Published: 2022-05-10 00:00:00 ET

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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 three months ended March 31, 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, 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, which has steadily increased in recent months. As of March 31, 2022, nearly all communities are open for new admissions and allowing visitors, in-person tours and communal dining and activities. Average occupancy increased from 73.0% to 77.5% for the three months ended March 31, 2022 and 2021, respectively. Occupancy metrics represent occupancy at our share for 543 properties in operation as of December 31, 2020, including unconsolidated properties but excluding acquisitions, executed dispositions, development conversions and four closed properties.

Property-level operating expenses associated with the COVID-19 pandemic related to our Seniors Housing Operating portfolio totaled $11,003,000 and $27,976,000 for the three months ended March 31, 2022 and 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, net of reimbursements. 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.

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. For the three months ended March 31, 2022 and 2021, we recognized $5,760,000 and $49,180,000, respectively, of government grant income as a reduction to property operating expenses in our Consolidated Statements of Comprehensive Income.

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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 are generally experiencing a higher degree of occupancy declines. These factors may continue to impact the ability of our Triple-net operators to make contractual rent payments to us in the future. Many of our Triple-net operators received funds under the 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 new standard was effective for us upon issuance and elections can be made through December 31, 2022. 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):

			Three Months Ended
			March 31, 2022																								March 31, 2021
			Seniors Housing Operating						Triple-net						Outpatient Medical						Totals						Seniors Housing Operating						Triple-net						Outpatient Medical						Totals
Land and land improvements			$	43,897					$	—					$	240					$	44,137					$	1,240					$	24,154					$	2,273					$	27,667
Buildings and improvements			402,342						171						131,412						533,925						3,491						170,362						10,570						184,423
Acquired lease intangibles			31,366						—						16,978						48,344						339						—						1,439						1,778
Right of use assets, net			—						—						3,852						3,852						—						—						—						—
Total net real estate assets			477,605						171						152,482						630,258						5,070						194,516						14,282						213,868
Receivables and other assets			1,630						—						—						1,630						34						—						—						34
Total assets acquired			479,235						171						152,482						631,888						5,104						194,516						14,282						213,902
Lease liabilities			—						—						(3,852)						(3,852)						—						—						—						—
Accrued expenses and other liabilities			(4,154)						—						—						(4,154)						—						(8,703)						(36)						(8,739)
Total liabilities acquired			(4,154)						—						(3,852)						(8,006)						—						(8,703)						(36)						(8,739)
Noncontrolling interests (1)			(20,348)						(4)						—						(20,352)						—						(2,056)						—						(2,056)
Non-cash acquisition related activity(2)			(2,120)						—						—						(2,120)						—						—						—						—
Cash disbursed for acquisitions			452,613						167						148,630						601,410						5,104						183,757						14,246						203,107
Construction in progress additions			113,407						20,756						9,642						143,805						38,373						31,809						7,601						77,783
Less: Capitalized interest			(4,179)						(1,089)						(211)						(5,479)						(2,980)						(524)						(992)						(4,496)
Accruals (3)			(1,963)						—						1,778						(185)						7						—						311						318
Cash disbursed for construction in progress			107,265						19,667						11,209						138,141						35,400						31,285						6,920						73,605
Capital improvements to existing properties			68,612						8,294						13,323						90,229						(3,159)						25,295						6,644						28,780
Total cash invested in real property, net of cash acquired			$	628,490					$	28,128					$	173,162					$	829,780					$	37,345					$	240,337					$	27,810					$	305,492

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

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

(3) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the 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. As of March 31, 2022, a right of use asset of $77,080,000 and a related lease liability of $135,701,000 were recorded on the Consolidated Balance Sheet.

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):

						Three Months Ended
						March 31, 2022						March 31, 2021
Development projects:
Seniors Housing Operating						$	73,458					$	—
Triple-net						—						22,990
Total construction in progress conversions						$	73,458					$	22,990

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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):

						March 31, 2022						December 31, 2021
Assets:
In place lease intangibles						$	1,732,980					$	1,681,533
Above market tenant leases						53,988						53,964
Lease commissions						57,812						54,131
Gross historical cost						1,844,780						1,789,628
Accumulated amortization						(1,338,046)						(1,286,259)
Net book value						$	506,734					$	503,369
Weighted-average amortization period in years						7.2						5.5
Liabilities:
Below market tenant leases						$	74,910					$	74,909
Accumulated amortization						(47,174)						(45,291)
Net book value						$	27,736					$	29,618
Weighted-average amortization period in years						8.3						8.2

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

						Three Months Ended March 31,
						2022						2021
Rental income related to (above)/below market tenant leases, net						$	385					$	425
Amortization related to in place lease intangibles and lease commissions						(47,994)						(22,779)

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

						Assets						Liabilities
2022						$	138,363					$	5,482
2023						132,163						5,262
2024						63,179						3,117
2025						26,311						2,588
2026						22,718						2,077
Thereafter						124,000						9,210
Total						$	506,734					$	27,736

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 March 31, 2022, three Seniors Housing Operating, 11 Triple-net, and one Outpatient Medical properties with an aggregate real estate balance of $199,490,000 were classified as held for sale. In addition to the real property balances held for sale, lease liabilities of $66,893,000 and net other assets and (liabilities) of $2,462,000 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 is approximately $273,165,000.

During the three months ended March 31, 2021, we recorded $12,098,000 of impairment charges related to one Triple-net property classified as held for sale for which the carrying value exceeded the estimated fair value less cost to sell. Additionally, during the three months ended March 31, 2021, we recorded $11,470,000 of impairment charges related to one Seniors Housing Operating property 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):

						Three Months Ended March 31,
						2022						2021
Real estate dispositions:
Seniors Housing Operating						$	—					$	74,326
Triple-net						52,661						—
Outpatient Medical						—						137,890
Total dispositions						52,661						212,216
Gain (loss) on real estate dispositions, net						22,934						59,080
Net other assets/(liabilities) disposed						(2,027)						2,912
Proceeds from real estate dispositions						$	73,568					$	274,208

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 March 31,
						2022						2021
Revenues:
Total revenues						$	4,958					$	30,414
Expenses:
Interest expense						871						1,115
Property operating expenses						1,971						3,576
Provision for depreciation						13						6,368
Total expenses						2,855						11,059
Income (loss) from real estate dispositions, net						$	2,103					$	19,355

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):

												Three Months Ended
						Classification						March 31, 2022						March 31, 2021
Operating lease cost: (1)
Real estate lease expense						Property operating expenses						$	5,816					$	5,358
Non-real estate investment lease expense						General and administrative expenses						978						1,185
Finance lease cost:
Amortization of leased assets						Property operating expenses						1,156						2,035
Interest on lease liabilities						Interest expense						1,618						1,663
Sublease income						Rental income						(2,715)						(1,043)
Total												$	6,853					$	9,198

(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						March 31, 2022						December 31, 2021
Right of use assets:
Operating leases - real estate			Right of use assets, net						$	370,740					$	367,068
Finance leases - real estate			Right of use assets, net						33,949						155,728
Real estate right of use assets, net									404,689						522,796
Operating leases - non-real estate investments			Receivables and other assets						9,430						9,627
Finance leases - held for sale (1)			Real property held for sale, net of accumulated depreciation						119,733						—
Total right of use assets, net									$	533,852					$	532,423
Lease liabilities:
Operating leases									$	438,175					$	434,261
Financing leases									110,824						111,683
Total									$	548,999					$	545,944
(1) At March 31, 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 three months ended March 31, 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 typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 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 three months ended March 31, 2021, we recognized $302,843,000 of rental income related to operating leases, of which $46,026,000 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 ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842, "Leases." The amount of revenue related to these leases was $94,827,000 and $15,771,000 for the three months ended March 31, 2022 and March 31, 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, 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 $26,215,000 and $26,659,000 as of March 31, 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):

						March 31, 2022						December 31, 2021
Mortgage loans						$	833,070					$	889,556
Other real estate loans						184,223						194,477
Allowance for credit losses on real estate loans receivable						(14,157)						(15,352)
Real estate loans receivable, net of credit allowance						1,003,136						1,068,681
Non-real estate loans						390,559						375,060
Allowance for credit losses on non-real estate loans receivable						(151,536)						(151,433)
Non-real estate loans receivable, net of credit allowance						239,023						223,627
Total loans receivable, net of credit allowance						$	1,242,159					$	1,292,308

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

						Three Months Ended
						March 31, 2022						March 31, 2021
Advances on loans receivable						$	39,201					$	43,148
Receipts on loans receivable						(89,207)						(2,852)
Net cash advances (receipts) on loans receivable						$	(50,006)					$	40,296

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):

						March 31, 2022
Loan category						Years of Origination						Loan Carrying Value						Allowance for Credit Loss						Net Loan Balance						No. of Loans
Deteriorated loans						2007 - 2018						$	174,841					$	(148,438)					$	26,403					3
Collective loan pool						2007-2017						209,774						(2,982)						206,792						15
Collective loan pool						2018						22,800						(325)						22,475						2
Collective loan pool						2019						22,084						(315)						21,769						4
Collective loan pool						2020						50,563						(721)						49,842						6
Collective loan pool						2021						894,186						(12,433)						881,753						20
Collective loan pool						2022						33,604						(479)						33,125						5
Total loans												$	1,407,852					$	(165,693)					$	1,242,159					55

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):                            

			Three Months Ended
			March 31, 2022						March 31, 2021
Balance at beginning of period			$	166,785					$	224,036
Provision for loan losses			(804)						1,383
Loan write-offs			—						(1,322)
Foreign currency translation			(288)						49
Balance at end of period			$	165,693					$	224,146

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

						Three Months Ended
						March 31, 2022						March 31, 2021
Balance of deteriorated loans at end of period (1)						$	174,841					$	241,012
Allowance for credit losses						(148,438)						(211,191)
Balance of deteriorated loans not reserved						$	26,403					$	29,821
Interest recognized on deteriorated loans (2)						$	—					$	3,079

(1) Current year amounts include $2,157,000 and $2,157,000 of loans on non-accrual as of March 31, 2022 and December 31, 2021, respectively. Prior year amounts include $2,250,000 and $3,623,000 as of March 31, 2021 and December 31, 2020, respectively.

(2) 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)						March 31, 2022						December 31, 2021
Seniors Housing Operating						10% to 65%						$	897,769					$	830,647
Triple-net						10% to 88%						68,643						44,814
Outpatient Medical						15% to 50%						172,114						163,582
Total												$	1,138,526					$	1,039,043

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

At March 31, 2022, the aggregate unamortized basis difference of our joint venture investments of $147,598,000 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 16 properties as of March 31, 2022 for the development and construction of certain properties which are classified as in substance real estate investments and have a carrying value of $371,061,000. 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 $184,926,000 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 three months ended March 31, 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						$	61,084					11%
Sunrise Senior Living						110						30,467						6%
Atria Senior Living						96						28,745						5%
HC-One Group (4)						1						23,872						4%
Avery Healthcare						61						19,901						4%
Remaining portfolio						1,190						377,966						70%
Totals						1,663						$	542,035					100%

(1) ProMedica and HC-One Group are in our Triple-net segment. Sunrise Senior Living and Atria Senior Living are in our Seniors Housing Operating segment. Avery Healthcare is in both the Triple-net and Seniors Housing Operating segments.

(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.

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unsecured credit facility also allows us to borrow up to $1,000,000,000 in alternate currencies (none outstanding at March 31, 2022). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate (1.23% at March 31, 2022). The applicable margin is based on our debt ratings and was 0.775% at March 31, 2022. 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 March 31, 2022. Effective with the Merger on April 1, 2022, Old Welltower remains the borrower under the credit facility and New Welltower will guarantee Old Welltower's obligations under the agreement.

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 March 31, 2022, there was a balance of $189,968,000 outstanding on the commercial paper program ($190,000,000 in principal outstanding, net of an unamortized discount of $32,000), which reduces the borrowing capacity of the unsecured revolving credit facility. The notes bear interest at various floating rates with a weighted average of 0.94% as of March 31, 2022 and a weighted average maturity of seven days as of March 31, 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 March 31, 2022, the annual principal payments due on these debt obligations were as follows (in thousands):

						Senior Unsecured Notes (1,2)						Secured Debt (1,3)						Totals
2022						$	—					$	575,737					$	575,737
2023 (4, 5)						700,288						448,580						1,148,868
2024						1,350,000						184,770						1,534,770
2025						1,260,000						167,506						1,427,506
2026						700,000						109,782						809,782
Thereafter (6, 7, 8)						8,221,307						629,266						8,850,573
Totals						$	12,231,595					$	2,115,641					$	14,347,236

(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 0.93% to 6.50%.

(3) Annual interest rates range from 0.32% to 6.67%. Carrying value of the properties securing the debt totaled $4,882,090,000 at March 31, 2022.

(4) Includes a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $200,288,000 based on the Canadian/U.S. Dollar exchange rate on March 31, 2022). The loan matures on July 19, 2023 and bears interest at the Canadian Dealer Offered Rate plus 0.90% (1.83% at March 31, 2022).

(5) Includes a $500,000,000 unsecured term credit facility. The loan matures on July 19, 2023 and bears interest at LIBOR plus 0.90% (1.36% at March 31, 2022).

(6) Includes a $300,000,000 Canadian-denominated 2.95% senior unsecured notes due 2027 (approximately $240,347,000 based on the Canadian/U.S. Dollar exchange rate on March 31, 2022).

(7) Includes a £550,000,000 4.80% senior unsecured notes due 2028 (approximately $723,360,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on March 31, 2022).

(8) Includes a £500,000,000 4.50% senior unsecured notes due 2034 (approximately $657,600,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on March 31, 2022).

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

						Three Months Ended
						March 31, 2022												March 31, 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						550,000						3.85%						750,000						2.80%
Foreign currency						(26,366)						4.14%						20,059						3.90%
Ending balance						$	12,231,595					3.69%						$	12,279,592					3.62%

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

						Three Months Ended
						March 31, 2022												March 31, 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						5,385						3.08%						—						—%
Debt extinguished						(100,821)						4.21%						(41,933)						7.60%
Principal payments						(15,968)						3.19%						(15,955)						3.59%
Foreign currency						24,733						2.73%						15,987						2.92%
Ending balance						$	2,115,641					3.02%						$	2,336,172					3.14%

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 March 31, 2022, we were in compliance in all material respects with the covenants under our debt agreements.

In connection with the Merger on April 1, 2022, senior unsecured notes will continue to be obligations of Old Welltower and New Welltower has fully and unconditionally guaranteed all existing and future senior unsecured notes.

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 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. During the quarter ended March 31, 2022, we entered into a $550,000,000 fixed to floating swap in connection with our March senior note issuance. The carrying amount of

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the notes, exclusive of the hedge, is $545,082,000. The fair value of the swap as of March 31, 2022 was $1,413,000 and was recorded as a derivative asset with an offset to senior unsecured notes on our Consolidated Balance Sheet.

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 three months ended March 31, 2022, we settled certain net investment hedges generating cash proceeds of $10,169,000. 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.

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

						March 31, 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 March 31, 2022 the maximum maturity date was November 1, 2023.

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

												Three Months Ended March 31,
Description						Location						2022						2021
Gain (loss) on derivative instruments designated as hedges recognized in income						Interest expense						$	5,984					$	6,024
Gain (loss) on derivative instruments not designated as hedges recognized in income						Interest expense						$	(693)					$	(719)
Gain (loss) on equity warrants recognized in income						Gain (loss) on derivatives and financial instruments						$	(2,423)					$	—
Gain (loss) on derivative and financial instruments designated as hedges recognized in OCI						OCI						$	51,940					$	(20,037)

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

						March 31, 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						455,763,781						448,998,438
Outstanding shares						453,948,046						447,239,477

Common Stock

In July 2021, we entered into an amended and restated equity distribution agreement whereby we can offer and sell up to $2,500,000,000 aggregate amount of our common stock ("ATM Program"). The ATM Program also allows us to enter into forward sale agreements. As of March 31, 2022, we had $1,317,295,000 of remaining capacity under the ATM Program, which excludes forward sales agreements outstanding for the sale of 14,297,958 shares with maturity dates in 2023, which we expect to physically settle for cash proceeds of $1,253,955,000.

The following is a summary of our common stock issuances during the three months ended March 31, 2022 and 2021 (dollars in thousands, except shares and average price amounts): 

						Shares Issued						Average Price						Gross Proceeds						Net Proceeds
2021 Stock incentive plans, net of forfeitures						119,818												$	—					$	—
2022 ATM Program issuances						6,605,191						$	84.60					$	558,790					$	549,326
2022 Option exercises						299						66.89						20						20
2022 Stock incentive plans, net of forfeitures						103,079												—						—
2022 Totals						6,708,569												$	558,810					$	549,346

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Dividends 

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

			Three Months Ended
			March 31, 2022												March 31, 2021
			Per Share						Amount						Per Share						Amount
Common stock			$	0.61					$	273,668					$	0.61					$	254,952

Accumulated Other Comprehensive Income 

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

						March 31, 2022						December 31, 2021
Foreign currency translation						$	(743,402)					$	(674,306)
Derivative and financial instruments designated as hedges						604,930						552,990
Total accumulated other comprehensive income (loss)						$	(138,472)					$	(121,316)

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

						Three Months Ended March 31,
						2022						2021
Numerator for basic earnings per share - net income (loss) attributable to common stockholders						$	61,925					$	71,546
Adjustment for net income (loss) attributable to OP units						(145)						(1,353)
Numerator for diluted earnings per share						$	61,780					$	70,193
Denominator for basic earnings per share - weighted average shares						447,379						417,241
Effect of dilutive securities:
Employee stock options						31						—
Non-vested restricted shares						974						421
Redeemable OP units						1,396						1,396
Employee stock purchase program						22						21
Dilutive potential common shares						2,423						1,838
Denominator for diluted earnings per share - adjusted weighted average shares						449,802						419,079
Basic earnings per share						$	0.14					$	0.17
Diluted earnings per share						$	0.14					$	0.17

As of March 31, 2022, and March 31, 2021, outstanding forward sales agreements for the sale of 14,297,958 shares and 2,214,760 shares, respectively, were not included in the computation of diluted earnings per share because such forward sales were anti-dilutive for the periods.

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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.

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):

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						March 31, 2022												December 31, 2021
						Carrying Amount						Fair Value						Carrying Amount						Fair Value
Financial assets:
Mortgage loans receivable						$	821,509					$	909,533					$	877,102					$	932,552
Other real estate loans receivable						181,627						183,784						191,579						193,999
Equity securities						1,455						1,455						1,608						1,608
Cash and cash equivalents						301,089						301,089						269,265						269,265
Restricted cash						65,954						65,954						77,490						77,490
Non-real estate loans receivable						239,023						245,928						223,627						241,544
Foreign currency forward contracts, interest rate swaps and cross currency swaps						9,179						9,179						7,205						7,205
Equity warrants						38,416						38,416						41,909						41,909
Financial liabilities:
Borrowings under unsecured credit facility and commercial paper program						$	299,968					$	299,968					$	324,935					$	324,935
Senior unsecured notes						12,136,760						12,458,423						11,613,758						13,139,748
Secured debt						2,104,945						2,108,622						2,192,261						2,252,107
Foreign currency forward contracts, interest rate swaps and cross currency swaps						30,580						30,580						39,296						39,296
Redeemable OP unitholder interests						$	171,609					$	171,609					$	153,098					$	153,098

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 March 31, 2022
						Total						Level 1						Level 2						Level 3
Equity securities						$	1,455					$	1,455					$	—					$	—
Equity warrants						38,416						—						—						38,416
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) (1)						(21,401)						—						(21,401)						—
Totals						$	18,470					$	1,455					$	(21,401)					$	38,416

(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):

						Three Months Ended
						March 31, 2022						March 31, 2021
Beginning balance						$	41,909					$	—
Mark-to-market adjustment						(2,425)						—
Foreign currency						(1,068)						—
Ending balance						$	38,416					$	—

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 9.5%.

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 that 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 or assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 7 for impairments of 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

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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 seniors apartments, 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). 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 March 31, 2022:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	994,335					$	—					$	—					$	—					$	994,335
Rental income						—						196,001						160,389						—						356,390
Interest income						1,417						37,506						71						—						38,994
Other income						860						1,656						2,863						606						5,985
Total revenues						996,612						235,163						163,323						606						1,395,704
Property operating expenses						789,928						11,211						49,915						2,615						853,669
Consolidated net operating income (loss)						206,684						223,952						113,408						(2,009)						542,035
Depreciation and amortization						192,793						53,504						57,791						—						304,088
Interest expense						7,650						314						4,567						109,165						121,696
General and administrative expenses						—						—						—						37,706						37,706
Loss (gain) on derivatives and financial instruments, net						—						2,578						—						—						2,578
Loss (gain) on extinguishment of debt, net						(15)						—						3						—						(12)
Provision for loan losses, net						267						(1,065)						(6)						—						(804)
Other expenses						8,191						11,044						789						6,045						26,069
Income (loss) from continuing operations before income taxes and other items						(2,202)						157,577						50,264						(154,925)						50,714
Income tax (expense) benefit						—						—						—						(5,013)						(5,013)
Income (loss) from unconsolidated entities						(17,782)						15,543						(645)						—						(2,884)
Gain (loss) on real estate dispositions, net						2,701						20,449						(216)						—						22,934
Income (loss) from continuing operations						(17,283)						193,569						49,403						(159,938)						65,751
Net income (loss)						$	(17,283)					$	193,569					$	49,403					$	(159,938)					$	65,751
Total assets						$	19,986,904					$	8,986,422					$	6,333,821					$	165,306					$	35,472,453

Three Months Ended March 31, 2021:						Seniors Housing Operating						Triple-net						Outpatient Medical						Non-segment / Corporate						Total
Resident fees and services						$	723,464					$	—					$	—					$	—					$	723,464
Rental income						—						152,463						150,380						—						302,843
Interest income						1,119						14,922						3,538						—						19,579
Other income						1,819						1,097						2,305						955						6,176
Total revenues						726,402						168,482						156,223						955						1,052,062
Property operating expenses						555,968						12,841						46,863						1,654						617,326
Consolidated net operating income (loss)						170,434						155,641						109,360						(699)						434,736
Depreciation and amortization						132,586						56,667						55,173						—						244,426
Interest expense						11,418						1,882						4,015						105,827						123,142
General and administrative expenses						—						—						—						29,926						29,926
Loss (gain) on derivatives and financial instruments, net						—						1,934						—						—						1,934
Loss (gain) on extinguishment of debt, net						(4,643)						—						—						—						(4,643)
Provision for loan losses, net						251						853						279						—						1,383
Impairment of assets						4,604						18,964						—						—						23,568
Other expenses						3,459						4,983						712						1,840						10,994
Income (loss) from continuing operations before income taxes and other items						22,759						70,358						49,181						(138,292)						4,006
Income tax (expense) benefit						—						—						—						(3,943)						(3,943)
Income (loss) from unconsolidated entities						5,234						4,907						2,908						—						13,049
Gain (loss) on real estate dispositions, net						5,195						2,042						51,843						—						59,080
Income (loss) from continuing operations						33,188						77,307						103,932						(142,235)						72,192
Net income (loss)						$	33,188					$	77,307					$	103,932					$	(142,235)					$	72,192

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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
						March 31, 2022												March 31, 2021
Revenues:						Amount(1)						%						Amount						%
United States						$	1,139,016					81.6		%				$	825,648					78.5		%
United Kingdom						144,491						10.4		%				118,874						11.3		%
Canada						112,197						8.0		%				107,540						10.2		%
Total						$	1,395,704					100.0		%				$	1,052,062					100.0		%
						As of
						March 31, 2022												December 31, 2021
Assets:						Amount						%						Amount						%
United States						$	28,821,624					81.2		%				$	28,595,703					81.9		%
United Kingdom						3,822,998						10.8		%				3,938,258						11.3		%
Canada						2,827,831						8.0		%				2,376,364						6.8		%
Total						$	35,472,453					100.0		%				$	34,910,325					100.0		%

(1) The United States, United Kingdom and Canada represent 79%, 10% and 11% of our resident fees and services revenue for the three month period ended March 31, 2022.

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 three months ended March 31, 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):

						March 31, 2022						December 31, 2021
Assets:
Net real estate investments						$	445,561					$	445,776
Cash and cash equivalents						11,489						9,964
Receivables and other assets						8,100						7,617
Total assets (1)						$	465,150					$	463,357
Liabilities and equity:
Secured debt						$	163,021					$	163,519
Lease liabilities						1,324						1,324
Accrued expenses and other liabilities						13,067						12,394
Total equity						287,738						286,120
Total liabilities and equity						$	465,150					$	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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