966	358,383	390,021	352,378
NOI	540,500	557,161	579,222	590,599	601,438	618,979	610,545
Per share data (fully diluted):
NICS	$ 1.17	$ 0.41	$ 0.17	$ 0.27	$ 0.71	$ 0.34	$ 1.45
FFO	$ 0.95	$ 1.02	$ 0.76	$ 0.99	$ 0.91	$ 0.96	$ 0.87

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

	Three Months Ended — March, 31	June 30,	September 30,	December 31,	March 31,	June 30,	September 30,
	2018	2018	2018	2018	2019	2019	2019
Net debt to book capitalization ratio	42%	42%	46%	45%	43%	48%	45%
Net debt to undepreciated book capitalization ratio	35%	36%	39%	38%	36%	41%	38%
Net debt to market capitalization ratio	34%	31%	34%	31%	28%	30%	26%
Interest coverage ratio	6.67x	4.34x	3.38x	3.60x	4.80x	3.74x	7.61x
Fixed charge coverage ratio	5.49x	3.58x	2.85x	3.05x	4.38x	3.42x	6.96x

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:

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

	Three Months Ended — March 31,	June 30,	September 30,	December 31,	March 31,	June 30,	September 30,
	2018	2018	2018	2018	2019	2019	2019
Property mix: (1)
Seniors Housing Operating	42%	43%	46%	43%	44%	45%	42%
Triple-net	41%	40%	38%	40%	39%	37%	38%
Outpatient Medical	17%	17%	16%	17%	17%	18%	20%
Relationship mix: (1)
Sunrise Senior Living (2)	15%	15%	15%	14%	15%	14%	14%
ProMedica	—%	—%	7%	9%	9%	9%	9%
Revera (2)	7%	7%	7%	6%	6%	6%	6%
Genesis HealthCare	6%	6%	6%	6%	5%	5%	5%
Belmont Village	3%	3%	3%	3%	3%	3%	4%
Remaining relationships	69%	69%	62%	62%	62%	63%	62%
Geographic mix: (1)
California	14%	14%	13%	13%	13%	13%	14%
United Kingdom	10%	9%	9%	9%	9%	8%	8%
Texas	8%	8%	7%	8%	8%	8%	8%
New Jersey	8%	7%	7%	7%	7%	7%	7%
Canada	9%	8%	8%	8%	7%	7%	7%
Remaining geographic areas	51%	54%	56%	55%	56%	57%	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.

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

	Expiration Year (1) — 2019	2020	2021	2022	2023	2024	2025	2026	2027	2028	Thereafter
Triple-net:
Properties	8	—	6	10	2	4	48	94	19	15	430
Base rent (2)	$ 3,470	$ —	$ 12,292	$ 10,496	$ 1,331	$ 11,096	$ 52,728	$ 122,530	$ 35,725	$ 22,036	$ 487,015
% of base rent	0.5 %	— %	1.6 %	1.4 %	0.2 %	1.5 %	6.9 %	16.1 %	4.7 %	2.9 %	64.2 %
Units/beds	649	—	1,023	1,022	140	692	3,033	7,554	2,401	1,633	44,588
% of Units/beds	1.0 %	— %	1.6 %	1.6 %	0.2 %	1.1 %	4.8 %	12.0 %	3.8 %	2.6 %	71.3 %
Outpatient Medical:
Square feet	514,534	1,614,257	2,017,333	2,158,069	2,129,097	2,128,846	1,207,793	1,482,284	864,668	932,339	6,141,513
Base rent (2)	$ 11,453	$ 44,978	$ 56,712	$ 58,920	$ 57,737	$ 62,850	$ 31,700	$ 38,283	$ 21,554	$ 23,984	$ 133,599
% of base rent	2.1 %	8.3 %	10.5 %	10.9 %	10.7 %	11.6 %	5.9 %	7.1 %	4.0 %	4.4 %	24.5 %
Leases	148	415	417	420	435	337	184	193	120	106	294
% of Leases	4.8 %	13.5 %	13.6 %	13.7 %	14.2 %	11.0 %	6.0 %	6.3 %	3.9 %	3.5 %	9.5 %
(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, 2018 , under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of these risk factors.

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

Corporate Governance

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

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash include resident fees and services, rent and interest receipts, 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 (dollars in thousands):

	Nine Months Ended — September 30, 2019		September 30, 2018		Change — $		%
Cash, cash equivalents and restricted cash at beginning of period	$ 316,129		$ 309,303		$ 6,826		2 %
Cash provided from (used in) operating activities	1,209,900		1,211,148		(1,248	)	— %
Cash provided from (used in) investing activities	(1,058,325	)	(2,133,293	)	1,074,968		50 %
Cash provided from (used in) financing activities	(132,533	)	899,559		(1,032,092	)	-115 %
Effect of foreign currency translation	(4,436	)	(5,432	)	996		18 %
Cash, cash equivalents and restricted cash at end of period	$ 330,735		$ 281,285		$ 49,450		18 %

Operating Activities The change in net cash provided from operating activities was immaterial. Please see “Results of Operations” for discussion of net income fluctuations. For the nine months ended September 30, 2019 and 2018 , cash flow provided from operations exceeded cash distributions to stockholders.

Investing Activities The changes in net cash provided from/used in investing activities are primarily attributable to changes in acquisition and dispositions, 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 (dollars in thousands):

	Nine Months Ended — September 30, 2019	September 30, 2018	Change — $	%
New development	$ 258,113	$ 88,146	$ 169,967	193 %
Recurring capital expenditures, tenant improvements and lease commissions	86,488	57,384	29,104	51 %
Renovations, redevelopments and other capital improvements	119,925	116,251	3,674	3 %
Total	$ 464,526	$ 261,781	$ 202,745	77 %

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 issuance/redemption of common and preferred 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.

Off-Balance Sheet Arrangements

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

Contractual Obligations

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

Contractual Obligations	Payments Due by Period — Total	2019	2020-2021	2022-2023	Thereafter
Unsecured credit facility and commercial paper (1,2)	$ 1,335,000	$ 835,000	$ —	$ 500,000	$ —
Senior unsecured notes and term credit facilities: (2)
U.S. Dollar senior unsecured notes	7,600,000	—	—	1,100,000	6,500,000
Canadian Dollar senior unsecured notes (3)	226,501	—	226,501	—	—
Pounds Sterling senior unsecured notes (3)	1,292,025	—	—	—	1,292,025
U.S. Dollar term credit facility	510,000	—	—	510,000	—
Canadian Dollar term credit facility (3)	188,750	—	—	188,750	—
Secured debt: (2,3)
Consolidated	2,639,015	256,322	541,763	682,997	1,157,933
Unconsolidated	800,225	11,817	75,636	61,013	651,759
Contractual interest obligations: (4)
Unsecured credit facility and commercial paper	54,389	4,012	28,787	21,590	—
Senior unsecured notes and term loans (3)	4,070,524	124,827	791,836	768,216	2,385,645
Consolidated secured debt (3)	414,543	23,972	152,966	102,246	135,359
Unconsolidated secured debt (3)	206,939	7,565	55,418	51,529	92,427
Financing lease liabilities (5)	192,414	2,511	17,908	77,405	94,590
Operating lease liabilities (5)	1,189,326	5,040	39,654	37,153	1,107,479
Purchase obligations (6)	469,967	111,914	310,941	47,112	—
Other long-term liabilities	123	123	—	—	—
Total contractual obligations	$ 21,189,741	$ 1,383,103	$ 2,241,410	$ 4,148,011	$ 13,417,217
(1) Relates to our unsecured credit facility and commercial paper with an aggregate commitment of $3,000,000,000. See Note 10 to our unaudited consolidated financial statements for additional information.
(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(3) Based on foreign currency exchange rates in effect as of balance sheet date.
(4) Based on variable interest rates in effect as of balance sheet date.
(5) See Note 6 to our unaudited consolidated financial statements for additional information.
(6) See Note 13 to our unaudited consolidated financial statements for additional information.

Capital Structure

Please refer to “Credit Strength” above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of September 30, 2019 , we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged. We plan to manage the company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could, in turn, have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.

On May 17, 2018, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan

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

(“DRIP”) under which we may issue up to 15,000,000 shares of common stock. As of October 21, 2019 , 4,119,785 shares of common stock remained available for issuance under the DRIP registration statement. On February 25, 2019, we entered into separate amended and restated equity distribution agreements with each of Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to $1,500,000,000 aggregate amount of our common stock (“Equity Shelf Program”). The Equity Shelf Program also allows us to enter into forward sale agreements. As of October 21, 2019 , we had $ 1,333,682,000 of remaining capacity under the Equity Shelf Program, which excludes forward sales agreements outstanding for the sale of 6,018,906 shares with maturity dates in the fourth quarter and 2020. 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.

Results of Operations

Summary

Our primary sources of revenue include resident fees and services, rent and interest income. Our primary expenses include depreciation and amortization, interest expense, property operating expenses, 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"), which are discussed below. Please see Non-GAAP Financial Measures for additional information and reconciliations. The following is a summary of our results of operations (dollars in thousands, except per share amounts):

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		Amount		%	2019		2018		Amount		%
Net income	$ 647,932		$ 84,226		$ 563,706		669 %	$ 1,090,274		$ 705,054		$ 385,220		55 %
NICS	589,876		64,384		525,492		816 %	1,008,108		656,487		351,621		54 %
FFO	352,378		285,272		67,106		24 %	1,100,782		1,017,217		83,565		8 %
EBITDA	1,061,688		467,148		594,540		127 %	2,286,403		1,802,072		484,331		27 %
NOI	610,545		579,222		31,323		5 %	1,830,962		1,676,883		154,079		9 %
SSNOI	440,759		437,628		3,131		0.7 %	1,217,372		1,210,808		6,564		0.5 %
Per share data (fully diluted):
NICS	$ 1.45		$ 0.17		$ 1.28		753 %	$ 2.51		$ 1.76		$ 0.75		43 %
FFO	$ 0.87		$ 0.76		$ 0.11		14 %	$ 2.74		$ 2.72		$ 0.02		1 %
Interest coverage ratio	7.61	x	3.38	x	4.23	x	125 %	5.36	x	4.73	x	0.63	x	13 %
Fixed charge coverage ratio	6.96	x	2.85	x	4.11	x	144 %	4.90	x	3.93	x	0.97	x	25 %

Seniors Housing Operating

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

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
NOI	$ 254,155		$ 265,846		$ (11,691	)	-4.4 %	$ 797,067		$ 730,577		$ 66,490		9.1 %
Non SSNOI attributable to same store properties	(2,897	)	(1,323	)	(1,574	)	-119.0 %	1,061		938		123		13.1 %
NOI attributable to non same store properties (1)	(32,688	)	(46,374	)	13,686		29.5 %	(242,615	)	(176,665	)	(65,950	)	-37.3 %
SSNOI (2)	$ 218,570		$ 218,149		$ 421		0.2 %	$ 555,513		$ 554,850		$ 663		0.1 %

(1) Change primarily related to acquisitions and segment transitions during the relevant periods. See Non-GAAP Financial Measures for discussion of properties excluded from the same store pools and the SSNOI Property Reconciliations for details.

(2) For the three and nine month periods ended September 30, 2019 and 2018, amounts relate to 413 and 351 same store properties, respectively. The same store property pools include 39 and 19 properties that have undergone operator transitions within the same segment during the relevant periods for the three and nine month periods ended September 30, 2019 and 2018, respectively. Furthermore, the same store pools exclude 72 unconsolidated properties for both the three and nine month periods ended September 30, 2019 and 2018.

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

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

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
Revenues:
Resident fees and services	$ 834,121		$ 875,171		$ (41,050	)	-5 %	$ 2,616,491		$ 2,374,450		$ 242,041		10 %
Interest income	—		159		(159	)	-100 %	—		416		(416	)	-100 %
Other income	1,375		1,175		200		17 %	6,920		3,973		2,947		74 %
Total revenues	835,496		876,505		(41,009	)	-5 %	2,623,411		2,378,839		244,572		10 %
Property operating expenses	581,341		610,659		(29,318	)	-5 %	1,826,344		1,648,262		178,082		11 %
NOI (1)	254,155		265,846		(11,691	)	-4 %	797,067		730,577		66,490		9 %
Other expenses:
Depreciation and amortization	148,126		136,532		11,594		8 %	416,252		397,080		19,172		5 %
Interest expense	16,356		17,319		(963	)	-6 %	52,179		51,225		954		2 %
Loss (gain) on extinguishment of debt, net	1,450		—		1,450		n/a	1,450		110		1,340		1,218 %
Impairment of assets	2,599		562		2,037		362 %	2,599		5,075		(2,476	)	-49 %
Other expenses	4,274		(811	)	5,085		627 %	19,077		5,168		13,909		269 %
	172,805		153,602		19,203		13 %	491,557		458,658		32,899		7 %
Income (loss) from continuing operations before income taxes and other items	81,350		112,244		(30,894	)	-28 %	305,510		271,919		33,591		12 %
Income tax benefit (expense)	(2,554	)	211		(2,765	)	-1,310 %	(2,798	)	(2,244	)	(554	)	-25 %
Income (loss) from unconsolidated entities	(3,859	)	(6,705	)	2,846		42 %	(37,892	)	(21,389	)	(16,503	)	-77 %
Gain (loss) on real estate dispositions, net	519,203		(1	)	519,204		n/a	518,493		3		518,490		n/a
Income from continuing operations	594,140		105,749		488,391		462 %	783,313		248,289		535,024		215 %
Net income (loss)	594,140		105,749		488,391		462 %	783,313		248,289		535,024		215 %
Less: Net income (loss) attributable to noncontrolling interests	46,849		405		46,444		11,468 %	50,826		(1,259	)	52,085		4,137 %
Net income (loss) attributable to common stockholders	$ 547,291		$ 105,344		$ 441,947		420 %	$ 732,487		$ 249,548		$ 482,939		194 %
(1) See Non-GAAP Financial Measures.

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

During the three and nine months ended September 30, 2019 and 2018, we recorded impairment charges on certain held for sale and held for use properties as the carrying values exceeded the estimated fair values. The significant gain on sale of properties during the three months ended September 30, 2019 is related to the sale of the Benchmark Senior Living portfolio. Transaction costs related to asset acquisitions are capitalized as a component of the purchase price. The increase in other expenses is primarily due to additional noncapitalizable transaction costs associated with acquisitions and operator transitions.

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

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

Location	Units	Commitment	Balance	Est. Completion
Wandsworth, UK	97	$ 72,538	$ 57,955	1Q20
Taylor, PA	113	14,272	10,314	1Q20
Beavercreek, OH	100	12,032	10,487	1Q20
Potomac, MD	120	56,720	17,337	4Q20
Beckenham, UK	100	57,957	27,239	3Q21
	530	$ 213,519	123,332
Toronto, ON	Project in planning stage		42,466
Hendon, UK	Project in planning stage		29,519
Barnet, UK	Project in planning stage		25,717
Washington, DC	Project in planning stage		17,361
Brookline, MA	Project in planning stage		16,829
			$ 255,224

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

	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$ 2,018,180		3.80 %	$ 1,909,415		3.73 %	$ 1,810,587		3.87 %	$ 1,988,700		3.66 %
Debt issued	22,885		3.95 %	—		— %	318,854		3.51 %	44,606		3.38 %
Debt assumed	—		— %	—		— %	42,000		4.62 %	85,192		4.38 %
Debt extinguished	(42,131	)	4.15 %	—		— %	(193,604	)	4.37 %	(131,175	)	4.85 %
Debt transferred	(12,072	)	3.89 %	35,830		3.84 %	(12,072	)	3.89 %	35,830		3.84 %
Principal payments	(10,556	)	3.49 %	(11,908	)	3.64 %	(32,987	)	3.38 %	(35,910	)	3.58 %
Foreign currency	(12,614	)	3.34 %	18,204		3.33 %	30,914		3.21 %	(35,702	)	3.54 %
Ending balance	$ 1,963,692		3.58 %	$ 1,951,541		3.76 %	$ 1,963,692		3.58 %	$ 1,951,541		3.76 %
Monthly averages	$ 1,980,216		3.67 %	$ 1,934,652		3.74 %	$ 1,955,651		3.76 %	$ 1,935,752		3.70 %

The majority of our Seniors Housing Operating properties are formed through partnership interests. Losses from unconsolidated entities are largely attributable to depreciation and amortization of short-lived intangible assets related to certain investments in unconsolidated joint ventures, as well as the disposal of an investment in an unconsolidated entity during the quarter ended June 30, 2019. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures. The increase during the three months ended September 30, 2019 relates to our partner's share of the gain recognized on the sale of the Benchmark Senior Living portfolio.

Triple-net

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

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
NOI	$ 230,685		$ 218,684		$ 12,001		5.5 %	$ 691,906		$ 665,706		$ 26,200		3.9 %
Non SSNOI attributable to same store properties	(7,270	)	(5,269	)	(2,001	)	-38.0 %	(22,336	)	(19,738	)	(2,598	)	-13.2 %
NOI attributable to non same store properties (1)	(92,872	)	(84,468	)	(8,404	)	-9.9 %	(279,290	)	(258,375	)	(20,915	)	-8.1 %
SSNOI (2)	$ 130,543		$ 128,947		$ 1,596		1.2 %	$ 390,280		$ 387,593		$ 2,687		0.7 %

(1) Change primarily related to acquisitions during the relevant periods. See Non-GAAP Financial Measures for discussion of properties excluded from the same store pools and the SSNOI Property Reconciliations for details.

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

(2) For both the three and nine month periods ended September 30, 2019 and 2018, amounts relate to 371 same store properties. The same store property pools include 3 properties that have undergone operator transitions within the same segment during the relevant periods for both the three and nine month periods ended September 30, 2019 and 2018. Furthermore, the same store pools exclude 39 unconsolidated properties for both the three and nine month periods ended September 30, 2019 and 2018.

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

	Three Months Ended			Change			Nine Months Ended				Change
	September 30,		September 30,				September 30,		September 30,
	2019		2018	$		%	2019		2018		$		%
Revenues:
Rental income	$ 227,499		$ 203,039	$ 24,460		12 %	$ 681,893		$ 607,831		$ 74,062		12 %
Interest income	15,279		14,378	901		6 %	47,343		42,176		5,167		12 %
Other income	1,829		1,693	136		8 %	4,370		16,282		(11,912	)	-73 %
Total revenues	244,607		219,110	25,497		12 %	733,606		666,289		67,317		10 %
Property operating expenses	13,922		426	13,496		3,168 %	41,700		583		41,117		7,053 %
NOI (1)	230,685		218,684	12,001		5 %	691,906		665,706		26,200		4 %
Other expenses:
Depreciation and amortization	57,147		60,383	(3,236	)	-5 %	174,551		171,724		2,827		2 %
Interest expense	3,076		3,500	(424	)	-12 %	9,741		10,742		(1,001	)	-9 %
Loss (gain) on derivatives and financial instruments, net	1,244		8,991	(7,747	)	-86 %	670		(5,642	)	6,312		112 %
Loss (gain) on extinguishment of debt, net	—		—	—		n/a	—		(32	)	32		100 %
Provision for loan losses	—		—	—		n/a	18,690		—		18,690		n/a
Impairment of assets	12,314		6,178	6,136		99 %	11,374		34,482		(23,108	)	-67 %
Other expenses	(2,496	)	87,076	(89,572	)	-103 %	6,093		89,153		(83,060	)	-93 %
	71,285		166,128	(94,843	)	-57 %	221,119		300,427		(79,308	)	-26 %
Income from continuing operations before income taxes and other items	159,400		52,556	106,844		203 %	470,787		365,279		105,508		29 %
Income tax (expense) benefit	12		1,116	(1,104	)	-99 %	(2,300	)	(708	)	(1,592	)	-225 %
Income (loss) from unconsolidated entities	5,276		5,377	(101	)	-2 %	17,512		16,260		1,252		8 %
Gain (loss) on real estate dispositions, net	51,529		24,782	26,747		108 %	217,973		158,938		59,035		37 %
Income from continuing operations	216,217		83,831	132,386		158 %	703,972		539,769		164,203		30 %
Net income	216,217		83,831	132,386		158 %	703,972		539,769		164,203		30 %
Less: Net income (loss) attributable to noncontrolling interests	9,096		6,913	2,183		32 %	27,422		10,129		17,293		171 %
Net income attributable to common stockholders	$ 207,121		$ 76,918	$ 130,203		169 %	$ 676,550		$ 529,640		$ 146,910		28 %
(1) See Non-GAAP Financial Measures.

The increase in rental income is primarily attributable to acquisitions including Quality Care Properties Inc. ("QCP") in July 2018, partially offset by the disposition or segment transition of various properties. In addition, we have recorded certain real estate property taxes on a gross basis, with the offset to property operating expenses, as a result of our ASC 842 adoption on January 1, 2019. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. For the three months ended September 30, 2019 , we had 18 leases with rental rate increases ranging from 0.10% to 0.82% in our Triple-net portfolio. The decrease in other income for the nine month period ending September 30, 2019 is primarily due to $10,805,000 of net lease termination fees recognized during 2018.

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

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain real estate loans receivable that are no longer deemed collectible. During the three and nine months ended September 30, 2019 and 2018, we recorded impairment charges on certain held for sale and held for use properties as the carrying values exceeded the estimated fair values. Changes in the gain on sales of properties are related to the volume and timing of property sales and the sales prices. Transaction costs related to asset acquisitions are capitalized as a component of purchase price. The fluctuation in other expenses is primarily due to noncapitalizable transaction costs from acquisitions and segment transitions. In addition, during the three months ended September 30, 2018, we recognized $79,368,000 related to a joint venture transaction, including the conversion of properties from Triple-net to Seniors Housing Operating and termination/restructuring of preexisting relationships.

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

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

Location	Units/Beds	Commitment	Balance	Est. Completion
Union, KY	162	$ 34,600	$ 20,557	1Q20
Westerville, OH	90	22,800	17,049	1Q20
Droitwich, UK	70	15,584	8,787	2Q20
Thousand Oaks, CA	82	24,763	8,199	4Q20
Leicester, UK	60	13,782	3,247	1Q21
	464	$ 111,529	$ 57,839

Interest expense represents secured debt interest expense and related fees. The change in interest expense is due to the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The fluctuations in loss (gain) on extinguishment of debt is primarily attributable to the volume of extinguishments and terms of the related secured debt. The fluctuation in loss (gain) on derivatives and financial instruments, net is primarily attributable to the mark-to-market adjustment recorded on the Genesis HealthCare available-for-sale investment. The following is a summary of our Triple-net secured debt principal activity (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$ 287,952		3.63 %	$ 334,033		3.53 %	$ 288,386		3.63 %	$ 347,474		3.55 %
Debt extinguished	—		— %	—		— %	—		— %	(4,107	)	4.94 %
Debt transferred	12,072		3.89 %	(35,830	)	3.80 %	12,072		3.89 %	(35,830	)	3.84 %
Principal payments	(1,037	)	5.17 %	(962	)	5.26 %	(2,945	)	5.22 %	(3,033	)	5.42 %
Foreign currency	(5,986	)	2.95 %	(979	)	3.51 %	(4,512	)	3.23 %	(8,242	)	3.29 %
Ending balance	$ 293,001		3.64 %	$ 296,262		3.63 %	$ 293,001		3.64 %	$ 296,262		3.63 %
Monthly averages	$ 291,300		3.64 %	$ 309,920		3.53 %	$ 291,475		3.63 %	$ 331,239		3.48 %

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 interest represents our partners’ share of net income relating to those partnerships where we are the controlling partner. Increases in net income attributable to noncontrolling interest is due primarily to the ProMedica joint venture formed as part of the QCP acquisition.

Outpatient Medical

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

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
NOI	$ 124,864		$ 93,997		$ 30,867		32.8 %	$ 338,537		$ 279,039		$ 59,498		21.3 %
Non SSNOI on same store properties	(1,294	)	(1,806	)	512		28.3 %	(4,152	)	(4,517	)	365		8.1 %
NOI attributable to non same store properties (1)	(31,924	)	(1,659	)	(30,265	)	-1,824.3 %	(62,806	)	(6,157	)	(56,649	)	-920.1 %
SSNOI (2)	$ 91,646		$ 90,532		$ 1,114		1.2 %	$ 271,579		$ 268,365		$ 3,214		1.2 %

(2) For the three and nine month periods ended September 30, 2019 and 2018, amounts relate to 239 and 235 same store properties, respectively. The same store pools exclude 6 unconsolidated properties for both the three and nine month periods ended September 30, 2019 and 2018.

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

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

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
Revenues:
Rental income	$ 184,648		$ 139,848		$ 44,800		32 %	$ 496,924		$ 412,026		$ 84,898		21 %
Interest income	358		85		273		321 %	769		140		629		449 %
Other income	183		136		47		35 %	322		401		(79	)	-20 %
Total revenues	185,189		140,069		45,120		32 %	498,015		412,567		85,448		21 %
Property operating expenses	60,325		46,072		14,253		31 %	159,478		133,528		25,950		19 %
NOI (1)	124,864		93,997		30,867		33 %	338,537		279,039		59,498		21 %
Other expenses:
Depreciation and amortization	67,172		46,234		20,938		45 %	173,626		138,821		34,805		25 %
Interest expense	3,363		1,643		1,720		105 %	10,097		4,975		5,122		103 %
Loss (gain) on extinguishment of debt, net	—		—		—		n/a	—		11,928		(11,928	)	-100 %
Impairment of assets	3,183		—		3,183		n/a	14,062		—		14,062		n/a
Other expenses	524		1,055		(531	)	-50 %	1,274		3,748		(2,474	)	-66 %
	74,242		48,932		25,310		52 %	199,059		159,472		39,587		25 %
Income (loss) from continuing operations before income taxes and other items	50,622		45,065		5,557		12 %	139,478		119,567		19,911		17 %
Income tax (expense) benefit	(302	)	239		(541	)	-226 %	(1,253	)	(567	)	(686	)	-121 %
Income from unconsolidated entities	1,845		1,672		173		10 %	5,394		4,293		1,101		26 %
Gain (loss) on real estate dispositions, net	(482	)	(58	)	(424	)	-731 %	(489	)	214,721		(215,210	)	-100 %
Income from continuing operations	51,683		46,918		4,765		10 %	143,130		338,014		(194,884	)	-58 %
Net income (loss)	51,683		46,918		4,765		10 %	143,130		338,014		(194,884	)	-58 %
Less: Net income (loss) attributable to noncontrolling interests	2,111		848		1,263		149 %	3,918		4,669		(751	)	-16 %
Net income (loss) attributable to common stockholders	$ 49,572		$ 46,070		$ 3,502		8 %	$ 139,212		$ 333,345		$ (194,133	)	-58 %
(1) See Non-GAAP Financial Measures.

The increases in rental income and property operating expenses are primarily attributable to acquisitions and development conversions, particularly the $1.25 billion CNL Healthcare Properties portfolio acquisition that closed in May 2019, partially offset by dispositions of outpatient medical properties. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rental rates, resulting in an increase or decrease in rental income. For the three months ended September 30, 2019 , our consolidated outpatient medical portfolio signed 179,206 square feet of new leases and 389,671 square feet of renewals. The weighted-average term of these leases was six years, with a rate of $36.98 per square foot and tenant improvement and lease commission costs of $20.47 per square foot. Substantially all of these leases contain an annual fixed or contingent escalation rent structure ranging from 2.0% to 3.9%.

The fluctuation in depreciation and amortization is primarily due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly. Changes in the gain/loss on sale of properties are related to the volume and timing of property sales and sales prices. During the three and nine months ended September 30, 2019 we recorded impairment charges on certain held for sale outpatient medical properties as the carrying values exceeded the estimated fair value less costs to sell.

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

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

Location	Square Feet	Commitment	Balance	Est. Completion
Houston, TX	73,500	$ 23,455	$ 16,126	4Q19
Porter, TX	55,000	20,800	12,041	1Q20
Lowell, MA	50,668	8,700	6,559	1Q20
Brooklyn, NY	140,955	105,306	77,097	2Q20
Katy, TX	36,500	12,028	1,077	2Q20
Total	356,623	$ 170,289	$ 112,900

Total interest expense represents secured debt interest expense. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. The fluctuation in losses/gains on debt extinguishment is primarily attributable to the prepayment penalties paid on certain extinguishments in the first quarter of 2018.

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

	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
			Wtd. Ave			Wtd. Ave			Wtd. Ave			Wtd. Ave
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$ 383,850		4.22 %	$ 217,007		4.35 %	$ 386,738		4.20 %	$ 279,951		4.72 %
Debt assumed	—		— %	14,360		3.80 %	—		— %	14,360		3.80 %
Debt extinguished	—		— %	—		— %	—		— %	(61,291	)	7.43 %
Principal payments	(1,528	)	4.97 %	(702	)	5.90 %	(4,416	)	5.03 %	(2,355	)	6.02 %
Ending balance	$ 382,322		4.09 %	$ 230,665		4.19 %	$ 382,322		4.09 %	$ 230,665		4.19 %
Monthly averages	$ 383,084		4.17 %	$ 220,246		4.22 %	$ 384,590		4.21 %	$ 224,943		4.26 %

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 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 (dollars in thousands):

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2019		2018		$		%	2019		2018		$		%
Revenues:
Other income	$ 841		$ 695		$ 146		21 %	$ 3,452		$ 1,561		$ 1,891		121 %
Total revenue	841		695		146		21 %	3,452		1,561		1,891		121 %
Expenses:
Interest expense	114,548		115,570		(1,022	)	-1 %	351,894		315,281		36,613		12 %
General and administrative expenses	31,019		28,746		2,273		8 %	100,042		95,282		4,760		5 %
Loss (gain) on extinguishment of debt, net	64,374		4,038		60,336		1,494 %	80,093		4,038		76,055		1,883 %
Other expenses	3,884		1,306		2,578		197 %	10,126		4,327		5,799		134 %
	213,825		149,660		64,165		43 %	542,155		418,928		123,227		29 %
Loss from continuing operations before income taxes and other items	(212,984	)	(148,965	)	(64,019	)	-43 %	(538,703	)	(417,367	)	(121,336	)	-29 %
Income tax (expense) benefit	(1,124	)	(3,307	)	2,183		66 %	(1,438	)	(3,651	)	2,213		61 %
Loss from continuing operations	(214,108	)	(152,272	)	(61,836	)	-41 %	(540,141	)	(421,018	)	(119,123	)	-28 %
Less: Preferred stock dividends	—		11,676		(11,676	)	-100 %	—		35,028		(35,028	)	-100 %
Net loss attributable to common stockholders	$ (214,108	)	$ (163,948	)	$ (50,160	)	-31 %	$ (540,141	)	$ (456,046	)	$ (84,095	)	-18 %

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

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

	Three Months Ended		Change			Nine Months Ended		Change
	September 30,	September 30,				September 30,	September 30,
	2019	2018	$		%	2019	2018	$		%
Senior unsecured notes	$ 100,356	$ 99,445	$ 911		1 %	$ 307,587	$ 282,847	$ 24,740		9 %
Secured debt	—	26	(26	)	-100 %	—	96	(96	)	-100 %
Unsecured revolving credit facility and commercial paper note program	10,300	12,662	(2,362	)	-19 %	32,978	22,442	10,536		47 %
Loan expense	3,892	3,437	455		13 %	11,329	9,896	1,433		14 %
Totals	$ 114,548	$ 115,570	$ (1,022	)	-1 %	$ 351,894	$ 315,281	$ 36,613		12 %

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, as well as the movement of foreign exchange rates and related hedge activity. Please refer to Note 11 for additional information. The change in interest expense on the 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 nine months ended September 30, 2019 is due primarily to the early extinguishment of the $600,000,000 of 4.125% senior unsecured notes due 2019 and the $450,000,000 of 6.125% senior unsecured notes due 2020 in March 2019, and the early extinguishment of the $450,000,000 of 4.95% senior unsecured notes due 2021 and $600,000,000 of 5.25% senior unsecured notes due 2022 in September 2019.

General and administrative expenses as a percentage of consolidated revenues for the three months ended September 30, 2019 and 2018 were 2.45% and 2.33% , respectively. Other expenses primarily represent severance-related costs associated with the departure of executive officers and other key employees.

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

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. For the three month periods ended, same store is generally defined as those revenue-generating properties in the portfolio subsequent to July 1, 2018. For the year to date periods ended, same store is generally defined as those revenue-generating properties in the portfolio subsequent to January 1, 2018 . Land parcels, loans and sub-leases, as well as any properties acquired, under development, transitioned to a different segment, sold or classified as held for sale during that period are excluded from the same store amounts. Additionally, unconsolidated properties are excluded from the same store amounts. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties.

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

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

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

	Three Months Ended — March 31,		June 30,		September 30,		December 31,		March 31,		June 30,	September 30,
NOI Reconciliations:	2018		2018		2018		2018		2019		2019	2019
Net income (loss)	$ 453,555		$ 167,273		$ 84,226		$ 124,696		$ 292,302		$ 150,040	$ 647,932
Loss (gain) on real estate dispositions, net	(338,184	)	(10,755	)	(24,723	)	(41,913	)	(167,409	)	1,682	(570,250	)
Loss (income) from unconsolidated entities	2,429		(1,249	)	(344	)	(195	)	9,199		9,049	(3,262	)
Income tax expense (benefit)	1,588		3,841		1,741		1,504		2,222		1,599	3,968
Other expenses	3,712		10,058		88,626		10,502		8,756		21,628	6,186
Impairment of assets	28,185		4,632		6,740		76,022		—		9,939	18,096
Provision for loan losses	—		—		—		—		18,690		—	—
Loss (gain) on extinguishment of debt, net	11,707		299		4,038		53		15,719		—	65,824
Loss (gain) on derivatives and financial instruments, net	(7,173	)	(7,460	)	8,991		1,626		(2,487	)	1,913	1,244
General and administrative expenses	33,705		32,831		28,746		31,101		35,282		33,741	31,019
Depreciation and amortization	228,201		236,275		243,149		242,834		243,932		248,052	272,445
Interest expense	122,775		121,416		138,032		144,369		145,232		141,336	137,343
Consolidated net operating income (NOI)	$ 540,500		$ 557,161		$ 579,222		$ 590,599		$ 601,438		$ 618,979	$ 610,545
NOI by segment:
Seniors Housing Operating	$ 225,226		$ 239,505		$ 265,846		$ 254,445		$ 264,700		$ 278,212	$ 254,155
Triple-net	222,738		224,284		218,684		234,343		233,286		227,935	230,685
Outpatient Medical	92,168		92,874		93,997		101,097		101,295		112,378	124,864
Non-segment/corporate	368		498		695		714		2,157		454	841
Total NOI	$ 540,500		$ 557,161		$ 579,222		$ 590,599		$ 601,438		$ 618,979	$ 610,545

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

	Nine Months Ended — September 30, 2018		September 30, 2019
NOI Reconciliations:
Net income (loss)	$ 705,054		$ 1,090,274
Loss (gain) on real estate dispositions, net	(373,662	)	(735,977	)
Loss (income) from unconsolidated entities	836		14,986
Income tax expense (benefit)	7,170		7,789
Other expenses	102,396		36,570
Impairment of assets	39,557		28,035
Provision for loan losses	—		18,690
Loss (gain) on extinguishment of debt, net	16,044		81,543
Loss (gain) on derivatives and financial instruments, net	(5,642	)	670
General and administrative expenses	95,282		100,042
Depreciation and amortization	707,625		764,429
Interest expense	382,223		423,911
Consolidated net operating income (NOI)	$ 1,676,883		$ 1,830,962
NOI by segment:
Seniors Housing Operating	$ 730,577		$ 797,067
Triple-net	665,706		691,906
Outpatient Medical	279,039		338,537
Non-segment/corporate	1,561		3,452
Total NOI	$ 1,676,883		$ 1,830,962

SSNOI Reconciliations:	Three Months Ended — September 30, 2018		September 30, 2019		Nine Months Ended — September 30, 2018		September 30, 2019
NOI:
Seniors Housing Operating	$ 265,846		$ 254,155		$ 730,577		$ 797,067
Triple-net	218,684		230,685		665,706		691,906
Outpatient Medical	93,997		124,864		279,039		338,537
Total	578,527		609,704		1,675,322		1,827,510
Adjustments:
Seniors Housing Operating:
Non SSNOI on same store properties	(1,323	)	(2,897	)	938		1,061
NOI attributable to non same store properties	(46,374	)	(32,688	)	(176,665	)	(242,615	)
Subtotal	(47,697	)	(35,585	)	(175,727	)	(241,554	)
Triple-net:
Non SSNOI on same store properties	(5,269	)	(7,270	)	(19,738	)	(22,336	)
NOI attributable to non same store properties	(84,468	)	(92,872	)	(258,375	)	(279,290	)
Subtotal	(89,737	)	(100,142	)	(278,113	)	(301,626	)
Outpatient Medical:
Non SSNOI on same store properties	(1,806	)	(1,294	)	(4,517	)	(4,152	)
NOI attributable to non same store properties	(1,659	)	(31,924	)	(6,157	)	(62,806	)
Subtotal	(3,465	)	(33,218	)	(10,674	)	(66,958	)
SSNOI:
Seniors Housing Operating	218,149		218,570		554,850		555,513
Triple-net	128,947		130,543		387,593		390,280
Outpatient Medical	90,532		91,646		268,365		271,579
Total	$ 437,628		$ 440,759		$ 1,210,808		$ 1,217,372

SSNOI Property Reconciliations:	Three Months Ended September 30, 2019 — Seniors Housing Operating		Triple-net		Outpatient Medical		Total		Nine Months Ended September 30, 2019 — Seniors Housing Operating		Triple-net		Outpatient Medical		Total
Total properties	524		657		358		1,539		524		657		358		1,539
Recent acquisitions/development conversions	(52	)	(236	)	(103	)	(391	)	(66	)	(236	)	(107	)	(409	)
Developments	(11	)	(5	)	(5	)	(21	)	(11	)	(5	)	(5	)	(21	)
Held for sale	(12	)	(8	)	(5	)	(25	)	(12	)	(8	)	(5	)	(25	)
Segment transitions	(36	)	(17	)	—		(53	)	(84	)	(17	)	—		(101	)
Other (1)	—		(20	)	(6	)	(26	)	—		(20	)	(6	)	(26	)
Same store properties	413		371		239		1,023		351		371		235		957
(1) Includes eight land parcels, eight subleases and ten loans.

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

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

	March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
FFO Reconciliations:	2018		2018		2018		2018		2019		2019		2019
Net income attributable to common stockholders	$ 437,671		$ 154,432		$ 64,384		$ 101,763		$ 280,470		$ 137,762		$ 589,876
Depreciation and amortization	228,201		236,275		243,149		242,834		243,932		248,052		272,445
Impairment of assets	28,185		4,632		6,740		76,022		—		9,939		18,096
Loss (gain) on real estate dispositions, net	(338,184	)	(10,755	)	(24,723	)	(41,913	)	(167,409	)	1,682		(570,250	)
Noncontrolling interests	(16,353	)	(17,692	)	(17,498	)	(17,650	)	(17,760	)	(18,889	)	31,347
Unconsolidated entities	13,700		11,833		13,220		13,910		19,150		11,475		10,864
FFO	$ 353,220		$ 378,725		$ 285,272		$ 374,966		$ 358,383		$ 390,021		$ 352,378
Average diluted shares outstanding	373,257		373,075		374,487		380,002		393,452		406,673		406,891
Per diluted share data:
Net income attributable to common stockholders	$ 1.17		$ 0.41		$ 0.17		$ 0.27		$ 0.71		$ 0.34		$ 1.45
FFO	$ 0.95		$ 1.02		$ 0.76		$ 0.99		$ 0.91		$ 0.96		$ 0.87

	Nine Months Ended — September 30,		September 30,
FFO Reconciliations:	2018		2019
Net income attributable to common stockholders	$ 656,487		$ 1,008,108
Depreciation and amortization	707,625		764,429
Impairment of assets	39,557		28,035
Loss (gain) on real estate dispositions, net	(373,662	)	(735,977	)
Noncontrolling interests	(51,543	)	(5,302	)
Unconsolidated entities	38,753		41,489
FFO	$ 1,017,217		$ 1,100,782
Average diluted common shares outstanding:	373,638		402,412
Per diluted share data:
Net income attributable to common stockholders	$ 1.76		$ 2.51
FFO	$ 2.72		$ 2.74

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

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

	Three Months Ended — March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
EBITDA Reconciliations:	2018		2018		2018		2018		2019		2019		2019
Net income (loss)	$ 453,555		$ 167,273		$ 84,226		$ 124,696		$ 292,302		$ 150,040		$ 647,932
Interest expense	122,775		121,416		138,032		144,369		145,232		141,336		137,343
Income tax expense (benefit)	1,588		3,841		1,741		1,504		2,222		1,599		3,968
Depreciation and amortization	228,201		236,275		243,149		242,834		243,932		248,052		272,445
EBITDA	$ 806,119		$ 528,805		$ 467,148		$ 513,403		$ 683,688		$ 541,027		$ 1,061,688
Interest Coverage Ratio:
Interest expense	$ 122,775		$ 121,416		$ 138,032		$ 144,369		$ 145,232		$ 141,336		$ 137,343
Non-cash interest expense	(4,179	)	(1,716	)	(1,658	)	(3,307	)	(5,171	)	(752	)	(1,988	)
Capitalized interest	2,336		2,100		1,921		1,548		2,327		3,929		4,148
Total interest	120,932		121,800		138,295		142,610		142,388		144,513		139,503
EBITDA	$ 806,119		$ 528,805		$ 467,148		$ 513,403		$ 683,688		$ 541,027		$ 1,061,688
Interest coverage ratio	6.67	x	4.34	x	3.38	x	3.60	x	4.80	x	3.74	x	7.61	x
Fixed Charge Coverage Ratio:
Total interest	$ 120,932		$ 121,800		$ 138,295		$ 142,610		$ 142,388		$ 144,513		$ 139,503
Secured debt principal payments	14,247		14,139		13,908		13,994		13,543		13,684		13,121
Preferred dividends	11,676		11,676		11,676		11,676		—		—		—
Total fixed charges	146,855		147,615		163,879		168,280		155,931		158,197		152,624
EBITDA	$ 806,119		$ 528,805		$ 467,148		$ 513,403		$ 683,688		$ 541,027		$ 1,061,688
Fixed charge coverage ratio	5.49	x	3.58	x	2.85	x	3.05	x	4.38	x	3.42	x	6.96	x

	Nine Months Ended — September 30,		September 30,
EBITDA Reconciliations:	2018		2019
Net income (loss)	$ 705,054		$ 1,090,274
Interest expense	382,223		423,911
Income tax expense (benefit)	7,170		7,789
Depreciation and amortization	707,625		764,429
EBITDA	$ 1,802,072		$ 2,286,403
Interest Coverage Ratio:
Interest expense	$ 382,223		$ 423,911
Non-cash interest expense	(7,553	)	(7,911	)
Capitalized interest	6,357		10,404
Total interest	381,027		426,404
EBITDA	$ 1,802,072		$ 2,286,403
Interest coverage ratio	4.73	x	5.36	x
Fixed Charge Coverage Ratio:
Total interest	$ 381,027		$ 426,404
Secured debt principal payments	42,294		40,348
Preferred dividends	35,028		—
Total fixed charges	458,349		466,752
EBITDA	$ 1,802,072		$ 2,286,403
Fixed charge coverage ratio	3.93	x	4.90	x

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

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

	Twelve Months Ended — March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
Adjusted EBITDA Reconciliations:	2018		2018		2018		2018		2019		2019		2019
Net income	$ 656,551		$ 620,384		$ 615,311		$ 829,750		$ 668,497		$ 651,264		$ 1,214,970
Interest expense	488,800		493,986		509,440		526,592		549,049		568,969		568,280
Income tax expense (benefit)	19,471		31,761		32,833		8,674		9,308		7,066		9,293
Depreciation and amortization	921,645		933,072		946,083		950,459		966,190		977,967		1,007,263
EBITDA	2,086,467		2,079,203		2,103,667		2,315,475		2,193,044		2,205,266		2,799,806
Loss (income) from unconsolidated entities	62,448		57,221		60,285		641		7,411		17,709		14,791
Stock-based compensation expense (1)	25,753		26,158		25,443		27,646		23,618		26,113		25,347
Loss (gain) on extinguishment of debt, net	17,593		12,377		16,415		16,097		20,109		19,810		81,596
Loss (gain) on real estate dispositions, net	(438,342	)	(406,942	)	(430,043	)	(415,575	)	(244,800	)	(232,363	)	(777,890	)
Impairment of assets	141,637		132,638		139,378		115,579		87,394		92,701		104,057
Provision for loan losses	62,966		62,966		62,966		—		18,690		18,690		18,690
Loss (gain) on derivatives and financial instruments, net	(6,113	)	(14,309	)	(5,642	)	(4,016	)	670		10,043		2,296
Other expenses (1)	167,524		171,243		161,655		111,990		117,942		126,994		45,512
Additional other income	—		(10,805	)	(10,805	)	(14,832	)	(14,832	)	(4,027	)	(4,027	)
Adjusted EBITDA	$ 2,119,933		$ 2,109,750		$ 2,123,319		$ 2,153,005		$ 2,209,246		$ 2,280,936		$ 2,310,178
Adjusted Fixed Charge Coverage Ratio:
Interest expense	$ 488,800		$ 493,986		$ 509,440		$ 526,592		$ 549,049		$ 568,969		$ 568,280
Capitalized interest	11,696		10,437		9,813		7,905		7,896		9,725		11,952
Non-cash interest expense	(12,858	)	(11,628	)	(10,087	)	(10,860	)	(11,852	)	(10,888	)	(11,218	)
Total interest	487,638		492,795		509,166		523,637		545,093		567,806		569,014
Adjusted EBITDA	$ 2,119,933		$ 2,109,750		$ 2,123,319		$ 2,153,005		$ 2,209,246		$ 2,280,936		$ 2,310,178
Adjusted interest coverage ratio	4.35	x	4.28	x	4.17	x	4.11	x	4.05	x	4.02	x	4.06	x
Total interest	$ 487,638		$ 492,795		$ 509,166		$ 523,637		$ 545,093		$ 567,806		$ 569,014
Secured debt principal payments	62,077		60,258		58,866		56,288		55,584		55,129		54,342
Preferred dividends	46,707		46,704		46,704		46,704		35,028		23,352		11,676
Total fixed charges	596,422		599,757		614,736		626,629		635,705		646,287		635,032
Adjusted EBITDA	$ 2,119,933		$ 2,109,750		$ 2,123,319		$ 2,153,005		$ 2,209,246		$ 2,280,936		$ 2,310,178
Adjusted fixed charge coverage ratio	3.55	x	3.52	x	3.45	x	3.44	x	3.48	x	3.53	x	3.64	x
(1) Certain severance-related costs are included in stock-based compensation and excluded from other expenses.

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

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

	As of — March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
	2018		2018		2018		2018		2019		2019		2019
Book capitalization:
Unsecured credit facility and commercial paper	$ 865,000		$ 540,000		$ 1,312,000		$ 1,147,000		$ 419,293		$ 1,869,188		$ 1,334,586
Long-term debt obligations (1)	10,484,840		10,895,559		12,192,060		12,150,144		12,371,729		13,390,344		12,463,680
Cash & cash equivalents (2)	(202,824	)	(215,120	)	(191,199	)	(215,376	)	(249,127	)	(268,666	)	(265,788	)
Total net debt	11,147,016		11,220,439		13,312,861		13,081,768		12,541,895		14,990,866		13,532,478
Total equity and noncontrolling interests (3)	15,448,201		15,198,644		15,670,065		16,010,645		16,498,376		16,452,806		16,696,070
Book capitalization	$ 26,595,217		$ 26,419,083		$ 28,982,926		$ 29,092,413		$ 29,040,271		$ 31,443,672		$ 30,228,548
Net debt to book capitalization ratio	42	%	42	%	46	%	45	%	43	%	48	%	45	%
Undepreciated book capitalization:
Total net debt	$ 11,147,016		$ 11,220,439		$ 13,312,861		$ 13,081,768		$ 12,541,895		$ 14,990,866		$ 13,532,478
Accumulated depreciation and amortization	4,990,780		5,113,928		5,394,274		5,499,958		5,670,111		5,539,435		5,769,843
Total equity and noncontrolling interests (3)	15,448,201		15,198,644		15,670,065		16,010,645		16,498,376		16,452,806		16,696,070
Undepreciated book capitalization	$ 31,585,997		$ 31,533,011		$ 34,377,200		$ 34,592,371		$ 34,710,382		$ 36,983,107		$ 35,998,391
Net debt to undepreciated book capitalization ratio	35	%	36	%	39	%	38	%	36	%	41	%	38	%
Market capitalization:
Common shares outstanding	371,971		372,030		375,577		383,675		403,740		405,254		405,758
Period end share price	$ 54.43		$ 62.69		$ 64.32		$ 69.41		$ 77.60		$ 81.53		$ 90.65
Common equity market capitalization	$ 20,246,382		$ 23,322,561		$ 24,157,113		$ 26,630,882		$ 31,330,224		$ 33,040,359		$ 36,781,963
Total net debt	11,147,016		11,220,439		13,312,861		13,081,768		12,541,895		14,990,866		13,532,478
Noncontrolling interests (3)	889,766		856,721		1,362,380		1,378,311		1,419,885		1,458,351		1,430,005
Preferred stock	718,498		718,498		718,498		718,498		—		—		—
Enterprise value	$ 33,001,662		$ 36,118,219		$ 39,550,852		$ 41,809,459		$ 45,292,004		$ 49,489,576		$ 51,744,446
Net debt to market capitalization ratio	34	%	31	%	34	%	31	%	28	%	30	%	26	%
(1) Amounts include senior unsecured notes, secured debt and lease liabilities related to financing leases, as reflected on our Consolidated Balance Sheet. Operating lease liabilities related to the ASC 842 adoption are excluded.
(2) Inclusive of IRC Section 1031 deposits, if any.
(3) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests as reflected on our Consolidated Balance Sheet.

Critical Accounting Policies

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

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

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

Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors. Management believes the current assumptions and other considerations used to estimate amounts reflected in our unaudited consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our unaudited consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for further information regarding significant accounting policies that impact us. There have been no material changes to these policies in 2019 .

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 the Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to the Company’s opportunities to acquire, develop or sell properties; the Company’s ability to close its anticipated acquisitions, investments or dispositions on currently anticipated terms or within currently anticipated timeframes; the expected performance of the Company’s operators/tenants and properties; the Company’s expected occupancy rates; the Company’s ability to declare and to make distributions to shareholders; the Company’s investment and financing opportunities and plans; the Company’s continued qualification as a real estate investment trust (“REIT”); the Company’s ability to access capital markets or other sources of funds; and the Company’s ability to meet its earnings guidance. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the Company’s actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including availability and cost of capital; uncertainty from the expected discontinuance of LIBOR and the transition to any other interest rate benchmark; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; the Company’s ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting the Company’s properties; the Company’s ability to re-lease space at similar rates as vacancies occur; the Company’s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting the Company’s properties; changes in rules or practices governing the Company’s financial reporting; the movement of U.S. and foreign currency exchange rates; the Company’s ability to maintain its qualification as a REIT; and key management personnel recruitment and retention. Other important factors are identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 , including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Finally, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity or repaid by the sale of assets. To illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate debt instruments whereby we modeled the change in net present values arising from a

Item 3. Quantitative and Qualitative Disclosures About Market Risk

hypothetical 1% increase in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis performed as of the dates indicated (in thousands):

	September 30, 2019 — Principal	Change in		December 31, 2018 — Principal	Change in
	balance	fair value		balance	fair value
Senior unsecured notes	$ 9,118,526	$ (706,397	)	$ 9,009,159	$ (548,558	)
Secured debt	1,484,713	(56,110	)	1,639,983	(59,522	)
Totals	$ 10,603,239	$ (762,507	)	$ 10,649,142	$ (608,080	)

Our variable rate debt, including our unsecured revolving credit facility and Commercial Paper Program, is reflected at fair value. At September 30, 2019 , we had $3,188,052,000 outstanding related to our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would result in increased annual interest expense of $31,881,000 . At December 31, 2018, we had $2,683,553,000 outstanding under our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would have resulted in increased annual interest expense of $26,836,000 .

We are subject to currency fluctuations that may, from time to time, affect our financial condition and results of operations. Increases or decreases in the value of the Canadian Dollar or Pounds Sterling relative to the U.S. Dollar impact the amount of net income we earn from our investments in Canada and the United Kingdom. Based solely on our results for the three months ended September 30, 2019 , including the impact of existing hedging arrangements, if these exchange rates were to increase or decrease by 10%, our net income from these investments would increase or decrease, as applicable, by less than $ 11,000,000 . We will continue to mitigate these underlying foreign currency exposures with non-U.S. denominated borrowings and gains and losses on derivative contracts. If we increase our international presence through investments in, or acquisitions or development of, seniors housing and health care properties outside the U.S., we may also decide to transact additional business or borrow funds in currencies other than U.S. Dollars, Canadian Dollars or Pounds Sterling. To illustrate the impact of changes in foreign currency markets, we performed a sensitivity analysis on our derivative portfolio whereby we modeled the change in net present values arising from a hypothetical 1% increase in foreign currency exchange rates to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

	September 30, 2019 — Carrying	Change in	December 31, 2018 — Carrying	Change in
	Value	fair value	Value	fair value
Foreign currency forward contracts	$ 116,853	$ 10,663	$ 23,620	$ 16,163
Debt designated as hedges	1,480,775	14,808	1,559,159	15,592
Totals	$ 1,597,628	$ 25,471	$ 1,582,779	$ 31,755

For additional information regarding fair values of financial instruments, see “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and Notes 12 and 17 to our unaudited consolidated financial statements.

Item 4. Controls and Procedures

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, there are various legal proceedings pending against us that arise in the ordinary course of our business. Management does not believe that the resolution of any of these legal proceedings either individually or in the aggregate will have a material adverse effect on our business, results of operations or financial condition. Further, from time to time, we are party to certain legal proceedings for which third parties, such as tenants, operators and/or managers are contractually obligated to indemnify, defend and hold us harmless. In some of these matters, the indemnitors have insurance for the potential damages. In other matters, we are being defended by tenants and other obligated third parties and these indemnitors may not have sufficient insurance, assets, income or resources to satisfy their defense and indemnification obligations to us. The unfavorable resolution of such legal proceedings could, individually or in the aggregate, materially adversely affect the indemnitors’ ability to satisfy their respective obligations to us, which, in turn, could have a material adverse effect on our business, results of operations or financial condition. It is management’s opinion that there are currently no such legal proceedings pending that will, individually or in the aggregate, have such a material adverse effect. Despite management’s view of the ultimate resolution of these legal proceedings, we may have significant legal expenses and costs associated with the defense of such matters. Further, management cannot predict the outcome of these legal proceedings and if management’s expectation regarding such matters is not correct, such proceedings could have a material adverse effect on our business, results of operations or financial condition.

Item 1A. Risk Factors

There have been no material changes from the risk factors identified under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 .

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

Issuer Purchases of Equity Securities — Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share
July 1, 2019 through July 31, 2019	—	$ —
August 1, 2019 through August 31, 2019	42,138	81.77
September 1, 2019 through September 30, 2019	15,267	88.81
Totals	57,405	$ 83.64

(1) During the three months ended September 30, 2019 , the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

(2) No shares were purchased as part of publicly announced plans or programs.

Item 5. Other Information

None.

Item 6. Exhibits

4.1	Supplemental Indenture No. 16, dated as of August 19, 2019 between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (filed with the SEC as Exhibit 4.3 to the Company's 8-K filed August 19, 2019 and incorporated by reference herein).
10.1	Settlement Agreement by and between John A. Goodey and Welltower Inc. *
10.2	2019 Non-Qualified Deferred Compensation Plan. *
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1	Certification pursuant to 18 U.S.C. Section 1350 by Chairman and Chief Executive Officer.
32.2	Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.
101.INS	XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL
*	Management contract or Compensatory Plan or Arrangement.

SIGNATURES

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

Date:	October 30, 2019	WELLTOWER INC. — By:	/s/ THOMAS J. DEROSA
		Thomas J. DeRosa,
		Chairman and Chief Executive Officer (Principal Executive Officer)
Date:	October 30, 2019	By:	/s/ TIMOTHY G. MCHUGH
		Timothy G. McHugh,
		Senior Vice President & Chief Financial Officer (Principal Financial Officer)
Date:	October 30, 2019	By:	/s/ JOSHUA T. FIEWEGER
		Joshua T. Fieweger,
		Senior Vice President & Controller (Principal Accounting Officer)

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WELLTOWER INC. — Interim / Quarterly Report 2019

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WELLTOWER INC. Interim / Quarterly Report 2019