Item 1.
Financial Statements
CONSOLIDATED BALANCE SHEETS
WELLTOWER INC. AND SUBSIDIARIES
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 (Unaudited)
|
|
December 31, 2018 (Note)
|
Assets:
|
|
|
|
|
Real estate investments:
|
|
|
|
|
Real property owned:
|
|
|
|
|
Land and land improvements
|
|
$
|
3,337,234
|
|
|
$
|
3,205,091
|
|
Buildings and improvements
|
|
28,691,274
|
|
|
28,019,502
|
|
Acquired lease intangibles
|
|
1,589,138
|
|
|
1,581,159
|
|
Real property held for sale, net of accumulated depreciation
|
|
1,704,206
|
|
|
590,271
|
|
Construction in progress
|
|
363,160
|
|
|
194,365
|
|
Less accumulated depreciation and amortization
|
|
(5,539,435
|
)
|
|
(5,499,958
|
)
|
Net real property owned
|
|
30,145,577
|
|
|
28,090,430
|
|
Right of use assets, net
|
|
550,342
|
|
|
—
|
|
Real estate loans receivable, net of allowance
|
|
368,994
|
|
|
330,339
|
|
Net real estate investments
|
|
31,064,913
|
|
|
28,420,769
|
|
Other assets:
|
|
|
|
|
Investments in unconsolidated entities
|
|
519,387
|
|
|
482,914
|
|
Goodwill
|
|
68,321
|
|
|
68,321
|
|
Cash and cash equivalents
|
|
268,666
|
|
|
215,376
|
|
Restricted cash
|
|
91,052
|
|
|
100,753
|
|
Straight-line rent receivable
|
|
419,501
|
|
|
367,093
|
|
Receivables and other assets
|
|
716,857
|
|
|
686,846
|
|
Total other assets
|
|
2,083,784
|
|
|
1,921,303
|
|
Total assets
|
|
$
|
33,148,697
|
|
|
$
|
30,342,072
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
Liabilities:
|
|
|
|
|
Unsecured credit facility and commercial paper
|
|
$
|
1,869,188
|
|
|
$
|
1,147,000
|
|
Senior unsecured notes
|
|
10,606,106
|
|
|
9,603,299
|
|
Secured debt
|
|
2,675,507
|
|
|
2,476,177
|
|
Lease liabilities
|
|
469,029
|
|
|
70,668
|
|
Accrued expenses and other liabilities
|
|
1,076,061
|
|
|
1,034,283
|
|
Total liabilities
|
|
16,695,891
|
|
|
14,331,427
|
|
Redeemable noncontrolling interests
|
|
483,234
|
|
|
424,046
|
|
Equity:
|
|
|
|
|
Preferred stock
|
|
—
|
|
|
718,498
|
|
Common stock
|
|
406,014
|
|
|
384,465
|
|
Capital in excess of par value
|
|
19,740,145
|
|
|
18,424,368
|
|
Treasury stock
|
|
(74,042
|
)
|
|
(68,499
|
)
|
Cumulative net income
|
|
6,539,766
|
|
|
6,121,534
|
|
Cumulative dividends
|
|
(11,516,994
|
)
|
|
(10,818,557
|
)
|
Accumulated other comprehensive income (loss)
|
|
(100,622
|
)
|
|
(129,769
|
)
|
Other equity
|
|
188
|
|
|
294
|
|
Total Welltower Inc. stockholders’ equity
|
|
14,994,455
|
|
|
14,632,334
|
|
Noncontrolling interests
|
|
975,117
|
|
|
954,265
|
|
Total equity
|
|
15,969,572
|
|
|
15,586,599
|
|
Total liabilities and equity
|
|
$
|
33,148,697
|
|
|
$
|
30,342,072
|
|
NOTE: The consolidated balance sheet at
December 31, 2018
has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
WELLTOWER INC. AND SUBSIDIARIES
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
|
Resident fees and services
|
|
$
|
914,085
|
|
|
$
|
763,345
|
|
|
$
|
1,782,370
|
|
|
$
|
1,499,279
|
|
Rental income
|
|
385,586
|
|
|
333,601
|
|
|
766,670
|
|
|
676,970
|
|
Interest income
|
|
17,356
|
|
|
13,462
|
|
|
32,475
|
|
|
28,110
|
|
Other income
|
|
3,079
|
|
|
15,504
|
|
|
10,836
|
|
|
18,518
|
|
Total revenues
|
|
1,320,106
|
|
|
1,125,912
|
|
|
2,592,351
|
|
|
2,222,877
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
701,127
|
|
|
568,751
|
|
|
1,371,934
|
|
|
1,125,216
|
|
Depreciation and amortization
|
|
248,052
|
|
|
236,275
|
|
|
491,984
|
|
|
464,476
|
|
Interest expense
|
|
141,336
|
|
|
121,416
|
|
|
286,568
|
|
|
244,191
|
|
General and administrative expenses
|
|
33,741
|
|
|
32,831
|
|
|
69,023
|
|
|
66,536
|
|
Loss (gain) on derivatives and financial instruments, net
|
|
1,913
|
|
|
(7,460
|
)
|
|
(574
|
)
|
|
(14,633
|
)
|
Loss (gain) on extinguishment of debt, net
|
|
—
|
|
|
299
|
|
|
15,719
|
|
|
12,006
|
|
Provision for loan losses
|
|
—
|
|
|
—
|
|
|
18,690
|
|
|
—
|
|
Impairment of assets
|
|
9,939
|
|
|
4,632
|
|
|
9,939
|
|
|
32,817
|
|
Other expenses
|
|
21,628
|
|
|
10,058
|
|
|
30,384
|
|
|
13,770
|
|
Total expenses
|
|
1,157,736
|
|
|
966,802
|
|
|
2,293,667
|
|
|
1,944,379
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes and other items
|
|
162,370
|
|
|
159,110
|
|
|
298,684
|
|
|
278,498
|
|
Income tax (expense) benefit
|
|
(1,599
|
)
|
|
(3,841
|
)
|
|
(3,821
|
)
|
|
(5,429
|
)
|
Income (loss) from unconsolidated entities
|
|
(9,049
|
)
|
|
1,249
|
|
|
(18,248
|
)
|
|
(1,180
|
)
|
Gain (loss) on real estate dispositions, net
|
|
(1,682
|
)
|
|
10,755
|
|
|
165,727
|
|
|
348,939
|
|
Income (loss) from continuing operations
|
|
150,040
|
|
|
167,273
|
|
|
442,342
|
|
|
620,828
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
150,040
|
|
|
167,273
|
|
|
442,342
|
|
|
620,828
|
|
Less: Preferred stock dividends
|
|
—
|
|
|
11,676
|
|
|
—
|
|
|
23,352
|
|
Less: Net income (loss) attributable to noncontrolling interests
(1)
|
|
12,278
|
|
|
1,165
|
|
|
24,110
|
|
|
5,373
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
137,762
|
|
|
$
|
154,432
|
|
|
$
|
418,232
|
|
|
$
|
592,103
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
404,607
|
|
|
371,640
|
|
|
398,073
|
|
|
371,552
|
|
Diluted
|
|
406,673
|
|
|
373,075
|
|
|
400,096
|
|
|
373,186
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.37
|
|
|
$
|
0.45
|
|
|
$
|
1.11
|
|
|
$
|
1.67
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
0.34
|
|
|
$
|
0.42
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.37
|
|
|
$
|
0.45
|
|
|
$
|
1.11
|
|
|
$
|
1.66
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
0.34
|
|
|
$
|
0.41
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid per common share
|
|
$
|
0.87
|
|
|
$
|
0.87
|
|
|
$
|
1.74
|
|
|
$
|
1.74
|
|
(1)
Includes amounts attributable to redeemable noncontrolling interests.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
WELLTOWER INC. AND SUBSIDIARIES
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
|
|
$
|
150,040
|
|
|
$
|
167,273
|
|
|
$
|
442,342
|
|
|
$
|
620,828
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
(54,024
|
)
|
|
(200,826
|
)
|
|
24,596
|
|
|
(121,802
|
)
|
Derivative instruments gain (loss)
|
|
100,407
|
|
|
150,703
|
|
|
12,725
|
|
|
88,005
|
|
Total other comprehensive income (loss)
|
|
46,383
|
|
|
(50,123
|
)
|
|
37,321
|
|
|
(33,797
|
)
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
196,423
|
|
|
117,150
|
|
|
479,663
|
|
|
587,031
|
|
Less: Total comprehensive income (loss) attributable
to noncontrolling interests
(1)
|
|
14,665
|
|
|
(7,580
|
)
|
|
32,284
|
|
|
(7,258
|
)
|
Total comprehensive income (loss) attributable to common stockholders
|
|
$
|
181,758
|
|
|
$
|
124,730
|
|
|
$
|
447,379
|
|
|
$
|
594,289
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes amounts attributable to redeemable noncontrolling interests.
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
WELLTOWER INC. AND SUBSIDIARIES
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Capital in
Excess of
Par Value
|
|
Treasury
Stock
|
|
Cumulative
Net Income
|
|
Cumulative
Dividends
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Other
Equity
|
|
Noncontrolling
Interests
|
|
Total
|
Balances at December 31, 2018
|
|
$
|
718,498
|
|
|
$
|
384,465
|
|
|
$
|
18,424,368
|
|
|
$
|
(68,499
|
)
|
|
$
|
6,121,534
|
|
|
$
|
(10,818,557
|
)
|
|
$
|
(129,769
|
)
|
|
$
|
294
|
|
|
$
|
954,265
|
|
|
$
|
15,586,599
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
280,470
|
|
|
|
|
|
|
|
|
10,785
|
|
|
291,255
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,849
|
)
|
|
|
|
5,787
|
|
|
(9,062
|
)
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,193
|
|
Net change in noncontrolling interests
|
|
|
|
|
|
|
(8,845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1,497
|
)
|
|
(10,342
|
)
|
Amounts related to stock incentive plans, net of forfeitures
|
|
|
|
|
120
|
|
|
7,420
|
|
|
(5,993
|
)
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
1,521
|
|
Proceeds from issuance of common stock
|
|
|
|
|
7,212
|
|
|
525,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,620
|
|
Conversion of preferred stock
|
|
(718,498
|
)
|
|
12,712
|
|
|
705,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
(344,760
|
)
|
|
|
|
|
|
|
|
(344,760
|
)
|
Balances at March 31, 2019
|
|
$
|
—
|
|
|
$
|
404,509
|
|
|
$
|
19,654,137
|
|
|
$
|
(74,492
|
)
|
|
$
|
6,402,004
|
|
|
$
|
(11,163,317
|
)
|
|
$
|
(144,618
|
)
|
|
$
|
268
|
|
|
$
|
969,340
|
|
|
$
|
16,047,831
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
137,762
|
|
|
|
|
|
|
|
|
11,349
|
|
|
149,111
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,996
|
|
|
|
|
2,387
|
|
|
46,383
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,494
|
|
Net change in noncontrolling interests
|
|
|
|
|
|
(23,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(7,959
|
)
|
|
(31,631
|
)
|
Amounts related to stock incentive plans, net of forfeitures
|
|
|
|
18
|
|
|
7,959
|
|
|
450
|
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
8,347
|
|
Proceeds from issuance of common stock
|
|
|
|
1,487
|
|
|
101,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,208
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
(353,677
|
)
|
|
|
|
|
|
|
|
(353,677
|
)
|
Balances at June 30, 2019
|
|
$
|
—
|
|
|
$
|
406,014
|
|
|
$
|
19,740,145
|
|
|
$
|
(74,042
|
)
|
|
$
|
6,539,766
|
|
|
$
|
(11,516,994
|
)
|
|
$
|
(100,622
|
)
|
|
$
|
188
|
|
|
$
|
975,117
|
|
|
$
|
15,969,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Capital in
Excess of
Par Value
|
|
Treasury
Stock
|
|
Cumulative
Net Income
|
|
Cumulative
Dividends
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
Other
Equity
|
|
Noncontrolling
Interests
|
|
Total
|
Balances at December 31, 2017
|
|
$
|
718,503
|
|
|
$
|
372,449
|
|
|
$
|
17,662,681
|
|
|
$
|
(64,559
|
)
|
|
$
|
5,316,580
|
|
|
$
|
(9,471,712
|
)
|
|
$
|
(111,465
|
)
|
|
$
|
670
|
|
|
$
|
502,305
|
|
|
$
|
14,925,452
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
449,347
|
|
|
|
|
|
|
|
|
5,191
|
|
|
454,538
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,212
|
|
|
|
|
(3,886
|
)
|
|
16,326
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
470,864
|
|
Net change in noncontrolling interests
|
|
|
|
|
|
(13,157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(2,719
|
)
|
|
(15,876
|
)
|
Amounts related to stock incentive plans, net of forfeitures
|
|
|
|
150
|
|
|
11,085
|
|
|
(4,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
7,098
|
|
Proceeds from issuance of common stock
|
|
|
|
130
|
|
|
7,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,190
|
|
Conversion of preferred stock
|
|
(5
|
)
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
(323,726
|
)
|
|
|
|
|
|
|
|
(323,726
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
(11,676
|
)
|
|
|
|
|
|
|
|
(11,676
|
)
|
Balances at March 31, 2018
|
|
$
|
718,498
|
|
|
$
|
372,729
|
|
|
$
|
17,667,674
|
|
|
$
|
(68,696
|
)
|
|
$
|
5,765,927
|
|
|
$
|
(9,807,114
|
)
|
|
$
|
(91,253
|
)
|
|
$
|
670
|
|
|
$
|
500,891
|
|
|
$
|
15,059,326
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,108
|
|
|
|
|
|
|
|
|
|
|
|
2,355
|
|
|
168,463
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,378
|
)
|
|
|
|
|
(8,745
|
)
|
|
(50,123
|
)
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,340
|
|
Net change in noncontrolling interests
|
|
|
|
|
|
|
|
(14,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,937
|
)
|
|
(50,759
|
)
|
Amounts related to stock incentive plans, net of forfeitures
|
|
|
|
|
18
|
|
|
5,801
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
5,843
|
|
Proceeds from issuance of common stock
|
|
|
|
|
54
|
|
|
2,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,785
|
|
Dividends paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323,372
|
)
|
|
|
|
|
|
|
|
|
|
|
(323,372
|
)
|
Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,676
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,676
|
)
|
Balances at June 30, 2018
|
|
$
|
718,498
|
|
|
$
|
372,801
|
|
|
$
|
17,661,384
|
|
|
$
|
(68,661
|
)
|
|
$
|
5,932,035
|
|
|
$
|
(10,142,162
|
)
|
|
$
|
(132,631
|
)
|
|
$
|
659
|
|
|
$
|
458,564
|
|
|
$
|
14,800,487
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
WELLTOWER INC. AND SUBSIDIARIES
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
Operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
442,342
|
|
|
$
|
620,828
|
|
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
491,984
|
|
|
464,476
|
|
Other amortization expenses
|
|
9,761
|
|
|
7,984
|
|
Provision for loan losses
|
|
18,690
|
|
|
—
|
|
Impairment of assets
|
|
9,939
|
|
|
32,817
|
|
Stock-based compensation expense
|
|
15,192
|
|
|
16,725
|
|
Loss (gain) on derivatives and financial instruments, net
|
|
(574
|
)
|
|
(14,633
|
)
|
Loss (gain) on extinguishment of debt, net
|
|
15,719
|
|
|
12,006
|
|
Loss (income) from unconsolidated entities
|
|
18,248
|
|
|
1,180
|
|
Rental income less than (in excess of) cash received
|
|
(53,234
|
)
|
|
13,544
|
|
Amortization related to above (below) market leases, net
|
|
(2
|
)
|
|
1,363
|
|
Loss (gain) on real estate dispositions, net
|
|
(165,727
|
)
|
|
(348,939
|
)
|
Distributions by unconsolidated entities
|
|
46
|
|
|
21
|
|
Increase (decrease) in accrued expenses and other liabilities
|
|
55,415
|
|
|
46,718
|
|
Decrease (increase) in receivables and other assets
|
|
(3,317
|
)
|
|
(15,666
|
)
|
Net cash provided from (used in) operating activities
|
|
854,482
|
|
|
838,424
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
Cash disbursed for acquisitions
|
|
(2,718,808
|
)
|
|
(595,596
|
)
|
Cash disbursed for capital improvements to existing properties
|
|
(124,176
|
)
|
|
(111,332
|
)
|
Cash disbursed for construction in progress
|
|
(155,409
|
)
|
|
(62,978
|
)
|
Capitalized interest
|
|
(6,256
|
)
|
|
(4,436
|
)
|
Investment in real estate loans receivable
|
|
(62,935
|
)
|
|
(48,291
|
)
|
Principal collected on real estate loans receivable
|
|
6,840
|
|
|
91,427
|
|
Other investments, net of payments
|
|
(17,640
|
)
|
|
(48,212
|
)
|
Contributions to unconsolidated entities
|
|
(119,001
|
)
|
|
(32,768
|
)
|
Distributions by unconsolidated entities
|
|
70,844
|
|
|
22,897
|
|
Proceeds from (payments on) derivatives
|
|
(21,643
|
)
|
|
(27,678
|
)
|
Proceeds from sales of real property
|
|
616,820
|
|
|
947,218
|
|
Net cash provided from (used in) investing activities
|
|
(2,531,364
|
)
|
|
130,251
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
Net increase (decrease) in unsecured credit facility and commercial paper
|
|
722,188
|
|
|
(179,000
|
)
|
Proceeds from issuance of senior unsecured notes
|
|
2,036,964
|
|
|
545,074
|
|
Payments to extinguish senior unsecured notes
|
|
(1,050,000
|
)
|
|
(450,000
|
)
|
Net proceeds from the issuance of secured debt
|
|
295,969
|
|
|
44,606
|
|
Payments on secured debt
|
|
(178,700
|
)
|
|
(224,958
|
)
|
Net proceeds from the issuance of common stock
|
|
647,156
|
|
|
10,188
|
|
Payments for deferred financing costs and prepayment penalties
|
|
(24,177
|
)
|
|
(18,639
|
)
|
Contributions by noncontrolling interests
(1)
|
|
39,122
|
|
|
8,421
|
|
Distributions to noncontrolling interests
(1)
|
|
(64,004
|
)
|
|
(59,484
|
)
|
Cash distributions to stockholders
|
|
(695,099
|
)
|
|
(670,859
|
)
|
Other financing activities
|
|
(8,615
|
)
|
|
(5,639
|
)
|
Net cash provided from (used in) financing activities
|
|
1,720,804
|
|
|
(1,000,290
|
)
|
Effect of foreign currency translation on cash, cash equivalents and restricted cash
|
|
(333
|
)
|
|
(5,305
|
)
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
43,589
|
|
|
(36,920
|
)
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
316,129
|
|
|
309,303
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
359,718
|
|
|
$
|
272,383
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
Interest paid
|
|
$
|
252,714
|
|
|
$
|
209,156
|
|
Income taxes paid (received), net
|
|
2,040
|
|
|
4,835
|
|
|
|
|
|
|
(1)
Includes amounts attributable to redeemable noncontrolling interests.
|
|
|
|
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Welltower Inc. (the "Company"), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties.
2. Accounting Policies and Related Matters
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (such as normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the
six
months ended
June 30, 2019
are not necessarily an indication of the results that may be expected for the year ending December 31, 2019. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2018
.
New Accounting Standards
|
|
•
|
We adopted Accounting Standards Update 2016-02, Leases (Topic 842) ("ASC 842") which requires lessees to recognize assets and liabilities on their consolidated balance sheet related to the rights and obligations created by most leases, while continuing to recognize expenses on their consolidated statement of comprehensive income over the lease term. We adopted ASC 842 as of January 1, 2019, using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits us to carry forward our prior conclusions for lease classification and initial direct costs on existing leases. We also made an accounting policy election to keep short-term leases less than twelve months off the balance sheet for all classes of underlying assets.
|
In July 2018, the FASB issued ASU 2018-11 "Leases (Topic 842): Targeted Improvements" that (1) simplifies transition requirements for both lessees and lessors by adding an option that permits entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) allows lessors to elect, as a practical expedient, to not separate lease and non-lease components in a contract, and instead to account for as a single lease component, if certain criteria are met. This practical expedient causes an entity to assess whether a contract is predominantly lease or service-based and recognize the entire contract under the relevant accounting guidance (i.e. predominantly lease-based would be accounted for under ASC 842 and predominantly service-based would be accounted for under ASU 2014-09, "Revenue from Contracts with Customers (ASC 606)"). For the year ended December 31, 2018, we recognized revenue for our Seniors Housing Operating resident agreements in accordance with the provisions of the prior lease guidance, ASC 840, "Leases." Upon adoption of ASC 842, we elected the lessor practical expedient described above and recognized revenue for our Seniors Housing Operating segment based upon the predominant component, the non-lease service component. Therefore, beginning on January 1, 2019, we accounted for these resident agreements under ASC 606. The timing and pattern of revenue recognition is substantially the same as that prior to adoption.
The FASB also issued ASU 2018-20 "Leases (Topic 842) - Narrow Improvements for Lessors," which provides lessors the ability to make an accounting policy election not to evaluate whether certain sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as owner of the underlying leased asset. A lessor that makes this election will exclude these taxes from the measurement of lease revenue and the associated expense. Upon adoption of ASC 842, we utilized this practical expedient in instances in which real estate taxes are paid directly by our tenants to taxing authorities. For triple-net leasing arrangements in which the tenant remits payment for real estate taxes to us and we pay the taxing authority, we have included the associated revenue and expense in rental income and property operating expenses on the Consolidated Statements of Comprehensive Income. This reporting had no impact on our net income.
For leases in which the Company is the lessee, primarily consisting of ground leases and various office and equipment leases, we recognized upon adoption a right of use asset of
$509,386,000
which included the present value of minimum leases payments, existing above and/or below market lease intangible values and existing straight-line rent liabilities
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
associated with such leases. We also recognized operating lease liabilities of
$357,070,000
. The standard did not materially impact our Consolidated Statements of Comprehensive Income or our Consolidated Statement of Cash Flows. See Note 6 for additional details.
The following ASU has been issued but not yet adopted:
|
|
•
|
In 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under the new leases standard from the scope of the new credit losses standard. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.
|
3. Real Property Acquisitions and Development
The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their relative fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. Transaction costs related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in other expenses on our Consolidated Statements of Comprehensive Income. Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries.
The following is a summary of our real property investment activity by segment for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2018
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient
Medical
|
|
Totals
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient
Medical
|
|
Totals
|
Land and land improvements
|
$
|
103,743
|
|
|
$
|
8,099
|
|
|
$
|
132,154
|
|
|
$
|
243,996
|
|
|
$
|
47,865
|
|
|
$
|
1,691
|
|
|
$
|
7,369
|
|
|
$
|
56,925
|
|
Buildings and improvements
|
1,109,966
|
|
|
96,244
|
|
|
1,198,608
|
|
|
2,404,818
|
|
|
535,921
|
|
|
—
|
|
|
42,673
|
|
|
578,594
|
|
Acquired lease intangibles
|
58,773
|
|
|
—
|
|
|
85,492
|
|
|
144,265
|
|
|
68,084
|
|
|
—
|
|
|
5,852
|
|
|
73,936
|
|
Construction in progress
|
36,174
|
|
|
—
|
|
|
—
|
|
|
36,174
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Right of use assets, net
|
—
|
|
|
—
|
|
|
56,073
|
|
|
56,073
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Receivables and other assets
|
4,560
|
|
|
—
|
|
|
376
|
|
|
4,936
|
|
|
1,255
|
|
|
—
|
|
|
1
|
|
|
1,256
|
|
Total assets acquired
(1)
|
1,313,216
|
|
|
104,343
|
|
|
1,472,703
|
|
|
2,890,262
|
|
|
653,125
|
|
|
1,691
|
|
|
55,895
|
|
|
710,711
|
|
Secured debt
|
(43,209
|
)
|
|
—
|
|
|
—
|
|
|
(43,209
|
)
|
|
(89,973
|
)
|
|
—
|
|
|
—
|
|
|
(89,973
|
)
|
Lease liabilities
|
—
|
|
|
—
|
|
|
(45,287
|
)
|
|
(45,287
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Accrued expenses and other liabilities
|
(8,677
|
)
|
|
—
|
|
|
(22,506
|
)
|
|
(31,183
|
)
|
|
(14,686
|
)
|
|
(6
|
)
|
|
(632
|
)
|
|
(15,324
|
)
|
Total liabilities acquired
|
(51,886
|
)
|
|
—
|
|
|
(67,793
|
)
|
|
(119,679
|
)
|
|
(104,659
|
)
|
|
(6
|
)
|
|
(632
|
)
|
|
(105,297
|
)
|
Noncontrolling interests
|
(38,830
|
)
|
|
(1,056
|
)
|
|
—
|
|
|
(39,886
|
)
|
|
(9,818
|
)
|
|
—
|
|
|
—
|
|
|
(9,818
|
)
|
Non-cash acquisition related activity
(2)
|
(11,889
|
)
|
|
—
|
|
|
—
|
|
|
(11,889
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash disbursed for acquisitions
|
1,210,611
|
|
|
103,287
|
|
|
1,404,910
|
|
|
2,718,808
|
|
|
538,648
|
|
|
1,685
|
|
|
55,263
|
|
|
595,596
|
|
Construction in progress additions
|
110,761
|
|
|
24,066
|
|
|
26,587
|
|
|
161,414
|
|
|
20,704
|
|
|
38,238
|
|
|
11,319
|
|
|
70,261
|
|
Less: Capitalized interest
|
(3,560
|
)
|
|
(908
|
)
|
|
(1,788
|
)
|
|
(6,256
|
)
|
|
(1,783
|
)
|
|
(1,432
|
)
|
|
(1,221
|
)
|
|
(4,436
|
)
|
Foreign currency translation
|
141
|
|
|
65
|
|
|
—
|
|
|
206
|
|
|
1,176
|
|
|
132
|
|
|
—
|
|
|
1,308
|
|
Accruals
(3)
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
(4,155
|
)
|
|
(4,155
|
)
|
Cash disbursed for construction in progress
|
107,342
|
|
|
23,223
|
|
|
24,844
|
|
|
155,409
|
|
|
20,097
|
|
|
36,938
|
|
|
5,943
|
|
|
62,978
|
|
Capital improvements to existing properties
|
97,867
|
|
|
7,423
|
|
|
18,886
|
|
|
124,176
|
|
|
76,237
|
|
|
8,569
|
|
|
26,526
|
|
|
111,332
|
|
Total cash invested in real property, net of cash acquired
|
$
|
1,415,820
|
|
|
$
|
133,933
|
|
|
$
|
1,448,640
|
|
|
$
|
2,998,393
|
|
|
$
|
634,982
|
|
|
$
|
47,192
|
|
|
$
|
87,732
|
|
|
$
|
769,906
|
|
(1)
Excludes $
1,910,000
and $
4,392,000
of unrestricted and restricted cash acquired during the
six
months ended
June 30, 2019
and
2018
, respectively.
(2)
Relates to the 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.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Construction Activity
The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
Development projects:
|
|
|
|
|
Seniors Housing Operating
|
|
$
|
28,117
|
|
|
$
|
37,215
|
|
Triple-net
|
|
—
|
|
|
59,188
|
|
Outpatient Medical
|
|
—
|
|
|
11,358
|
|
Total construction in progress conversions
|
|
$
|
28,117
|
|
|
$
|
107,761
|
|
4. Real Estate Intangibles
The following is a summary of our real estate intangibles, excluding those classified as held for sale, as of the dates indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Assets:
|
|
|
|
|
In place lease intangibles
|
|
$
|
1,473,060
|
|
|
$
|
1,410,725
|
|
Above market tenant leases
|
|
69,656
|
|
|
63,935
|
|
Below market ground leases
(1)
|
|
—
|
|
|
64,513
|
|
Lease commissions
|
|
46,422
|
|
|
41,986
|
|
Gross historical cost
|
|
1,589,138
|
|
|
1,581,159
|
|
Accumulated amortization
|
|
(1,163,936
|
)
|
|
(1,197,336
|
)
|
Net book value
|
|
$
|
425,202
|
|
|
$
|
383,823
|
|
|
|
|
|
|
Weighted-average amortization period in years
|
|
8.6
|
|
|
16.0
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Below market tenant leases
|
|
$
|
94,082
|
|
|
$
|
81,676
|
|
Above market ground leases
(1)
|
|
—
|
|
|
8,540
|
|
Gross historical cost
|
|
94,082
|
|
|
90,216
|
|
Accumulated amortization
|
|
(45,147
|
)
|
|
(44,266
|
)
|
Net book value
|
|
$
|
48,935
|
|
|
$
|
45,950
|
|
|
|
|
|
|
Weighted-average amortization period in years
|
|
8.2
|
|
|
14.7
|
|
(1)
Effective on January 1, 2019 with the adoption of ASC 842, above and below market ground lease intangibles are reported within the right of use assets, net line on the Consolidated Balance Sheet.
The following is a summary of real estate intangible amortization for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Rental income related to (above)/below market tenant leases, net
|
|
$
|
73
|
|
|
$
|
(333
|
)
|
|
$
|
(82
|
)
|
|
$
|
(684
|
)
|
Amortization related to in place lease intangibles and lease commissions
|
|
(28,518
|
)
|
|
(33,763
|
)
|
|
(53,423
|
)
|
|
(66,024
|
)
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
2019
|
|
$
|
84,909
|
|
|
$
|
4,777
|
|
2020
|
|
101,374
|
|
|
8,835
|
|
2021
|
|
51,215
|
|
|
7,865
|
|
2022
|
|
34,495
|
|
|
7,130
|
|
2023
|
|
28,361
|
|
|
4,989
|
|
Thereafter
|
|
124,848
|
|
|
15,339
|
|
Total
|
|
$
|
425,202
|
|
|
$
|
48,935
|
|
5. Dispositions and Assets Held for Sale
We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (i.e., property type, relationship or geography). At
June 30, 2019
,
55
Seniors Housing Operating,
30
Triple-net, and
four
Outpatient Medical properties with an aggregate real estate balance of $
1,704,206,000
were classified as held for sale. In addition, secured debt of $
37,429,000
and net other assets and liabilities of $
58,816,000
related to the held for sale properties. During the
six months ended June 30, 2019
, we recorded net impairment charges of
$9,939,000
on certain held for sale properties for which the carrying value exceeded the fair values, less estimated costs to sell, if applicable. The following is a summary of our real property disposition activity for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2019
|
|
2018
|
Real estate dispositions:
|
|
|
|
|
Seniors Housing Operating
|
|
$
|
8,726
|
|
|
$
|
2,200
|
|
Triple-net
|
|
442,865
|
|
|
367,978
|
|
Outpatient Medical
|
|
—
|
|
|
223,069
|
|
Total dispositions
|
|
451,591
|
|
|
593,247
|
|
Gain (loss) on real estate dispositions, net
|
|
165,727
|
|
|
348,939
|
|
Net other assets/liabilities disposed
|
|
(498
|
)
|
|
5,032
|
|
Proceeds from real estate dispositions
|
|
$
|
616,820
|
|
|
$
|
947,218
|
|
Dispositions and Assets Held for Sale
Pursuant to our adoption of ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, operating results attributable to properties sold subsequent to or classified as held for sale after January 1, 2014 and which do not meet the definition of discontinued operations are no longer reclassified on our Consolidated Statements of Comprehensive Income. The following represents the activity related to these properties for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
112,694
|
|
|
$
|
121,079
|
|
|
$
|
228,441
|
|
|
$
|
249,639
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
479
|
|
|
579
|
|
|
983
|
|
|
1,200
|
|
Property operating expenses
|
|
70,244
|
|
|
74,213
|
|
|
146,260
|
|
|
150,120
|
|
Provision for depreciation
|
|
12,520
|
|
|
18,431
|
|
|
24,897
|
|
|
38,275
|
|
Total expenses
|
|
83,243
|
|
|
93,223
|
|
|
172,140
|
|
|
189,595
|
|
Income (loss) from real estate dispositions, net
|
|
$
|
29,451
|
|
|
$
|
27,856
|
|
|
$
|
56,301
|
|
|
$
|
60,044
|
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Leases
We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to
25 years
or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through
30 years
, as well as other longer-term market rates). For leases that commenced prior to January 1,
2019
, we used the incremental borrowing rate on
December 31, 2018
.
We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for
seven
buildings.
The components of lease expense were as follows for the period presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
Operating lease cost:
(1)
|
|
|
|
|
|
|
Real estate lease expense
|
|
Property operating expenses
|
|
$
|
7,267
|
|
|
$
|
14,679
|
|
Non-real estate lease expense
|
|
General and administrative expenses
|
|
408
|
|
|
770
|
|
Finance lease cost:
|
|
|
|
|
|
|
Amortization of leased assets
|
|
Property operating expenses
|
|
2,153
|
|
|
4,245
|
|
Interest on lease liabilities
|
|
Interest expense
|
|
1,166
|
|
|
2,169
|
|
Sublease income
|
|
Rental income
|
|
(1,043
|
)
|
|
(2,087
|
)
|
Total
|
|
|
|
$
|
9,951
|
|
|
$
|
19,776
|
|
(1)
Includes short-term leases which are immaterial.
Maturities of lease liabilities as of
June 30, 2019
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
2019
|
|
$
|
9,809
|
|
|
$
|
4,488
|
|
2020
|
|
19,625
|
|
|
8,821
|
|
2021
|
|
19,558
|
|
|
8,485
|
|
2022
|
|
18,627
|
|
|
7,852
|
|
2023
|
|
18,707
|
|
|
68,967
|
|
Thereafter
|
|
1,595,101
|
|
|
86,081
|
|
Total lease payments
|
|
1,681,427
|
|
|
184,694
|
|
Less: Imputed interest
|
|
(1,321,129
|
)
|
|
(75,963
|
)
|
Total present value of lease liabilities
|
|
$
|
360,298
|
|
|
$
|
108,731
|
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental balance sheet information related to leases was as follows for the date indicated (in thousands, except lease terms and discount rate):
|
|
|
|
|
|
|
|
Classification
|
|
June 30, 2019
|
Right of use assets:
|
|
|
|
Operating leases - real estate
|
Right of use assets, net
|
|
$
|
386,061
|
|
Finance leases
|
Right of use assets, net
|
|
164,281
|
|
Real estate right of use assets, net
|
|
|
550,342
|
|
Operating leases - corporate
|
Receivables and other assets
|
|
5,055
|
|
Total right of use assets, net
|
|
|
$
|
555,397
|
|
|
|
|
|
Lease liabilities:
|
|
|
|
Operating leases
|
|
|
$
|
360,298
|
|
Financing leases
|
|
|
108,731
|
|
Total
|
|
|
$
|
469,029
|
|
|
|
|
|
Weighted average remaining lease term (years):
|
|
|
|
Operating leases
|
|
|
50.0
|
|
Finance leases
|
|
|
15.8
|
|
|
|
|
|
Weighted average discount rate:
|
|
|
|
Operating leases
|
|
|
5.21
|
%
|
Finance leases
|
|
|
5.17
|
%
|
Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):
|
|
|
|
|
|
|
|
Classification
|
|
Six Months Ended June 30, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows from operating leases
|
Decrease (increase) in receivables and other assets
|
|
$
|
4,627
|
|
Operating cash flows from finance leases
|
Decrease (increase) in receivables and other assets
|
|
3,916
|
|
Financing cash flows from finance leases
|
Other financing activities
|
|
(1,638
|
)
|
Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our outpatient medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized
$766,670,000
of rental and other revenues related to operating lease payments, of which $
94,017,000
was for variable lease payments for the six months ended
June 30, 2019
, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at
June 30, 2019
(excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):
|
|
|
|
|
|
2019
|
|
$
|
925,026
|
|
2020
|
|
1,380,111
|
|
2021
|
|
1,346,698
|
|
2022
|
|
1,237,904
|
|
2023
|
|
1,255,408
|
|
Thereafter
|
|
9,745,880
|
|
Totals
|
|
$
|
15,891,027
|
|
7. Real Estate Loans Receivable
Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2018
for discussion of our accounting policies for real estate loans receivable and related interest income.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of our net real estate loans receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Mortgage loans
|
|
$
|
332,770
|
|
|
$
|
317,443
|
|
Other real estate loans
|
|
104,596
|
|
|
81,268
|
|
Less allowance for losses on loans receivable
|
|
(68,372
|
)
|
|
(68,372
|
)
|
Totals
|
|
$
|
368,994
|
|
|
$
|
330,339
|
|
The following is a summary of our real estate loan activity for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
June 30, 2019
|
|
June 30, 2018
|
|
|
Triple-net
|
|
Outpatient
Medical
|
|
Totals
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient
Medical
|
|
Totals
|
Advances on real estate loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in new loans
|
|
$
|
25,000
|
|
|
$
|
5,000
|
|
|
$
|
30,000
|
|
|
$
|
11,806
|
|
|
$
|
8,281
|
|
|
$
|
7,022
|
|
|
$
|
27,109
|
|
Draws on existing loans
|
|
20,051
|
|
|
12,884
|
|
|
32,935
|
|
|
—
|
|
|
21,182
|
|
|
—
|
|
|
21,182
|
|
Net cash advances on real estate loans
|
|
45,051
|
|
|
17,884
|
|
|
62,935
|
|
|
11,806
|
|
|
29,463
|
|
|
7,022
|
|
|
48,291
|
|
Receipts on real estate loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payoffs
|
|
4,384
|
|
|
—
|
|
|
4,384
|
|
|
—
|
|
|
58,557
|
|
|
—
|
|
|
58,557
|
|
Principal payments on loans
|
|
2,456
|
|
|
—
|
|
|
2,456
|
|
|
—
|
|
|
32,870
|
|
|
—
|
|
|
32,870
|
|
Net cash receipts on real estate loans
|
|
6,840
|
|
|
—
|
|
|
6,840
|
|
|
—
|
|
|
91,427
|
|
|
—
|
|
|
91,427
|
|
Net cash advances (receipts) on real estate loans
|
|
$
|
38,211
|
|
|
$
|
17,884
|
|
|
$
|
56,095
|
|
|
$
|
11,806
|
|
|
$
|
(61,964
|
)
|
|
$
|
7,022
|
|
|
$
|
(43,136
|
)
|
In 2016, we restructured real estate loans with Genesis HealthCare and recorded a loan loss charge in the amount of $
6,935,000
on one of the loans as the present value of expected future cash flows was less than the carrying value of the loan. In 2017, we recorded an additional loan loss charge of $
62,966,000
relating to real estate loans with Genesis HealthCare based on an estimation of expected future cash flows discounted at the effective interest rate of the loans. In March 2019, we recognized a provision for loan losses of
$18,690,000
to fully reserve for certain Triple-net real estate loans receivable that were no longer deemed collectible. During the quarter ended
June 30, 2019
, these loans were written off. As of
June 30, 2019
, the allowance for loan loss balance of $
68,372,000
is deemed to be sufficient to absorb expected losses. At
June 30, 2019
, we had
one
real estate loan with an outstanding balance of
$2,534,000
on non-accrual status.
The following is a summary of our impaired loans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
Balance of impaired loans at end of period
|
|
$
|
188,068
|
|
|
$
|
214,871
|
|
Allowance for loan losses
|
|
68,372
|
|
|
68,372
|
|
Balance of impaired loans not reserved
|
|
$
|
119,696
|
|
|
$
|
146,499
|
|
Average impaired loans for the period
|
|
$
|
197,426
|
|
|
$
|
252,172
|
|
Interest recognized on impaired loans
(1)
|
|
7,964
|
|
|
8,847
|
|
(1)
Represents cash interest recognized in the period since loans were identified as impaired.
8. Investments in Unconsolidated Entities
We participate in a number of joint ventures, which generally invest in seniors housing and health care real estate. The results of operations for these entities have been included in our consolidated results of operations from the date of acquisition by the joint ventures and are reflected in our Consolidated Statements of Comprehensive Income as income or loss from unconsolidated entities. The following is a summary of our investments in unconsolidated entities (dollars in thousands):
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Ownership
(1)
|
|
June 30, 2019
|
|
December 31, 2018
|
Seniors Housing Operating
|
|
10% to 50%
|
|
$
|
379,886
|
|
|
$
|
344,982
|
|
Triple-net
|
|
10% to 49%
|
|
9,459
|
|
|
34,284
|
|
Outpatient Medical
|
|
43% to 50%
|
|
130,042
|
|
|
103,648
|
|
Total
|
|
|
|
$
|
519,387
|
|
|
$
|
482,914
|
|
(1)
Excludes ownership of in-substance real estate.
At
June 30, 2019
, the aggregate unamortized basis difference of our joint venture investments of $
101,571,000
is primarily attributable to the difference between the amount for which we purchase our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the joint venture. This difference is being amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.
9. Credit Concentration
We use consolidated net operating income (“NOI”) as our credit concentration metric. See Note 18 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the
six months ended
June 30, 2019
, excluding our share of NOI in unconsolidated entities (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Total
|
|
Percent of
|
Concentration by relationship:
(1)
|
|
Properties
|
|
NOI
|
|
NOI
(2)
|
Sunrise Senior Living
(3)
|
|
165
|
|
|
$
|
174,422
|
|
|
14%
|
ProMedica
|
|
218
|
|
|
107,541
|
|
|
9%
|
Revera
(3)
|
|
98
|
|
|
72,928
|
|
|
6%
|
Genesis HealthCare
|
|
60
|
|
|
60,984
|
|
|
5%
|
Benchmark Senior Living
(4)
|
|
48
|
|
|
55,530
|
|
|
5%
|
Remaining portfolio
|
|
1,009
|
|
|
749,012
|
|
|
61%
|
Totals
|
|
1,598
|
|
|
$
|
1,220,417
|
|
|
100%
|
(1)
Genesis Healthcare and ProMedica are in our Triple-net segment. Sunrise Senior Living and Revera are in our Seniors Housing Operating segment. Benchmark Senior Living is in both our Triple-net and Seniors Housing Operating segments.
(2)
NOI with our top five relationships comprised
38%
of total NOI for the year ended
December 31, 2018
.
(3)
Revera owns a controlling interest in Sunrise Senior Living.
(4)
Please see Note 21 for additional information.
10. Borrowings Under Credit Facilities and Commercial Paper Program
At
June 30, 2019
, we had a primary unsecured credit facility with a consortium of
31
banks that includes a $
3,000,000,000
unsecured revolving credit facility (
$935,000,000
outstanding at
June 30, 2019
), a $
500,000,000
unsecured term credit facility and a $
250,000,000
Canadian-denominated unsecured term credit facility. We have an option, through an accordion feature, to upsize the unsecured revolving credit facility and the $
500,000,000
unsecured term credit facility by up to an additional $
1,000,000,000
, in the aggregate, and the $
250,000,000
Canadian-denominated unsecured term credit facility by up to an additional $
250,000,000
. The primary unsecured credit facility also allows us to borrow up to $
1,000,000,000
in alternate currencies (
none
outstanding at
June 30, 2019
). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate (
3.22%
at June 30, 2019). The applicable margin is based on our debt ratings and was
0.825%
at
June 30, 2019
. In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on our debt ratings and was
0.15%
at
June 30, 2019
. The term credit facilities mature on
July 19, 2023
. The revolving credit facility is scheduled to mature on
July 19, 2022
and can be extended for
two
successive terms of
six months
each at our option.
In January 2019, we established an unsecured commercial paper program (the "Commercial Paper Program"). Under the terms of the program, we may issue unsecured commercial paper notes with maturities that vary, but do not exceed
397 days
from the date of issue, up to a maximum aggregate face or principal amount outstanding at any time of
$1,000,000,000
. As of
June 30, 2019
, there was a balance of
$934,188,000
outstanding on the Commercial Paper Program (
$935,000,000
in principal outstanding net of an unamortized discount of
$812,000
), which reduces the borrowing capacity on the unsecured revolving credit facility. The notes bear interest at various floating rates with a weighted average of
2.70%
as of
June 30, 2019
and a weighted average maturity of
31
days as of
June 30, 2019
.
The following information relates to aggregate borrowings under the unsecured revolving credit facility and Commercial Paper Program for the periods presented (dollars in thousands):
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Balance outstanding at quarter end
|
|
$
|
1,870,000
|
|
|
$
|
540,000
|
|
|
$
|
1,870,000
|
|
|
$
|
540,000
|
|
Maximum amount outstanding at any month end
|
|
$
|
2,880,000
|
|
|
$
|
685,000
|
|
|
$
|
2,880,000
|
|
|
$
|
865,000
|
|
Average amount outstanding (total of daily
|
|
|
|
|
|
|
|
|
principal balances divided by days in period)
|
|
$
|
1,807,631
|
|
|
$
|
562,747
|
|
|
$
|
1,301,883
|
|
|
$
|
463,978
|
|
Weighted average interest rate (actual interest
|
|
|
|
|
|
|
|
|
expense divided by average borrowings outstanding)
|
|
3.08
|
%
|
|
3.04
|
%
|
|
3.11
|
%
|
|
2.91
|
%
|
11. Senior Unsecured Notes and Secured Debt
We may repurchase, redeem or refinance senior unsecured notes from time to time, taking advantage of favorable market conditions when available. We may purchase senior notes for cash through open market purchases, privately negotiated transactions, a tender offer or, in some cases, through the early redemption of such securities pursuant to their terms. The senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the sum of (1) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (2) any “make-whole” amount due under the terms of the notes in connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
At
June 30, 2019
, the annual principal payments due on these debt obligations were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Unsecured Notes
(1,2)
|
|
Secured
Debt
(1,3)
|
|
Totals
|
2019
|
|
$
|
—
|
|
|
$
|
312,291
|
|
|
$
|
312,291
|
|
2020
(4)
|
|
1,236,665
|
|
|
144,518
|
|
|
1,381,183
|
|
2021
|
|
450,000
|
|
|
383,425
|
|
|
833,425
|
|
2022
|
|
600,000
|
|
|
352,410
|
|
|
952,410
|
|
2023
(5,6)
|
|
1,790,971
|
|
|
330,498
|
|
|
2,121,469
|
|
Thereafter
(7,8)
|
|
6,633,920
|
|
|
1,166,840
|
|
|
7,800,760
|
|
Totals
|
|
$
|
10,711,556
|
|
|
$
|
2,689,982
|
|
|
$
|
13,401,538
|
|
(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the Consolidated Balance Sheet.
(2) Annual interest rates range from
2.86%
to
6.50%
.
(3) Annual interest rates range from
1.69%
to
12.00%
. Carrying value of the properties securing the debt totaled
$5,991,142,000
at
June 30, 2019
.
(4) Includes a
$300,000,000
Canadian-denominated
3.35%
senior unsecured notes due 2020 (approximately
$229,165,000
based on the Canadian/U.S. Dollar exchange rate on
June 30, 2019
) and a
$1,000,000,000
unsecured term loan facility that matures on May 28, 2020 which was put in place to bridge the acquisition of the CNL Healthcare Properties portfolio. The unsecured term loan facility was subsequently extinguished in July 2019 with proceeds from the disposition of the Benchmark Senior Living portfolio.
(5) Includes a
$250,000,000
Canadian-denominated unsecured term credit facility (approximately
$190,971,000
based on the Canadian/U.S. Dollar exchange rate on
June 30, 2019
). The loan matures on
July 19, 2023
and bears interest at the Canadian Dealer Offered Rate plus
0.9%
(
2.86%
at
June 30, 2019
).
(6) Includes a
$500,000,000
unsecured term credit facility. The loan matures on
July 19, 2023
and bears interest at LIBOR plus
0.9%
(
3.29%
at
June 30, 2019
).
(7) Includes a
£550,000,000
4.80%
senior unsecured notes due 2028 (approximately
$698,720,000
based on the Sterling/U.S. Dollar exchange rate in effect on
June 30, 2019
).
(8) Includes a
£500,000,000
4.50%
senior unsecured notes due 2034 (approximately
$635,200,000
based on the Sterling/U.S. Dollar exchange rate in effect on
June 30, 2019
).
The following is a summary of our senior unsecured notes principal activity during the periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
|
|
|
|
Weighted Avg.
|
|
|
|
Weighted Avg.
|
|
|
Amount
|
|
Interest Rate
|
|
Amount
|
|
Interest Rate
|
Beginning balance
|
|
$
|
9,699,984
|
|
|
4.48%
|
|
$
|
8,417,447
|
|
|
4.31%
|
Debt issued
|
|
2,050,000
|
|
|
3.58%
|
|
550,000
|
|
|
4.25%
|
Debt extinguished
|
|
(1,050,000
|
)
|
|
4.98%
|
|
(450,000
|
)
|
|
2.25%
|
Foreign currency
|
|
11,572
|
|
|
3.52%
|
|
(55,693
|
)
|
|
4.02%
|
Ending balance
|
|
$
|
10,711,556
|
|
|
4.24%
|
|
$
|
8,461,754
|
|
|
4.46%
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of our secured debt principal activity for the periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
|
|
|
|
Weighted Avg.
|
|
|
|
Weighted Avg.
|
|
|
Amount
|
|
Interest Rate
|
|
Amount
|
|
Interest Rate
|
Beginning balance
|
|
$
|
2,485,711
|
|
|
3.90%
|
|
$
|
2,618,408
|
|
|
3.76%
|
Debt issued
|
|
295,969
|
|
|
3.52%
|
|
44,606
|
|
|
3.38%
|
Debt assumed
|
|
42,000
|
|
|
4.62%
|
|
85,192
|
|
|
4.40%
|
Debt extinguished
|
|
(151,473
|
)
|
|
4.42%
|
|
(196,573
|
)
|
|
5.66%
|
Principal payments
|
|
(27,227
|
)
|
|
3.74%
|
|
(28,385
|
)
|
|
3.91%
|
Foreign currency
|
|
45,002
|
|
|
3.37%
|
|
(61,170
|
)
|
|
3.33%
|
Ending balance
|
|
$
|
2,689,982
|
|
|
3.84%
|
|
$
|
2,462,078
|
|
|
3.76%
|
Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of
June 30, 2019
, we were in compliance with all of the covenants under our debt agreements.
12. Derivative Instruments
We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our non-U.S. investments and interest rate risk related to our capital structure. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, cross currency swap contacts, interest rate swaps, interest rate locks, and debt issued in foreign currencies to offset a portion of these risks.
Foreign Currency Forward Contracts Designated as Cash Flow Hedges
For instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is deferred as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in earnings.
Cash Flow Hedges of Interest Rate Risk
We enter into interest rate swaps in order to maintain a capital structure containing targeted amounts of fixed and floating-rate debt and manage interest rate risk. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our fixed-rate payments. These interest rate swap agreements were used to hedge the variable cash flows associated with variable-rate debt.
Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt, except where a material amount is deemed to be ineffective, which would be immediately reclassified to the consolidated statements of income.
Foreign Currency Forward Contracts and Cross Currency Swap Contracts Designated as Net Investment Hedges
We use foreign currency forward and cross currency forward swap contracts to hedge a portion of the net investment in foreign subsidiaries against fluctuations in foreign exchange rates. For instruments that are designated and qualify as net investment hedges, the variability in the foreign currency to U.S. Dollar of the instrument is recorded as a cumulative translation adjustment component of OCI.
During the
six months ended
June 30, 2019
and 2018, we settled certain net investment hedges generating cash proceeds of $
6,716,000
and necessitating cash payments of $
27,774,000
, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings if the hedged investment is sold or substantially liquidated.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Derivative Contracts Undesignated
We use foreign currency exchange contracts to manage existing exposures to foreign currency exchange risk. Gains and losses resulting from the changes in fair value of these instruments are recorded in interest expense on the Consolidated Statements of Comprehensive Income and are substantially offset by net revaluation impacts on foreign currency denominated balance sheet exposures. In addition, we have several interest rate cap contracts related to variable rate secured debt agreements. Gains and losses resulting from the changes in fair values of these instruments are also recorded in interest expense.
The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Derivatives designated as net investment hedges:
|
|
|
|
|
Denominated in Canadian Dollars
|
|
$
|
500,000
|
|
|
$
|
575,000
|
|
Denominated in Pounds Sterling
|
|
£
|
1,340,708
|
|
|
£
|
890,708
|
|
|
|
|
|
|
Financial instruments designated as net investment hedges:
|
|
|
|
|
Denominated in Canadian Dollars
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Denominated in Pounds Sterling
|
|
£
|
1,050,000
|
|
|
£
|
1,050,000
|
|
|
|
|
|
|
Interest rate swaps designated as cash flow hedges:
|
|
|
|
|
Denominated in U.S Dollars
(1)
|
|
$
|
1,188,250
|
|
|
$
|
—
|
|
|
|
|
|
|
Derivative instruments not designated:
|
|
|
|
|
Interest rate caps denominated in U.S. Dollars
|
|
$
|
405,819
|
|
|
$
|
405,819
|
|
Forward purchase contracts denominated in Canadian Dollars
|
|
$
|
(217,500
|
)
|
|
$
|
(325,000
|
)
|
Forward sales contracts denominated in Canadian Dollars
|
|
$
|
280,000
|
|
|
$
|
405,000
|
|
Forward purchase contracts denominated in Pounds Sterling
|
|
£
|
(125,000
|
)
|
|
£
|
(350,000
|
)
|
Forward sales contracts denominated in Pounds Sterling
|
|
£
|
125,000
|
|
|
£
|
350,000
|
|
(1)
At June 30, 2019 the maximum maturity date was July 15, 2021.
The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
Location
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Gain (loss) on derivative instruments designated as hedges recognized in income
|
|
Interest expense
|
|
$
|
7,134
|
|
|
$
|
4,091
|
|
|
$
|
12,467
|
|
|
$
|
3,822
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative instruments not designated as hedges recognized in income
|
|
Interest expense
|
|
$
|
(1,128
|
)
|
|
$
|
734
|
|
|
$
|
(2,666
|
)
|
|
$
|
2,453
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI
|
|
OCI
|
|
$
|
100,407
|
|
|
$
|
150,703
|
|
|
$
|
12,725
|
|
|
$
|
88,005
|
|
13. Commitments and Contingencies
At
June 30, 2019
, we had
14
outstanding letter of credit obligations totaling $
48,111,000
and expiring between
2019
and
2024
. At
June 30, 2019
, we had outstanding construction in progress of $
363,160,000
and were committed to providing additional funds of approximately $
483,210,000
to complete construction. Purchase obligations include contingent purchase obligations totaling $
8,476,000
. These contingent purchase obligations relate to unfunded capital improvement obligations and contingent obligations on acquisitions. Rents due from the tenant are increased to reflect the additional investment in the property.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
14. Stockholders’ Equity
The following is a summary of our stockholders’ equity capital accounts as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Preferred Stock:
|
|
|
|
|
Authorized shares
|
|
50,000,000
|
|
|
50,000,000
|
|
Issued shares
|
|
—
|
|
|
14,375,000
|
|
Outstanding shares
|
|
—
|
|
|
14,369,965
|
|
|
|
|
|
|
Common Stock, $1.00 par value:
|
|
|
|
|
Authorized shares
|
|
700,000,000
|
|
|
700,000,000
|
|
Issued shares
|
|
406,497,122
|
|
|
384,849,236
|
|
Outstanding shares
|
|
405,254,113
|
|
|
383,674,603
|
|
Preferred Stock
The following is a summary of our preferred stock activity during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
|
|
|
|
Weighted Avg.
|
|
|
|
Weighted Avg.
|
|
|
Shares
|
|
Dividend Rate
|
|
Shares
|
|
Dividend Rate
|
Beginning balance
|
|
14,369,965
|
|
|
6.50%
|
|
14,370,060
|
|
|
6.50%
|
Shares converted
|
|
(14,369,965
|
)
|
|
6.50%
|
|
(95
|
)
|
|
6.50%
|
Ending balance
|
|
—
|
|
|
—%
|
|
14,369,965
|
|
|
6.50%
|
During the
six
months ended
June 30, 2019
, we converted all of the outstanding Series I Preferred Stock. Each share was converted into
0.8857
shares of common stock.
Common Stock
In February 2019, we entered into separate amended and restated equity distribution agreements whereby we can offer and sell up to
$1,500,000,000
aggregate amount of our common stock ("Equity Shelf Program"). The Equity Shelf Program also allows us to enter into forward sale agreements. As of
June 30, 2019
, we had $
1,360,820,000
of remaining capacity under the Equity Shelf Program, which excludes forward sales agreements outstanding for the sale of
2,194,575
shares with maturity dates in the fourth quarter. We expect to physically settle the forward sales for cash proceeds.
The following is a summary of our common stock issuances during the
six
months ended
June 30, 2019
and
2018
(dollars in thousands, except average price amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued
|
|
Average Price
|
|
Gross Proceeds
|
|
Net Proceeds
|
2018 Dividend reinvestment plan issuances
|
|
182,910
|
|
|
$55.40
|
|
$
|
10,133
|
|
|
$
|
10,133
|
|
2018 Option exercises
|
|
1,026
|
|
|
53.61
|
|
55
|
|
|
55
|
|
2018 Preferred stock conversions
|
|
83
|
|
|
|
|
—
|
|
|
—
|
|
2018 Stock incentive plans, net of forfeitures
|
|
114,037
|
|
|
|
|
—
|
|
|
—
|
|
2018 Totals
|
|
298,056
|
|
|
|
|
$
|
10,188
|
|
|
$
|
10,188
|
|
|
|
|
|
|
|
|
|
|
2019 Dividend reinvestment plan issuances
|
|
4,304,712
|
|
|
$75.20
|
|
$
|
323,724
|
|
|
$
|
320,243
|
|
2019 Option exercises
|
|
10,736
|
|
|
51.32
|
|
551
|
|
|
551
|
|
2019 Equity Shelf Program issuances
|
|
4,384,045
|
|
|
74.97
|
|
328,665
|
|
|
326,362
|
|
2019 Preferred stock conversions
|
|
12,712,452
|
|
|
|
|
—
|
|
|
—
|
|
2019 Stock incentive plans, net of forfeitures
|
|
167,565
|
|
|
|
|
—
|
|
|
—
|
|
2019 Totals
|
|
21,579,510
|
|
|
|
|
$
|
652,940
|
|
|
$
|
647,156
|
|
Dividends
The increase in dividends is primarily attributable to increases in our common shares outstanding, offset by the conversion of the Series I Preferred Stock as described above. The following is a summary of our dividend payments (in thousands, except per share amounts):
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
|
|
Per Share
|
|
Amount
|
|
Per Share
|
|
Amount
|
Common Stock
|
|
$
|
1.7400
|
|
|
$
|
698,437
|
|
|
$
|
1.7400
|
|
|
$
|
647,098
|
|
Series I Preferred Stock
|
|
—
|
|
|
—
|
|
|
1.6250
|
|
|
23,352
|
|
Totals
|
|
|
|
$
|
698,437
|
|
|
|
|
$
|
670,450
|
|
Accumulated Other Comprehensive Income
The following is a summary of accumulated other comprehensive income (loss) for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Foreign currency translation
|
$
|
(851,584
|
)
|
|
$
|
(868,006
|
)
|
Derivative instruments
|
751,502
|
|
|
738,777
|
|
Actuarial losses
|
(540
|
)
|
|
(540
|
)
|
Total accumulated other comprehensive loss
|
$
|
(100,622
|
)
|
|
$
|
(129,769
|
)
|
15. Stock Incentive Plans
Our 2016 Long-Term Incentive Plan (“2016 Plan”) authorizes up to
10,000,000
shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Our non-employee directors, officers and key employees are eligible to participate in the 2016 Plan. The 2016 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock, deferred stock units, performance units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from
three
to
five years
. Options expire
ten years
from the date of grant. Stock-based compensation expense totaled
$7,662,000
and
$15,192,000
for the
three and six
months ended
June 30, 2019
, respectfully, and
$5,167,000
and
$16,725,000
for the same periods in
2018
.
16. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Numerator for basic and diluted earnings
|
|
|
|
|
|
|
|
|
per share - net income (loss) attributable
|
|
|
|
|
|
|
|
|
to common stockholders
|
|
$
|
137,762
|
|
|
$
|
154,432
|
|
|
$
|
418,232
|
|
|
$
|
592,103
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per
|
|
|
|
|
|
|
|
|
share - weighted average shares
|
|
404,607
|
|
|
371,640
|
|
|
398,073
|
|
|
371,552
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Employee stock options
|
|
—
|
|
|
14
|
|
|
1
|
|
|
15
|
|
Non-vested restricted shares
|
|
955
|
|
|
325
|
|
|
911
|
|
|
523
|
|
Redeemable shares
|
|
1,096
|
|
|
1,096
|
|
|
1,096
|
|
|
1,096
|
|
Employee stock purchase program
|
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
Dilutive potential common shares
|
|
2,066
|
|
|
1,435
|
|
|
2,023
|
|
|
1,634
|
|
Denominator for diluted earnings per
|
|
|
|
|
|
|
|
|
share - adjusted weighted average shares
|
|
406,673
|
|
|
373,075
|
|
|
400,096
|
|
|
373,186
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.42
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
Diluted earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.41
|
|
|
$
|
1.05
|
|
|
$
|
1.59
|
|
The Series I Cumulative Convertible Perpetual Preferred Stock were excluded from the 2018 calculation as the effect of the conversions were anti-dilutive. As of June 30, 2019, forward sales agreements outstanding for the sale of
2,194,575
shares of common stock were not included in the computation of diluted earnings per share because such forward sales were anti-dilutive for the period.
17. Disclosure about Fair Value of Financial Instruments
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets and liabilities. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2018
for additional information. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.
Mortgage Loans and Other Real Estate Loans Receivable
— The fair value of mortgage loans and other real estate loans receivable is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Cash and Cash Equivalents and Restricted Cash
— The carrying amount approximates fair value.
Equity Securities
— Equity securities are recorded at their fair value based on Level 1 publicly available trading prices.
Unsecured Revolving Credit Facility and Commercial Paper Program
— The carrying amount of the unsecured revolving credit facility and Commercial Paper Program approximates fair value because the borrowings are interest rate adjustable.
Senior Unsecured Notes
— The fair value of the senior unsecured notes payable was estimated based on Level 1 publicly available trading prices. The carrying amount of the variable rate senior unsecured notes approximates fair value because they are interest rate adjustable.
Secured Debt
— The fair value of fixed rate secured debt is estimated using Level 2 inputs by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities. The carrying amount of variable rate secured debt approximates fair value because the borrowings are interest rate adjustable.
Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps
— Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2).
Redeemable OP Unitholder Interests
— Our redeemable unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.
The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
Mortgage loans receivable
|
|
$
|
264,398
|
|
|
$
|
274,116
|
|
|
$
|
249,071
|
|
|
$
|
257,337
|
|
Other real estate loans receivable
|
|
104,596
|
|
|
105,706
|
|
|
81,268
|
|
|
82,742
|
|
Equity securities
|
|
11,860
|
|
|
11,860
|
|
|
11,286
|
|
|
11,286
|
|
Cash and cash equivalents
|
|
268,666
|
|
|
268,666
|
|
|
215,376
|
|
|
215,376
|
|
Restricted cash
|
|
91,052
|
|
|
91,052
|
|
|
100,753
|
|
|
100,753
|
|
Foreign currency forward contracts, interest rate swaps and cross currency swaps
|
|
91,290
|
|
|
91,290
|
|
|
94,729
|
|
|
94,729
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Unsecured revolving credit facility and commercial paper note program
|
|
$
|
1,869,188
|
|
|
$
|
1,869,188
|
|
|
$
|
1,147,000
|
|
|
$
|
1,147,000
|
|
Senior unsecured notes
|
|
10,606,106
|
|
|
11,026,259
|
|
|
9,603,299
|
|
|
10,043,797
|
|
Secured debt
|
|
2,675,507
|
|
|
2,737,838
|
|
|
2,476,177
|
|
|
2,499,130
|
|
Foreign currency forward contracts, interest rate swaps and cross currency swaps
|
|
32,249
|
|
|
32,249
|
|
|
71,109
|
|
|
71,109
|
|
|
|
|
|
|
|
|
|
|
Redeemable OP unitholder interests
|
|
$
|
121,476
|
|
|
$
|
121,476
|
|
|
$
|
103,071
|
|
|
$
|
103,071
|
|
Items Measured at Fair Value on a Recurring Basis
The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair value on a recurring basis. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following summarizes items measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2019
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Equity securities
|
|
$
|
11,860
|
|
|
$
|
11,860
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability)
(1)
|
|
59,041
|
|
|
—
|
|
|
59,041
|
|
|
—
|
|
Redeemable OP unitholder interests
|
|
121,476
|
|
|
—
|
|
|
121,476
|
|
|
—
|
|
Totals
|
|
$
|
192,377
|
|
|
$
|
11,860
|
|
|
$
|
180,517
|
|
|
$
|
—
|
|
(1)
Please see Note 12 for additional information.
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed. Asset impairments (if applicable, see Note 5 for impairments of real property and Note 7 for impairments of real estate loans receivable) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally resides within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in asset acquisitions using current interest rates at which similar borrowings could be obtained on the transaction date.
18. Segment Reporting
We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our
three
operating segments: Seniors Housing Operating, Triple-net and Outpatient Medical. Our seniors housing operating properties include assisted living, independent living/continuing care retirement communities, independent supportive living communities
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Canada), care homes with and without nursing (U.K.) and combinations thereof that are owned and/or operated through RIDEA structures (see Note 19). Under the Triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our outpatient medical properties are typically leased to multiple tenants and generally require a certain level of property management by us.
We evaluate performance based upon consolidated NOI of each segment. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.
Non-segment revenue consists mainly of interest income on certain non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining NOI.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2018
). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments. There are no intersegment sales or transfers.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Summary information for the reportable segments (which excludes unconsolidated entities) is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019:
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient Medical
|
|
Non-segment / Corporate
|
|
Total
|
Resident fees and services
|
|
$
|
914,085
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
914,085
|
|
Rental income
|
|
—
|
|
|
222,362
|
|
|
163,224
|
|
|
—
|
|
|
385,586
|
|
Interest income
|
|
—
|
|
|
17,118
|
|
|
238
|
|
|
—
|
|
|
17,356
|
|
Other income
|
|
1,444
|
|
|
1,278
|
|
|
(97
|
)
|
|
454
|
|
|
3,079
|
|
Total revenues
|
|
915,529
|
|
|
240,758
|
|
|
163,365
|
|
|
454
|
|
|
1,320,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
637,317
|
|
|
12,823
|
|
|
50,987
|
|
|
—
|
|
|
701,127
|
|
Consolidated net operating income
|
|
278,212
|
|
|
227,935
|
|
|
112,378
|
|
|
454
|
|
|
618,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
136,551
|
|
|
56,056
|
|
|
55,445
|
|
|
—
|
|
|
248,052
|
|
Interest expense
|
|
17,572
|
|
|
3,225
|
|
|
3,386
|
|
|
117,153
|
|
|
141,336
|
|
General and administrative expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,741
|
|
|
33,741
|
|
Loss (gain) on derivatives and financial instruments, net
|
|
—
|
|
|
1,913
|
|
|
—
|
|
|
—
|
|
|
1,913
|
|
Impairment of assets
|
|
—
|
|
|
(940
|
)
|
|
10,879
|
|
|
—
|
|
|
9,939
|
|
Other expenses
|
|
11,857
|
|
|
5,560
|
|
|
(4
|
)
|
|
4,215
|
|
|
21,628
|
|
Income (loss) from continuing operations before income taxes and other items
|
|
112,232
|
|
|
162,121
|
|
|
42,672
|
|
|
(154,655
|
)
|
|
162,370
|
|
Income tax (expense) benefit
|
|
375
|
|
|
(1,361
|
)
|
|
(586
|
)
|
|
(27
|
)
|
|
(1,599
|
)
|
(Loss) income from unconsolidated entities
|
|
(17,453
|
)
|
|
6,578
|
|
|
1,826
|
|
|
—
|
|
|
(9,049
|
)
|
Gain (loss) on real estate dispositions, net
|
|
(550
|
)
|
|
(1,130
|
)
|
|
(2
|
)
|
|
—
|
|
|
(1,682
|
)
|
Income (loss) from continuing operations
|
|
94,604
|
|
|
166,208
|
|
|
43,910
|
|
|
(154,682
|
)
|
|
150,040
|
|
Net income (loss)
|
|
$
|
94,604
|
|
|
$
|
166,208
|
|
|
$
|
43,910
|
|
|
$
|
(154,682
|
)
|
|
$
|
150,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
16,440,104
|
|
|
$
|
9,494,388
|
|
|
$
|
7,004,561
|
|
|
$
|
209,644
|
|
|
$
|
33,148,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018:
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient Medical
|
|
Non-segment / Corporate
|
|
Total
|
Resident fees and services
|
|
$
|
763,345
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
763,345
|
|
Rental income
|
|
—
|
|
|
197,961
|
|
|
135,640
|
|
|
—
|
|
|
333,601
|
|
Interest income
|
|
172
|
|
|
13,247
|
|
|
43
|
|
|
—
|
|
|
13,462
|
|
Other income
|
|
1,650
|
|
|
13,212
|
|
|
144
|
|
|
498
|
|
|
15,504
|
|
Total revenues
|
|
765,167
|
|
|
224,420
|
|
|
135,827
|
|
|
498
|
|
|
1,125,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
525,662
|
|
|
136
|
|
|
42,953
|
|
|
—
|
|
|
568,751
|
|
Consolidated net operating income
|
|
239,505
|
|
|
224,284
|
|
|
92,874
|
|
|
498
|
|
|
557,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
134,779
|
|
|
55,309
|
|
|
46,187
|
|
|
—
|
|
|
236,275
|
|
Interest expense
|
|
16,971
|
|
|
3,800
|
|
|
1,656
|
|
|
98,989
|
|
|
121,416
|
|
General and administrative expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,831
|
|
|
32,831
|
|
Loss (gain) on derivatives and financial instruments, net
|
|
—
|
|
|
(7,460
|
)
|
|
—
|
|
|
—
|
|
|
(7,460
|
)
|
Loss (gain) on extinguishment of debt, net
|
|
299
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
299
|
|
Impairment of assets
|
|
2,212
|
|
|
2,420
|
|
|
—
|
|
|
—
|
|
|
4,632
|
|
Other expenses
|
|
6,167
|
|
|
957
|
|
|
2,095
|
|
|
839
|
|
|
10,058
|
|
Income (loss) from continuing operations before income taxes and other items
|
|
79,077
|
|
|
169,258
|
|
|
42,936
|
|
|
(132,161
|
)
|
|
159,110
|
|
Income tax (expense) benefit
|
|
(2,617
|
)
|
|
(688
|
)
|
|
(378
|
)
|
|
(158
|
)
|
|
(3,841
|
)
|
(Loss) income from unconsolidated entities
|
|
(5,204
|
)
|
|
5,062
|
|
|
1,391
|
|
|
—
|
|
|
1,249
|
|
Gain (loss) on real estate dispositions, net
|
|
(1
|
)
|
|
10,759
|
|
|
(3
|
)
|
|
—
|
|
|
10,755
|
|
Income (loss) from continuing operations
|
|
71,255
|
|
|
184,391
|
|
|
43,946
|
|
|
(132,319
|
)
|
|
167,273
|
|
Net income (loss)
|
|
$
|
71,255
|
|
|
$
|
184,391
|
|
|
$
|
43,946
|
|
|
$
|
(132,319
|
)
|
|
$
|
167,273
|
|
|
|
|
|
|
|
|
|
|
|
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient Medical
|
|
Non-segment / Corporate
|
|
Total
|
Resident fees and services
|
|
$
|
1,782,370
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,782,370
|
|
Rental income
|
|
—
|
|
|
454,394
|
|
|
312,276
|
|
|
—
|
|
|
766,670
|
|
Interest income
|
|
—
|
|
|
32,064
|
|
|
411
|
|
|
—
|
|
|
32,475
|
|
Other income
|
|
5,545
|
|
|
2,541
|
|
|
139
|
|
|
2,611
|
|
|
10,836
|
|
Total revenues
|
|
1,787,915
|
|
|
488,999
|
|
|
312,826
|
|
|
2,611
|
|
|
2,592,351
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
1,245,003
|
|
|
27,778
|
|
|
99,153
|
|
|
—
|
|
|
1,371,934
|
|
Consolidated net operating income
|
|
542,912
|
|
|
461,221
|
|
|
213,673
|
|
|
2,611
|
|
|
1,220,417
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
268,126
|
|
|
117,404
|
|
|
106,454
|
|
|
—
|
|
|
491,984
|
|
Interest expense
|
|
35,823
|
|
|
6,665
|
|
|
6,734
|
|
|
237,346
|
|
|
286,568
|
|
General and administrative expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69,023
|
|
|
69,023
|
|
Loss (gain) on derivatives and financial instruments, net
|
|
—
|
|
|
(574
|
)
|
|
—
|
|
|
—
|
|
|
(574
|
)
|
Loss (gain) on extinguishment of debt, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,719
|
|
|
15,719
|
|
Provision for loan losses
|
|
—
|
|
|
18,690
|
|
|
—
|
|
|
—
|
|
|
18,690
|
|
Impairment of assets
|
|
—
|
|
|
(940
|
)
|
|
10,879
|
|
|
—
|
|
|
9,939
|
|
Other expenses
|
|
14,803
|
|
|
8,589
|
|
|
750
|
|
|
6,242
|
|
|
30,384
|
|
Income (loss) from continuing operations before income taxes and other items
|
|
224,160
|
|
|
311,387
|
|
|
88,856
|
|
|
(325,719
|
)
|
|
298,684
|
|
Income tax (expense) benefit
|
|
(244
|
)
|
|
(2,312
|
)
|
|
(951
|
)
|
|
(314
|
)
|
|
(3,821
|
)
|
(Loss) income from unconsolidated entities
|
|
(34,033
|
)
|
|
12,236
|
|
|
3,549
|
|
|
—
|
|
|
(18,248
|
)
|
Gain (loss) on real estate dispositions, net
|
|
(710
|
)
|
|
166,444
|
|
|
(7
|
)
|
|
—
|
|
|
165,727
|
|
Income (loss) from continuing operations
|
|
189,173
|
|
|
487,755
|
|
|
91,447
|
|
|
(326,033
|
)
|
|
442,342
|
|
Net income (loss)
|
|
$
|
189,173
|
|
|
$
|
487,755
|
|
|
$
|
91,447
|
|
|
$
|
(326,033
|
)
|
|
$
|
442,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
Seniors Housing Operating
|
|
Triple-net
|
|
Outpatient Medical
|
|
Non-segment / Corporate
|
|
Total
|
Resident fees and services
|
|
$
|
1,499,279
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,499,279
|
|
Rental income
|
|
—
|
|
|
404,792
|
|
|
272,178
|
|
|
—
|
|
|
676,970
|
|
Interest income
|
|
257
|
|
|
27,798
|
|
|
55
|
|
|
—
|
|
|
28,110
|
|
Other income
|
|
2,798
|
|
|
14,589
|
|
|
265
|
|
|
866
|
|
|
18,518
|
|
Total revenues
|
|
1,502,334
|
|
|
447,179
|
|
|
272,498
|
|
|
866
|
|
|
2,222,877
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
1,037,603
|
|
|
157
|
|
|
87,456
|
|
|
—
|
|
|
1,125,216
|
|
Consolidated net operating income
|
|
464,731
|
|
|
447,022
|
|
|
185,042
|
|
|
866
|
|
|
1,097,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
260,548
|
|
|
111,341
|
|
|
92,587
|
|
|
—
|
|
|
464,476
|
|
Interest expense
|
|
33,906
|
|
|
7,242
|
|
|
3,332
|
|
|
199,711
|
|
|
244,191
|
|
General and administrative expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,536
|
|
|
66,536
|
|
Loss (gain) on derivatives and financial
instruments, net
|
|
—
|
|
|
(14,633
|
)
|
|
—
|
|
|
—
|
|
|
(14,633
|
)
|
Loss (gain) on extinguishment of debt, net
|
|
110
|
|
|
(32
|
)
|
|
11,928
|
|
|
—
|
|
|
12,006
|
|
Impairment of assets
|
|
4,513
|
|
|
28,304
|
|
|
—
|
|
|
—
|
|
|
32,817
|
|
Other expenses
|
|
5,979
|
|
|
2,077
|
|
|
2,693
|
|
|
3,021
|
|
|
13,770
|
|
Income (loss) from continuing operations before income taxes and other items
|
|
159,675
|
|
|
312,723
|
|
|
74,502
|
|
|
(268,402
|
)
|
|
278,498
|
|
Income tax (expense) benefit
|
|
(2,455
|
)
|
|
(1,824
|
)
|
|
(806
|
)
|
|
(344
|
)
|
|
(5,429
|
)
|
(Loss) income from unconsolidated entities
|
|
(14,684
|
)
|
|
10,883
|
|
|
2,621
|
|
|
—
|
|
|
(1,180
|
)
|
Gain (loss) on real estate dispositions, net
|
|
4
|
|
|
134,156
|
|
|
214,779
|
|
|
—
|
|
|
348,939
|
|
Income (loss) from continuing operations
|
|
142,540
|
|
|
455,938
|
|
|
291,096
|
|
|
(268,746
|
)
|
|
620,828
|
|
Net income (loss)
|
|
$
|
142,540
|
|
|
$
|
455,938
|
|
|
$
|
291,096
|
|
|
$
|
(268,746
|
)
|
|
$
|
620,828
|
|
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Our portfolio of properties and other investments are located in the United States, the United Kingdom and Canada. Revenues and assets are attributed to the country in which the property is physically located. The following is a summary of geographic information for the periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
June 30, 2018
|
|
June 30, 2019
|
|
June 30, 2018
|
Revenues:
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
United States
|
|
$
|
1,092,376
|
|
|
82.8
|
%
|
|
$
|
895,734
|
|
|
79.5
|
%
|
|
$
|
2,136,042
|
|
|
82.4
|
%
|
|
$
|
1,759,523
|
|
|
79.1
|
%
|
United Kingdom
|
|
112,647
|
|
|
8.5
|
%
|
|
112,031
|
|
|
10.0
|
%
|
|
225,065
|
|
|
8.7
|
%
|
|
228,556
|
|
|
10.3
|
%
|
Canada
|
|
115,083
|
|
|
8.7
|
%
|
|
118,147
|
|
|
10.5
|
%
|
|
231,244
|
|
|
8.9
|
%
|
|
234,798
|
|
|
10.6
|
%
|
Total
|
|
$
|
1,320,106
|
|
|
100.0
|
%
|
|
$
|
1,125,912
|
|
|
100.0
|
%
|
|
$
|
2,592,351
|
|
|
100.0
|
%
|
|
$
|
2,222,877
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
|
|
Assets:
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
27,496,270
|
|
|
82.9
|
%
|
|
$
|
24,884,292
|
|
|
82.0
|
%
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
3,173,654
|
|
|
9.6
|
%
|
|
3,078,994
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
Canada
|
|
2,478,773
|
|
|
7.5
|
%
|
|
2,378,786
|
|
|
7.9
|
%
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
33,148,697
|
|
|
100.0
|
%
|
|
$
|
30,342,072
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
19.
Income Taxes and Distributions
We elected to be taxed as a REIT commencing with our first taxable year. To qualify as a REIT for federal income tax purposes, at least
90%
of taxable income (excluding
100%
of net capital gains) must be distributed to stockholders. REITs that do not distribute a certain amount of current year taxable income in the current year are also subject to a
4%
federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, basis differences in acquisitions, recording of impairments, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.
Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, a REIT may lease “qualified health care properties” on an arm’s-length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such TRS by a person who qualifies as an “eligible independent contractor.” Generally, the rent received from the TRS will meet the related party rent exception and will be treated as “rents from real property.” A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients. We have entered into various joint ventures that were structured under RIDEA. Resident level rents and related operating expenses for these facilities are reported in the unaudited consolidated financial statements and are subject to federal and state income taxes as the operations of such facilities are included in TRS entities. Certain net operating loss carryforwards could be utilized to offset taxable income in future years.
Income taxes reflected in the financial statements primarily represents U.S. federal, 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
six months ended
June 30, 2019
and
2018
, was primarily due to operating income or losses, offset by certain discrete items at our TRS entities. In 2014, we established certain wholly-owned direct and indirect subsidiaries in Luxembourg and Jersey and transferred interests in certain foreign investments into this holding company structure. The structure includes a property holding company that is tax resident in the United Kingdom. No material adverse current tax consequences in Luxembourg, Jersey or the United Kingdom resulted from the creation of this holding company structure and most of the subsidiary entities in the structure are treated as disregarded entities of the company for U.S. federal income tax purposes. The company reflects current and deferred tax liabilities for any such withholding taxes incurred as a result of this holding company structure in its consolidated financial statements. Generally, given current statutes of limitations, we are subject to audit by the Internal Revenue Service for the year ended December 31, 2015 and subsequent years and by state taxing authorities for the year ended December 31, 2014 and subsequent years. The Company and its subsidiaries are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to our initial investments in Canada in May 2013, by HM Revenue & Customs for periods subsequent to our initial investments in the United Kingdom in August 2013.
WELLTOWER INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
20.
Variable Interest Entities
We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be VIEs. We have concluded that we are the primary beneficiary of these VIEs based on a combination of operational control of the joint venture and the rights to receive residual returns or the obligation to absorb losses arising from the joint ventures. Except for capital contributions associated with the initial joint venture formations, the joint ventures have been and are expected to be funded from the ongoing operations of the underlying properties. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
Assets:
|
|
|
|
|
Net real estate investments
|
|
$
|
966,417
|
|
|
$
|
973,813
|
|
Cash and cash equivalents
|
|
22,491
|
|
|
18,678
|
|
Receivables and other assets
|
|
15,411
|
|
|
14,600
|
|
Total assets
(1)
|
|
$
|
1,004,319
|
|
|
$
|
1,007,091
|
|
|
|
|
|
|
Liabilities and equity:
|
|
|
|
|
Secured debt
|
|
$
|
462,836
|
|
|
$
|
465,433
|
|
Lease liabilities
|
|
1,326
|
|
|
—
|
|
Accrued expenses and other liabilities
|
|
21,922
|
|
|
18,229
|
|
Total equity
|
|
518,235
|
|
|
523,429
|
|
Total liabilities and equity
|
|
$
|
1,004,319
|
|
|
$
|
1,007,091
|
|
(1) Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs.
21. Subsequent Events
Disposition of Benchmark Senior Living
On July 16, 2019, we disposed of our Benchmark Senior Living portfolio for a
$1.8 billion
gross sale price. The portfolio consisted of
48
seniors housing operating properties located in New England. Proceeds were used to extinguish the
$1 billion
bridge loan (discussed in Note 11) and
$24 million
of secured debt.