Published: 2022-11-08 00:00:00 ET

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Welltower Inc., an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. We invest 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 Inc., 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. 

As of May 24, 2022, we are structured as an umbrella partnership REIT under which substantially all of our business is conducted through Welltower OP LLC, the day-to-day management of which is exclusively controlled by Welltower Inc. For additional information on the UPREIT reorganization, please see our Current Reports on Form 8-K filed with the SEC on March 7, 2022, April 1, 2022 and May 25, 2022. Unless stated otherwise or the context otherwise requires, references to "Welltower" mean Welltower Inc. and references to "Welltower OP" mean Welltower OP LLC. References to "we," "us" and "our" mean collectively Welltower, Welltower OP and those entities/subsidiaries owned or controlled by Welltower and/or Welltower OP. Welltower's weighted average ownership in Welltower OP was 99.737% for the three months ended September 30, 2022. As of September 30, 2022, Welltower owned 99.742% of the issued and outstanding units of Welltower OP, with other investors owning the remaining 0.258% of outstanding units. We adjust the noncontrolling members' interest at the end of each period to reflect their interest in the net assets of Welltower OP.

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, 2022 are not necessarily an indication of the results that may be expected for the year ending December 31, 2022. 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, 2021.

Impact of COVID-19 Pandemic

The extent to which the COVID-19 pandemic impacts our operations and those of our operators and tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the direct and indirect economic effects of the pandemic and containment measures, the impact of new variants, the effectiveness of vaccines and the overall pace of recovery, among others. The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations and cash flows in the future.

Our Seniors Housing Operating revenues are dependent on occupancy. As of September 30, 2022, nearly all communities are open for new admissions and allowing visitors, in-person tours and communal dining and activities. Average occupancy is as follows:

						Three Months Ended(1)
						March 31,						June 30,						September 30,						December 31,
2021						72.7		%				73.0		%				74.9		%				76.3		%
2022						76.3		%				77.1		%				78.0		%

(1) Average occupancy includes our minority ownership share related to unconsolidated properties and excludes the minority partners' noncontrolling ownership share related to consolidated properties. Also excludes land parcels and properties under development.

Property-level operating expenses associated with the COVID-19 pandemic related to our Seniors Housing Operating portfolio totaled $8,134,000 and $28,152,000 for the three and nine ended September 30, 2022, respectively, as compared to $8,842,000 and $53,767,000 during the three and nine ended September 30, 2021, respectively. These expenses were incurred as a result of public health measures and other regulations affecting our properties, as well as additional health and safety measures adopted by us and our operators related to the COVID-19 pandemic, including increases in labor and property cleaning expenses and expenditures related to our efforts to procure personal protective equipment and supplies. We expect total Seniors Housing Operating expenses to remain elevated during the pandemic and potentially beyond as these additional health and safety measures become standard practice.

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In 2021 and 2022, we received government grants under the CARES Act primarily to cover increased expenses and lost revenue during the COVID-19 pandemic, as well as under similar programs in the U.K. and Canada. We recognized $5,573,000 and $33,137,000 during the three and nine months ended September 30, 2022, respectively, as compared to $10,965,000 and $78,670,000 during the three and nine months ended September 30, 2021, respectively. These grants represent a reduction to property operating expenses in our Consolidated Statements of Comprehensive Income.

Our Triple-net operators have experienced similar occupancy declines and operating costs as our Seniors Housing Operating properties. Additionally, long-term/post-acute care facilities have generally experienced a higher degree of occupancy declines. These factors may continue to impact the ability of our Triple-net operators to make contractual rent payments to us in the future. Many of our Triple-net operators received funds under the CARES Act Paycheck Protection Program and Provider Relief Fund.

New Accounting Standards   

•In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” This ASU simplifies accounting for convertible instruments and removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. This ASU also simplifies the diluted earnings per share calculation in certain areas and provides updated disclosure requirements. The ASU is effective for public business entities beginning after December 15, 2021 including interim periods within those fiscal years. The adoption of this standard did not have a significant impact on our consolidated financial statements.

•In March 2020, the FASB issued an amendment to the reference rate reform standard, which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting for relationships affected by reference rate reform. The guidance is optional and may be elected over time as reference rate reform activities occur. We are currently evaluating our options with regards to existing contracts and hedging relationships and the impact of adopting this update on our consolidated financial statements.

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

			Nine Months Ended
			September 30, 2022																								September 30, 2021
			Seniors Housing Operating						Triple-net						Outpatient Medical						Totals						Seniors Housing Operating						Triple-net						Outpatient Medical						Totals
Land and land improvements			$	199,892					$	—					$	65,688					$	265,580					$	264,706					$	48,099					$	45,350					$	358,155
Buildings and improvements			1,988,999						172						249,660						2,238,831						1,655,067						436,828						227,390						2,319,285
Acquired lease intangibles			109,049						—						33,978						143,027						142,439						—						17,333						159,772
Construction in progress			108,141						—						—						108,141						—						—						—						—
Right of use assets, net			169						—						3,852						4,021						77,455						—						—						77,455
Total net real estate assets			2,406,250						172						353,178						2,759,600						2,139,667						484,927						290,073						2,914,667
Receivables and other assets			10,410						—						460						10,870						6,041						—						3,534						9,575
Total assets acquired (1)			2,416,660						172						353,638						2,770,470						2,145,708						484,927						293,607						2,924,242
Secured debt			(219,067)						—						—						(219,067)						—						—						—						—
Lease liabilities			—						—						(3,852)						(3,852)						(138,126)						—						—						(138,126)
Accrued expenses and other liabilities			(111,373)						—						(1,294)						(112,667)						(20,748)						(8,703)						(266)						(29,717)
Total liabilities acquired			(330,440)						—						(5,146)						(335,586)						(158,874)						(8,703)						(266)						(167,843)
Noncontrolling interests (2)			(115,112)						(4)						(975)						(116,091)						(2,597)						(2,056)						(16,540)						(21,193)
Non-cash acquisition related activity(3)			(25,795)						—						—						(25,795)						—						—						—						—
Cash disbursed for acquisitions			1,945,313						168						347,517						2,292,998						1,984,237						474,168						276,801						2,735,206
Construction in progress additions			343,000						64,091						75,460						482,551						190,672						60,251						29,448						280,371
Less: Capitalized interest			(16,464)						(3,088)						(1,177)						(20,729)						(9,658)						(2,092)						(2,277)						(14,027)
Accruals (4)			(2,809)						—						4,452						1,643						38						—						(3,057)						(3,019)
Cash disbursed for construction in progress			323,727						61,003						78,735						463,465						181,052						58,159						24,114						263,325
Capital improvements to existing properties			232,618						39,526						43,691						315,835						115,115						26,496						24,080						165,691
Total cash invested in real property, net of cash acquired			$	2,501,658					$	100,697					$	469,943					$	3,072,298					$	2,280,404					$	558,823					$	324,995					$	3,164,222

(1) Excludes $6,431,000 and $301,000 of unrestricted and restricted cash acquired during the nine months ended September 30, 2022 and September 30, 2021, respectively.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests. For the nine months ended September 30, 2022, 1,227,000 Welltower OP units were issued as a component of funding for certain transactions.

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

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

Effective on April 1, 2022, our leasehold interest relating to the master lease with National Health Investors, Inc. ("NHI") for 17 properties assumed in conjunction with the Holiday Retirement acquisition was terminated as a result of the transition or sale of the properties by NHI. The lease termination was part of an agreement to resolve outstanding litigation with NHI. In conjunction with the agreement, a wholly owned subsidiary and the lessee on the master lease agreed to release $6,883,000 of cash to the landlord, which represents the net cash flow generated from the properties since we assumed the leasehold interest. Additionally, in conjunction with the lease termination, during the three months ended June 30, 2022 we recognized $58,621,000 in other income on our Consolidated Statements of Comprehensive Income, from the derecognition of the right of use asset and related lease liability.

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, 2022						September 30, 2021
Development projects:
Seniors Housing Operating						$	182,421					$	58,844
Triple-net						—						22,990
Outpatient Medical						—						116,612
Total construction in progress conversions						$	182,421					$	198,446

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

						September 30, 2022						December 31, 2021
Assets:
In place lease intangibles						$	1,801,657					$	1,681,533
Above market tenant leases						56,844						53,964
Lease commissions						62,302						54,131
Gross historical cost						1,920,803						1,789,628
Accumulated amortization						(1,416,849)						(1,286,259)
Net book value						$	503,954					$	503,369
Weighted-average amortization period in years						7.4						5.5
Liabilities:
Below market tenant leases						$	77,071					$	74,909
Accumulated amortization						(50,642)						(45,291)
Net book value						$	26,429					$	29,618
Weighted-average amortization period in years						8.5						8.2

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

						Three Months Ended September 30,												Nine Months Ended September 30,
						2022						2021						2022						2021
Rental income related to (above)/below market tenant leases, net						$	358					$	384					$	1,094					$	1,241
Amortization related to in place lease intangibles and lease commissions						(60,176)						(32,872)						(158,364)						(76,083)

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

						Assets						Liabilities
2022						$	48,478					$	2,458
2023						161,778						5,106
2024						85,462						3,554
2025						35,610						2,911
2026						28,159						2,430
Thereafter						144,467						9,970
Total						$	503,954					$	26,429

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). At September 30, 2022, two Seniors Housing Operating, 11 Triple-net and one Outpatient Medical properties with an aggregate real estate balance of $175,657,000 were classified as held for sale. In addition to the real property balances, lease liabilities of $66,890,000 and net other assets and (liabilities) of $1,877,000 are included in the Consolidated Balance Sheets related to the held for sale properties. Expected gross sales proceeds related to the held for sale properties are approximately $236,919,000.

During the nine months ended September 30, 2022, we recorded $4,356,000 of impairment charges related to two Triple-net properties and one Outpatient Medical property classified as held for use in which the carrying value exceeded the estimated fair value. During the nine months ended September 30, 2021, we recorded $19,567,000 of impairment charges related to four Triple-net properties and one Outpatient Medical property classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell. Additionally, during the nine months ended September 30, 2021, we recorded $29,183,000 of impairment charges related to two Seniors Housing Operating properties and two Triple-net properties that were held for use in which the carrying value exceeded the estimated fair value.

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

						Nine Months Ended
						September 30, 2022						September 30, 2021
Real estate dispositions:
Seniors Housing Operating						$	13,470					$	112,837
Triple-net						89,827						439,974
Outpatient Medical						393						159,000
Total dispositions						103,690						711,811
Gain (loss) on real estate dispositions, net						20,466						223,702
Net other assets/(liabilities) disposed						275						6,195
Proceeds from real estate dispositions						$	124,431					$	941,708

Operating results attributable to properties sold or classified as held for sale which do not meet the definition of discontinued operations are not 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,												Nine Months Ended September 30,
						2022						2021						2022						2021
Revenues:
Total revenues						$	4,299					$	14,813					$	13,331					$	69,018
Expenses:
Interest expense						867						803						2,545						2,813
Property operating expenses						1,941						2,457						5,946						11,874
Provision for depreciation						218						4,583						233						22,124
Total expenses						3,026						7,843						8,724						36,811
Income (loss) from real estate dispositions, net						$	1,273					$	6,970					$	4,607					$	32,207

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.

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

												Nine Months Ended
						Classification						September 30, 2022						September 30, 2021
Operating lease cost: (1)
Real estate lease expense						Property operating expenses						$	16,767					$	16,430
Non-real estate investment lease expense						General and administrative expenses						4,174						3,461
Finance lease cost:
Amortization of leased assets						Property operating expenses						4,927						6,120
Interest on lease liabilities						Interest expense						4,584						4,950
Sublease income						Rental income						(8,537)						(5,972)
Total												$	21,915					$	24,989

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

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Supplemental balance sheet information related to leases is as follows (in thousands):

			Classification						September 30, 2022						December 31, 2021
Right of use assets:
Operating leases - real estate			Right of use assets, net						$	290,133					$	367,068
Finance leases - real estate			Right of use assets, net						33,097						155,728
Real estate right of use assets, net									323,230						522,796
Operating leases - non-real estate investments			Receivables and other assets						8,088						9,627
Finance leases - held for sale (1)			Real property held for sale, net of accumulated depreciation						116,577						—
Total right of use assets, net									$	447,895					$	532,423
Lease liabilities:
Operating leases									$	301,001					$	434,261
Financing leases									109,414						111,683
Total									$	410,415					$	545,944
(1) At September 30, 2022, finance leases at seven properties were classified as held for sale.

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. During the nine months ended September 30, 2021, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 through rental income, relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable.

Leases in our Triple-net and Outpatient Medical portfolios recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the nine months ended September 30, 2022, we recognized $1,079,784,000 of rental income related to operating leases, of which $145,541,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the nine months ended September 30, 2021, we recognized $1,015,550,000 of rental income related to operating leases, of which $134,632,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASC 606, "Revenue from Contracts with Customers." Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $304,338,000 and $100,328,000 for the nine months ended September 30, 2022 and 2021, respectively.

Loans receivable are recorded on our Consolidated Balance Sheets in real estate loans receivable, net of allowance for credit losses, or for non-real estate loans receivable, in receivables and other assets. Real estate loans receivable consists of mortgage loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, as well as corporate guarantees and/or personal guarantees. Non-real estate loans are generally corporate loans with no real estate backing. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of the risk of credit loss. Accrued interest receivable was $25,142,000 and $26,659,000 as of September 30, 2022 and December 31, 2021, respectively, and is included in receivables and other assets on the Consolidated Balance Sheets. The following is a summary of our loans receivable (in thousands):

						September 30, 2022						December 31, 2021
Mortgage loans						$	709,120					$	889,556
Other real estate loans						220,484						194,477
Allowance for credit losses on real estate loans receivable						(12,965)						(15,352)
Real estate loans receivable, net of credit allowance						916,639						1,068,681
Non-real estate loans						409,796						375,060
Allowance for credit losses on non-real estate loans receivable						(151,800)						(151,433)
Non-real estate loans receivable, net of credit allowance						257,996						223,627
Total loans receivable, net of credit allowance						$	1,174,635					$	1,292,308

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

						Nine Months Ended
						September 30, 2022						September 30, 2021
Advances on loans receivable						$	133,179					$	953,006
Receipts on loans receivable						(172,380)						(250,415)
Net cash advances (receipts) on loans receivable						$	(39,201)					$	702,591

The allowance for credit losses on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the credit allowance is based on a quarterly evaluation of each of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of credit quality indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral.

A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans we identified as having deteriorated credit quality, we determine the amount of credit loss on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual are deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to income accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

For the remaining loans we assess credit loss on a collective pool basis and use our historical loss experience for similar loans to determine the reserve for credit losses. The following is a summary of our loans by credit loss category (in thousands):

						September 30, 2022
Loan category						Years of Origination						Loan Carrying Value						Allowance for Credit Loss						Net Loan Balance						No. of Loans
Deteriorated loans						2007 - 2018						$	172,265					$	(148,436)					$	23,829					3
Collective loan pool						2007-2017						214,598						(3,012)						211,586						13
Collective loan pool						2018						19,778						(278)						19,500						2
Collective loan pool						2019						22,839						(321)						22,518						4
Collective loan pool						2020						51,954						(729)						51,225						6
Collective loan pool						2021						748,653						(10,456)						738,197						18
Collective loan pool						2022						109,313						(1,533)						107,780						15
Total loans												$	1,339,400					$	(164,765)					$	1,174,635					61

The total allowance for credit losses balance is deemed sufficient to absorb expected losses relating to our loan portfolio. The following is a summary of the allowance for credit losses on loans receivable for the periods presented (in thousands):                            

			Nine Months Ended
			September 30, 2022						September 30, 2021
Balance at beginning of period			$	166,785					$	224,036
Provision for loan losses, net			(149)						7,309
Loan write-offs			—						(64,075)
Foreign currency translation			(1,871)						(468)
Balance at end of period			$	164,765					$	166,802

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

						Nine Months Ended
						September 30, 2022						September 30, 2021
Balance of deteriorated loans at end of period						$	172,265					$	178,301
Allowance for credit losses						(148,436)						(148,438)
Balance of deteriorated loans not reserved						$	23,829					$	29,863
Interest recognized on deteriorated loans (1)						$	—					$	3,171

(1) Represents cash interest recognized in the period.

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We participate in a number of joint ventures, which generally invest in seniors housing and health care real estate. Our share of the results of operations for these properties has 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, 2022						December 31, 2021
Seniors Housing Operating						10% to 65%						$	1,082,217					$	830,647
Triple-net						10% to 88%						102,168						44,814
Outpatient Medical						15% to 50%						198,861						163,582
Total												$	1,383,246					$	1,039,043

(1) Includes ownership of investments classified as liabilities and excludes ownership of in substance real estate.

At September 30, 2022, the aggregate unamortized basis difference of our joint venture investments of $132,437,000 is primarily attributable to the difference between the amount for which we purchased 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.

We have made loans related to 21 properties as of September 30, 2022 for the development and construction of certain properties which are classified as in substance real estate investments and have a carrying value of $593,376,000. We believe that such borrowers typically represent variable interest entities ("VIE" or "VIEs") in accordance with ASC 810, "Consolidation." VIEs are required to be consolidated by their primary beneficiary which is the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impacts the entity's economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We have concluded that we are not the primary beneficiary of such borrowers, therefore, the loan arrangements were assessed based on among other factors, the amount and timing of expected residual profits, the estimated fair value of the collateral and the significance of the borrower's equity in the project. Based on these assessments, the arrangements have been classified as in substance real estate investments. We expect to fund an additional $236,458,000 related to these investments.

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, 2022, excluding our share of NOI in unconsolidated entities (dollars in thousands):

Concentration by relationship: (1)						Number of Properties						Total NOI						Percent of NOI (2)
ProMedica (3)						205						$	183,506					11%
Atria Senior Living(4)						98						125,933						8%
Sunrise Senior Living						109						116,647						7%
HC-One Group (5)						1						66,547						4%
Cogir Management Corporation						48						56,065						4%
Remaining portfolio						1,273						1,173,454						66%
Totals						1,734						$	1,722,152					100%

(1) ProMedica and HC-One Group are in our Triple-net segment. Sunrise Senior Living, Atria Senior Living, and Cogir Management Corporation are in our Seniors Housing Operating segment.

(2) NOI with our top five relationships comprised 34% of total NOI for the year ended December 31, 2021.

(3) During the quarter ended March 31, 2022, we purchased an additional 5% ownership interest in the consolidated ProMedica joint ventures for $137,437,000.

(4) Inclusive of $58,621,000 of income recognized upon termination of lease. See Note 3 for further details.

(5) In addition to the one property, HC-One Group is the borrower on a £532,904,000 loan as of September 30, 2022 which is included in NOI.

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$1,000,000,000 in alternate currencies (none outstanding at September 30, 2022). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over SOFR interest rate. Based on our current credit ratings, the loans under the unsecured revolving credit facility currently bear interest at 0.775% over the adjusted SOFR rate. 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, 2022. 

Under the terms of our commercial paper 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, 2022, there was a balance of $614,715,000 outstanding on the commercial paper program ($615,000,000 in principal outstanding, net of an unamortized discount of $285,000), which reduces the borrowing capacity of the unsecured revolving credit facility. The notes bear interest at various floating rates with a weighted average of 3.43% as of September 30, 2022 and a weighted average maturity of six days as of September 30, 2022.

The following information relates to aggregate borrowings under the unsecured revolving credit facility and commercial paper program for the periods presented (dollars in thousands):

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: (i) 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 (ii) 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, 2022, the annual principal payments due on these debt obligations were as follows (in thousands):

						Senior Unsecured Notes (1,2,3)						Secured Debt (1,4)						Totals
2022						$	—					$	268,769					$	268,769
2023						—						494,352						494,352
2024						1,350,000						318,176						1,668,176
2025						1,260,000						224,036						1,484,036
2026						700,000						124,195						824,195
Thereafter (5, 6, 7, 8)						9,169,012						691,793						9,860,805
Totals						$	12,479,012					$	2,121,321					$	14,600,333

(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 Sheets.

(2) Annual interest rates range from 2.05% to 6.50%.

(3) All senior unsecured notes with the exception of the $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 have been issued by Welltower OP and are fully and unconditionally guaranteed by Welltower. The $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 have been issued through private placement by a wholly owned subsidiary of Welltower OP and are fully and unconditionally guaranteed by Welltower OP.

(4) Annual interest rates range from 1.25% to 6.67%. Carrying value of the properties securing the debt totaled $4,921,860,000 at September 30, 2022.

(5) Includes a $1,000,000,000 unsecured term loan and a $250,000,000 Canadian-denominated unsecured term loan (approximately $181,792,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2022). Both term loans mature on July 19, 2026 and may be extended for two successive terms of six months at our option. The loans bear interest at adjusted SOFR plus 0.85% (3.76% at September 30, 2022) and Canadian Dealer Offered Rate plus 0.85% (4.57% at September 30, 2022), respectively.

(6) Includes a $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 (approximately $218,150,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2022).

(7) Includes a £550,000,000 4.80% senior unsecured notes due 2028 (approximately $612,370,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on September 30, 2022).

(8) Includes a £500,000,000 4.50% senior unsecured notes due 2034 (approximately $556,700,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on September 30, 2022).

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Welltower, the parent entity that consolidates Welltower OP and all other subsidiaries, fully and unconditionally guarantees to each holder of all series of senior unsecured notes issued by Welltower OP that the principal of and premium, if any, and interest on the notes will be promptly paid in full when due, whether at the applicable maturity date, by acceleration or redemption or otherwise, and interest on the overdue principal of and interest on the notes, if any, if lawful, and all other obligations of Welltower OP to the holders of the notes will be promptly paid in full or performed. Welltower’s guarantees of such notes are its senior unsecured obligation and rank equally with all of Welltower’s other future unsecured senior indebtedness and guarantees from time to time outstanding. Welltower’s guarantees of such notes are effectively subordinated to all liabilities of its subsidiaries and to its secured indebtedness to the extent of the assets securing such indebtedness. Because Welltower conducts substantially all of its business through its subsidiaries, Welltower's ability to make required payments with respect to the guarantees depends on the financial results and condition of its subsidiaries and its ability to receive funds from its subsidiaries, whether by dividends, loans, distributions or other payments.

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

						Nine Months Ended
						September 30, 2022												September 30, 2021
												Weighted Avg.												Weighted Avg.
						Amount						Interest Rate						Amount						Interest Rate
Beginning balance						$	11,707,961					3.67%						$	11,509,533					3.67%
Debt issued						1,050,000						3.08%						1,250,000						2.50%
Debt extinguished						—						—%						(1,533,752)						2.42%
Foreign currency						(278,949)						4.51%						(17,437)						4.37%
Ending balance						$	12,479,012					3.86%						$	11,208,344					3.71%

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

						Nine Months Ended
						September 30, 2022												September 30, 2021
												Weighted Avg.												Weighted Avg.
						Amount						Interest Rate						Amount						Interest Rate
Beginning balance						$	2,202,312					3.03%						$	2,378,073					3.27%
Debt issued						89,804						4.57%						2,693						3.75%
Debt assumed						221,159						4.32%						—						—%
Debt extinguished						(276,252)						4.28%						(70,144)						6.02%
Principal payments						(44,125)						3.36%						(48,710)						3.39%
Foreign currency						(71,577)						3.17%						7,869						2.97%
Ending balance						$	2,121,321					3.91%						$	2,269,781					3.10%

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. 

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Cash Flow Hedges and Fair Value 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 are used to hedge the variable cash flows associated with variable-rate debt.

Interest rate swaps designated as fair value hedges involve the receipt of fixed amounts from a counterparty in exchange for our variable-rate payments. These interest rate swap agreements hedge the exposure to changes in the fair value of fixed-rate debt attributable to changes in the designated benchmark interest rate. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in earnings. We record the gain or loss on the hedged items in interest expense, the same line item as the offsetting loss or gain on the related interest rate swaps. In March 2022, we entered into a $550,000,000 fixed to floating swap in connection with our March senior note issuance. The carrying amount of the notes, exclusive of the hedge, is $545,259,000. The fair value of the swap as of September 30, 2022 was ($59,709,000) and was recorded as a derivative liability with an offset to senior unsecured notes on our Consolidated Balance Sheets.

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 earnings over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately recognized in the Consolidated Statements of Comprehensive Income. Approximately $2,562,000 of losses, which are included in OCI, are expected to be reclassified into earnings in the next 12 months.

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, 2022 and 2021, we settled certain net investment hedges generating cash proceeds of $61,853,000 and $8,879,000, 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.

Equity Warrants

We received equity warrants through our lending activities, which were accounted for as loan origination fees. The warrants provide us the right to participate in the capital appreciation of the underlying HC-One Group real estate portfolio above a designated price upon liquidation and contain net settlement terms qualifying as derivatives under ASC Topic 815. The warrants are classified within receivables and other assets on our Consolidated Balance Sheets. These warrants are measured at fair value with changes in fair value being recognized within gain (loss) on derivatives and financial instruments in our Consolidated Statements of Comprehensive Income.

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

						September 30, 2022						December 31, 2021
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars						$	1,075,000					$	675,000
Denominated in Pound Sterling						£	1,890,708					£	1,904,708
Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars						$	250,000					$	250,000
Denominated in Pound Sterling						£	1,050,000					£	1,050,000
Interest rate swaps designated as cash flow hedges:
Denominated in U.S Dollars (1)						$	25,000					$	25,000
Interest rate swaps designated as fair value hedges:
Denominated in U.S Dollars						$	550,000					$	—
Derivative instruments not designated:
Interest rate caps denominated in U.S. Dollars						$	26,137					$	26,137
Forward sales contracts denominated in Canadian Dollars						$	80,000					$	80,000

(1) At September 30, 2022 the maximum maturity date was November 1, 2023.

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

												Three Months Ended September 30,												Nine Months Ended September 30,
Description						Location						2022						2021						2022						2021
Gain (loss) on derivative instruments designated as hedges recognized in income						Interest expense						$	8,236					$	5,849					$	23,262					$	17,416
Gain (loss) on derivative instruments not designated as hedges recognized in income						Interest expense						$	4,215					$	241					$	5,349					$	(1,415)
Gain (loss) on equity warrants recognized in income						Gain (loss) on derivatives and financial instruments						$	(6,083)					$	9,216					$	(6,604)					$	9,216
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI						OCI						$	417,567					$	130,711					$	753,588					$	100,866

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

						September 30, 2022						December 31, 2021
Preferred Stock, $1.00 par value:
Authorized shares						50,000,000						50,000,000
Issued shares						—						—
Outstanding shares						—						—
Common Stock, $1.00 par value:
Authorized shares						700,000,000						700,000,000
Issued shares						474,312,155						448,998,438
Outstanding shares						472,516,526						447,239,477

Common Stock In April 2022, we entered into an amended and restated equity distribution agreement whereby we can offer and sell up to $3,000,000,000 aggregate amount of our common stock ("ATM Program"). The ATM Program also allows us to enter into forward sale agreements. As of September 30, 2022, we had $2,571,105,000 of remaining capacity under the ATM Program, which excludes forward sales agreements outstanding for the sale of 17,204,668 shares or approximately $1,420,902,000 with maturity dates in 2023. In addition, we have forward sale agreements for the sale of 759,935 shares or approximately $74,045,000 with maturity dates in 2023 under the July 30, 2021 ATM Program.

The following is a summary of our common stock issuances during the nine months ended September 30, 2022 and 2021 (dollars in thousands, except shares and average price amounts): 

						Shares Issued						Average Price						Gross Proceeds						Net Proceeds
2021 ATM Program issuances						17,720,008						$	77.91					$	1,380,519					$	1,366,464
2021 Stock incentive plans, net of forfeitures						153,275												—						—
2021 Totals						17,873,283												$	1,380,519					$	1,366,464
2022 Option exercises						2,433						$	67.00					$	163					$	163
2022 ATM Program issuances						25,128,285						88.39						2,221,023						2,184,790
2022 Redemption of OP units						5,498												—						—
2022 Stock incentive plans, net of forfeitures						140,833												—						—
2022 Totals						25,277,049												$	2,221,186					$	2,184,953

Dividends The following is a summary of our dividend payments (in thousands, except per share amounts): 

			Nine Months Ended
			September 30, 2022												September 30, 2021
			Per Share						Amount						Per Share						Amount
Common stock			$	1.83					$	834,779					$	1.83					$	771,984

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

						September 30, 2022						December 31, 2021
Foreign currency translation						$	(1,381,845)					$	(674,306)
Derivative and financial instruments designated as hedges						1,306,578						552,990
Total accumulated other comprehensive income (loss)						$	(75,267)					$	(121,316)

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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,
						2022						2021						2022						2021
Numerator for basic earnings per share - net income (loss) attributable to common stockholders						$	(6,767)					$	179,663					$	144,942					$	277,466
Adjustment for net income (loss) attributable to OP units(1)						(7)						(473)						99						(2,699)
Numerator for diluted earnings per share						$	(6,774)					$	179,190					$	145,041					$	274,767
Denominator for basic earnings per share - weighted average shares						463,366						428,031						455,074						420,955
Effect of dilutive securities:
Employee stock options						7						—						26						—
Non-vested restricted shares						1,238						537						1,127						465
OP units(1)						2,316						1,396						1,749						1,396
Employee stock purchase program						23						19						23						19
Dilutive potential common shares						3,584						1,952						2,925						1,880
Denominator for diluted earnings per share - adjusted weighted average shares						463,366						429,983						457,999						422,835
Basic earnings per share						$	(0.01)					$	0.42					$	0.32					$	0.66
Diluted earnings per share						$	(0.01)					$	0.42					$	0.32					$	0.65

(1) OP units include both Welltower OP units owned by outside investors as well as OP units owned by outside investors in certain consolidated DownREIT subsidiaries.

The diluted earnings per share calculation for the three months ended September 30, 2022 excludes the dilutive effect of all common stock equivalents as they are anti-dilutive due to the net loss attributable to common stockholders. As of September 30, 2022, and September 30, 2021, outstanding forward sales agreements for the sale of 17,964,603 shares and 11,798,154 shares, respectively, were not included in the computation of diluted earnings per share because such forward sales were anti-dilutive for the periods.

Fair value is defined 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. A three-level valuation hierarchy exists for disclosures of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. The three levels are defined below: 

•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, Other Real Estate Loans and Non-real Estate Loans Receivable — The fair value of mortgage loans, other real estate loans and non-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.

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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. 

Equity Warrants — The fair value of equity warrants is estimated using Level 3 inputs and includes data points such as enterprise value of the underlying HC-One Group real estate portfolio, marketability discount for private company warrants, dividend yield, volatility and risk-free rate. The enterprise value is driven by projected cash flows, weighted average cost of capital and a terminal capitalization rate.

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

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

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

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

Redeemable OP Unitholder Interests — Our redeemable OP unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs unless the fair value is below the initial amount in which case the redeemable OP unitholder interests are recorded at the initial amount adjusted for distributions to the unitholders and income or loss attributable to the unitholders. 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, 2022												December 31, 2021
						Carrying Amount						Fair Value						Carrying Amount						Fair Value
Financial assets:
Mortgage loans receivable						$	699,219					$	748,216					$	877,102					$	932,552
Other real estate loans receivable						217,420						217,088						191,579						193,999
Equity securities						136						136						1,608						1,608
Cash and cash equivalents						343,446						343,446						269,265						269,265
Restricted cash						81,738						81,738						77,490						77,490
Non-real estate loans receivable						257,996						251,926						223,627						241,544
Foreign currency forward contracts, interest rate swaps and cross currency swaps						401,428						401,428						7,205						7,205
Equity warrants						28,272						28,272						41,909						41,909
Financial liabilities:
Borrowings under unsecured credit facility and commercial paper program						$	654,715					$	654,715					$	324,935					$	324,935
Senior unsecured notes						12,324,601						11,207,285						11,613,758						13,139,748
Secured debt						2,121,628						2,053,767						2,192,261						2,252,107
Foreign currency forward contracts, interest rate swaps and cross currency swaps						59,709						59,709						39,296						39,296
Redeemable OP unitholder interests						$	95,513					$	95,513					$	153,098					$	153,098

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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, 2022
						Total						Level 1						Level 2						Level 3
Equity securities						$	136					$	136					$	—					$	—
Equity warrants						28,272						—						—						28,272
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) (1)						341,718						—						341,718						—
Totals						$	370,126					$	136					$	341,718					$	28,272

(1) Please see Note 12 for additional information.

The following table summarizes the change in fair value for equity warrants using unobservable Level 3 inputs for the periods presented (in thousands):

						Nine Months Ended
						September 30, 2022						September 30, 2021
Beginning balance						$	41,909					$	—
Warrants acquired						—						32,419
Mark-to-market adjustment						(6,604)						9,216
Foreign currency						(7,033)						(977)
Ending balance						$	28,272					$	40,658

The most significant assumptions utilized in the valuation of the equity warrants are the cash flows of the underlying HC-One Group enterprise, as well as the terminal capitalization rate of 10.5%.

Items Measured at Fair Value on a Nonrecurring Basis 

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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). In addition, Seniors Housing Operating properties include seniors apartments. Our Triple-net properties include the property types described above as well as long-term/post-acute care facilities. 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 cash investments recorded in 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, 2021). 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. All inter-segment transactions are eliminated.

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

Three Months Ended September 30, 2022:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	1,068,706					$	—					$	—					$	—					$	1,068,706
Rental income						—						191,443						170,540						—						361,983
Interest income						2,155						35,556						80						—						37,791
Other income						1,739						1,820						1,558						247						5,364
Total revenues						1,072,600						228,819						172,178						247						1,473,844
Property operating expenses						841,914						11,495						52,921						5,850						912,180
Consolidated net operating income (loss)						230,686						217,324						119,257						(5,603)						561,664
Depreciation and amortization						235,984						57,338						60,377						—						353,699
Interest expense						9,022						196						4,343						126,121						139,682
General and administrative expenses						—						—						—						34,811						34,811
Loss (gain) on derivatives and financial instruments, net						—						6,905						—						—						6,905
Loss (gain) on extinguishment of debt, net						—						—						2						—						2
Provision for loan losses, net						198						290						2						—						490
Impairment of assets						—						3,595						761						—						4,356
Other expenses						8,341						820						366						5,954						15,481
Income (loss) from continuing operations before income taxes and other items						(22,859)						148,180						53,406						(172,489)						6,238
Income tax (expense) benefit						—						—						—						(3,257)						(3,257)
Income (loss) from unconsolidated entities						(8,788)						3,167						(1,077)						—						(6,698)
Gain (loss) on real estate dispositions, net						1,146						674						(606)						(150)						1,064
Income (loss) from continuing operations						(30,501)						152,021						51,723						(175,896)						(2,653)
Net income (loss)						$	(30,501)					$	152,021					$	51,723					$	(175,896)					$	(2,653)
Total assets						$	21,560,096					$	8,700,199					$	6,569,005					$	585,188					$	37,414,488

Three Months Ended September 30, 2021:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	835,617					$	—					$	—					$	—					$	835,617
Rental income						—						200,641						157,343						—						357,984
Interest income						1,135						38,257						472						—						39,864
Other income						2,767						1,087						1,688						790						6,332
Total revenues						839,519						239,985						159,503						790						1,239,797
Property operating expenses						666,610						11,664						48,072						3,054						729,400
Consolidated net operating income (loss)						172,909						228,321						111,431						(2,264)						510,397
Depreciation and amortization						157,176						54,226						56,352						—						267,754
Interest expense						9,360						1,548						4,811						106,803						122,522
General and administrative expenses						—						—						—						32,256						32,256
Loss (gain) on derivatives and financial instruments, net						—						(8,078)						—						—						(8,078)
Loss (gain) on extinguishment of debt, net						—						—						(5)						—						(5)
Provision for loan losses, net						152						(323)						(100)						—						(271)
Impairment of assets						—						1,490						—						—						1,490
Other expenses						5,449						(4,248)						640						1,734						3,575
Income (loss) from continuing operations before income taxes and other items						772						183,706						49,733						(143,057)						91,154
Income tax (expense) benefit						—						—						—						(4,940)						(4,940)
Income (loss) from unconsolidated entities						(15,810)						5,038						(5,060)						—						(15,832)
Gain (loss) on real estate dispositions, net						(615)						81,712						38,857						—						119,954
Income (loss) from continuing operations						(15,653)						270,456						83,530						(147,997)						190,336
Net income (loss)						$	(15,653)					$	270,456					$	83,530					$	(147,997)					$	190,336

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Nine Months Ended September 30, 2022						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	3,073,040					$	—					$	—					$	—					$	3,073,040
Rental income						—						584,626						495,158						—						1,079,784
Interest income						5,255						108,454						216						—						113,925
Other income						62,127						5,262						6,449						1,497						75,335
Total revenues						3,140,422						698,342						501,823						1,497						4,342,084
Property operating expenses						2,421,141						34,197						153,484						11,110						2,619,932
Consolidated net operating income						719,281						664,145						348,339						(9,613)						1,722,152
Depreciation and amortization						629,955						160,403						177,724						—						968,082
Interest expense						24,153						830						13,441						350,704						389,128
General and administrative expenses						—						—						—						109,071						109,071
Loss (gain) on derivatives and financial instruments, net						—						8,076						—						—						8,076
Loss (gain) on extinguishment of debt, net						385						—						9						199						593
Provision for loan losses, net						807						(951)						(5)						—						(149)
Impairment of assets						—						3,595						761						—						4,356
Other expenses						45,781						12,327						1,362						17,246						76,716
Income (loss) from continuing operations before income taxes and other items						18,200						479,865						155,047						(486,833)						166,279
Income tax (expense) benefit						—						—						—						(11,335)						(11,335)
Income (loss) from unconsolidated entities						(39,239)						24,584						(1,985)						—						(16,640)
Gain (loss) on real estate dispositions, net						2,623						18,994						(1,001)						(150)						20,466
Income (loss) from continuing operations						(18,416)						523,443						152,061						(498,318)						158,770
Net income (loss)						$	(18,416)					$	523,443					$	152,061					$	(498,318)					$	158,770

Nine Months Ended September 30, 2021						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	2,299,972					$	—					$	—					$	—					$	2,299,972
Rental income						—						557,829						457,721						—						1,015,550
Interest income						3,110						86,040						8,741						—						97,891
Other income						5,388						3,539						8,336						2,175						19,438
Total revenues						2,308,470						647,408						474,798						2,175						3,432,851
Property operating expenses						1,804,939						37,132						140,430						6,882						1,989,383
Consolidated net operating income						503,531						610,276						334,368						(4,707)						1,443,468
Depreciation and amortization						420,797						165,299						166,969						—						753,065
Interest expense						31,331						5,134						12,733						318,807						368,005
General and administrative expenses						—						—						—						93,618						93,618
Loss (gain) on derivatives and financial instruments, net						—						(6,503)						—						—						(6,503)
Loss (gain) on extinguishment of debt, net						(1,537)						—						(5)						52,506						50,964
Provision for loan losses, net						222						10,549						(3,462)						—						7,309
Impairment of assets						22,317						24,222						2,211						—						48,750
Other expenses						12,617						4,845						2,450						6,344						26,256
Income (loss) from continuing operations before income taxes and other items						17,784						406,730						153,472						(475,982)						102,004
Income tax (expense) benefit						—						—						—						(6,662)						(6,662)
Income (loss) from unconsolidated entities						(23,514)						14,822						(2,067)						—						(10,759)
Gain (loss) on real estate dispositions, net						4,552						126,463						92,687						—						223,702
Income (loss) from continuing operations						(1,178)						548,015						244,092						(482,644)						308,285
Net income (loss)						$	(1,178)					$	548,015					$	244,092					$	(482,644)					$	308,285

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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																								Nine Months Ended
						September 30, 2022												September 30, 2021												September 30, 2022												September 30, 2021
Revenues:						Amount(1)						%						Amount						%						Amount(1)						%						Amount						%
United States						$	1,276,927					86.6		%				$	990,034					79.9		%				$	3,799,621					87.5		%				$	2,709,354					78.9		%
United Kingdom						95,914						6.5		%				146,308						11.8		%				246,226						5.7		%				405,938						11.8		%
Canada						101,003						6.9		%				103,455						8.3		%				296,237						6.8		%				317,559						9.3		%
Total						$	1,473,844					100.0		%				$	1,239,797					100.0		%				$	4,342,084					100.0		%				$	3,432,851					100.0		%
						As of
						September 30, 2022												December 31, 2021
Assets:						Amount						%						Amount						%
United States						$	31,604,241					84.5		%				$	28,595,703					81.9		%
United Kingdom						3,195,747						8.5		%				3,938,258						11.3		%
Canada						2,614,500						7.0		%				2,376,364						6.8		%
Total						$	37,414,488					100.0		%				$	34,910,325					100.0		%

(1) The United States, United Kingdom and Canada represent 80%, 9%, and 11% of our resident fees and services revenue for the three month periods ended September 30, 2022, respectively, and 79%, 10% and 11% of our resident fees and services revenue for the nine month periods ended September 30, 2022, respectively.

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, 2022 and 2021, 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. Subsequent to 2014 we transferred certain subsidiaries to the United Kingdom, while some wholly-owned direct and indirect subsidiaries remain in Luxembourg and Jersey. 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.

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We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be 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, 2022						December 31, 2021
Assets:
Net real estate investments						$	444,485					$	445,776
Cash and cash equivalents						12,186						9,964
Receivables and other assets						8,588						7,617
Total assets (1)						$	465,259					$	463,357
Liabilities and equity:
Secured debt						$	162,072					$	163,519
Lease liabilities						1,329						1,324
Accrued expenses and other liabilities						15,138						12,394
Total equity						286,720						286,120
Total liabilities and equity						$	465,259					$	463,357

(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.

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