WELLTOWER INC.
Item 1. Business
General
Welltower Inc. (NYSE:HCN), 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 real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. WelltowerTM, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets. More information is available on the Internet at www.welltower.com. The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.
Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.
Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund operations, meet debt service obligations (both principal and interest), make dividend distributions and complete construction projects in process. We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from net operating income and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.
References herein to “we,” “us,” “our” or the “Company” refer to Welltower Inc. and its subsidiaries unless specifically noted otherwise.
Portfolio of Properties
Please see “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation - Executive Summary - Company Overview” for a table that summarizes our portfolio as of December 31, 2016.
Property Types
We invest in seniors housing and health care real estate and evaluate our business on three reportable segments: triple-net, seniors housing operating and outpatient medical. For additional information regarding our segments, please see Note 17 to our consolidated financial statements. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2 to our consolidated financial statements. The following is a summary of our various property types.
Triple-Net
Our triple-net properties include independent living facilities and independent supportive living facilities (Canada), continuing care retirement communities, assisted living facilities, care homes with and without nursing (United Kingdom), Alzheimer’s/dementia care facilities and long-term/post-acute care facilities. We invest primarily through acquisitions, development and joint venture partnerships. Our properties are primarily leased to operators under long-term, triple-net master leases. We are not involved in property management. Our properties include stand-alone facilities that provide one level of service, combination facilities that provide multiple levels of service, and communities or campuses that provide a wide range of services.
Independent Living Facilities and Independent Supportive Living Facilities (Canada). Independent living facilities and independent supportive living facilities are age-restricted, multifamily properties with central dining facilities that provide residents access to meals and other services such as housekeeping, linen service, transportation and social and recreational activities.
Continuing Care Retirement Communities. Continuing care retirement communities typically include a combination of detached homes, an independent living facility, an assisted living facility and/or a long-term/post-acute care facility on one campus. These communities appeal to residents because there is no need to relocate when health and medical needs change. Resident payment plans
vary, but can include entrance fees, condominium fees and rental fees. Many of these communities also charge monthly maintenance fees in exchange for a living unit, meals and some health services.
Assisted Living Facilities. Assisted living facilities are state regulated rental properties that provide the same services as independent living facilities, but also provide supportive care from trained employees to residents who require assistance with activities of daily living, including, but not limited to, management of medications, bathing, dressing, toileting, ambulating and eating.
Care Homes with Nursing (United Kingdom). Care homes with nursing, regulated by the Care Quality Commission are licensed daily rate or rental properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these properties are licensed for various national and local reimbursement programs. Unlike the U.S., care homes with nursing in the U.K. generally do not provide post-acute care.
Care Homes (United Kingdom). Care homes, regulated by the Care Quality Commission, are rental properties that provide essentially the same services as U.S. assisted living facilities.
Alzheimer’s/Dementia Care Facilities. Certain assisted living facilities may include state-licensed settings that specialize in caring for those afflicted with Alzheimer’s disease and/or other types of dementia.
Long-Term/Post-Acute Care Facilities. Our long-term/post-acute care facilities generally include skilled nursing/post-acute care facilities, inpatient rehabilitation facilities and long-term acute care facilities. Skilled nursing/post-acute care facilities are licensed daily rate or rental properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these properties are licensed for Medicaid and/or Medicare reimbursement in the U.S. or provincial reimbursement in Canada. All facilities offer some level of rehabilitation services. Some facilities focus on higher acuity patients and offer rehabilitation units specializing in cardiac, orthopedic, dialysis, neurological or pulmonary rehabilitation. Inpatient rehabilitation facilities provide inpatient services for patients with intensive rehabilitation needs. Long-term acute care facilities provide inpatient services for patients with complex medical conditions that require more intensive care, monitoring or emergency support than is available in most skilled nursing/post-acute care facilities.
Our triple-net segment accounted for 28%, 31% and 31% of total revenues for the years ended December 31, 2016, 2015 and 2014, respectively. We lease 85 facilities to Genesis Healthcare, LLC, an operator of long-term/post-acute care facilities, pursuant to a long-term, triple-net master lease. In addition to rent, the master lease requires Genesis to pay all operating costs, utilities, real estate taxes, insurance, building repairs, maintenance costs and all obligations under certain ground leases. All obligations under the master lease have been guaranteed by FC-GEN Operations Investment, LLC, a subsidiary of Genesis Healthcare, LLC. For the year ended December 31, 2016, our lease with Genesis accounted for approximately 27% of our triple-net segment revenues and 8% of our total revenues.
Seniors Housing Operating
Our seniors housing operating properties include several of the facility types described in “Item 1 - Business - Property Types - Triple-Net”, including independent living facilities and independent supportive living facilities, assisted living facilities, care homes and Alzheimer’s/dementia care facilities. Properties are primarily held in consolidated joint venture entities with operating partners. We utilize the structure proposed in the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). See Note 18 to our consolidated financial statements for more information.
Our seniors housing operating segment accounted for 59%, 56% and 57% of total revenues for the years ended December 31, 2016, 2015 and 2014, respectively. We have relationships with 16 operators to own and operate 420 facilities (plus 69 unconsolidated facilities). In each instance, our partner provides management services to the properties pursuant to an incentive-based management contract. We rely on our partners to effectively and efficiently manage these properties. For the year ended December 31, 2016, our relationship with Sunrise Senior Living accounted for approximately 40% of our seniors housing operating segment revenues and 23% of our total revenues.
Outpatient Medical
Our outpatient medical properties include outpatient medical buildings and, prior to June 30, 2015, life science facilities. We typically lease our outpatient medical buildings to multiple tenants and provide varying levels of property management. Our life science investment represented an investment in an unconsolidated joint venture entity. Our outpatient medical segment accounted for 13%, 13% and 12% of total revenues for the years ended December 31, 2016, 2015 and 2014, respectively. No single tenant exceeds 20% of segment revenues.
Outpatient Medical Buildings. The outpatient medical building portfolio consists of health care related buildings that generally include physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/or labs. Our portfolio has a strong affiliation with health systems. Approximately 95% of our outpatient medical building portfolio is affiliated with health systems (with buildings on hospital campuses or serving as satellite locations for the health system and its physicians).
Life Science Facilities. The life science portfolio consisted of laboratory and office facilities specifically designed and constructed for use by biotechnology and pharmaceutical companies. These facilities were located adjacent to The Massachusetts Institute of Technology, which is a well-established market known for pharmaceutical and biotechnology research. They are similar to commercial office buildings with advanced HVAC (heating, ventilation and air conditioning), electrical and mechanical systems. On June 30, 2015, we disposed of our life science investments.
Investments
Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. We invest in seniors housing and health care real estate primarily through acquisitions, developments and joint venture partnerships. For additional information regarding acquisition and development activity, please see Note 3 to our consolidated financial statements. We diversify our investment portfolio by property type, relationship and geographic location. In determining whether to invest in a property, we focus on the following: (1) the experience of the obligor’s/partner’s management team; (2) the historical and projected financial and operational performance of the property; (3) the credit of the obligor/partner; (4) the security for any lease or loan; (5) the real estate attributes of the building and its location; (6) the capital committed to the property by the obligor/partner; and (7) the operating fundamentals of the applicable industry. We conduct market research and analysis for all potential investments. In addition, we review the value of all properties, the interest rates and covenant requirements of any facility-level debt to be assumed at the time of the acquisition and the anticipated sources of repayment of any existing debt that is not to be assumed at the time of the acquisition.
We monitor our investments through a variety of methods determined by the type of property. Our proactive and comprehensive asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division actively manages and monitors the outpatient medical portfolio with a comprehensive process including review of, among other things, tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends.
We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we are generally able to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.
Investment Types
Real Property. Our properties are primarily comprised of land, buildings, improvements and related rights. Our triple-net properties are generally leased to operators under long-term operating leases. The leases generally have a fixed contractual term of 12 to 15 years and contain one or more five to 15-year renewal options. Certain of our leases also contain purchase options, a portion of which could result in the disposition of properties for less than full market value. Most of our rents are received under triple-net leases requiring the operator to pay rent and all additional charges incurred in the operation of the leased property. The tenants are required to repair, rebuild and maintain the leased properties. Substantially all of these operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period.
At December 31, 2016, approximately 92% of our triple-net properties were subject to master leases. A master lease is a lease of multiple properties to one tenant entity under a single lease agreement. From time to time, we may acquire additional properties that are then leased to the tenant under the master lease. The tenant is required to make one monthly payment that represents rent on all the properties that are subject to the master lease. Typically, the master lease tenant can exercise its right to purchase the properties or to renew the master lease only with respect to all leased properties at the same time. This bundling feature benefits us because the tenant cannot limit the purchase or renewal to the better performing properties and terminate the leasing arrangement with respect to the poorer performing properties. This spreads our risk among the entire group of properties within the master lease. The bundling feature should provide a similar advantage to us if the master lease tenant is in bankruptcy. Subject to certain restrictions, a debtor in bankruptcy has the right to assume or reject each of its leases. It is our intent that a tenant in bankruptcy would be required to assume or reject the master lease as a whole, rather than deciding on a property by property basis.
Our outpatient medical portfolio is primarily self-managed and consists principally of multi-tenant properties leased to health care providers. Our leases typically include increasers and some form of operating expense reimbursement by the tenant. As of December 31, 2016, 80% of our portfolio included leases with full pass through, 17% with a partial expense reimbursement (modified gross) and 3% with no expense reimbursement (gross). Our outpatient medical leases are non-cancellable operating leases that have a weighted-average remaining term of seven years at December 31, 2016 and are often credit enhanced by security deposits, guaranties and/or letters of credit.
Construction. We occasionally provide for the construction of properties for tenants as part of long-term operating leases. We capitalize certain interest costs associated with funds used for the construction of properties owned by us. The amount capitalized is based upon the amount advanced during the construction period using the rate of interest that approximates our Company-wide cost of financing. Our interest expense is reduced by the amount capitalized. We also typically charge a transaction fee at the commencement of construction which we defer and amortize to income over the term of the resulting lease. The construction period commences upon funding and terminates upon the earlier of the completion of the applicable property or the end of a specified period. During the construction period, we advance funds to the tenants in accordance with agreed upon terms and conditions which require, among other things, periodic site visits by a Company representative. During the construction period, we generally require an additional credit enhancement in the form of payment and performance bonds and/or completion guaranties. At December 31, 2016, we had outstanding construction investments of $506,091,000 and were committed to provide additional funds of approximately $493,972,000 to complete construction for investment properties.
Real Estate Loans. Our real estate loans are typically structured to provide us with interest income, principal amortization and transaction fees and are generally secured by first/second mortgage liens, leasehold mortgages, corporate guaranties and/or personal guaranties. At December 31, 2016, we had outstanding real estate loans of $622,627,508. The interest yield averaged approximately 9.5% per annum on our outstanding real estate loan balances. Our yield on real estate loans depends upon a number of factors, including the stated interest rate, average principal amount outstanding during the term of the loan and any interest rate adjustments. The real estate loans outstanding at December 31, 2016 are generally subject to one to 15-year terms with principal amortization schedules and/or balloon payments of the outstanding principal balances at the end of the term. Typically, real estate loans are cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.
Investments in Unconsolidated Entities. Investments in entities that we do not consolidate but have the ability to exercise significant influence over operating and financial policies are reported under the equity method of accounting. Our investments in unconsolidated entities generally represent interests ranging from 10% to 50% in real estate assets. Under the equity method of accounting, our share of the investee’s earnings or losses is included in our consolidated results of operations. To the extent that our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of equity in earnings of the entity. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the entity interest or the estimated fair value of the assets prior to the sale of interests in the entity. We evaluate our equity method investments for impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying value. When we determine a decline in the estimated fair value of such an investment below its carrying value is other-than-temporary, an impairment is recorded. See Note 7 to our consolidated financial statements for more information.
Principles of Consolidation
The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint venture entities that we control, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation.
At inception of joint venture transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary. Accounting Standards Codification Topic 810, Consolidations, requires enterprises to perform a qualitative approach to determining whether or not a VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.
For investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner(s). We assess the limited partners’ rights and their impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We similarly evaluate the rights of managing members of limited liability companies.
Borrowing Policies
We utilize a combination of debt and equity to fund investments. Our debt and equity levels are determined by management to maintain a conservative balance sheet and credit profile. Generally, we intend to issue unsecured, fixed-rate public debt with long-term maturities to approximate the maturities on our triple-net leases and investment strategy. For short-term purposes, we may borrow on our primary unsecured credit facility. We replace these borrowings with long-term capital such as senior unsecured notes or common stock. When terms are deemed favorable, we may invest in properties subject to existing mortgage indebtedness. In addition, we may obtain secured financing for unleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis. In certain agreements with our lenders, we are subject to restrictions with respect to secured and unsecured indebtedness.
Competition
We compete with other real estate investment trusts, real estate partnerships, private equity and hedge fund investors, banks, insurance companies, finance/investment companies, government-sponsored agencies, taxable and tax-exempt bond funds, health care operators, developers and other investors in the acquisition, development, leasing and financing of health care and seniors housing properties. We compete for investments based on a number of factors including relationships, certainty of execution, investment structures and underwriting criteria. Our ability to successfully compete is impacted by economic and demographic trends, availability of acceptable investment opportunities, our ability to negotiate beneficial investment terms, availability and cost of capital, construction and renovation costs and applicable laws and regulations.
The operators/tenants of our properties compete with properties that provide comparable services in the local markets. Operators/tenants compete for patients and residents based on a number of factors including quality of care, reputation, physical appearance of properties, location, services offered, family preferences, physicians, staff and price. We also face competition from other health care facilities for tenants, such as physicians and other health care providers that provide comparable facilities and services.
For additional information on the risks associated with our business, please see “
Item 1A. Risk Factors
This section discusses the most significant factors that affect our business, operations and financial condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our securities. If any of the following risks, as well as other risks and uncertainties that are not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected. In that event, the value of our securities could decline. We group these risk factors into three categories:
• Risks arising from our business;
• Risks arising from our capital structure; and
• Risks arising from our status as a REIT.
Risks Arising from Our Business
Our investments in and acquisitions of health care and seniors housing properties may be unsuccessful or fail to meet our expectations
We are exposed to the risk that some of our acquisitions may not prove to be successful. We could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. If we agree to provide construction funding to an operator/tenant and the project is not completed, we may need to take steps to ensure completion of the project. Such expenditures may negatively affect our results of operations. Furthermore, there can be no assurance that our anticipated acquisitions and investments, the completion of which is subject to various conditions, will be consummated in accordance with anticipated timing, on anticipated terms, or at all. We also may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and this could have an adverse effect on our results of operations and financial condition.
Our investments in joint ventures could be adversely affected by our lack of exclusive control over these investments, our partners’ insolvency or failure to meet their obligations and disputes between us and our partners
We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities. Joint venture investments involve risks that may not be present with other methods of ownership, including the possibility that our partner might become insolvent, refuse to make capital contributions when due or otherwise fail to meet its obligations, which may result in certain liabilities to us for guarantees and other commitments; that our partner might at any time have economic or other business interests or goals that are or become inconsistent with our interests or goals; that we could become engaged in a dispute with our partner, which could require us to expend additional resources to resolve such dispute and could have an adverse impact on the operations and profitability of the joint venture; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. In addition, our ability to transfer our interest in a joint venture to a third party may be restricted. In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest may be limited if we do not have sufficient cash, available borrowing capacity or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition or financing of a property.
We are exposed to operational risks with respect to our seniors housing operating properties that could adversely affect our revenue and operations
We are exposed to various operational risks with respect to our seniors housing operating properties that may increase our costs or adversely affect our ability to generate revenues. These risks include fluctuations in occupancy, Medicare and Medicaid reimbursement, if applicable, and private pay rates; economic conditions; competition; federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; state regulation and rights of residents related to entrance fees; and the availability and increases in the cost of labor (as a result of unionization or otherwise). Any one or a combination of these factors may adversely affect our revenue and operations.
Decreases in our operators’ revenues or increases in our operators’ expenses could affect our operators’ ability to make payments to us
Our operators’ revenues are primarily driven by occupancy, private pay rates, and Medicare and Medicaid reimbursement, if applicable. Expenses for these facilities are primarily driven by the costs of labor, food, utilities, taxes, insurance and rent or debt service. Revenues from government reimbursement have, and may continue to, come under pressure due to reimbursement cuts and state budget shortfalls. Operating costs continue to increase for our operators. To the extent that any decrease in revenues and/or any increase in operating expenses result in a property not generating enough cash to make payments to us, the credit of our operator and the value of other collateral would have to be relied upon. To the extent the value of such property is reduced, we may need to record an impairment for such asset. Furthermore, if we determine to dispose of an underperforming property, such sale may result in a loss. Any such impairment or loss on sale would negatively affect our financial results.
Increased competition may affect our operators’ ability to meet their obligations to us
The operators of our properties compete on a local and regional basis with operators of properties and other health care providers that provide comparable services. We cannot be certain that the operators of all of our facilities will be able to achieve and maintain occupancy and rate levels that will enable them to meet all of their obligations to us. Our operators are expected to encounter increased competition in the future that could limit their ability to attract residents or expand their businesses.
A severe cold and flu season, epidemics or any other widespread illnesses could adversely affect the occupancy of our seniors housing operating and triple-net properties
Our and our operators’ revenues are dependent on occupancy. It is impossible to predict the severity of the cold and flu season or the occurrence of epidemics or any other widespread illnesses. The occupancy of our seniors housing operating and triple-net properties could significantly decrease in the event of a severe cold and flu season, an epidemic or any other widespread illness. Such a decrease could affect the operating income of our seniors housing operating properties and the ability of our triple-net operators to make payments to us.
The insolvency or bankruptcy of our obligors may adversely affect our business, results of operations and financial condition
We are exposed to the risk that our obligors may not be able to meet the rent, principal and interest or other payments due us, which may result in an obligor bankruptcy or insolvency, or that an obligor might become subject to bankruptcy or insolvency
proceedings for other reasons. Although our operating lease agreements provide us with the right to evict a tenant, demand immediate payment of rent and exercise other remedies, and our loans provide us with the right to terminate any funding obligation, demand immediate repayment of principal and unpaid interest, foreclose on the collateral and exercise other remedies, the bankruptcy and insolvency laws afford certain rights to a party that has filed for bankruptcy or reorganization. An obligor in bankruptcy or subject to insolvency proceedings may be able to limit or delay our ability to collect unpaid rent in the case of a lease or to receive unpaid principal and interest in the case of a loan, and to exercise other rights and remedies. We may be required to fund certain expenses (e.g., real estate taxes and maintenance) to preserve the value of an investment property, avoid the imposition of liens on a property and/or transition a property to a new tenant. In some instances, we have terminated our lease with a tenant and relet the property to another tenant. In some of those situations, we have provided working capital loans to and limited indemnification of the new obligor. If we cannot transition a leased property to a new tenant, we may take possession of that property, which may expose us to certain successor liabilities. Should such events occur, our revenue and operating cash flow may be adversely affected.
We may not be able to timely reinvest our sale proceeds on terms acceptable to us
From time to time, we will have cash available from (1) the proceeds of sales of our securities, (2) principal payments on our loans receivable and (3) the sale of properties, including non-elective dispositions, under the terms of master leases or similar financial support arrangements. In order to maintain current revenues and continue generating attractive returns, we expect to re-invest these proceeds in a timely manner. We compete for real estate investments with a broad variety of potential investors. This competition for attractive investments may negatively affect our ability to make timely investments on terms acceptable to us.
Failure to properly manage our rapid growth could distract our management or increase our expenses
We have experienced rapid growth and development in a relatively short period of time and expect to continue this rapid growth in the future. This growth has resulted in increased levels of responsibility for our management. Future property acquisitions could place significant additional demands on, and require us to expand, our management, resources and personnel. Our failure to manage any such rapid growth effectively could harm our business and, in particular, our financial condition, results of operations and cash flows, which could negatively affect our ability to make distributions to stockholders. Our growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and incur additional debt.
We depend on Genesis Healthcare, LLC (“Genesis”) and Brookdale Senior Living for a significant portion of our revenues and any inability or unwillingness by Genesis and Brookdale Senior Living to satisfy their obligations under their agreements with us could adversely affect us
The properties we lease to Genesis and Brookdale Senior Living account for a significant portion of our revenues, and because our leases with Genesis and Brookdale Senior Living are triple-net leases, we also depend on Genesis and Brookdale Senior Living to pay all insurance, taxes, utilities and maintenance and repair expenses in connection with the leased properties. We cannot assure you that Genesis and Brookdale Senior Living will have sufficient assets, income and access to financing to enable them to make rental payments to us or to otherwise satisfy their respective obligations under our leases, and any inability or unwillingness by Genesis or Brookdale Senior Living to do so could have an adverse effect on our business, results of operations and financial condition. Genesis and Brookdale Senior Living have also agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses, and we cannot assure you that Genesis and Brookdale Senior Living will have sufficient assets, income, access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations. Genesis and Brookdale Senior Living’s failure to effectively conduct their operations or to maintain and improve our properties could adversely affect their business reputations and their ability to attract and retain patients and residents in our properties, which, in turn, could adversely affect our business, results of operations and financial condition.
The properties managed by Sunrise Senior Living, LLC account for a significant portion of our revenues and operating income and any adverse developments in its business or financial condition could adversely affect us
Sunrise Senior Living, LLC manages our entire Sunrise property portfolio, which as of December 31, 2016, consisted of 157 seniors housing properties. These properties account for a significant portion of our revenues, and we rely on Sunrise Senior Living, LLC to manage these properties efficiently and effectively. We also rely on Sunrise Senior Living, LLC to set appropriate resident fees, to provide accurate property-level financial results for our properties in a timely manner and to otherwise operate them in compliance with the terms of our management agreements and all applicable laws and regulations. Any adverse developments in Sunrise Senior Living, LLC’s business or financial condition could impair its ability to manage our properties efficiently and effectively, which could adversely affect our business, results of operations, and financial condition. Also, if Sunrise Senior Living, LLC experiences any significant financial, legal, accounting or regulatory difficulties, such difficulties could result in, among other things, acceleration of its indebtedness, impairment of its continued access to capital or the commencement of insolvency proceedings by or against it under the U.S. Bankruptcy Code, which, in turn, could adversely affect our business, results of operations and financial condition.
Ownership of property outside the United States may subject us to different or greater risks than those associated with our domestic operations
We have operations in Canada and the United Kingdom. International development, ownership, and operating activities involve risks that are different from those we face with respect to our domestic properties and operations. These risks include, but are not limited to, any international currency gain recognized with respect to changes in exchange rates may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify and maintain our status as a REIT; challenges with respect to the repatriation of foreign earnings and cash; changes in foreign political, regulatory, and economic conditions, including regionally, nationally, and locally, including, but not limited to, the United Kingdom’s June 2016 vote to exit the European Union (commonly known as “Brexit”); challenges in managing international operations; challenges of complying with a wide variety of foreign laws and regulations, including those relating to real estate, corporate governance, operations, taxes, employment and other civil and criminal legal proceedings; foreign ownership restrictions with respect to operations in countries; differences in lending practices and the willingness of domestic or foreign lenders to provide financing; regional or country-specific business cycles and political and economic instability; and failure to comply with applicable laws and regulations in the United States that affect foreign operations, including, but not limited to, the U.S. Foreign Corrupt Practices Act. If we are unable to successfully manage the risks associated with international expansion and operations, our results of operations and financial condition may be adversely affected.
We do not know if our tenants will renew their existing leases, and if they do not, we may be unable to lease the properties on as favorable terms, or at all
We cannot predict whether our tenants will renew existing leases at the end of their lease terms, which expire at various times. If these leases are not renewed, we would be required to find other tenants to occupy those properties or sell them. There can be no assurance that we would be able to identify suitable replacement tenants or enter into leases with new tenants on terms as favorable to us as the current leases or that we would be able to lease those properties at all.
Our operators and managers may not have the necessary insurance coverage to insure adequately against losses
We maintain or require our operators and managers to maintain comprehensive insurance coverage on our properties and their operations with terms, conditions, limits and deductibles that we believe are customary for similarly-situated companies in our industry, and we continually review our insurance programs and requirements. That said, we cannot assure you that we or our operators or managers will continue to be able to maintain adequate levels of insurance and required coverages, which could adversely affect us in the event of a significant uninsured loss. Also, in recent years, long-term/post-acute care and seniors housing operators and managers have experienced substantial increases in both the number and size of patient care liability claims. As a result, general and professional liability costs have increased in some markets. General and professional liability insurance coverage may be restricted or very costly, which may adversely affect the property operators’ and managers’ future operations, cash flows and financial condition, and may have a material adverse effect on the property operators’ and managers’ ability to meet their obligations to us.
Our ownership of properties through ground leases exposes us to the loss of such properties upon breach or termination of the ground leases
We have acquired an interest in certain of our properties by acquiring a leasehold interest in the property on which the building is located, and we may acquire additional properties in the future through the purchase of interests in ground leases. As the lessee under a ground lease, we are exposed to the possibility of losing the property upon termination of the ground lease or an earlier breach of the ground lease by us.
The requirements of, or changes to, governmental reimbursement programs, such as Medicare or Medicaid, could have a material adverse effect on our obligors’ liquidity, financial condition and results of operations, which could adversely affect our obligors’ ability to meet their obligations to us
Some of our obligors’ businesses are affected by government reimbursement. To the extent that an operator/tenant receives a significant portion of its revenues from government payors, primarily Medicare and Medicaid, such revenues may be subject to statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, court decisions, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries or carriers, government funding restrictions (at a program level or with respect to specific facilities) and interruption or delays in payments due to any ongoing government investigations and audits at such property. In recent years, government payors have frozen or reduced payments to health care providers due to budgetary pressures. Health care reimbursement will likely continue to be of paramount importance to federal and state authorities. We cannot make any assessment as to the ultimate timing or effect any future legislative reforms may have on the financial condition of our obligors and properties. There can be no assurance that adequate reimbursement levels will be available
for services provided by any property operator, whether the property receives reimbursement from Medicare, Medicaid or private payors. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on an obligor’s liquidity, financial condition and results of operations, which could adversely affect the ability of an obligor to meet its obligations to us.
The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Laws”), provides those states that expand their Medicaid coverage to otherwise eligible state residents with incomes at or below 138% of the federal poverty level with an increased federal medical assistance percentage, effective January 1, 2014, when certain conditions are met. Given that the federal government substantially funds the Medicaid expansion, it is unclear how many states will ultimately pursue this option, although, as of early February 2017, more than half of the states have expanded Medicaid coverage. The participation by states in the Medicaid expansion could have the dual effect of increasing our tenants’ revenues, through new patients, but further straining state budgets and their ability to pay our tenants. We expect that the new Presidential Administration and U.S. Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Health Reform Laws, including Medicaid expansion. Since taking office, President Trump has continued to support the repeal of all or portions of the Health Reform Laws. The House and Senate have recently passed a budget resolution that authorizes congressional committees to draft legislation to repeal all or portions of the Health Reform Laws and permits such legislation to pass with a majority vote in the Senate. President Trump has also recently issued an executive order in which he stated that it is his Administration’s policy to seek the prompt repeal of the Health Reform Laws and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of Health Reform Laws to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s Administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for health care items and services covered by plans that were authorized by the Health Reform Laws. We cannot predict whether the existing Health Reform Laws, or future health care reform legislation or regulatory changes, will have a material impact on our operators’ or tenants’ property or business. If the operations, cash flows or financial condition of our operators and tenants are materially adversely impacted by the Health Reform Laws or future legislation, our revenue and operations may be adversely affected as well. See “Item 1 - Business - Certain Government Regulations - United States - Reimbursement” above.
More generally, and because of the dynamic nature of the legislative and regulatory environment for health care products and services, and in light of existing federal deficit and budgetary concerns, we cannot predict the impact that broad-based, far-reaching legislative or regulatory changes could have on the U.S. economy, our business or that of our operators and tenants.
Our operators’ or tenants’ failure to comply with federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards could adversely affect such operators’ or tenants’ operations, which could adversely affect our operators’ and tenants’ ability to meet their obligations to us
Our operators and tenants generally are subject to varying levels of federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations, and standards. Our operators’ or tenants’ failure to comply with any of these laws, regulations, or standards could result in loss of accreditation, denial of reimbursement, imposition of fines, suspension, decertification or exclusion from federal and state health care programs, loss of license or closure of the facility. Such actions may have an effect on our operators’ or tenants’ ability to make lease payments to us and, therefore, adversely impact us. See “Item 1 - Business - Certain Government Regulations - United States - Fraud & Abuse Enforcement” above.
Many of our properties may require a license, registration, and/or certificate of need (“CON”) to operate. Failure to obtain a license, registration, or CON, or loss of a required license, registration, or CON would prevent a facility from operating in the manner intended by the operators or tenants. These events could materially adversely affect our operators’ or tenants’ ability to make rent payments to us. State and local laws also may regulate the expansion, including the addition of new beds or services or acquisition of medical equipment, and the construction or renovation of health care facilities, by requiring a CON or other similar approval from a state agency. See “Item 1 - Business - Certain Government Regulations - United States - Licensing and Certification” above.
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties
Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions will be limited. No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. In addition, we are exposed to the risks inherent in concentrating investments in real estate, and in particular, the seniors housing and health care industries. A downturn in the real estate industry could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us.
Unfavorable resolution of pending and future litigation matters and disputes could have a material adverse effect on our financial condition
From time to time, we may be directly involved in a number of legal proceedings, lawsuits and other claims. We may also be named as defendants in lawsuits allegedly arising out of our actions or the actions of our operators/tenants or managers in which such operators/tenants or managers have agreed to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with their respective businesses. An unfavorable resolution of pending or future litigation may have a material adverse effect on our business, results of operations and financial condition. Regardless of its outcome, litigation may result in substantial costs and expenses and significantly divert the attention of management. There can be no assurance that we will be able to prevail in, or achieve a favorable settlement of, pending or future litigation. In addition, pending litigation or future litigation, government proceedings or environmental matters could lead to increased costs or interruption of our normal business operations.
Development, redevelopment and construction risks could affect our profitability
At any given time, we may be in the process of constructing one or more new facilities that ultimately will require a CON and license before they can be utilized by the operator for their intended use. The operator also may need to obtain Medicare and Medicaid certification and enter into Medicare and Medicaid provider agreements and/or third party payor contracts. In the event that the operator is unable to obtain the necessary CON, licensure, certification, provider agreements or contracts after the completion of construction, there is a risk that we will not be able to earn any revenues on the facility until either the initial operator obtains a license or certification to operate the new facility and the necessary provider agreements or contracts or we find and contract with a new operator that is able to obtain a license to operate the facility for its intended use and the necessary provider agreements or contracts.
In connection with our renovation, redevelopment, development and related construction activities, we may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations. These factors could result in increased costs or our abandonment of these projects. In addition, we may not be able to obtain financing on favorable terms, which may render us unable to proceed with our development activities, and we may not be able to complete construction and lease-up of a property on schedule, which could result in increased debt service expense or construction costs. Additionally, the time frame required for development, construction and lease-up of these properties means that we may have to wait years for significant cash returns. Because we are required to make cash distributions to our stockholders, if the cash flow from operations or refinancing is not sufficient, we may be forced to borrow additional money to fund such distributions. Newly developed and acquired properties may not produce the cash flow that we expect, which could adversely affect our overall financial performance.
In deciding whether to acquire or develop a particular property, we make assumptions regarding the expected future performance of that property. In particular, we estimate the return on our investment based on expected occupancy, rental rates and capital costs. If our financial projections with respect to a new property are inaccurate as a result of increases in capital costs or other factors, the property may fail to perform as we expected in analyzing our investment. Our estimate of the costs of repositioning or redeveloping an acquired property may prove to be inaccurate, which may result in our failure to meet our profitability goals. Additionally, we may acquire new properties that are not fully leased, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property.
We may experience losses caused by severe weather conditions or natural disasters, which could result in an increase of our or our tenants’ cost of insurance, a decrease in our anticipated revenues or a significant loss of the capital we have invested in a property
We maintain or require our tenants to maintain comprehensive insurance coverage on our properties with terms, conditions, limits and deductibles that we believe are appropriate given the relative risk and costs of such coverage, and we continually review our insurance programs and requirements. However, a large number of our properties are located in areas particularly susceptible to revenue loss, cost increase or damage caused by severe weather conditions or natural disasters such as hurricanes, earthquakes, tornadoes and floods. We believe, given current industry practice and analysis prepared by outside consultants, that our and our tenants’ insurance coverage is appropriate to cover reasonably anticipated losses that may be caused by hurricanes, earthquakes, tornadoes, floods and other severe weather conditions and natural disasters. Nevertheless, we are always subject to the risk that such insurance will not fully cover all losses and, depending on the severity of the event and the impact on our properties, such insurance may not cover a significant portion of the losses. These losses may lead to an increase of our and our tenants’ cost of insurance, a decrease in our anticipated revenues from an affected property and a loss of all or a portion of the capital we have invested in an affected property. In addition, we or our tenants may not purchase insurance under certain circumstances if the cost of insurance exceeds, in our or our tenants’ judgment, the value of the coverage relative to the risk of loss.
We may incur costs to remediate environmental contamination at our properties, which could have an adverse effect on our or our obligors’ business or financial condition
Under various federal and state laws, owners or operators of real estate may be required to respond to the presence or release of hazardous substances on the property and may be held liable for property damage, personal injuries or penalties that result from environmental contamination or exposure to hazardous substances. We may become liable to reimburse the government for damages and costs it incurs in connection with the contamination. Generally, such liability attaches to a person based on the person’s relationship to the property. Our tenants or borrowers are primarily responsible for the condition of the property. Moreover, we review environmental site assessments of the properties that we own or encumber prior to taking an interest in them. Those assessments are designed to meet the “all appropriate inquiry” standard, which we believe qualifies us for the innocent purchaser defense if environmental liabilities arise. Based upon such assessments, we do not believe that any of our properties are subject to material environmental contamination. However, environmental liabilities may be present in our properties and we may incur costs to remediate contamination, which could have a material adverse effect on our business or financial condition or the business or financial condition of our obligors.
Cybersecurity incidents could disrupt our business and result in the loss of confidential information
Our business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain unauthorized access to our confidential data, and other electronic security breaches. Such cyber attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. While we employ a number of measures to prevent, detect and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cyber attack. Cybersecurity incidents could disrupt our business and compromise the confidential information of our employees, operators and tenants.
Actual or threatened terrorist attacks could adversely affect the occupancy and the value of our properties
We have significant investments in large metropolitan markets that have been or may be in the future the targets of actual or threatened terrorism attacks, including Boston, Chicago, New York, San Diego, San Francisco, Los Angeles and Washington D.C. As a result, some of our tenants in these markets may choose to relocate to other markets that may be perceived to be less likely targets of future terrorist activity. This could result in an overall decrease in the occupancy of our properties. In addition, terrorist attacks could also result in significant damages to, or loss of, our properties, which could exceed our insurance coverage.
Our certificate of incorporation and by-laws contain anti-takeover provisions
Our certificate of incorporation and by-laws contain anti-takeover provisions (restrictions on share ownership and transfer and super majority stockholder approval requirements for business combinations) that could make it more difficult for or even prevent a third party from acquiring us without the approval of our incumbent Board of Directors. Provisions and agreements that inhibit or discourage takeover attempts could reduce the market value of our common stock.
Our success depends on key personnel whose continued service is not guaranteed
We are dependent on key personnel. Although we have entered into employment agreements with our executive officers, losing any one of them could, at least temporarily, have an adverse impact on our operations. We believe that losing more than one could have a material adverse impact on our business.
Risks Arising from Our Capital Structure
We may become more leveraged
Permanent financing for our investments is typically provided through a combination of public offerings of debt and equity securities and the incurrence or assumption of secured debt. The incurrence or assumption of indebtedness may cause us to become more leveraged, which could (1) require us to dedicate a greater portion of our cash flow to the payment of debt service, (2) make us more vulnerable to a downturn in the economy, (3) limit our ability to obtain additional financing, or (4) negatively affect our credit ratings or outlook by one or more of the rating agencies.
We are subject to covenants in our debt agreements that may restrict or limit our operations and acquisitions and our failure to comply with the covenants in our debt agreements could have a material adverse impact on our business, results of operations and financial condition
Our debt agreements contain various covenants, restrictions and events of default. Among other things, these provisions 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. Breaches of these covenants could result in defaults under the instruments governing the
applicable indebtedness, in addition to any other indebtedness cross-defaulted against such instruments. These defaults could have a material adverse impact on our business, results of operations and financial condition.
Limitations on our ability to access capital could have an adverse effect on our ability to make future investments or to meet our obligations and commitments
We cannot assure you that we will be able to raise the capital necessary to make future investments or to meet our obligations and commitments as they mature. Our access to capital depends upon a number of factors over which we have little or no control, including rising interest rates, inflation and other general market conditions; the market’s perception of our growth potential and our current and potential future earnings and cash distributions; the market price of the shares of our capital stock and the credit ratings of our debt securities; the financial stability of our lenders, which might impair their ability to meet their commitments to us or their willingness to make additional loans to us; changes in the credit ratings on U.S. government debt securities; or default or delay in payment by the United States of its obligations. If our access to capital is limited by these factors or other factors, it could negatively impact our ability to acquire properties, repay or refinance our indebtedness, fund operations or make distributions to our stockholders.
Downgrades in our credit ratings could have a material adverse impact on our cost and availability of capital
We plan to manage the Company to maintain a capital structure consistent with our current profile, but there can be no assurance that we will be able to maintain our current credit ratings. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.
Fluctuations in the value of foreign currencies could adversely affect our results of operations and financial position
As we expand our operations internationally, currency exchange rate fluctuations could affect our results of operations and financial position. We expect to generate an increasing portion of our revenue and expenses in such foreign currencies as the Canadian dollar and the British pound. Although we may enter into foreign exchange agreements with financial institutions and/or obtain local currency mortgage debt in order to reduce our exposure to fluctuations in the value of foreign currencies, we cannot assure you that foreign currency fluctuations will not have a material adverse effect on us.
Our entry into swap agreements may not effectively reduce our exposure to changes in interest rates or foreign currency exchange rates
We enter into swap agreements from time to time to manage some of our exposure to interest rate and foreign currency exchange rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing our exposure to changes in interest rates or foreign currency exchange rates. When we use forward-starting interest rate swaps, there is a risk that we will not complete the long-term borrowing against which the swap is intended to hedge. If such events occur, our results of operations may be adversely affected.
Risks Arising from Our Status as a REIT
We might fail to qualify or remain qualified as a REIT
We intend to operate as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), and believe we have and will continue to operate in such a manner. If we lose our status as a REIT, we will face serious income tax consequences that will substantially reduce the funds available for satisfying our obligations and for distribution to our stockholders because:
• we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;
• we could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and
• unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.
Since REIT qualification requires us to meet a number of complex requirements, it is possible that we may fail to fulfill them, and if we do, our earnings will be reduced by the amount of U.S. federal and other income taxes owed. A reduction in our earnings would affect the amount we could distribute to our stockholders. If we do not qualify as a REIT, we would not be required to make distributions to stockholders since a non-REIT is not required to pay dividends to stockholders in order to maintain REIT status or avoid an excise tax. See “Item 1 - Business - Taxation - Federal Income Tax Considerations” above for a discussion of the provisions of the Code that apply to us and the effects of failure to qualify as a REIT. In addition, if we fail to qualify as a REIT, all distributions to stockholders would continue to be treated as dividends to the extent of our current and accumulated earnings and
profits, although corporate stockholders may be eligible for the dividends received deduction, and individual stockholders may be eligible for taxation at the rates generally applicable to long-term capital gains (currently at a maximum rate of 20%) with respect to distributions.
As a result of all these factors, our failure to qualify as a REIT also could impair our ability to implement our business strategy and would adversely affect the value of our common stock. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to remain qualified as a REIT. Although we believe that we qualify as a REIT, we cannot assure you that we will continue to qualify or remain qualified as a REIT for U.S. federal income tax purposes. See “Item 1 - Business - Taxation - Federal Income Tax Considerations” above.
Certain subsidiaries might fail to qualify or remain qualified as a REIT
We own interests in a number of entities which have elected to be taxed as REITs for federal income tax purposes, some of which we consolidate for financial reporting purposes but each of which is treated as a separate REIT for federal income tax purposes (each a “Subsidiary REIT”). To qualify as a REIT, each Subsidiary REIT must independently satisfy all of the REIT qualification requirements under the Code, together with all other rules applicable to REITs. Provided that each Subsidiary REIT qualifies as a REIT, our interests in the Subsidiary REITs will be treated as qualifying real estate assets for purposes of the REIT asset tests. See “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Asset Tests” above. If a Subsidiary REIT fails to qualify as a REIT in any taxable year, such Subsidiary REIT will be subject to federal and state income taxes and may not be able to qualify as a REIT for the four subsequent taxable years. Any such failure could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT, unless we are able to avail ourselves of certain relief provisions.
The 90% annual distribution requirement will decrease our liquidity and may limit our ability to engage in otherwise beneficial transactions
To comply with the 90% distribution requirement applicable to REITs and to avoid the nondeductible excise tax, we must make distributions to our stockholders. See “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Annual Distribution Requirements” above. Although we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the REIT distribution requirement, it is possible that, from time to time, we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement, or we may decide to retain cash or distribute such greater amount as may be necessary to avoid income and excise taxation. This may be due to timing differences between the actual receipt of income and actual payment of deductible expenses, on the one hand, and the inclusion of that income and deduction of those expenses in arriving at our taxable income, on the other hand. In addition, non-deductible expenses such as principal amortization or repayments or capital expenditures in excess of non-cash deductions may cause us to fail to have sufficient cash or liquid assets to enable us to satisfy the 90% distribution requirement. In the event that timing differences occur, or we deem it appropriate to retain cash, we may borrow funds, issue additional equity securities (although we cannot assure you that we will be able to do so), pay taxable stock dividends, if possible, distribute other property or securities or engage in another transaction intended to enable us to meet the REIT distribution requirements. This may require us to raise additional capital to meet our obligations.
The lease of qualified health care properties to a taxable REIT subsidiary is subject to special requirements
We lease certain qualified health care properties to taxable REIT subsidiaries (or limited liability companies of which the taxable REIT subsidiaries are members), which lessees contract with managers (or related parties) to manage the health care operations at these properties. The rents from this taxable REIT subsidiary lessee structure are treated as qualifying rents from real property if (1) they are paid pursuant to an arms-length lease of a qualified health care property with a taxable REIT subsidiary and (2) the manager qualifies as an eligible independent contractor (as defined in the Code). If any of these conditions are not satisfied, then the rents will not be qualifying rents. See “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Income Tests” above.
If certain sale-leaseback transactions are not characterized by the Internal Revenue Service as “true leases,” we may be subject to adverse tax consequences
We have purchased certain properties and leased them back to the sellers of such properties, and we may enter into similar transactions in the future. We intend for any such sale-leaseback transaction to be structured in such a manner that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes. However, depending on the terms of any specific transaction, the Internal Revenue Service might take the position that the transaction is not a “true lease” but is more properly treated in some other manner. In the event any sale-leaseback transaction is challenged and successfully re-characterized by the Internal Revenue Service, we would not be entitled to claim the deductions for depreciation and
cost recovery generally available to an owner of property. Furthermore, if a sale-leaseback transaction were so re-characterized, we might fail to satisfy the REIT asset tests or income tests and, consequently, could lose our REIT status effective with the year of re-characterization. See “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Asset Tests” and “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Income Tests” above. Alternatively, the amount of our REIT taxable income could be recalculated, which may cause us to fail to meet the REIT annual distribution requirements for a taxable year. See “Item 1 - Business - Taxation - Federal Income Tax Considerations - Qualification as a REIT - Annual Distribution Requirements” above.
The new Presidential Administration may propose substantial changes to fiscal and tax policies that, if enacted, may adversely affect REITs and our business
The recently inaugurated U.S. President and his Administration have called for substantial changes to fiscal and tax policies, which may include comprehensive tax reform. We cannot predict the impact, if any, of such tax reform to REITs or to our business. It is possible that any comprehensive tax reform could adversely affect REITs in general or our business specifically. Until any such tax reform changes are enacted, we will not know whether we will benefit from, or will be negatively affected by, such changes.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own our corporate headquarters located at 4500 Dorr Street, Toledo, Ohio 43615. We also lease corporate offices in Canada, the United Kingdom and Luxembourg and have ground leases relating to certain of our properties. The following table sets forth certain information regarding the properties that comprise our consolidated real property and real estate loan investments as of December 31, 2016 (dollars in thousands and annualized revenues adjusted for timing of investment):
Triple-Net
Seniors Housing Operating
Property Location
Number of Properties
Total Investment
Annualized Revenues
Number of Properties
Total Investment
Annualized Revenues
Alabama
$
35,149
$
3,856
-
$
-
$
-
Arizona
26,126
2,237
60,346
22,075
California
506,530
54,595
2,564,855
585,482
Colorado
241,603
21,311
140,940
40,800
Connecticut
178,295
21,102
391,695
126,697
District Of Columbia
-
-
-
63,194
14,544
Delaware
105,106
15,537
21,160
6,268
Florida
585,009
48,896
550,064
78,566
Georgia
98,973
11,019
122,512
36,955
Iowa
56,783
5,346
32,434
10,068
Idaho
32,254
3,564
-
-
-
Illinois
259,844
25,446
448,055
114,224
Indiana
519,632
54,568
-
-
-
Kansas
267,942
24,639
70,132
17,262
Kentucky
74,482
10,037
38,805
13,096
Louisiana
20,260
3,369
50,879
12,278
Massachusetts
226,246
31,814
1,159,025
224,522
Maryland
144,638
8,829
153,359
47,671
Maine
-
-
-
49,790
17,831
Michigan
99,727
9,989
110,532
26,436
Minnesota
205,989
17,162
113,982
23,538
Missouri
28,164
134,202
20,225
Mississippi
27,446
3,241
-
-
-
Montana
6,050
-
-
-
North Carolina
359,869
33,706
40,413
7,181
Nebraska
32,988
4,067
-
-
-
New Hampshire
52,757
19,578
118,242
28,647
New Jersey
1,238,636
131,635
239,091
65,946
New Mexico
-
-
-
18,606
1,496
Nevada
83,529
12,519
36,658
10,576
New York
197,196
38,570
468,303
85,404
Ohio
222,137
41,569
193,825
37,672
Oklahoma
175,095
13,864
40,441
3,864
Oregon
76,035
6,741
-
-
-
Pennsylvania
911,973
90,347
81,188
39,484
Rhode Island
-
-
4,603
60,107
20,290
South Carolina
33,116
5,656
-
-
-
Tennessee
40,926
3,600
50,044
15,624
Texas
631,977
66,283
593,826
118,877
Utah
30,908
2,533
16,892
10,796
Virginia
181,903
19,166
37,677
11,252
Vermont
-
-
2,680
27,428
6,405
Washington
444,970
45,324
410,424
74,123
Wisconsin
130,602
15,138
-
-
-
West Virginia
68,678
19,591
-
-
-
Total domestic
8,659,543
955,556
8,709,126
1,976,175
Canada
153,544
10,530
2,058,447
427,444
United Kingdom
996,194
88,262
1,291,441
273,270
Total international
1,149,738
98,792
3,349,888
700,714
Grand total
$
9,809,281
$
1,054,348
$
12,059,014
$
2,676,889
Outpatient Medical
Property Location
Number of Properties
Total Investment
Annualized Revenues
Alaska
$
21,859
$
2,562
Alabama
30,531
5,233
Arkansas
22,845
2,079
Arizona
65,537
8,466
California
841,277
80,417
Colorado
29,924
4,097
Connecticut
41,153
2,318
Florida
400,031
48,218
Georgia
175,245
24,572
Iowa
6,794
1,653
Illinois
51,613
8,920
Indiana
146,612
18,383
Kansas
75,300
12,673
Kentucky
7,677
Maryland
85,994
13,394
Maine
20,470
2,980
Michigan
22,315
1,931
Minnesota
172,680
28,877
Missouri
142,631
18,383
North Carolina
55,776
7,199
Nebraska
35,186
5,465
New Hampshire
14,009
New Jersey
205,118
42,169
New Mexico
33,235
3,715
Nevada
45,069
4,194
New York
102,417
6,849
Ohio
67,209
11,365
Oklahoma
24,987
3,262
Oregon
9,506
1,575
South Carolina
25,853
2,138
Tennessee
78,058
10,499
Texas
891,821
97,226
Virginia
33,073
5,103
Washington
179,100
20,751
Wisconsin
267,226
27,991
Total domestic
4,428,131
536,215
United Kingdom
267,204
23,849
Grand total
$
4,695,335
$
560,064
The following table sets forth occupancy, coverages and average annualized revenues for certain property types (excluding investments in unconsolidated entities):
Occupancy(1)
Coverages(1,2)
Average Annualized Revenues(3)
Triple-net(4)
86.5%
87.2%
1.43x
1.49x
$
16,841
$
15,966
per bed/unit
Seniors housing operating(5)
88.7%
91.2%
n/a
n/a
59,627
60,260
per unit
Outpatient medical(6)
94.7%
95.1%
n/a
n/a
per sq. ft.
(1) We use unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy and coverages for properties other than medical office buildings and have not independently verified the information.
(2) Represents the ratio of our triple-net customers' earnings before interest, taxes, depreciation, amortization, rent and management fees to contractual rent or interest due us. Data reflects the 12 months ended September 30 for the periods presented.
(3) Represents annualized revenues divided by total beds, units or square feet as presented in the tables above.
(4) Occupancy represents average quarterly operating occupancy based on the quarters ended September 30 and excludes properties that are unstabilized, closed or for which data is not available or meaningful.
(5) Occupancy for seniors housing operating represents average occupancy for the three months ended December 31.
(6) Outpatient medical facilities occupancy represents the percentage of total rentable square feet leased and occupied (including month-to-month and holdover leases and excluding terminations) as of December 31.
The following table sets forth information regarding lease expirations for certain portions of our portfolio as of December 31, 2016 (dollars in thousands):
Expiration Year
Thereafter
Triple-net:
Properties
Base rent(1)
$
12,936
$
37,120
$
$
17,740
$
24,906
$
7,295
$
4,175
$
11,076
$
72,866
$
64,361
$
665,719
% of base rent
1.4%
4.0%
0.0%
1.9%
2.7%
0.8%
0.5%
1.2%
7.9%
7.0%
72.5%
Units
1,165
3,151
1,225
2,289
4,538
3,724
39,644
% of units
2.0%
5.5%
0.0%
2.1%
4.0%
1.2%
0.6%
1.3%
7.9%
6.5%
68.9%
Outpatient medical:
Square feet
1,253,812
923,728
1,171,476
1,153,444
1,442,424
2,297,626
1,168,037
1,347,883
669,305
1,064,151
3,684,305
Base rent(1)
$
32,570
$
23,952
$
30,651
$
30,505
$
38,660
$
48,713
$
28,635
$
37,287
$
18,552
$
27,262
$
83,817
% of base rent
8.1%
6.0%
7.7%
7.6%
9.7%
12.2%
7.1%
9.3%
4.6%
6.8%
20.9%
Leases
% of leases
15.1%
11.8%
13.2%
11.6%
11.4%
9.9%
7.6%
4.5%
4.1%
5.3%
5.5%
(1) The most recent monthly base rent including straight line for leases with fixed escalators or annual cash rents with contingent escalators. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.
Item 3. Legal Proceedings
From time to time, there are various legal proceedings pending against us that arise in the ordinary course of our business. Management does not believe that the resolution of any of these legal proceedings either individually or in the aggregate will have a material adverse effect on our business, results of operations or financial condition. Despite management’s view of the ultimate resolution of these legal proceedings, we may have significant legal expenses and costs associated with the defense of such matters. Further, management cannot predict the outcome of these legal proceedings and if management’s expectation regarding such matters is not correct, such proceedings could have a material adverse effect on our business, results of operations or financial condition.
From time to time, we are party to certain legal proceedings for which third parties, such as tenants, operators and/or managers are contractually obligated to indemnify, defend and hold us harmless. In some of these matters, the indemnitors have insurance for the potential damages. In other matters, we are being defended by tenants and other obligated third parties and these indemnitors may not have sufficient insurance, assets, income or resources to satisfy their defense and indemnification obligations to us. The unfavorable resolution of such legal proceedings could, individually or in the aggregate, materially adversely affect the indemnitors’ ability to satisfy their respective obligations to us, which, in turn, could have a material adverse effect on our business, results of operations or financial condition. It is management’s opinion that there are currently no such legal proceedings pending that will, individually or in the aggregate, have such a material adverse effect.
Item 4. Mine Safety Disclosures
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
There were 5,066 stockholders of record as of January 31, 2017. The following table sets forth, for the periods indicated, the high and low prices of our common stock on the New York Stock Exchange (NYSE:HCN), and common dividends paid per share:
Sales Price
Dividends Paid
High
Low
Per Share
First Quarter
$
70.45
$
52.80
$
0.86
Second Quarter
76.24
66.55
0.86
Third Quarter
80.19
72.34
0.86
Fourth Quarter
74.85
59.39
0.86
First Quarter
$
84.88
$
73.20
$
0.825
Second Quarter
79.60
65.48
0.825
Third Quarter
70.22
61.00
0.825
Fourth Quarter
71.25
58.21
0.825
Our Board of Directors has approved a new quarterly cash dividend rate of $0.87 per share of common stock per quarter, commencing with the February 2017 dividend. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Directors.
Stockholder Return Performance Presentation
Set forth below is a line graph comparing the yearly percentage change and the cumulative total stockholder return on our shares of common stock against the cumulative total return of the S & P Composite-500 Stock Index and the FTSE NAREIT Equity Index. As of December 31, 2016, 161 companies comprised the FTSE NAREIT Equity Index. The Index consists of REITs identified by NAREIT as equity (those REITs which have at least 75% of their investments in real property). The data are based on the closing prices as of December 31 for each of the five years. 2011 equals $100 and dividends are assumed to be reinvested.
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
S & P 500
100.00
116.00
153.57
174.60
177.01
198.18
Welltower Inc.
100.00
118.21
108.27
160.79
151.58
156.69
FTSE NAREIT Equity
100.00
118.06
120.97
157.43
162.46
176.30
Except to the extent that we specifically incorporate this information by reference, the foregoing Stockholder Return Performance Presentation shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended. This information shall not otherwise be deemed filed under such Acts.
Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased(1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2016 through October 31, 2016
-
$
-
November 1, 2016 through November 30, 2016
62.33
December 1, 2016 through December 31, 2016
37,916
66.93
Totals
38,061
$
66.90
(1) During the three months ended December 31, 2016, the Company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.
Item 6. Selected Financial Data
The following selected financial data for the five years ended December 31, 2016 are derived from our audited consolidated financial statements (in thousands, except per share data):
Year Ended December 31,
Operating Data
Revenues
$
1,805,044
$
2,880,608
$
3,343,546
$
3,859,826
$
4,281,160
Expenses
1,619,132
2,778,363
2,959,333
3,223,709
3,571,907
Income from continuing operations before income taxes and income (loss) from unconsolidated entities
185,912
102,245
384,213
636,117
709,253
Income tax (expense) benefit
(7,612)
(7,491)
1,267
(6,451)
19,128
Income (loss) from unconsolidated entities
2,482
(8,187)
(27,426)
(21,504)
(10,357)
Income from continuing operations
180,782
86,567
358,054
608,162
718,024
Income from discontinued operations, net
114,058
51,713
7,135
-
-
Gain (loss) on real estate dispositions, net
-
-
147,111
280,387
364,046
Net income
294,840
138,280
512,300
888,549
1,082,070
Preferred stock dividends
69,129
66,336
65,408
65,406
65,406
Preferred stock redemption charge
6,242
-
-
-
-
Net income (loss) attributable to noncontrolling interests
(2,415)
(6,770)
4,799
4,267
Net income attributable to common stockholders
$
221,884
$
78,714
$
446,745
$
818,344
$
1,012,397
Other Data
Average number of common shares outstanding:
Basic
224,343
276,929
306,272
348,240
358,275
Diluted
225,953
278,761
307,747
349,424
360,227
Per Share Data
Basic:
Income from continuing operations attributable to common stockholders
$
0.48
$
0.10
$
1.44
$
2.35
$
2.83
Discontinued operations, net
0.51
0.19
0.02
-
-
Net income attributable to common stockholders *
$
0.99
$
0.28
$
1.46
$
2.35
$
2.83
Diluted:
Income from continuing operations attributable to common stockholders
$
0.48
$
0.10
$
1.43
$
2.34
$
2.81
Discontinued operations, net
0.50
0.19
0.02
-
-
Net income attributable to common stockholders *
$
0.98
$
0.28
$
1.45
$
2.34
$
2.81
Cash distributions per common share
$
2.96
$
3.06
$
3.18
$
3.30
$
3.44
December 31,
Balance Sheet Data
Net real estate investments
$
17,423,009
$
21,680,221
$
22,851,196
$
26,888,685
$
26,563,629
Total assets
19,491,552
23,026,666
24,962,923
29,023,845
28,865,184
Total long-term obligations
8,474,342
10,594,723
10,776,640
12,967,686
12,358,245
Total liabilities
8,936,441
11,235,296
11,403,465
13,664,877
13,185,279
Total preferred stock
1,022,917
1,017,361
1,006,250
1,006,250
1,006,250
Total equity
10,520,519
11,756,331
13,473,049
15,175,885
15,281,472
* Amounts may not sum due to rounding
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
EXECUTIVE SUMMARY
Company Overview
Business Strategy
Capital Market Outlook
Key Transactions in 2016
Key Performance Indicators, Trends and Uncertainties
Corporate Governance
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Off-Balance Sheet Arrangements
Contractual Obligations
Capital Structure
RESULTS OF OPERATIONS
Summary
Triple-net
Seniors Housing Operating
Outpatient Medical
Non-Segment/Corporate
OTHER
Non-GAAP Financial Measures
Critical Accounting Policies
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis is based primarily on the consolidated financial statements of Welltower Inc. for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1 - Business” and “Item 1A - Risk Factors” above.
Executive Summary
Company Overview
Welltower Inc. (NYSE: HCN), 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. WelltowerTM, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties. Our capital programs, when combined with comprehensive planning, development and property management services, make us a single-source solution for acquiring, planning, developing, managing, repositioning and monetizing real estate assets.
The following table summarizes our consolidated portfolio for the year ended December 31, 2016 (dollars in thousands):
Net Operating
Percentage of
Number of
Type of Property
Income (NOI)(1)
NOI
Properties
Triple-net
$
1,208,860
50.3%
Seniors housing operating
814,114
33.9%
Outpatient medical
380,264
15.8%
Totals
$
2,403,238
100.0%
1,313
(1) Excludes our share of investments in unconsolidated entities and non-segment/corporate NOI. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.
Business Strategy
Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.
Substantially all of our revenues are derived from operating lease rentals, resident fees and services, and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our customers/partners experience operating difficulties and become unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our proactive and comprehensive asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division actively manages and monitors the outpatient medical portfolio with a comprehensive process including review of tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends. We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we are generally able to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.
In addition to our asset management and research efforts, we also structure our investments to help mitigate payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.
For the year ended December 31, 2016, rental income and resident fees represented 39% and 59%, respectively, of total revenues. Substantially all of our operating leases are designed with escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Our yield on loans receivable depends upon a number of factors, including the stated interest rate, the average principal amount
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
outstanding during the term of the loan and any interest rate adjustments.
Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.
We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from net operating income and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.
Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also likely that investment dispositions may occur in the future. To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any investment dispositions in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our primary unsecured credit facility. At December 31, 2016, we had $419,378,000 of cash and cash equivalents, $187,842,000 of restricted cash and $2,313,122,000 of available borrowing capacity under our primary unsecured credit facility.
Capital Market Outlook
We believe the capital markets remain supportive of our investment strategy. For the year ended December 31, 2016, we raised $1,235,138,000 in aggregate gross proceeds through the issuance of common stock and unsecured debt. The capital raised, in combination with available cash and borrowing capacity under our primary unsecured credit facility, supported pro rata gross new investments of $3,007,040,000 for the year. We expect attractive investment opportunities to remain available in the future as we continue to leverage the benefits of our relationship investment strategy.
Key Transactions in 2016
Capital. In March 2016, we issued $700,000,000 of 4.25% senior unsecured notes due 2026, generating approximately $688,560,000 of net proceeds. In May 2016, we closed on a new primary unsecured credit facility that includes a $3,000,000,000 unsecured revolving credit facility, a $500,000,000 unsecured term credit facility and a $250,000,000 Canadian-denominated unsecured term credit facility plus an option 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 facility also allows us to borrow up to $1,000,000,000 in alternate currencies. Based on our current credit ratings, the unsecured revolving credit facility is priced at 0.90% over LIBOR with a 0.15% annual facility fee and the unsecured term credit facilities are priced at 0.95% over LIBOR for the U.S. tranche and CDOR for the Canadian tranche. The unsecured term credit facilities mature on May 13, 2021 and the unsecured revolving credit facility matures on May 13, 2020. The unsecured revolving credit facility can be extended for two successive terms of six months each at our option. Also, for the year ended December 31, 2016, we raised $527,530,000 through our dividend reinvestment program and our Equity Shelf Program (as defined below).
Investments. The following summarizes our acquisitions and joint venture investments made during the year ended December 31, 2016 (dollars in thousands):
Properties
Investment Amount(1)
Capitalization Rates(2)
Book Amount(3)
Triple-net
$
450,537
6.7%
$
526,814
Seniors housing operating
1,680,165
6.2%
1,801,446
Outpatient medical
51,434
6.3%
56,386
Totals
$
2,182,136
6.3%
$
2,384,646
(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected income to be received in cash divided by investment amounts.
(3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our consolidated financial statements for additional information.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Dispositions. The following summarizes property dispositions made during the year ended December 31, 2016 (dollars in thousands):
Properties
Proceeds(1)
Capitalization Rates(2)
Book Amount(3)
Triple-net
$
2,288,211
8.8%
$
1,773,614
Outpatient medical
80,300
7.9%
78,786
Totals
$
2,368,511
8.8%
$
1,852,400
(1) Represents pro rata proceeds received upon disposition including any seller financing.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of assets at time of disposition. See Note 5 to our consolidated financial statements for additional information.
Dividends. Our Board of Directors increased the annual cash dividend to $3.48 per common share ($0.87 per share quarterly), as compared to $3.44 per common share for 2016, beginning in February 2017. The dividend declared for the quarter ended December 31, 2016 represents the 183rd consecutive quarterly dividend payment.
Key Performance Indicators, Trends and Uncertainties
We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to operating performance, credit strength and concentration risk. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.
Operating Performance. We believe that net income attributable to common stockholders (“NICS”) is the most appropriate earnings measure. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”), net operating income from continuing operations (“NOI”) and same store NOI (“SSNOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations of FFO, NOI and SSNOI. These earnings measures are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands):
Year Ended December 31,
Net income attributable to common stockholders
$
446,745
$
818,344
$
1,012,397
Funds from operations attributable to common stockholders
1,174,081
1,409,640
1,593,143
Net operating income from continuing operations
1,940,188
2,237,569
2,404,177
Same store net operating income
1,404,158
1,425,795
1,445,748
Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and IRC section 1031 deposits. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) which is discussed in further detail, and reconciled to net income, below in “Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:
Year Ended December 31,
Net debt to book capitalization ratio
43%
45%
43%
Net debt to undepreciated book capitalization ratio
38%
40%
37%
Net debt to market capitalization ratio
28%
33%
31%
Adjusted interest coverage ratio
3.73x
4.20x
4.19x
Adjusted fixed charge coverage ratio
2.96x
3.32x
3.32x
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Concentration Risk. We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns. Property mix measures the portion of our NOI that relates to our various property types. Relationship mix measures the portion of our NOI that relates to our top five relationships. Geographic mix measures the portion of our NOI that relates to our top five states (or international equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:
December 31,
Property mix:(1)
Triple-net
53%
54%
50%
Seniors housing operating
33%
31%
34%
Outpatient medical
14%
15%
16%
Relationship mix:(1)
Genesis Healthcare
16%
17%
16%
Sunrise Senior Living(2)
15%
13%
13%
Revera
4%
5%
6%
Brookdale Senior Living(2)
9%
7%
6%
Benchmark Senior Living
4%
4%
4%
Remaining customers
52%
54%
55%
Geographic mix:(1)
California
10%
10%
10%
New Jersey
8%
8%
8%
Canada
5%
6%
7%
United Kingdom
7%
9%
7%
Texas
7%
7%
7%
Remaining
63%
60%
61%
(1) Excludes our share of investments in unconsolidated entities and non-segment/corporate NOI. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount.
(2) Revera owns a controlling interest in Sunrise Senior Living.
We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. Factors that may cause actual results to differ from expected results are described in more detail in “Item 1 - Business - Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A - Risk Factors” and other sections of this Annual Report on Form 10-K. Management regularly monitors economic and other factors to develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and Company-specific trends. Please refer to “Item 1 - Business,” “Item 1A - Risk Factors” and “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for further discussion of these risk factors.
Corporate Governance
Maintaining investor confidence and trust is important in today’s business environment. Our Board of Directors and management are strongly committed to policies and procedures that reflect the highest level of ethical business practices. Our corporate governance guidelines provide the framework for our business operations and emphasize our commitment to increase stockholder value while meeting all applicable legal requirements. These guidelines meet the listing standards adopted by the New York Stock Exchange and are available on the Internet at www.welltower.com/investors/governance. The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.
Liquidity and Capital Resources
Sources and Uses of Cash
Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses, and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of our sources and uses of cash flows (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Beginning cash and cash equivalents
$
158,780
$
473,726
$
314,946
198%
$
360,908
$
(112,818)
-24%
$
202,128
127%
Cash provided from (used in):
Operating activities
1,138,670
1,373,468
234,798
21%
1,628,695
255,227
19%
490,025
43%
Investing activities
(2,126,206)
(3,484,160)
(1,357,954)
64%
(309,503)
3,174,657
-91%
1,816,703
-85%
Financing activities
1,303,172
2,006,449
703,277
54%
(1,240,448)
(3,246,897)
n/a
(2,543,620)
n/a
Effect of foreign currency translation on cash and cash equivalents
(690)
(8,575)
(7,885)
1,143%
(20,274)
(11,699)
136%
(19,584)
2,838%
Ending cash and cash equivalents
$
473,726
$
360,908
$
(112,818)
-24%
$
419,378
$
58,470
16%
$
(54,348)
-11%
Operating Activities. The change in net cash provided from operating activities is primarily attributable to increases in NOI, which is primarily due to acquisitions, net of dispositions. Please see “Results of Operations” for further discussion. For the years ended December 31, 2014, 2015 and 2016, cash flows from operations exceeded cash distributions to stockholders.
Investing Activities. The changes in net cash used in investing activities are primarily attributable to net changes in real property investments, real estate loans receivable and investments in unconsolidated entities which are summarized above in “Key Transactions in 2016.” Please refer to Notes 3 and 6 of our consolidated financial statements for additional information. The following is a summary of cash used in non-acquisition capital improvement activities (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
New development
$
197,881
$
244,561
$
46,680
24%
$
403,131
$
158,570
65%
$
205,250
104%
Recurring capital expenditures, tenant improvements and lease commissions
59,134
64,458
5,324
9%
66,332
1,874
3%
7,198
12%
Renovations, redevelopments and other capital improvements
73,646
123,294
49,648
67%
152,814
29,520
24%
79,168
107%
Total
$
330,661
$
432,313
$
101,652
31%
$
622,277
$
189,964
44%
$
291,616
88%
The change in new development is primarily due to the number and size of construction projects on-going during the relevant periods. Renovations, redevelopments and other capital improvements include expenditures to maximize property value, increase net operating income, maintain a market-competitive position and/or achieve property stabilization. Generally, these expenditures have increased as a result of acquisitions, primarily in our seniors housing operating segment.
Financing Activities. The changes in net cash provided from financing activities are primarily attributable to changes related to our long-term debt arrangements, the issuance/redemptions of common and preferred stock, and dividend payments which are summarized above in “Key Transactions in 2016.” Please refer to Notes 9, 10 and 13 of our consolidated financial statements for additional information.
Off-Balance Sheet Arrangements
At December 31, 2016, we had investments in unconsolidated entities with our ownership ranging from 10% to 50%. Please see Note 7 to our consolidated financial statements for additional information. We use financial derivative instruments to hedge interest rate and foreign currency exchange rate exposure. Please see Note 11 to our consolidated financial statements for additional information. At December 31, 2016, we had twelve outstanding letter of credit obligations. Please see Note 12 to our consolidated financial statements for additional information.
Contractual Obligations
The following table summarizes our payment requirements under contractual obligations as of December 31, 2016 (in thousands):
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Payments Due by Period
Contractual Obligations
Total
2018-2019
2020-2021
Thereafter
Unsecured revolving credit facility(1)
$
645,000
$
-
$
-
$
645,000
$
-
Senior unsecured notes and term credit facilities:(2)
U.S. Dollar senior unsecured notes
6,050,000
-
1,050,000
900,000
4,100,000
Canadian Dollar senior unsecured notes(3)
223,447
-
-
223,447
-
Pounds Sterling senior unsecured notes(3)
1,295,385
-
-
-
1,295,385
U.S. Dollar term credit facility
505,000
-
5,000
500,000
-
Canadian Dollar term credit facility(3)
186,206
-
-
186,206
-
Secured debt:(2,3)
Consolidated
3,465,066
550,620
1,321,310
516,038
1,077,098
Unconsolidated
668,282
22,886
153,360
40,919
451,117
Contractual interest obligations:(4)
Unsecured revolving credit facility
53,638
10,728
21,455
21,455
-
Senior unsecured notes and term loans(3)
3,386,130
352,450
686,783
578,625
1,768,272
Consolidated secured debt(3)
623,851
132,620
188,243
121,016
181,972
Unconsolidated secured debt(3)
163,201
24,801
49,414
33,968
55,018
Capital lease obligations(5)
93,836
4,731
9,012
8,346
71,747
Operating lease obligations(5)
1,105,992
16,939
34,332
33,457
1,021,264
Purchase obligations(5)
523,099
242,962
277,995
-
2,142
Other long-term liabilities(6)
4,179
1,475
2,704
-
-
Total contractual obligations
$
18,992,312
$
1,360,212
$
3,799,608
$
3,808,477
$
10,024,015
(1) Relates to our unsecured revolving credit facility with an aggregate commitment of $3,000,000,000. See Note 9 to our consolidated financial statements.
(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(3) Based on foreign currency exchange rates in effect as of balance sheet date.
(4) Based on variable interest rates in effect as of balance sheet date.
(5) See Note 12 to our consolidated financial statements.
(6) Primarily relates to payments to be made under our Supplemental Executive Retirement Plan, which is discussed in Note 19 to the consolidated financial statements.
Capital Structure
Please refer to “Credit Strength” above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. As of December 31, 2016, we were in compliance with all of the covenants under our debt agreements. None of our debt agreements contain provisions for acceleration which could be triggered by our debt ratings. However, under our primary unsecured credit facility, the ratings on our senior unsecured notes are used to determine the fees and interest charged. We plan to manage the Company to maintain compliance with our debt covenants and with a capital structure consistent with our current profile. Any downgrades in terms of ratings or outlook by any or all of the rating agencies could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition.
On May 1, 2015, we filed with the Securities and Exchange Commission (1) an open-ended automatic or “universal” shelf registration statement covering an indeterminate amount of future offerings of debt securities, common stock, preferred stock, depositary shares, warrants and units and (2) a registration statement in connection with our enhanced dividend reinvestment plan under which we may issue up to 15,000,000 shares of common stock. As of January 31, 2017, 7,737,978 shares of common stock remained available for issuance under this registration statement. We have entered into separate Equity Distribution Agreements with each of UBS Securities LLC, KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. relating to the offer and sale from time to time of up to $630,015,000 aggregate amount of our common stock (“Equity Shelf Program”). As of January 31, 2017, we had $170,640,000 of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our primary unsecured credit facility.
Results of Operations
Summary
Our primary sources of revenue include rent, resident fees and services, and interest income. Our primary expenses include interest
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
expense, depreciation and amortization, property operating expenses, transaction costs and general and administrative expenses. We evaluate our business and make resource allocations on our three business segments: triple-net, seniors housing operating and outpatient medical. The primary performance measures for our properties are NOI and SSNOI, which are discussed below. Please see Note 17 to our consolidated financial statements for additional information. The following is a summary of our results of operations (dollars in thousands, except per share amounts):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
Amount
%
Amount
%
Amount
%
Net income attributable to common stockholders
$
446,745
$
818,344
$
371,599
83%
$
1,012,397
$
194,053
24%
$
565,652
127%
Funds from operations attributable to common stockholders
1,174,081
1,409,640
235,559
20%
1,593,143
183,503
13%
419,062
36%
Adjusted EBITDA
1,813,241
2,091,754
278,513
15%
2,246,507
154,753
7%
433,266
24%
Net operating income from continuing operations
1,940,188
2,237,569
297,381
15%
2,404,177
166,608
7%
463,989
24%
Same store NOI
1,404,158
1,425,795
21,637
2%
1,445,748
19,953
1%
41,590
3%
Per share data (fully diluted):
Net income attributable to common stockholders
$
1.45
$
2.34
$
0.89
61%
$
2.81
$
0.47
20%
$
1.36
94%
Funds from operations attributable to common stockholders
3.82
4.03
0.21
5%
4.42
0.39
10%
0.60
16%
Adjusted interest coverage ratio
3.73x
4.20x
0.47x
13%
4.19x
-0.01x
0%
0.46x
12%
Adjusted fixed charge coverage ratio
2.96x
3.32x
0.36x
12%
3.32x
0.00x
0%
0.36x
12%
The following table represents the changes in outstanding common stock for the period from January 1, 2014 to December 31, 2016 (in thousands):
Year Ended
December 31, 2014
December 31, 2015
December 31, 2016
Totals
Beginning balance
289,564
328,790
354,778
289,564
Public offerings
33,925
19,550
-
53,475
Dividend reinvestment plan issuances
4,123
4,024
4,145
12,292
Senior note conversions
1,330
-
1,589
Preferred stock conversions
-
-
Option exercises
Equity Shelf Program issuances
-
3,135
3,831
Other, net
Ending balance
328,790
354,778
362,602
362,602
Average number of shares outstanding:
Basic
306,272
348,240
358,275
Diluted
307,747
349,424
360,227
During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, a large portion of our earnings are derived primarily from long-term investments with predictable rates of return. These investments are mainly financed with a combination of equity, senior unsecured notes, secured debt and borrowings under our primary unsecured credit facility. During inflationary periods, which generally are accompanied by rising interest rates, our ability to grow may be adversely affected because the yield on new investments may increase at a slower rate than new borrowing costs. Presuming the current inflation rate remains moderate and long-term interest rates do not increase significantly, we believe that inflation will not impact the availability of equity and debt financing for us.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Triple-net
The following is a summary of our NOI for the triple-net segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
SSNOI(1)
$
536,231
$
566,188
$
29,957
6%
$
575,764
$
9,576
2%
$
39,533
7%
Non-cash NOI attributable to same store properties(1)
43,448
53,578
10,130
23%
44,215
(9,363)
-17%
2%
NOI attributable to non same store properties(2)
447,455
556,040
108,585
24%
588,881
32,841
6%
141,426
32%
NOI
$
1,027,134
$
1,175,806
$
148,672
14%
$
1,208,860
$
33,054
3%
$
181,726
18%
(1) Change is due to increases in cash and non-cash NOI (described below) related to 397 same store properties.
(2) Change is primarily due to the acquisition of 144 properties and the conversion of 26 construction projects into revenue-generating properties subsequent to January 1, 2014.
The following is a summary of our results of operations for the triple-net segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Revenues:
Rental income
$
992,638
$
1,094,827
$
102,189
10%
$
1,112,325
$
17,498
2%
$
119,687
12%
Interest income
32,255
74,108
41,853
130%
90,476
16,368
22%
58,221
181%
Other income
2,973
6,871
3,898
131%
6,059
(812)
-12%
3,086
104%
1,027,866
1,175,806
147,940
14%
1,208,860
33,054
3%
180,994
18%
Property operating expenses
-
(732)
-100%
-
-
n/a
(732)
-100%
Net operating income from continuing operations (NOI)
1,027,134
1,175,806
148,672
14%
1,208,860
33,054
3%
181,726
18%
Other expenses:
Interest expense
32,135
28,384
(3,751)
-12%
21,370
(7,014)
-25%
(10,765)
-33%
Loss (gain) on derivatives, net
(1,770)
(58,427)
(56,657)
3,201%
58,495
-100%
1,838
-104%
Depreciation and amortization
273,296
288,242
14,946
5%
297,197
8,955
3%
23,901
9%
Transaction costs
45,146
53,195
8,049
18%
10,016
(43,179)
-81%
(35,130)
-78%
Loss (gain) on extinguishment of debt, net
10,095
9,997
10,201%
(9,232)
-91%
781%
Provision for loan losses
-
-
-
n/a
6,935
6,935
n/a
6,935
n/a
Impairment of assets
-
2,220
2,220
n/a
20,169
17,949
809%
20,169
n/a
Other expenses
8,825
35,648
26,823
304%
-
(35,648)
-100%
(8,825)
-100%
357,730
359,357
1,627
%
356,618
(2,739)
-1%
(1,112)
0%
Income from continuing operations before income taxes and income (loss) from unconsolidated entities
669,404
816,449
147,045
22%
852,242
35,793
4%
182,838
27%
Income tax benefit (expense)
6,141
(4,244)
(10,385)
n/a
(1,087)
3,157
-74%
(7,228)
-118%
Income (loss) from unconsolidated entities
5,423
8,260
2,837
52%
9,767
1,507
18%
4,344
80%
Income from continuing operations
680,968
820,465
139,497
20%
860,922
40,457
5%
179,954
26%
Discontinued operations, net
7,135
-
(7,135)
-100%
-
-
n/a
(7,135)
-100%
Gain (loss) on real estate dispositions, net
146,205
86,261
(59,944)
-41%
355,394
269,133
312%
209,189
143%
Net income
834,308
906,726
72,418
9%
1,216,316
309,590
34%
382,008
46%
Less: Net income attributable to noncontrolling interests
1,874
6,348
4,474
239%
1,221
(5,127)
-81%
(653)
-35%
Net income attributable to common stockholders
$
832,434
$
900,378
$
67,944
8%
$
1,215,095
$
314,717
35%
$
382,661
46%
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The increase in rental income is primarily attributable to the acquisitions of new properties and the conversion of newly constructed triple-net properties from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the three months ended December 31, 2016, we had no lease renewals but we had 26 leases with rental rate increasers ranging from 0.07% to 0.60% in our triple-net portfolio.
The increase in interest income is attributable to higher loan volume in the current year, which includes first mortgage loans to Genesis Healthcare. The decrease in other income is due to the receipt of an early prepayment fee in 2015 related to a real estate loan receivable.
During the year ended December 31, 2016, we completed two triple-net construction projects totaling $46,094,000 or $251,880 per bed/unit and one expansion project totaling $2,879,000. The following is a summary of triple-net construction projects pending as of December 31, 2016 (dollars in thousands):
Location
Units/Beds
Commitment
Balance
Est. Completion
Raleigh, NC
$
95,700
$
83,566
1Q17
Livingston, NJ
53,439
37,566
1Q17
Edmond, OK
27,300
23,881
1Q17
Tulsa, OK
28,500
19,197
1Q17
Lititz, PA
15,200
13,867
1Q17
Lancaster, PA
15,875
12,778
1Q17
Piscataway, NJ
40,800
34,924
2Q17
Bracknell, England
15,573
10,394
2Q17
Alexandria,VA
60,156
20,918
1Q18
Total
1,096
$
352,543
$
257,091
Total interest expense represents secured debt interest expense and gains and losses on forward exchange contracts. The change in secured debt interest expense is due to the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The following is a summary of our triple-net secured debt principal activity (dollars in thousands):
Year Ended
Year Ended
Year Ended
December 31, 2014
December 31, 2015
December 31, 2016
Weighted Avg.
Weighted Avg.
Weighted Avg.
Amount
Interest Rate
Amount
Interest Rate
Amount
Interest Rate
Beginning balance
$
587,136
5.394%
$
670,769
5.337%
$
554,014
5.488%
Debt issued
-
0.000%
-
0.000%
166,155
2.205%
Debt assumed
120,352
5.404%
44,142
5.046%
-
0.000%
Debt extinguished
(22,970)
6.235%
(132,545)
4.695%
(118,500)
5.562%
Foreign currency
(2,180)
5.317%
(15,633)
5.315%
3,157
5.247%
Principal payments
(11,569)
5.564%
(12,719)
5.450%
(10,627)
5.682%
Ending balance
$
670,769
5.337%
$
554,014
5.488%
$
594,199
4.580%
Monthly averages
$
596,941
5.381%
$
551,803
5.518%
$
497,213
5.414%
In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis Healthcare Corporation. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis Healthcare. In February 2015, Genesis Healthcare closed on a transaction to merge with Skilled Healthcare Group to become a publicly traded company which required us to record the value of the derivative asset due to the net settlement feature. This event resulted in $58,427,000 gain. During the fourth quarter of 2015, the cost basis of this investment exceeded the fair value. Management performed an assessment to determine whether the decline in fair value was other than temporary and concluded that it was. As a result, we recognized an other than temporary impairment charge of $35,648,000 which is recorded in other expense.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Depreciation and amortization increased primarily as a result of new property acquisitions and the conversions of newly constructed properties. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly.
Transaction costs are costs incurred with property acquisitions including due diligence costs, fees for legal and valuation services, the termination of pre-existing relationships, lease termination expenses and other similar costs. The change in transaction costs from year to year is primarily a function of investment volume. The fluctuations in loss (gain) on extinguishment of debt is primarily attributable to the volume of extinguishments and terms of the related secured debt.
Changes in gains on sales of properties are related to the volume of property sales and the sales prices. We recognized impairment losses on certain held-for-sale properties as the fair value less estimated costs to sell exceeded our carrying values.
During the year ended December 31, 2016, we recorded a provision for loan loss related to the restructuring of two first mortgage loans. During the years ended December 31, 2014 and 2015, we did not record a provision for loan loss or record loan write-offs. The provision for loan losses is related to our critical accounting estimate for the allowance for loan losses and is discussed in “Critical Accounting Policies” and Note 6 to our consolidated financial statements.
A portion of our triple-net properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income relating to those partnerships where we are the controlling partner.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Seniors Housing Operating
The following is a summary of our NOI for the seniors housing operating segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
SSNOI(1)
$
625,732
$
614,044
$
(11,688)
-2%
$
619,850
$
5,806
1%
$
(5,882)
-1%
Non-cash NOI attributable to same store properties
(1,044)
(1,003)
-4%
(2,404)
(1,401)
140%
(1,360)
130%
NOI attributable to non same store properties(2)
6,575
88,221
81,646
1,242%
196,668
108,447
123%
190,093
2,891%
NOI
$
631,263
$
701,262
$
69,999
11%
$
814,114
$
112,852
16%
$
182,851
29%
(1) Relates to 278 same store properties.
(2) Primarily due to the acquisition of 137 properties subsequent to January 1, 2014.
The following is a summary of our results of operations for the seniors housing operating segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Revenues:
Resident fees and services
$
1,892,237
$
2,158,031
$
265,794
14%
$
2,504,731
$
346,700
16%
$
612,494
32%
Interest income
2,119
4,180
2,061
97%
4,180
-
0%
2,061
97%
Other income
3,215
6,060
2,845
88%
17,085
11,025
182%
13,870
431%
1,897,571
2,168,271
270,700
14%
2,525,996
357,725
16%
628,425
33%
Property operating expenses
1,266,308
1,467,009
200,701
16%
1,711,882
244,873
17%
445,574
35%
Net operating income from continuing operations (NOI)
631,263
701,262
69,999
11%
814,114
112,852
16%
182,851
29%
Other expenses:
Interest expense
64,130
70,388
6,258
10%
81,853
11,465
16%
17,723
28%
Loss (gain) on derivatives, net
-
(275)
-100%
-
-
n/a
(275)
-100%
Depreciation and amortization
418,199
351,733
(66,466)
-16%
415,429
63,696
18%
(2,770)
-1%
Transaction costs
16,880
54,966
38,086
226%
29,207
(25,759)
-47%
12,327
73%
Loss (gain) on extinguishment of debt, net
(195)
(578)
-151%
(88)
-55%
(471)
-123%
Impairment of assets
-
-
-
n/a
12,403
12,403
n/a
12,403
n/a
Other expenses
1,437
-
(1,437)
-100%
-
-
n/a
(1,437)
-100%
501,304
476,892
(24,412)
-5%
538,804
61,912
13%
37,500
7%
(Loss) income from continuing operations before income from unconsolidated entities
129,959
224,370
94,411
73%
275,310
50,940
23%
145,351
112%
Income tax expense
(3,047)
4,033
-132%
(3,762)
(4,748)
-482%
(715)
23%
(Loss) income from unconsolidated entities
(38,204)
(32,672)
5,532
-14%
(20,442)
12,230
-37%
17,762
-46%
Net income (loss)
88,708
192,684
103,976
117%
251,106
58,422
30%
162,398
183%
Less: Net income (loss) attributable to noncontrolling interests
(2,335)
(1,438)
-38%
2,292
3,730
-259%
4,627
-198%
Net income (loss) attributable to common stockholders
$
91,043
$
194,122
$
103,079
113%
$
248,814
$
54,692
28%
$
157,771
173%
Fluctuations in revenues and property operating expenses are primarily a result of acquisitions and the movement of U.S. and foreign currency exchange rates. The increase in other income for the year ended December 31, 2016 is primarily a result of insurance proceeds received relating to a property as well as a bargain purchase gain recognized in conjunction with a single property acquisition. The fluctuations in depreciation and amortization are due to the net impact of acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly. Losses from unconsolidated entities are primarily attributable to depreciation and amortization of short-lived
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
intangible assets related to our investments in unconsolidated joint ventures with Chartwell in 2012, Sunrise in 2013 and Senior Resource Group in 2014.
During the year ended December 31, 2016, we completed one seniors housing operating construction project representing $18,979,000 or $210,878 per unit plus one expansion project representing $8,484,000. The following is a summary of our seniors housing operating construction projects, excluding expansions, pending as of December 31, 2016 (dollars in thousands):
Location
Units/Beds
Commitment
Balance
Est. Completion
Camberley, England
$
3,487
$
3,436
1Q17
Chertsey, England
38,160
18,727
1Q18
Bushey, England
48,861
16,949
2Q18
Total
$
90,508
39,112
New York, NY
Project in planning stage
126,781
$
165,893
Interest expense represents secured debt interest expense. Please refer to Note 10 to our consolidated financial statements for additional information. The following is a summary of our seniors housing operating property secured debt principal activity (dollars in thousands):
Year Ended
Year Ended
Year Ended
December 31, 2014
December 31, 2015
December 31, 2016
Weighted Avg.
Weighted Avg.
Weighted Avg.
Amount
Interest Rate
Amount
Interest Rate
Amount
Interest Rate
Beginning balance
$
1,714,714
4.622%
$
1,654,531
4.422%
$
2,290,552
3.958%
Debt issued
109,503
3.374%
228,685
2.776%
293,860
2.895%
Debt assumed
18,484
4.359%
842,316
3.420%
60,898
4.301%
Debt extinguished
(114,793)
3.626%
(285,599)
4.188%
(159,498)
3.656%
Foreign currency
(39,379)
3.727%
(110,691)
3.625%
26,549
3.483%
Principal payments
(33,998)
4.296%
(38,690)
4.126%
(49,112)
3.888%
Ending balance
$
1,654,531
4.422%
$
2,290,552
3.958%
$
2,463,249
3.936%
Monthly averages
$
1,657,416
4.515%
$
1,894,609
4.261%
$
2,391,706
3.926%
The fluctuations in gains/losses on debt extinguishments is primarily attributable the volume of extinguishments and terms of the related secured debt. During the year ended December 31, 2016, we recorded impairment charges totaling $12,403,000 relating to two properties. Transaction costs represent costs incurred with property 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 similar costs. The change in transaction costs from year to year is primarily a function of investment volume. The majority of our seniors housing operating properties are formed through partnership interests. Net income attributable to noncontrolling interests represents our partners’ share of net income or loss related to those partnerships where we are the controlling partner.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Outpatient Medical
The following is a summary of our NOI for the outpatient medical segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
SSNOI(1)
$
242,195
$
245,563
$
3,368
1%
$
250,134
$
4,571
2%
$
7,939
3%
Non-cash NOI attributable to same store properties(1)
8,015
5,186
(2,829)
-35%
2,440
(2,746)
-53%
(5,575)
-70%
NOI attributable to non same store properties(2)
30,904
108,661
77,757
252%
127,690
19,029
18%
96,786
313%
NOI
$
281,114
$
359,410
$
78,296
28%
$
380,264
$
20,854
6%
$
99,150
35%
(1) Due to increases in cash and non-cash NOI (described below) related to 176 same store properties.
(2) Primarily due to the acquisition of 54 properties and conversions of construction projects into 17 revenue-generating properties subsequent to January 1, 2013.
The following is a summary of our results of operations for the outpatient medical segment (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Revenues:
Rental income
$
413,129
$
504,121
$
90,992
22%
$
536,490
$
32,369
6%
$
123,361
30%
Interest income
3,293
5,853
2,560
78%
3,307
(2,546)
-43%
0%
Other income
1,010
4,684
3,674
364%
5,568
19%
4,558
451%
417,432
514,658
97,226
23%
545,365
30,707
6%
127,933
31%
Property operating expenses
136,318
155,248
18,930
14%
165,101
9,853
6%
28,783
21%
Net operating income from continuing operations (NOI)
281,114
359,410
78,296
28%
380,264
20,854
6%
99,150
35%
Other expenses:
Interest expense
31,050
27,542
(3,508)
-11%
19,087
(8,455)
-31%
(11,963)
-39%
Depreciation and amortization
152,635
186,265
33,630
22%
188,616
2,351
1%
35,981
24%
Transaction costs
7,512
2,765
(4,747)
-63%
3,687
33%
(3,825)
-51%
Loss (gain) on extinguishment of debt, net
-
(405)
-100%
-
-
n/a
(405)
-100%
Provision for loan losses
-
-
-
n/a
3,280
3,280
n/a
3,280
n/a
Impairment of assets
-
-
-
n/a
4,635
4,635
n/a
4,635
n/a
191,602
216,572
24,970
13%
219,305
2,733
1%
27,703
14%
Income from continuing operations before income taxes and income (loss) from unconsolidated entities
89,512
142,838
53,326
60%
160,959
18,121
13%
71,447
80%
Income tax expense
(1,827)
2,072
n/a
(511)
(756)
n/a
1,316
-72%
Income (loss) from unconsolidated entities
5,355
2,908
(2,447)
-46%
(2,590)
-89%
(5,037)
-94%
Income from continuing operations
93,040
145,991
52,951
57%
160,766
14,775
10%
67,726
73%
Gain (loss) on real estate dispositions, net
194,126
193,220
21,327%
(1,228)
(195,354)
n/a
(2,134)
n/a
Net income (loss)
93,946
340,117
246,171
262%
159,538
(180,579)
-53%
65,592
70%
Less: Net income (loss) attributable to noncontrolling interests
(110)
(718)
n/a
n/a
26%
Net income (loss) attributable to common stockholders
$
93,338
$
340,227
$
246,889
265%
$
158,770
$
(181,457)
-53%
$
65,432
70%
The increase in rental income is primarily attributable to the acquisitions of new properties and the conversion of newly constructed outpatient medical properties from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Revenue from real property that is sold would offset revenue increases and, to the extent that revenues from sold properties exceed those from new acquisitions, we would experience decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
three months ended December 31, 2016, our consolidated outpatient medical portfolio signed 81,930 square feet of new leases and 305,176 square feet of renewals. The weighted-average term of these leases was eight years, with a rate of $35.61 per square foot and tenant improvement and lease commission costs of $18.23 per square foot. Substantially all of these leases during the referenced quarter contain an annual fixed or contingent escalation rent structure ranging from the change in CPI to 5%.
The increase in other income is primarily attributable to the acquisition of a controlling interest in a portfolio of properties that were historically reported as unconsolidated property investments, and subsequent adjustments made to certain contingent receivables.
During the year ended December 31, 2016, we completed five outpatient medical construction projects representing $108,001,000 or $304 per square foot. The following is a summary of outpatient medical construction projects pending as of December 31, 2016 (dollars in thousands):
Location
Square Feet
Commitment
Balance
Est. Completion
Wausau, WI
43,883
$
14,100
$
13,125
1Q17
Castle Rock, CO
56,822
13,148
7,290
1Q17
Timmonium, MD
46,000
20,996
10,717
2Q17
Howell, MI
56,211
15,509
7,174
2Q17
Brooklyn, NY
140,955
103,624
39,867
1Q18
Total
343,871
$
167,377
$
78,173
Total interest expense represents secured debt interest expense. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. The following is a summary of our outpatient medical secured debt principal activity (dollars in thousands):
Year Ended
Year Ended
Year Ended
December 31, 2014
December 31, 2015
December 31, 2016
Weighted Avg.
Weighted Avg.
Weighted Avg.
Amount
Interest Rate
Amount
Interest Rate
Amount
Interest Rate
Beginning balance
$
700,427
5.999%
$
609,268
5.838%
$
627,689
5.177%
Debt assumed
66,113
3.670%
120,959
2.113%
-
0.000%
Debt extinguished
(141,796)
5.567%
(88,182)
5.257%
(210,115)
5.970%
Principal payments
(15,476)
5.797%
(14,356)
5.975%
(13,495)
6.552%
Ending balance
$
609,268
5.838%
$
627,689
5.177%
$
404,079
4.846%
Monthly averages
$
626,797
5.928%
$
613,155
5.434%
$
536,774
5.106%
The increases in property operating expenses and depreciation and amortization are primarily attributable to acquisitions and construction conversions of new outpatient medical facilities for which we incur certain property operating expenses. Transaction costs represent costs incurred with property acquisitions including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships, a lease termination expense and other similar costs. During the year ended December 31, 2016, we recorded a provision for loan loss related to our critical accounting estimate for the allowance for loan losses discussed in “Critical Accounting Policies” and Note 6 to our consolidated financial statements. In addition, we recognized impairment losses on certain held-for-sale properties as the fair value less estimated costs to sell exceeded our carrying values. Income from unconsolidated entities represents our share of net income or losses related to the periods for which we held a joint venture investment with Forest City Enterprises and certain unconsolidated property investments. Changes in gains/losses on sales of properties are related to volume of property sales and the sales prices.
A portion of our outpatient medical properties were formed through partnerships. Net income attributable to noncontrolling interests represents our partners’ share of net income or loss relating to those partnerships where we are the controlling partner.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Non-Segment/Corporate
The following is a summary of our results of operations for the non-segment/corporate activities (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Revenues:
Other income
$
$
1,091
$
61%
$
$
(152)
-14%
$
39%
Expenses:
Interest expense
353,724
365,855
12,131
3%
399,035
33,180
9%
45,311
13%
Loss (gain) on derivatives, net
-
-
-
n/a
(2,516)
(2,516)
n/a
(2,516)
n/a
General and administrative
142,943
147,416
4,473
3%
155,241
7,825
5%
12,298
9%
Loss (gain) on extinguishments of debt, net
8,672
24,777
16,105
186%
16,439
(8,338)
-34%
7,767
90%
Other expenses
-
10,583
10,583
n/a
11,998
1,415
13%
11,998
n/a
505,339
548,631
43,292
9%
580,197
31,566
6%
74,858
15%
Loss from continuing operations before income taxes
(504,662)
(547,540)
(42,878)
8%
(579,258)
(31,718)
6%
(74,596)
15%
Income tax expense
-
(3,438)
(3,438)
n/a
24,488
27,926
n/a
24,488
n/a
Net loss
(504,662)
(550,978)
(46,316)
9%
(554,770)
(3,792)
1%
(50,108)
10%
Preferred stock dividends
65,408
65,406
(2)
0%
65,406
-
0%
(2)
0%
Net loss attributable to common stockholders
$
(570,070)
$
(616,384)
$
(46,314)
8%
$
(620,176)
$
(3,792)
1%
$
(50,106)
9%
The following is a summary of our non-segment/corporate interest expense (dollars in thousands):
Year Ended
One Year Change
Year Ended
One Year Change
Two Year Change
December 31,
December 31,
December 31,
$
%
$
%
$
%
Senior unsecured notes
$
329,352
$
341,265
$
11,913
4%
$
368,775
$
27,510
8%
$
39,423
12%
Secured debt
(103)
-22%
(47)
-13%
(150)
-33%
Primary unsecured credit facility
8,914
10,812
1,898
21%
16,811
5,999
55%
7,897
89%
Loan expense
14,998
13,421
(1,577)
-11%
13,139
(282)
-2%
(1,859)
-12%
Totals
$
353,724
$
365,855
$
12,131
3%
$
399,035
$
33,180
9%
$
45,311
13%
The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments. Please refer to Note 10 to our consolidated financial statements for additional information. The increases in interest expense are attributed to the £500,000,000 Sterling-denominated senior unsecured notes issued in November 2014, the $300,000,000 Canadian-denominated senior unsecured notes issued in November 2015 and the $700,000,000 of 4.25% senior unsecured notes issued in March 2016. Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. Loan expense changes are due to amortization of charges for costs incurred in connection with senior unsecured note issuances. The change in interest expense on our primary unsecured credit facility is due primarily to the net effect and timing of draws, paydowns and variable interest rate changes. Please refer to Note 9 of our consolidated financial statements for additional information regarding our primary unsecured credit facility.
General and administrative expenses for 2014 included $19,688,000 of CEO transition costs. Excluding these costs, general and administrative expenses as a percentage of consolidated revenues for the years ended December 31, 2016, 2015 and 2014 were 3.63%, 3.82% and 3.69%, respectively. The loss on extinguishment of debt in 2015 is primarily due to the early extinguishment of the 2016 senior unsecured notes. The loss on extinguishment of debt in 2016 is due to the early extinguishment of the 2017 senior unsecured notes. Other expenses in 2016 and 2015 included costs associated with the departure of executive officers. Other expenses in 2015 also included costs associated with the termination of our investment in a strategic outpatient medical partnership.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Other
Non-GAAP Financial Measures
We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider funds from operations attributable to common stockholders (“FFO”), net operating income from continuing operations (“NOI”), same store NOI (“SSNOI”), EBITDA and Adjusted EBITDA to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests.
NOI is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our seniors housing operating and medical facility properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations or transaction costs. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. SSNOI is used to evaluate the operating performance of our properties under a consistent population which eliminates changes in the composition of our portfolio. As used herein, same store is generally defined as those revenue-generating properties in the portfolio for the reporting period subsequent to January 1, 2015. Land parcels, loans and sub-leases as well as any properties acquired, developed/redeveloped, transitioned, sold or classified as held for sale during that period are excluded from the same store amounts. We believe NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends.
A covenant in our primary unsecured credit facility contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial covenants, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for items per our covenant. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge coverage ratio of at least 1.50 times.
Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used to demonstrate our compliance with a comparable financial covenant in our primary unsecured credit facility and is not being presented for use by investors for any other purpose. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The table below reflects the reconciliation of FFO to net income attributable to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. The provisions for depreciation and amortization include provisions for depreciation and amortization from discontinued operations. Noncontrolling interest and unconsolidated entity amounts represent adjustments to reflect our share of depreciation and amortization. Amounts are in thousands except for per share data.
Year Ended December 31,
FFO Reconciliation:
Net income attributable to common stockholders
$
446,745
$
818,344
$
1,012,397
Depreciation and amortization
844,130
826,240
901,242
Impairment of assets
-
2,220
37,207
Loss (gain) on sales of properties, net
(153,522)
(280,387)
(364,046)
Noncontrolling interests
(37,852)
(39,271)
(71,527)
Unconsolidated entities
74,580
82,494
67,667
Funds from operations attributable to common stockholders
$
1,174,081
$
1,409,640
$
1,582,940
Average common shares outstanding:
Basic
306,272
348,240
358,275
Diluted
307,747
349,424
360,227
Per share data:
Net income attributable to common stockholders
Basic
$
1.46
$
2.35
$
2.83
Diluted
1.45
2.34
2.81
Funds from operations attributable to common stockholders
Basic
$
3.83
$
4.05
$
4.42
Diluted
3.82
4.03
4.39
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The table below reflects the reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense and the provisions for depreciation and amortization include discontinued operations. Dollars are in thousands.
Year Ended December 31,
Adjusted EBITDA Reconciliation:
Net income
$
512,300
$
888,549
$
1,082,070
Interest expense
481,196
492,169
521,345
Income tax expense (benefit), net
(1,267)
6,451
(19,128)
Depreciation and amortization
844,130
826,240
901,242
EBITDA
1,836,359
2,213,409
2,485,529
Stock-based compensation expense
32,075
30,844
28,869
Transaction costs
69,538
110,926
42,910
Provision for loan losses
-
-
10,215
Loss (gain) on extinguishment of debt, net
9,558
34,677
17,214
Loss/impairment (gain) on sales of properties, net
(153,522)
(278,167)
(326,839)
Loss (gain) on derivatives, net
(1,495)
(58,427)
(2,448)
CEO transition costs
10,465
-
-
Other expenses
10,262
40,636
7,721
Additional other income
-
(2,144)
(16,664)
Adjusted EBITDA
$
1,813,240
$
2,091,754
$
2,246,507
Adjusted Interest Coverage Ratio:
Interest expense
$
481,196
$
492,169
$
521,345
Capitalized interest
7,150
8,670
16,943
Non-cash interest expense
(2,427)
(2,586)
(1,681)
Total interest
485,919
498,253
536,607
Adjusted EBITDA
$
1,813,240
$
2,091,754
$
2,246,507
Adjusted interest coverage ratio
3.73x
4.20x
4.19x
Adjusted Fixed Charge Coverage Ratio:
Interest expense
$
481,196
$
492,169
$
521,345
Capitalized interest
7,150
8,670
16,943
Non-cash interest expense
(2,427)
(2,586)
(1,681)
Secured debt principal payments
62,280
67,064
74,466
Preferred dividends
65,408
65,406
65,406
Total fixed charges
613,607
630,723
676,479
Adjusted EBITDA
$
1,813,240
$
2,091,754
$
2,246,507
Adjusted fixed charge coverage ratio
2.96x
3.32x
3.32x
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following tables reflect the reconciliation of NOI and SSNOI to net operating income from continuing operations, the most directly comparable U.S. GAAP measure, for the periods presented. Dollar amounts are in thousands.
Year Ended December 31,
NOI Reconciliation:
Total revenues:
Triple-net
$
1,027,866
$
1,175,806
$
1,208,860
Seniors housing operating
1,897,571
2,168,271
2,525,996
Outpatient medical
417,432
514,658
545,365
Non-segment/corporate
1,091
Total revenues
3,343,546
3,859,826
4,281,160
Property operating expenses:
Triple-net
-
-
Seniors housing operating
1,266,308
1,467,009
1,711,882
Outpatient medical
136,318
155,248
165,101
Total property operating expenses
1,403,358
1,622,257
1,876,983
Net operating income:
Triple-net
1,027,134
1,175,806
1,208,860
Seniors housing operating
631,263
701,262
814,114
Outpatient medical
281,114
359,410
380,264
Non-segment/corporate
1,091
Net operating income from continuing operations
$
1,940,188
$
2,237,569
$
2,404,177
Year Ended December 31,
Same Store NOI Reconciliation:
Net operating income from continuing operations:
Triple-net
$
1,027,134
$
1,175,806
$
1,208,860
Seniors housing operating
631,263
701,262
814,114
Outpatient medical
281,114
359,410
380,264
Total
1,939,511
2,236,478
2,403,238
Adjustments:
Triple-net:
Non-cash NOI on same store properties
(43,448)
(53,578)
(44,215)
NOI attributable to non same store properties
(447,455)
(556,040)
(588,881)
Subtotal
(490,903)
(609,618)
(633,096)
Seniors housing operating:
Non-cash NOI on same store properties
1,044
1,003
2,404
NOI attributable to non same store properties
(6,575)
(88,221)
(196,668)
Subtotal
(5,531)
(87,218)
(194,264)
Outpatient medical:
Non-cash NOI on same store properties
(8,015)
(5,186)
(2,440)
NOI attributable to non same store properties
(30,904)
(108,661)
(127,690)
Subtotal
(38,919)
(113,847)
(130,130)
Total
(535,353)
(810,683)
(957,490)
Same store net operating income:
Triple-net
536,231
566,188
575,764
Seniors housing operating
625,732
614,044
619,850
Outpatient medical
242,195
245,563
250,134
Total
$
1,404,158
$
1,425,795
$
1,445,748
Same Store NOI Property Reconciliation:
Total properties
1,313
Acquisitions
(335)
Developments
(44)
Disposals/Held-for-sale
(72)
Segment transitions
(2)
Other(1)
(9)
Same store properties
(1) Includes eight land parcels and one loan.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers accounting estimates or assumptions critical if:
· the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
· the impact of the estimates and assumptions on financial condition or operating performance is material.
Management has discussed the development and selection of its critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to them. Management believes the current assumptions and other considerations used to estimate amounts reflected in our consolidated financial statements are appropriate and are not reasonably likely to change in the future. However, since these estimates require assumptions to be made that were uncertain at the time the estimate was made, they bear the risk of change. If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Please refer to Note 2 to our consolidated financial statements for further information on significant accounting policies that impact us and for the impact of new accounting standards, including accounting pronouncements that were issued but not yet adopted by us.
The following table presents information about our critical accounting policies, as well as the material assumptions used to develop each estimate:
Nature of Critical
Accounting Estimate
Assumptions/Approach
Used
Principles of Consolidation
The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries and the accounts of joint venture entities in which we own a majority voting interest with the ability to control operations and where no substantive participating rights or substantive kick out rights have been granted to the noncontrolling interests. In addition, we consolidate those entities deemed to be variable interest entities (VIEs) in which we are determined to be the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.
We make judgments about which entities are VIEs based on an assessment of whether (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We make judgments with respect to our level of influence or control of an entity and whether we are (or are not) the primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, our ability to direct the activities that most significantly impact the entity's economic performance, our form of ownership interest, our representation on the entity's governing body, the size and seniority of our investment, our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity, if applicable. Our ability to correctly assess our influence or control over an entity at inception of our involvement or on a continuous basis when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. If we perform a primary beneficiary analysis at a date other than at inception of the variable interest entity, our assumptions may be different and may result in the identification of a different primary beneficiary.
Income Taxes
As part of the process of preparing our consolidated financial statements, significant management judgment is required to evaluate our compliance with REIT requirements.
Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on the income tax expense recognized. Adjustments to income tax expense may be required as a result of: (i) audits conducted by federal, state and international tax authorities, (ii) our ability to qualify as a REIT, (iii) the potential for built-in-gain recognized related to prior-tax-free acquisitions of C corporations and (iv) changes in tax laws. Adjustments required in any given period are included in income.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Nature of Critical
Accounting Estimate
Assumptions/Approach
Used
Business Combinations
Real property developed by us is recorded at cost, including the capitalization of construction period interest. The cost of real property acquired is allocated to net tangible and identifiable intangible assets based on their respective fair values. Tangible assets primarily consist of land, buildings and improvements. The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value of in-place leases. The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant.
We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the acquisition based upon the relative fair value of each component. The most significant components of our allocations are typically the allocation of fair value to the buildings as-if-vacant, land and in-place leases. In the case of the fair value of buildings and the allocation of value to land and other intangibles, our estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in-place leases, we make our best estimates based on our evaluation of the specific characteristics of each tenant's lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases.
We compute depreciation and amortization on our properties using the straight-line method based on their estimated useful lives which range from 15 to 40 years for buildings and five to 15 years for improvements. Amortization periods for intangibles are based on the remaining life of the lease.
Allowance for Loan Losses
We maintain an allowance for loan losses in accordance with U.S. GAAP. The allowance for loan losses is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of all outstanding loans. If this evaluation indicates that there is a greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement or if it has been modified in a troubled debt restructuring. Consistent with this definition, all loans on non-accrual are deemed impaired. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status.
The determination of the allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments and principal. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying property. Any loans with collectability concerns are subjected to a projected payoff valuation. The valuation is based on the expected future cash flows and/or the estimated fair value of the underlying collateral. The valuation is compared to the outstanding balance to determine the reserve needed for each loan. We may base our valuation on a loan’s observable market price, if any, or the fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral.
Fair Value of Derivative Instruments
The valuation of derivative instruments is accounted for in accordance with U.S. GAAP, which requires companies to record derivatives at fair market value on the balance sheet as assets or liabilities.
The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values of our forward exchange contracts are estimated using pricing models that consider forward currency spot rates, forward trade rates and discount rates. Fair values of our interest rate swaps are estimated by utilizing pricing models that consider forward yield curves, discount rates and counterparty credit risk. Such amounts and their recognition are subject to significant estimates which may change in the future.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Nature of Critical
Accounting Estimate
Assumptions/Approach
Used
Revenue Recognition
Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. If the collectability of revenue is determined incorrectly, the amount and timing of our reported revenue could be significantly affected. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases contain fixed and/or contingent 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. We recognize resident fees and services, other than move-in fees, monthly as services are provided. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice.
We evaluate the collectability of our revenues and related receivables on an on-going basis. We evaluate collectability based on assumptions and other considerations including, but not limited to, the certainty of payment, payment history, the financial strength of the investment’s underlying operations as measured by cash flows and payment coverages, the value of the underlying collateral and guaranties and current economic conditions.
If our evaluation indicates that collectability is not reasonably assured, we may place an investment on non-accrual or reserve against all or a portion of current income as an offset to revenue.
Impairment of Long-Lived Assets
We review our long-lived assets for potential impairment in accordance with U.S. GAAP. An impairment charge must be recognized when the carrying value of a long-lived asset is not recoverable. The carrying value is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that a permanent impairment of a long-lived asset has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recognized for the difference between the carrying value and the fair value.
The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if there are indicators of impairment. These indicators may include anticipated operating losses at the property level, the tenant’s inability to make rent payments, a decision to dispose of an asset before the end of its estimated useful life and changes in the market that may permanently reduce the value of the property. If indicators of impairment exist, then the undiscounted future cash flows from the most likely use of the property are compared to the current net book value. This analysis requires us to determine if indicators of impairment exist and to estimate the most likely stream of cash flows to be generated from the property during the period the property is expected to be held.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates and foreign currency exchange rates. We seek to mitigate the underlying foreign currency exposures with gains and losses on derivative contracts hedging these exposures. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to match our variable rate investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. This section is a discussion of the risks associated with potential fluctuations in interest rates and foreign currency exchange rates. For additional information, see “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” and Notes 11 and 16 to our consolidated financial statements.
We historically borrow on our primary unsecured credit facility to acquire, construct or make loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue equity or long-term fixed rate debt to repay the borrowings under our primary unsecured credit facility. We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.
A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity or repaid by the sale of assets. To illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate debt instruments whereby we modeled the change in net present values arising from a hypothetical 1% increase in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis performed as of the dates indicated (in thousands):
December 31, 2016
December 31, 2015
Principal balance
Fair value change
Principal balance
Fair value change
Senior unsecured notes
$
7,568,832
$
(521,203)
$
7,965,107
$
(519,901)
Secured debt
2,489,276
(73,944)
2,757,123
(91,376)
Totals
$
10,058,108
$
(595,147)
$
10,722,230
$
(611,277)
Our variable rate debt, including our primary unsecured credit facility, is reflected at fair value. At December 31, 2016, we had $2,311,996,000 outstanding related to our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would result in increased annual interest expense of $23,120,000. At December 31, 2015, we had $2,236,733,000 outstanding under our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would have resulted in increased annual interest expense of $22,367,000.
We are subject to currency fluctuations that may, from time to time, affect our financial condition and results of operations. Increases or decreases in the value of the Canadian Dollar or Pounds Sterling relative to the U.S. Dollar impact the amount of net income we earn from our investments in Canada and the United Kingdom. Based solely on our results for the year ended December 31, 2016, including the impact of existing hedging arrangements, if these exchange rates were to increase or decrease by 10%, our net income from these investments would increase or decrease, as applicable, by less than $2,000,000. We will continue to mitigate these underlying foreign currency exposures with non-U.S. denominated borrowings and gains and losses on derivative contracts. If we increase our international presence through investments in, or acquisitions or development of, seniors housing and health care properties outside the U.S., we may also decide to transact additional business or borrow funds in currencies other than U.S. Dollars, Canadian Dollars or Pounds Sterling. To illustrate the impact of changes in foreign currency markets, we performed a sensitivity analysis on our derivative portfolio whereby we modeled the change in net present values arising from a hypothetical 1% increase in foreign currency exchange rates to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed, excluding cross currency hedge activity (dollars in thousands):
December 31, 2016
December 31, 2015
Carrying value
Fair value change
Carrying value
Fair value change
Foreign currency exchange contracts
$
87,962
$
$
117,452
$
1,915
Debt designated as hedges
1,481,591
13,000
1,728,979
13,000
Totals
$
1,569,553
$
13,722
$
1,846,431
$
14,915
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Welltower Inc.
We have audited the accompanying consolidated balance sheets of Welltower Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Welltower Inc. and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Welltower Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Toledo, Ohio
February 22, 2017
CONSOLIDATED BALANCE SHEETS
WELLTOWER INC. AND SUBSIDIARIES
December 31,
December 31,
Assets
(In thousands)
Real estate investments:
Real property owned:
Land and land improvements
$
2,591,071
$
2,563,445
Buildings and improvements
24,496,153
25,522,542
Acquired lease intangibles
1,402,884
1,350,585
Real property held for sale, net of accumulated depreciation
1,044,859
169,950
Construction in progress
506,091
258,968
Gross real property owned
30,041,058
29,865,490
Less accumulated depreciation and amortization
(4,093,494)
(3,796,297)
Net real property owned
25,947,564
26,069,193
Real estate loans receivable
622,628
819,492
Less allowance for losses on loans receivable
(6,563)
-
Net real estate loans receivable
616,065
819,492
Net real estate investments
26,563,629
26,888,685
Other assets:
Investments in unconsolidated entities
457,138
542,281
Goodwill
68,321
68,321
Cash and cash equivalents
419,378
360,908
Restricted cash
187,842
61,782
Straight-line receivable
342,578
395,562
Receivables and other assets
826,298
706,306
Total other assets
2,301,555
2,135,160
Total assets
$
28,865,184
$
29,023,845
Liabilities and equity
Liabilities:
Borrowings under primary unsecured credit facility
$
645,000
$
835,000
Senior unsecured notes
8,161,619
8,548,055
Secured debt
3,477,699
3,509,142
Capital lease obligations
73,927
75,489
Accrued expenses and other liabilities
827,034
697,191
Total liabilities
13,185,279
13,664,877
Redeemable noncontrolling interests
398,433
183,083
Equity:
Preferred stock
1,006,250
1,006,250
Common stock
363,071
354,811
Capital in excess of par value
16,999,691
16,478,300
Treasury stock
(54,741)
(44,372)
Cumulative net income
4,803,575
3,725,772
Cumulative dividends
(8,144,981)
(6,846,056)
Accumulated other comprehensive income (loss)
(169,531)
(88,243)
Other equity
3,059
4,098
Total Welltower Inc. stockholders’ equity
14,806,393
14,590,560
Noncontrolling interests
475,079
585,325
Total equity
15,281,472
15,175,885
Total liabilities and equity
$
28,865,184
$
29,023,845
See accompanying notes
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
WELLTOWER INC. AND SUBSIDIARIES
(In thousands, except per share data)
Year Ended December 31,
Revenues:
Rental income
$
1,648,815
$
1,598,948
$
1,405,767
Resident fees and services
2,504,731
2,158,031
1,892,237
Interest income
97,963
84,141
37,667
Other income
29,651
18,706
7,875
Total revenues
4,281,160
3,859,826
3,343,546
Expenses:
Interest expense
521,345
492,169
481,039
Property operating expenses
1,876,983
1,622,257
1,403,358
Depreciation and amortization
901,242
826,240
844,130
General and administrative
155,241
147,416
142,943
Transaction costs
42,910
110,926
69,538
Loss (gain) on derivatives, net
(2,448)
(58,427)
(1,495)
Loss (gain) on extinguishment of debt, net
17,214
34,677
9,558
Provision for loan losses
10,215
-
-
Impairment of assets
37,207
2,220
-
Other expenses
11,998
46,231
10,262
Total expenses
3,571,907
3,223,709
2,959,333
Income from continuing operations before income taxes
and income from unconsolidated entities
709,253
636,117
384,213
Income tax (expense) benefit
19,128
(6,451)
1,267
Income (loss) from unconsolidated entities
(10,357)
(21,504)
(27,426)
Income from continuing operations
718,024
608,162
358,054
Discontinued operations:
Gain (loss) on sales of properties, net
-
-
6,411
Income (loss) from discontinued operations, net
-
-
Discontinued operations, net
-
-
7,135
Gain (loss) on real estate dispositions, net
364,046
280,387
147,111
Net income
1,082,070
888,549
512,300
Less: Preferred stock dividends
65,406
65,406
65,408
Less: Net income (loss) attributable to noncontrolling interests(1)
4,267
4,799
Net income attributable to common stockholders
$
1,012,397
$
818,344
$
446,745
Average number of common shares outstanding:
Basic
358,275
348,240
306,272
Diluted
360,227
349,424
307,747
Earnings per share:
Basic:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$
2.83
$
2.35
$
1.44
Discontinued operations, net
-
-
0.02
Net income attributable to common stockholders*
$
2.83
$
2.35
$
1.46
Diluted:
Income from continuing operations attributable to common
stockholders, including real estate dispositions
$
2.81
$
2.34
$
1.43
Discontinued operations, net
-
-
0.02
Net income attributable to common stockholders*
$
2.81
$
2.34
$
1.45
* Amounts may not sum due to rounding
(1) Includes amounts attributable to redeemable noncontrolling interests
See accompanying notes
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)
WELLTOWER INC. AND SUBSIDIARIES
(In thousands)
Year Ended December 31,
Net income
$
1,082,070
$
888,549
$
512,300
Other comprehensive income (loss):
Unrecognized gain/(loss) on equity investments
5,120
-
Unrecognized gain/(loss) on cash flow hedges
1,414
(766)
4,409
Unrecognized actuarial gain/(loss)
(137)
Foreign currency translation gain/(loss)
(85,557)
(46,679)
(71,964)
Total other comprehensive income (loss)
(78,833)
(47,199)
(67,303)
Total comprehensive income
1,003,237
841,350
444,997
Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)
6,722
(31,166)
(14,678)
Total comprehensive income attributable to stockholders
$
996,515
$
872,516
$
459,675
(1) Includes amounts attributable to redeemable noncontrolling interests.
See accompanying notes
CONSOLIDATED STATEMENTS OF EQUITY
WELLTOWER INC. AND SUBSIDIARIES
(in thousands)
Accumulated
Capital in
Other
Preferred
Common
Excess of
Treasury
Cumulative
Cumulative
Comprehensive
Other
Noncontrolling
Stock
Stock
Par Value
Stock
Net Income
Dividends
Income
Equity
Interests
Total
Balances at December 31, 2013
$
1,017,361
$
289,461
$
12,418,520
$
(21,263)
$
2,329,869
$
(4,600,854)
$
(24,531)
$
6,020
$
341,748
$
11,756,331
Comprehensive income:
Net income
512,153
(342)
511,811
Other comprehensive income:
(52,478)
(14,825)
(67,303)
Total comprehensive income
444,508
Net change in noncontrolling interests
(17,653)
(28,685)
(46,338)
Amounts related to issuance of common stock
from dividend reinvestment and stock
incentive plans, net of forfeitures
22,710
(13,978)
(1,425)
7,644
Net proceeds from sale of common stock
38,546
2,305,322
2,343,868
Equity component of convertible debt
1,193
Conversion of preferred stock
(11,111)
10,878
-
Option compensation expense
Cash dividends paid:
Common stock cash dividends
(969,661)
(969,661)
Preferred stock cash dividends
(65,408)
(65,408)
Balances at December 31, 2014
1,006,250
328,835
14,740,712
(35,241)
2,842,022
(5,635,923)
(77,009)
5,507
297,896
13,473,049
Comprehensive income:
Net income
883,750
4,878
888,628
Other comprehensive income:
(11,234)
(35,965)
(47,199)
Total comprehensive income
841,429
Net change in noncontrolling interests
(23,077)
318,516
295,439
Amounts related to issuance of common stock
incentive plans, net of forfeitures
25,053
(9,131)
(2,107)
13,941
Net proceeds from sale of common stock
24,520
1,730,181
1,754,701
Equity component of convertible debt
1,330
5,431
6,761
Option compensation expense
Cash dividends paid:
Common stock cash dividends
(1,144,727)
(1,144,727)
Preferred stock cash dividends
(65,406)
(65,406)
Balances at December 31, 2015
1,006,250
354,811
16,478,300
(44,372)
3,725,772
(6,846,056)
(88,243)
4,098
585,325
15,175,885
Comprehensive income:
Net income
1,077,803
9,277
1,087,080
Other comprehensive income:
(81,288)
2,455
(78,833)
Total comprehensive income
1,008,247
Net change in noncontrolling interests
(51,478)
(121,978)
(173,456)
Amounts related to issuance of common stock
from dividend reinvestment and stock
incentive plans, net of forfeitures
46,938
(10,369)
(1,305)
36,103
Net proceeds from sale of common stock
7,421
525,931
533,352
Option compensation expense
Cash dividends paid:
Common stock cash dividends
(1,233,519)
(1,233,519)
Preferred stock cash dividends
(65,406)
(65,406)
Balances at December 31, 2016
$
1,006,250
$
363,071
$
16,999,691
$
(54,741)
$
4,803,575
$
(8,144,981)
$
(169,531)
$
3,059
$
475,079
$
15,281,472
See accompanying notes
CONSOLIDATED STATEMENTS OF CASH FLOWS
WELLTOWER INC. AND SUBSIDIARIES
Year Ended December 31,
(In thousands)
Operating activities
Net income
$
1,082,070
$
888,549
$
512,300
Adjustments to reconcile net income to
net cash provided from (used in) operating activities:
Depreciation and amortization
901,242
826,240
844,130
Other amortization expenses
8,822
4,991
6,971
Provision for loan losses
10,215
-
-
Impairment of assets
37,207
2,220
-
Stock-based compensation expense
28,869
30,844
32,075
Loss (gain) on derivatives, net
(2,448)
(58,427)
(1,495)
Loss (gain) on extinguishment of debt, net
17,214
34,677
9,558
Loss (income) from unconsolidated entities
10,357
21,504
27,426
Rental income in excess of cash received
(83,233)
(115,756)
(74,552)
Amortization related to above (below) market leases, net
4,018
Loss (gain) on sales of properties, net
(364,046)
(280,387)
(153,522)
Other (income) expense, net
(4,853)
31,979
-
Distributions by unconsolidated entities
1,065
9,060
Increase (decrease) in accrued expenses and other liabilities
3,929
(18,099)
(48,381)
Decrease (increase) in receivables and other assets
(18,037)
(25,639)
Net cash provided from (used in) operating activities
1,628,695
1,373,468
1,138,670
Investing activities
Cash disbursed for acquisitions
(2,145,590)
(3,364,891)
(2,210,600)
Cash disbursed for capital improvements to existing properties
(219,146)
(187,752)
(132,780)
Cash disbursed for construction in progress
(403,131)
(244,561)
(197,881)
Capitalized interest
(16,943)
(8,670)
(7,150)
Investment in real estate loans receivable
(129,884)
(598,722)
(202,207)
Other investments, net of payments
4,760
(141,994)
(100,033)
Principal collected on real estate loans receivable
249,552
131,830
105,496
Contributions to unconsolidated entities
(101,415)
(160,323)
(353,496)
Distributions by unconsolidated entities
119,723
130,880
57,183
Proceeds from (payments on) derivatives
108,347
106,360
10,269
Decrease (increase) in restricted cash
(125,844)
29,719
(6,072)
Proceeds from sales of real property
2,350,068
823,964
911,065
Net cash provided from (used in) investing activities
(309,503)
(3,484,160)
(2,126,206)
Financing activities
Net increase (decrease) under unsecured credit facilities
(190,000)
835,000
(130,000)
Proceeds from issuance of senior unsecured notes
693,560
1,451,434
773,992
Payments to extinguish senior unsecured notes
(865,863)
(558,830)
(365,188)
Net proceeds from the issuance of secured debt
460,015
228,685
109,503
Payments on secured debt
(563,759)
(573,390)
(341,839)
Net proceeds from the issuance of common stock
534,194
1,755,722
2,343,868
Decrease (increase) in deferred loan expenses
(22,196)
(11,513)
(16,782)
Contributions by noncontrolling interests(1)
148,666
173,018
9,962
Distributions to noncontrolling interests(1)
(134,578)
(50,877)
(43,691)
Acquisitions of noncontrolling interests
-
(5,663)
(1,175)
Cash distributions to stockholders
(1,298,925)
(1,210,133)
(1,035,069)
Other financing activities
(1,562)
(27,004)
(409)
Net cash provided from (used in) financing activities
(1,240,448)
2,006,449
1,303,172
Effect of foreign currency translation on cash and cash equivalents
(20,274)
(8,575)
(690)
Increase (decrease) in cash and cash equivalents
58,470
(112,818)
314,946
Cash and cash equivalents at beginning of period
360,908
473,726
158,780
Cash and cash equivalents at end of period
$
419,378
$
360,908
$
473,726
Supplemental cash flow information:
Interest paid
$
541,545
$
492,771
$
504,165
Income taxes paid
8,011
12,214
18,548
(1) Includes amounts attributable to redeemable noncontrolling interests.
See accompanying notes.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Welltower Inc., 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. WelltowerTM, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties. Founded in 1970, we were the first REIT to invest exclusively in health care facilities.
2. Accounting Policies and Related Matters
Principles of Consolidation
The consolidated financial statements include the accounts of our wholly-owned subsidiaries and joint venture (“JV”) entities that we control, through voting rights or other means. All material intercompany transactions and balances have been eliminated in consolidation. At inception of JV transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We consolidate investments in VIEs when we are determined to be the primary beneficiary. Accounting Standards Codification Topic 810, Consolidations (“ASC 810”), requires enterprises to perform a qualitative approach to determining whether or not a VIE will need to be consolidated on a continuous basis. This evaluation is based on an enterprise’s ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance. For investments in JVs, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner(s). We assess the limited partners’ rights and their impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership interests, or there is an increase or decrease in the number of outstanding limited partnership interests. We similarly evaluate the rights of managing members of limited liability companies.
Use of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recorded in accordance with U.S. GAAP, which requires that revenue be recognized after four basic criteria are met. These four criteria include persuasive evidence of an arrangement, the rendering of service, fixed and determinable income and reasonably assured collectability. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risk. Substantially all of our operating leases 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. Certain payments made to operators are treated as lease incentives and amortized as a reduction of revenue over the lease term. We recognize resident fees and services, other than move-in fees, monthly as services are provided. Lease agreements with residents generally have a term of one year and are cancelable by the resident with 30 days’ notice.
Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments with an original maturity of three months or less.
Restricted Cash
Restricted cash primarily consists of amounts held by lenders to provide future payments for real estate taxes, insurance, tenant and capital improvements, amounts held in escrow relating to acquisitions we are entitled to receive over a period of time as outlined in the escrow agreement and net proceeds from property sales that were executed as tax-deferred dispositions. At December 31, 2016, $138,281,000 of sales proceeds is on deposit in an Internal Revenue Code Section 1031 exchange escrow account with a qualified intermediary.
Deferred Loan Expenses
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Deferred loan expenses are costs incurred by us in connection with the issuance, assumption and amendments of debt arrangements. Deferred loan expenses related to debt instruments, excluding the primary unsecured credit facility, are recorded as a reduction of the related debt liability. Deferred loan expenses related to the primary unsecured credit facility are included in other assets. We amortize these costs over the term of the debt using the straight-line method, which approximates the effective interest method.
Investments in Unconsolidated Entities
Investments in entities that we do not consolidate but have the ability to exercise significant influence over operating and financial policies are reported under the equity method of accounting. Under the equity method, our share of the investee’s earnings or losses is included in our consolidated results of operations. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the entity interest inclusive of transaction costs. To the extent that our cost basis is different from the basis reflected at the entity level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in our share of equity in earnings of the entity. We evaluate our equity method investments for impairment based upon a comparison of the estimated fair value of the equity method investment to its carrying value. When we determine a decline in the estimated fair value of such an investment below its carrying value is other-than-temporary, an impairment is recorded.
Marketable Securities
We classify marketable securities as available-for-sale. These securities are carried at their fair value with unrealized gains and losses recognized in stockholders’ equity as a component of accumulated other comprehensive income (loss). When we determine declines in fair value of marketable securities are other-than-temporary, a loss is recognized in earnings.
Redeemable Noncontrolling Interests
Certain noncontrolling interests are redeemable at fair value. Accordingly, we record the carrying amount of the noncontrolling interests at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss and its share of other comprehensive income or loss and dividends or (ii) the redemption value. If it is probable that the interests will be redeemed in the future, we accrete the carrying value to the redemption value over the period until expected redemption, currently a weighted-average period of approximately four years. In accordance with ASC 810, the redeemable noncontrolling interests are classified outside of permanent equity, as a mezzanine item, in the balance sheet. At December 31, 2016, the current redemption value of redeemable noncontrolling interests exceeded the carrying value of $398,433,000 by $70,818,000.
During the year ended December 31, 2016, we determined that an immaterial portion of our noncontrolling interests related to a 2015 transaction was misclassified in permanent equity rather than temporary equity based on a redemption feature of the partnership agreement. We have corrected the $114,714,000 misclassification by recording the change in the consolidated statement of equity for the year ended December 31, 2016.
During 2014 and 2015, we entered into DownREIT partnerships which give a real estate seller the ability to exchange its property on a tax deferred basis for equity membership interests (“OP units”). The OP units may be redeemed any time following the first anniversary of the date of issuance at the election of the holders for one share of our common stock per unit or, at our option, cash.
Real Property Owned
Real property developed by us is recorded at cost, including the capitalization of construction period interest. Expenditures for repairs and maintenance are expensed as incurred. Property acquisitions are accounted for as business combinations where we measure the assets acquired, liabilities (including assumed debt and contingencies) and any noncontrolling interests at their fair values on the acquisition date. The cost of real property acquired, which represents substantially all of the purchase price, is allocated to net tangible and identifiable intangible assets based on their respective fair values. These properties are depreciated on a straight-line basis over their estimated useful lives which range from 15 to 40 years for buildings and 5 to 15 years for improvements. Tangible assets primarily consist of land, buildings and improvements, including those related to capital leases. We consider costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investment activities in our statement of cash flows.
The remaining purchase price is allocated among identifiable intangible assets primarily consisting of the above or below market component of in-place leases and the value associated with the presence of in-place tenants or residents. The value allocable to the above or below market component of the acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in acquired lease intangibles and below market leases are included in other liabilities in the balance sheet and are amortized to rental income over the remaining terms of the respective leases.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship values for in-place tenants based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The total amount of other intangible assets acquired is further allocated to in-place lease values for in-place residents with such value representing (i) value associated with lost revenue related to tenant reimbursable operating costs that would be incurred in an assumed re-leasing period, and (ii) value associated with lost rental revenue from existing leases during an assumed re-leasing period. This intangible asset will be amortized over the remaining life of the lease.
The net book value of long-lived assets is reviewed quarterly on a property by property basis to determine if facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be changed. We consider external factors relating to each asset and the existence of a master lease which may link the cash flows of an individual asset to a larger portfolio of assets leased to the same tenant. If these factors and the projected undiscounted cash flows of the asset over the remaining depreciation period indicate that the asset will not be recoverable, the carrying value is reduced to the estimated fair market value. In addition, we are exposed to the risks inherent in concentrating investments in real estate, and in particular, the seniors housing and health care industries. A downturn in the real estate industry could adversely affect the value of our properties and our ability to sell properties for a price or on terms acceptable to us.
Capitalization of Construction Period Interest
We capitalize interest costs associated with funds used for the construction of properties owned directly by us. The amount capitalized is based upon the balance outstanding during the construction period using the rate of interest which approximates our cost of financing. Our interest expense reflected in the consolidated statements of comprehensive income has been reduced by the amounts capitalized.
Gain on Sale of Assets
We recognize sales of assets only upon the closing of the transaction with the purchaser. Payments received from purchasers prior to closing are recorded as deposits and classified as other assets on our consolidated balance sheets. Gains on assets sold are recognized using the full accrual method upon closing when (i) the collectability of the sales price is reasonably assured, (ii) we are not obligated to perform significant activities after the sale to earn the profit, (iii) we have received adequate initial investment from the purchaser and (iv) other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate.
Real Estate Loans Receivable
Real estate loans receivable consist of mortgage loans and other real estate loans. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of collectability risks. The loans are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guaranties and/or personal guaranties.
Allowance for Losses on Loans Receivable
The allowance for losses on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the allowance is based on a quarterly evaluation of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical loan charge-offs, financial strength of the borrower and guarantors and value of the underlying collateral. If such factors indicate that there is greater risk of loan charge-offs, additional allowances or placement on non-accrual status may be required. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the original loan agreement. Consistent with this definition, all loans on non-accrual are deemed impaired. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to full accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance. Any loans with collectability concerns are subjected to a projected payoff valuation. The valuation is based on the expected future cash flows and/or the estimated fair value of the underlying collateral. The valuation is compared to the outstanding balance to determine the reserve needed for each loan. We may base our valuation on a loan’s observable market price, if any, or the fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral.
Goodwill
We account for goodwill in accordance with U.S. GAAP. Goodwill is tested annually for impairment and is tested for impairment
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount, including goodwill, exceeds the reporting unit’s fair value and the implied fair value of goodwill is less than the carrying amount of that goodwill. We have not had any goodwill impairments.
Fair Value of Derivative Instruments
Derivatives are recorded at fair value on the balance sheet as assets or liabilities. The valuation of derivative instruments requires us to make estimates and judgments that affect the fair value of the instruments. Fair values of our derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of our forward exchange contracts are estimated by pricing models that consider foreign currency spot rates, forward trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. See Note 11 for additional information.
Federal Income Tax
We have elected to be treated as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our first taxable year, and made no provision for federal income tax purposes prior to our acquisition of our “taxable REIT subsidiaries.” As a result of these as well as subsequent acquisitions, we now record income tax expense or benefit with respect to certain of our entities that are taxed as taxable REIT subsidiaries under provisions similar to those applicable to regular corporations and not under the REIT provisions. We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred tax liability that results from a change in circumstances, and that causes a change in our judgment about expected future tax consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances, and that causes a change in our judgment about the realizability of the related deferred tax asset, is included in the tax provision when such changes occur. See Note 18 for additional information.
Foreign Currency
Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. We translate the results of operations of our foreign subsidiaries into U.S. dollars using average rates of exchange in effect during the period, and we translate balance sheet accounts using exchange rates in effect at the end of the period. We record resulting currency translation adjustments in accumulated other comprehensive income, a component of stockholders’ equity, on our consolidated balance sheets. We record transaction gains and losses in our consolidated statements of comprehensive income.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares outstanding for the period adjusted for non-vested shares of restricted stock. The computation of diluted earnings per share is similar to basic earnings per share, except that the number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
Reclassifications
Certain amounts in prior years have been reclassified to conform to current year presentation.
Immaterial Error Correction
During the year ended December 31, 2016, we identified and corrected an immaterial mathematical error in the Consolidated Statement of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013. The error affected only the financial statement line item of “total comprehensive income attributable to stockholders” in the Consolidated Statement of Comprehensive Income. Total comprehensive income and total accumulated comprehensive income for all periods presented were not impacted. Additionally, no other line items within any of the other financial statements and none of the footnotes were impacted. The error resulted in an understatement of total comprehensive income attributable to stockholders of $62,332,000, $29,356,000 and $26,534,000 for the years ended December 31, 2015, 2014 and 2013, respectively. See the Consolidated Statement of Comprehensive Income for corrected total comprehensive income attributable to stockholders.
New Accounting Standards
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted beginning after December 15, 2016. A reporting entity may apply the new standard using either a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or a full retrospective approach. We are currently evaluating the impact of the adoption on our consolidated financial statements and have not yet determined the method by which we will adopt the standard. A significant source of revenue for the Company is generated through leasing arrangements, which are specifically excluded from the new standard. We expect that the new standard will affect our accounting policies related to non-lease revenue, including certain fees in our RIDEA joint ventures, common area maintenance in our outpatient medical properties and real estate sales. Under 2014-09, revenue recognition for real estate sales is mainly based on the transfer of control versus current guidance of continuing involvement. We expect that the new guidance will result in more transactions qualifying as sales of real estate and being recognized at an earlier date than under the current guidance.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting interest model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. We adopted ASU 2015-02 on January 1, 2016. This guidance did not have a significant impact on our consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”) to simplify the accounting for business combinations, specifically as it relates to measurement-period adjustments. Acquiring entities in a business combination must recognize measurement-period adjustments in the reporting period in which the adjustment amounts are determined. Also, ASU 2015-16 requires entities to present separately on the face of the income statement (or disclose in the notes to the financial statements) the portion of the amount recorded in the current period earnings, by line item, that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. We adopted ASU 2015-16 on January 1, 2016. This guidance did not have a significant impact on our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,” which will require entities to measure their investments at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The practicability exception will be available for equity investments that do not have readily determinable fair values. ASU 2016-01 is effective for fiscal years and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets and liabilities on their balance sheet related to the rights and obligations created by most leases, while continuing to recognize expenses on their income statements over the lease term. It will also require disclosures designed to give financial statement users information regarding amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We are currently evaluating the impact of this guidance on our consolidated financial statements. We believe that the adoption of this standard will likely have a material impact to our consolidated balance sheet for the recognition of certain operating leases as right-of-use assets and lease liabilities. Our operating lease obligations are described in Note 12 of the consolidated financial statements. We are in the process of analyzing our lease portfolio and evaluating systems to comply with the standard’s retrospective adoption requirements.
In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”. This standard simplifies the accounting treatment for excess tax benefits and deficiencies, forfeitures, and cash flow considerations related to share-based compensation. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We are currently evaluating the impact of the standard; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments”. This standard requires a new forward-looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. 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.
In January 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business”. This standard changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. A reporting entity must apply ASU 2017-01 using a prospective approach. Upon adoption, we expect that the majority of our real estate acquisitions will be deemed asset acquisitions rather than business combinations. We will record identifiable assets acquired, liabilities assumed and any noncontrolling interests associated with any asset acquisitions at cost on a relative fair value basis and will capitalize transaction costs. Furthermore, contingent considerations associated with asset acquisitions will be recorded when the contingency is resolved.
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 respective 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 property 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. Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Note 2 for information regarding our foreign currency policies. During the year ended December 31, 2016, we finalized our purchase price allocation of certain previously reported acquisitions and there were no material changes from those previously disclosed.
Triple-Net Activity
The following provides our purchase price allocations and other triple-net real property investment activity for the periods presented (in thousands):
Year Ended December 31,
2016(1)
Land and land improvements
$
104,754
$
95,835
$
141,387
Buildings and improvements
418,633
1,061,431
1,365,638
Acquired lease intangibles
2,876
4,408
19,196
Restricted cash
-
-
Receivables and other assets
4,895
Total assets acquired(2)
526,814
1,161,874
1,531,116
Secured debt
-
(47,741)
(130,638)
Senior unsecured notes
-
-
(48,567)
Accrued expenses and other liabilities
(3,384)
(2,905)
(9,067)
Total liabilities assumed
(3,384)
(50,646)
(188,272)
Noncontrolling interests
(26,771)
(13,465)
-
Non-cash acquisition related activity(3)
(51,733)
(38,355)
(3,453)
Cash disbursed for acquisitions
444,926
1,059,408
1,339,391
Construction in progress additions
181,084
143,140
135,349
Less: Capitalized interest
(8,729)
(5,699)
(4,582)
Accruals
Foreign currency translation
(3,665)
(167)
Non-cash related activity
-
-
(14,459)
Cash disbursed for construction in progress
168,690
137,274
116,729
Capital improvements to existing properties
32,603
45,293
18,901
Total cash invested in real property, net of cash acquired
$
646,219
$
1,241,975
$
1,475,021
(1) Includes acquisitions with an aggregate purchase price of $67,847,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2) Excludes $682,000, $16,572,000 and $1,382,000 of cash acquired during the years ended December 31, 2016, 2015 and 2014, respectively.
(3) For the year ended December 31, 2016, primarily relates to $45,044,000 for the acquisition of assets previously financed as real estate loans receivable and $6,630,000 previously financed as an equity investment. For the year ended December 31, 2015, primarily relates to $23,288,000 for the acquisition of assets previously financed as real estate loans receivable and $6,743,000 previously financed as equity investments.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Seniors Housing Operating Activity
Acquisitions of seniors housing operating properties are structured under RIDEA, which is described in Note 18. This structure results in the inclusion of all resident revenues and related property operating expenses from the operation of these qualified health care properties in our consolidated statements of comprehensive income.
The following is a summary of our seniors housing operating real property investment activity for the periods presented (in thousands):
Year Ended December 31,
2016(1)
Land and land improvements
$
164,653
$
218,581
$
57,534
Buildings and improvements
1,518,472
2,367,486
297,314
Acquired lease intangibles
115,643
187,512
12,983
Construction in progress
-
-
27,957
Restricted cash
11,798
Receivables and other assets
2,462
29,501
9,327
Total assets acquired(2)
1,801,446
2,814,878
405,919
Secured debt
(63,732)
(871,471)
(19,834)
Senior unsecured notes
-
(24,621)
-
Accrued expenses and other liabilities
(23,681)
(81,778)
(17,802)
Total liabilities assumed
(87,413)
(977,870)
(37,636)
Noncontrolling interests
(6,007)
(183,854)
(482)
Non-cash acquisition related activity(3)
(47,065)
-
-
Cash disbursed for acquisitions
1,660,961
1,653,154
367,801
Construction in progress additions
157,845
44,173
12,291
Less: Capitalized interest
(5,793)
(1,740)
(714)
Less: Foreign currency translation
(8,500)
(2,499)
(2,012)
Cash disbursed for construction in progress
143,552
39,934
9,565
Capital improvements to existing properties
138,673
104,308
86,803
Total cash invested in real property, net of cash acquired
$
1,943,186
$
1,797,396
$
464,169
(1) Includes an aggregate purchase price of $1,672,961,000 relating to acquisitions for which the allocation of the purchase price consideration is preliminary and subject to change.
(2) Excludes $135,000, $30,930,000 and $9,060,000 of cash acquired during the years ended December 31, 2016, 2015 and 2014, respectively.
(3) Primarily relates to the acquisition of assets previously financed as an equity investment.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Outpatient Medical Activity
Accrued contingent consideration related to certain outpatient medical acquisitions was $0, $0 and $27,374,000 as of December 31, 2016, 2015 and 2014, respectively. The following is a summary of our outpatient medical real property investment activity for the periods presented (in thousands):
Year Ended December 31,
2016(1)
Land and land improvements
$
5,738
$
223,708
$
63,129
Buildings and improvements
46,056
614,770
567,847
Acquired lease intangibles
4,592
45,226
46,661
Receivables and other assets
-
-
Total assets acquired(2)
56,386
884,643
677,637
Secured debt
-
(120,977)
(66,113)
Accrued expenses and other liabilities
(1,670)
(7,777)
(22,293)
Total liabilities assumed
(1,670)
(128,754)
(88,406)
Noncontrolling interests
-
(76,535)
(39,987)
Non-cash acquisition related activity
(15,013)(3)
(27,025)(4)
(45,836)(3)
Cash disbursed for acquisitions
39,703
652,329
503,408
Construction in progress additions
113,933
70,560
99,878
Less: Capitalized interest
(3,723)
(1,286)
(1,854)
Accruals(5)
(19,321)
(1,921)
(26,437)
Cash disbursed for construction in progress
90,889
67,353
71,587
Capital improvements to existing properties
47,870
38,151
27,076
Total cash invested in real property, net of cash acquired
$
178,462
$
757,833
$
602,071
(1) Includes acquisitions with an aggregate purchase price of $18,784,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2) Excludes $0, $5,522,000 and $0 of cash acquired during the years ended December 31, 2016, 2015 and 2014, respectively.
(3) The non-cash activity relates to the acquisition of assets previously financed as real estate loans. Please refer to Note 6 for additional information.
(4) The non-cash activity relates to the acquisition of a controlling interest in a portfolio of properties that was historically reported as an unconsolidated property investment.
(5) Represents non-cash consideration accruals for amounts to be paid in future periods relating to properties that converted in the periods noted above.
Construction Activity
The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented:
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Development projects:
Triple-net
$
46,094
$
104,844
$
71,569
Seniors housing operating
18,979
19,869
-
Outpatient medical
108,001
16,592
127,290
Total development projects
173,074
141,305
198,859
Expansion projects
11,363
38,808
24,804
Total construction in progress conversions
$
184,437
$
180,113
$
223,663
At December 31, 2016, future minimum lease payments receivable under operating leases (excluding properties in our seniors housing operating partnerships and excluding any operating expense reimbursements) are as follows (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
$
1,258,565
1,243,041
1,196,065
1,178,410
1,126,074
Thereafter
8,459,291
Totals
$
14,461,446
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):
December 31, 2016
December 31, 2015
Assets:
In place lease intangibles
$
1,252,143
$
1,179,537
Above market tenant leases
61,700
67,529
Below market ground leases
61,628
80,224
Lease commissions
27,413
23,295
Gross historical cost
1,402,884
1,350,585
Accumulated amortization
(966,714)
(881,096)
Net book value
$
436,170
$
469,489
Weighted-average amortization period in years
13.7
13.4
Liabilities:
Below market tenant leases
$
89,468
$
93,089
Above market ground leases
8,107
7,907
Gross historical cost
97,575
100,996
Accumulated amortization
(52,134)
(46,048)
Net book value
$
45,441
$
54,948
Weighted-average amortization period in years
15.2
14.5
The following is a summary of real estate intangible amortization for the periods presented (in thousands):
Year Ended December 31,
Rental income related to above/below market tenant leases, net
$
$
(2,746)
$
Property operating expenses related to above/below market ground leases, net
(1,241)
(1,272)
(1,248)
Depreciation and amortization related to in place lease intangibles and lease commissions
(132,141)
(115,855)
(214,966)
The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Assets
Liabilities
$
141,094
$
6,544
78,905
5,959
33,228
5,551
22,958
5,074
19,045
4,586
Thereafter
140,940
17,727
Totals
$
436,170
$
45,441
5. Dispositions, Assets Held for Sale and Discontinued Operations
We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (e.g. property type, operator or geography). Impairment of assets, as reflected in our consolidated statements of comprehensive income, primarily represents the charges necessary to adjust the carrying values of certain properties to estimated fair values less costs to sell. The following is a summary of our real property disposition activity for the periods presented (in thousands):
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Real property dispositions:
Triple-net
$
1,773,614
$
356,300
$
747,720
Outpatient medical(1)
78,786
181,553
45,695
Land parcels
-
5,724
-
Total dispositions
1,852,400
543,577
793,415
Gain (loss) on sales of real property, net
364,046
280,387
153,522
Net other assets/liabilities disposed
133,622
-
(35,872)
Proceeds from real property sales
$
2,350,068
$
823,964
$
911,065
(1) Dispositions occurring in the year ended December 31, 2015 primarily relate to the disposition of an unconsolidated equity investment with Forest City Enterprises.
During the year ended December 31, 2016, we completed two portfolio dispositions of properties leased to Genesis Healthcare for which we received loans for termination fees relating to the properties sold under the master lease. At December 31, 2016, $74,445,000 of principal is outstanding on the loans. The related termination fee income will be deferred and recognized as the principal balance of the loans are repaid.
Dispositions and Assets Held for Sale
Pursuant to our adoption of ASU No. 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” (ASU 2014-08”), 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):
Year Ended
December 31,
Revenues:
Rental income
$
310,390
$
352,615
$
401,640
Expenses:
Interest expense
49,599
64,741
80,893
Property operating expenses
10,846
12,117
14,127
Provision for depreciation
68,280
88,580
111,593
Total expenses
128,725
165,438
206,613
Income (loss) from real estate dispositions, net
$
181,665
$
187,177
$
195,027
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
6. Real Estate Loans Receivable
The following is a summary of our real estate loans receivable (in thousands):
December 31,
Mortgage loans
$
485,735
$
635,492
Other real estate loans
136,893
184,000
Totals
$
622,628
$
819,492
The following is a summary of our real estate loan activity for the periods presented (in thousands):
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Outpatient
Outpatient
Outpatient
Triple-net
Medical
Totals
Triple-net
Medical
Totals
Triple-net
Medical
Totals
Advances on real estate loans receivable:
Investments in new loans
$
8,445
$
-
$
8,445
$
530,497
$
-
$
530,497
$
61,730
$
60,902
$
122,632
Draws on existing loans
118,788
2,651
121,439
65,614
2,611
68,225
59,420
20,155
79,575
Net cash advances on real estate loans
127,233
2,651
129,884
596,111
2,611
598,722
121,150
81,057
202,207
Receipts on real estate loans receivable:
Loan payoffs
275,439
27,303
302,742
121,778
-
121,778
71,004
48,258
119,262
Principal payments on loans
6,867
-
6,867
33,340
-
33,340
31,998
32,070
Sub-total
282,306
27,303
309,609
155,118
-
155,118
103,002
48,330
151,332
Less: Non-cash activity(1)
(45,044)
(15,013)
(60,057)
(23,288)
-
(23,288)
-
(45,836)
(45,836)
Net cash receipts on real estate loans
237,262
12,290
249,552
131,830
-
131,830
103,002
2,494
105,496
Net cash advances (receipts) on real estate loans
(110,029)
(9,639)
(119,668)
464,281
2,611
466,892
18,148
78,563
96,711
Change in balance due to foreign currency translation
(14,086)
-
(14,086)
(4,281)
-
(4,281)
(2,852)
-
(2,852)
Loan impairments(2)
-
(3,053)
(3,053)
-
-
-
-
-
-
Net change in real estate loans receivable
$
(169,159)
$
(27,705)
$
(196,864)
$
436,712
$
2,611
$
439,323
$
15,296
$
32,727
$
48,023
(1) Represents an acquisition of assets previously financed as a real estate loan. Please see Note 3 for additional information.
(2) Represents a direct write down of an impaired loan receivable.
The Company restructured two existing real estate loans in the triple-net segment to Genesis Healthcare. The two existing loans, with a combined principal balance of $317,000,000, were scheduled to mature in 2017 and 2018. These loans were restructured into four separate loans effective October 1, 2016. Each loan has a five year term, a 10% interest rate and 25 basis point annual escalator. We 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. We expect to collect all principal amounts due under the loans.
The following is a summary of the allowance for losses on loans receivable for the periods presented (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
Balance at beginning of year
$
-
$
-
$
-
Provision for loan losses(1)
6,935
-
-
Change in present value
(372)
-
-
Balance at end of year
$
6,563
$
-
$
-
(1) Excludes direct write down of an impaired loan receivable.
The following is a summary of our loan impairments (in thousands):
Year Ended December 31,
Balance of impaired loans at end of year
$
377,549
$
-
$
21,000
Allowance for loan losses
6,563
-
-
Balance of impaired loans not reserved
$
370,986
$
-
$
21,000
Average impaired loans for the year
$
188,775
$
10,500
$
10,750
Interest recognized on impaired loans(1)
8,707
-
(1) Represents interest recognized in period since loans were identified as impaired.
7. 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 properties have been included in our consolidated results of operations from the date of acquisition by the joint ventures and are reflected in our Consolidated Statements of Comprehensive Income as income or loss from unconsolidated entities. The following is a summary of our investments in unconsolidated entities (dollars in thousands):
Percentage Ownership(1)
December 31, 2016
December 31, 2015
Triple-net
10% to 49%
$
27,005
$
36,351
Seniors housing operating
10% to 50%
407,172
499,537
Outpatient medical
43%
22,961
6,393
Total
$
457,138
$
542,281
(1) Excludes ownership of in-substance real estate.
At December 31, 2016, the aggregate unamortized basis difference of our joint venture investments of $149,147,000 is primarily attributable to the difference between the amount for which we purchased our interest in the entity, including transaction costs, and the historical carrying value of the net assets of the entity. This difference will be amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
8. Credit Concentration
We use net operating income from continuing operations (“NOI”) as our credit concentration metric. See Note 17 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the year ended December 31, 2016, excluding our share of NOI in unconsolidated entities (dollars in thousands):
Number of
Total
Percent of
Concentration by relationship:(1)
Properties
NOI
NOI(2)
Genesis Healthcare
$
373,577
16%
Sunrise Senior Living(3)
308,771
13%
Revera
153,712
6%
Brookdale Senior Living
151,337
6%
Benchmark Senior Living
96,958
4%
Remaining portfolio
1,319,822
55%
Totals
1,313
$
2,404,177
100%
(1) Genesis Healthcare is in our triple-net segment. Sunrise Senior Living and Revera are in our seniors housing operating segment. Brookdale Senior Living and Benchmark Senior Living are in both our triple-net and seniors housing operating segments.
(2) Investments with our top five relationships comprised 46% of total NOI in 2015.
(3) Revera owns a controlling interest in Sunrise Senior Living. For the year ended December 31, 2016, we recognized $998,783,000 of revenue from Sunrise Senior Living.
9. Borrowings Under Credit Facilities and Related Items
At December 31, 2016, we had a primary unsecured credit facility with a consortium of 29 banks that includes a $3,000,000,000 unsecured revolving credit facility, 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 December 31, 2016). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate (1.66% at December 31, 2016). The applicable margin is based on certain of our debt ratings and was 0.90% at December 31, 2016. In addition, we pay a facility fee quarterly to each bank based on the bank’s commitment amount. The facility fee depends on certain of our debt ratings and was 0.15% at December 31, 2016. The term credit facilities mature on May 13, 2021. The revolving credit facility is scheduled to mature on May 13, 2020 and can be extended for two successive terms of six months each at our option.
The following information relates to aggregate borrowings under the primary unsecured revolving credit facility for the periods presented (dollars in thousands):
Year Ended December 31,
Balance outstanding at year end(1)
$
645,000
$
835,000
$
-
Maximum amount outstanding at any month end
$
1,560,000
$
835,000
$
637,000
Average amount outstanding (total of daily
principal balances divided by days in period)
$
762,896
$
452,644
$
207,452
Weighted-average interest rate (actual interest
expense divided by average borrowings outstanding)
1.39%
1.17%
1.50%
(1) As of December 31, 2016, letters of credit in the aggregate amount of $41,878,000 have been issued, which reduce the available borrowing capacity on our primary unsecured revolving credit facility.
10. 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
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016, the annual principal payments due on these debt obligations were as follows (in thousands):
Senior
Secured
Unsecured Notes(1,2)
Debt (1,3)
Totals
$
-
$
550,620
$
550,620
450,000
697,557
1,147,557
605,000
623,753
1,228,753
2020(4)
673,447
166,932
840,379
2021(5,6)
1,136,206
349,106
1,485,312
Thereafter(7,8,9,10)
5,395,385
1,077,098
6,472,483
Totals
$
8,260,038
$
3,465,066
$
11,725,104
(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 1.4% to 6.5%.
(3) Annual interest rates range from 1.24% to 7.98%. Carrying value of the properties securing the debt totaled $6,149,872,000 at December 31, 2016.
(4) In November 2015, one of our wholly-owned subsidiaries issued and we guaranteed $300,000,000 of Canadian-denominated 3.35% senior unsecured notes due 2020 (approximately $223,447,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2016).
(5) On May 13, 2016, we refinanced the funding on a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $186,206,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2016). The loan matures on May 13, 2021 and bears interest at the Canadian Dealer Offered Rate plus 95 basis points (1.84% at December 31, 2016).
(6) On May 13, 2016, we refinanced the funding on a $500,000,000 unsecured term credit facility. The loan matures on May 13, 2021 and bears interest at LIBOR plus 95 basis points (1.63% at December 31, 2016).
(7) On November 20, 2013, we completed the sale of £550,000,000 (approximately $678,535,000 based on the Sterling/U.S. Dollar exchange rate in effect on December 31, 2016) of 4.8% senior unsecured notes due 2028.
(8) On November 25, 2014, we completed the sale of £500,000,000 (approximately $616,850,000 based on the Sterling/U.S. Dollar exchange rate in effect on December 31, 2016) of 4.5% senior unsecured notes due 2034.
(9) In May 2015, we issued $750,000,000 of 4.0% senior unsecured notes due 2025. In October 2015, we issued an additional $500,000,000 of these notes under a re-opening of the offer.
(10) In March 2016, we issued $700,000,000 of 4.25% senior unsecured notes due 2026.
The following is a summary of our senior unsecured note principal activity during the periods presented (dollars in thousands):
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Weighted Avg.
Weighted Avg.
Weighted Avg.
Amount
Interest Rate
Amount
Interest Rate
Amount
Interest Rate
Beginning balance
$
8,645,758
4.237%
$
7,817,154
4.385%
$
7,421,707
4.395%
Debt issued
705,000
4.228%
1,475,540
3.901%
838,804
4.572%
Debt assumed
-
0.000%
24,621
6.000%
-
0.000%
Debt extinguished
(850,000)
4.194%
(300,000)
6.200%
(298,567)
5.855%
Debt redeemed
-
0.000%
(240,249)
3.303%
(59,143)
3.000%
Foreign currency
(240,720)
4.565%
(131,308)
3.966%
(85,647)
4.222%
Ending balance
$
8,260,038
4.245%
$
8,645,758
4.237%
$
7,817,154
4.385%
The following is a summary of our secured debt principal activity for the periods presented (dollars in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Weighted Avg.
Weighted Avg.
Weighted Avg.
Amount
Interest Rate
Amount
Interest Rate
Amount
Interest Rate
Beginning balance
$
3,478,207
4.440%
$
2,941,765
4.940%
$
3,010,711
5.095%
Debt issued
460,015
2.646%
228,685
2.776%
109,503
3.374%
Debt assumed
60,898
4.301%
1,007,482
3.334%
204,949
4.750%
Debt extinguished
(489,293)
5.105%
(506,326)
4.506%
(279,559)
4.824%
Principal payments
(74,466)
4.663%
(67,064)
4.801%
(62,280)
4.930%
Foreign currency
29,705
3.670%
(126,335)
3.834%
(41,559)
3.811%
Ending balance
$
3,465,066
4.094%
$
3,478,207
4.440%
$
2,941,765
4.940%
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 December 31, 2016, we were in compliance with all of the covenants under our debt agreements.
11. Derivative Instruments
We are exposed to various market risks, including the potential loss arising from adverse changes in interest rates. We may elect to use financial derivative instruments to hedge interest rate exposure. These decisions are principally based on our policy to manage the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. In addition, non-U.S. investments expose us to the potential losses associated with adverse changes in foreign currency to U.S. Dollar exchange rates. We have elected to manage these risks through the use of forward exchange contracts and issuing debt in the foreign currency.
Interest Rate Swap Contracts and 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 reported 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. Approximately $7,650,000 of gains, which are included in accumulated other comprehensive income (“AOCI”), are expected to be reclassified into earnings in the next 12 months.
Foreign Currency Hedges
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 years ended December 31, 2016 and 2015, we settled certain net investment hedges generating cash proceeds of $108,347,000 and $106,360,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings when the hedged investment is sold or substantially liquidated.
The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016
December 31, 2015
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars
$
900,000
$
1,175,000
Denominated in Pounds Sterling
£
550,000
£
550,000
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
Derivatives designated as cash flow hedges
Denominated in U.S. Dollars
$
57,000
$
57,000
Denominated in Canadian Dollars
$
54,000
$
72,000
Denominated in Pounds Sterling
£
48,000
£
60,000
Derivative instruments not designated:
Denominated in Canadian Dollars
$
37,000
$
47,000
The following presents the impact of derivative instruments on the Consolidated Statements of Comprehensive Income for the periods presented (in thousands):
Year Ended
Location
December 31, 2016
December 31, 2015
December 31, 2014
Gain (loss) on forward exchange contracts recognized in income
Interest expense
$
8,544
$
14,474
$
-
Loss (gain) on option exercise(1)
Loss (gain) on derivatives, net
$
-
$
(58,427)
$
-
Gain on release of cumulative translation adjustment related to ineffectiveness on net investment hedge
Loss (gain) on derivatives, net
$
(2,516)
$
-
$
-
Gain (loss) on forward exchange contracts and term loans designated as net investment hedge recognized in OCI
OCI
$
357,021
$
298,116
$
103,140
(1) In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis Healthcare Corporation. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis Healthcare. In February 2015, Genesis Healthcare closed on a transaction to merge with Skilled Healthcare Group to become a publicly traded company which required us to record the value of the derivative asset due to the net settlement feature.
12. Commitments and Contingencies
At December 31, 2016, we had twelve outstanding letter of credit obligations totaling $174,799,000 and expiring between 2017 and 2024. At December 31, 2016, we had outstanding construction in process of $506,091,000 for leased properties and were committed to providing additional funds of approximately $493,972,000 to complete construction. At December 31, 2016, we had contingent purchase obligations totaling $29,127,000. 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.
We evaluate our leases for operating versus capital lease treatment in accordance with ASC Topic 840 “Leases.” A lease is classified as a capital lease if it provides for transfer of ownership of the leased asset at the end of the lease term, contains a bargain purchase option, has a lease term greater than 75% of the economic life of the leased asset, or if the net present value of the future minimum lease payments are in excess of 90% of the fair value of the leased asset. Certain leases contain bargain purchase options
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
and have been classified as capital leases. At December 31, 2016, we had operating lease obligations of $1,105,992,000 relating to certain ground leases and Company office space. Regarding the ground leases, we have sublease agreements with certain of our operators that require the operators to reimburse us for our monthly operating lease obligations. At December 31, 2016, aggregate future minimum rentals to be received under these noncancelable subleases totaled $74,744,000.
At December 31, 2016, future minimum lease payments due under operating and capital leases are as follows (in thousands):
Operating Leases
Capital Leases(1)
$
16,939
$
4,731
17,063
4,678
17,269
4,334
16,810
4,173
16,647
4,173
Thereafter
1,021,264
71,747
Totals
$
1,105,992
$
93,836
(1) Amounts above represent principal and interest obligations under capital lease arrangements. Related assets with a gross value of $167,324,000 and accumulated depreciation of $24,929,000 are recorded in real property.
13. Stockholders’ Equity
The following is a summary of our stockholder’s equity capital accounts as of the dates indicated:
December 31, 2016
December 31, 2015
Preferred Stock, $1.00 par value:
Authorized shares
50,000,000
50,000,000
Issued shares
25,875,000
25,875,000
Outstanding shares
25,875,000
25,875,000
Common Stock, $1.00 par value:
Authorized shares
700,000,000
700,000,000
Issued shares
363,576,924
355,594,373
Outstanding shares
362,602,173
354,777,670
Preferred Stock. The following is a summary of our preferred stock activity during the periods presented:
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Weighted Avg.
Weighted Avg.
Weighted Avg.
Shares
Dividend Rate
Shares
Dividend Rate
Shares
Dividend Rate
Beginning balance
25,875,000
6.500%
25,875,000
6.500%
26,108,236
6.496%
Shares converted
-
0.000%
-
0.000%
(233,236)
6.000%
Ending balance
25,875,000
6.500%
25,875,000
6.500%
25,875,000
6.500%
During the three months ended December 31, 2010, we issued 349,854 shares of 6.00% Series H Cumulative Convertible and Redeemable Preferred Stock in connection with a business combination. During the years ended December 31, 2013 and 2014, all shares were converted into common stock, leaving zero shares outstanding.
During the three months ended March 31, 2011, we issued 14,375,000 of 6.50% Series I Cumulative Convertible Perpetual Preferred Stock. These shares have a liquidation value of $50.00 per share. Dividends are payable quarterly in arrears. The preferred stock is not redeemable by us. The preferred shares are convertible, at the holder’s option, into 0.8460 shares of common stock (equal to an initial conversion price of approximately $59.10).
During the three months ended March 31, 2012, we issued 11,500,000 of 6.50% Series J Cumulative Redeemable Preferred Stock. Dividends are payable quarterly in arrears. On February 2, 2017, we announced that we will redeem all 11,500,000 shares outstanding
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
on March 7, 2017 at a redemption price of $25.00 per share plus accrued and unpaid dividends to, but not including, March 7, 2017.
Common Stock. The following is a summary of our common stock issuances during the periods indicated (dollars in thousands, except per share amounts):
Shares Issued
Average Price
Gross Proceeds
Net Proceeds
June 2014 public issuance
16,100,000
$
62.35
$
1,003,835
$
968,517
September 2014 public issuance
17,825,000
63.75
1,136,344
1,095,465
2014 Dividend reinvestment plan issuances
4,122,941
62.35
257,055
257,055
2014 Option exercises
498,549
45.79
22,831
22,831
2014 Preferred stock conversions
233,236
-
-
2014 Stock incentive plans, net of forfeitures
188,147
-
-
2014 Senior note conversions
258,542
-
-
2014 Totals
39,226,415
$
2,420,065
$
2,343,868
February 2015 public issuance
19,550,000
$
75.50
$
1,476,025
$
1,423,935
2015 Dividend reinvestment plan issuances
4,024,169
67.72
272,531
272,531
2015 Option exercises
249,054
47.35
11,793
11,793
2015 Equity Shelf Program issuances
696,070
69.23
48,186
47,463
2015 Stock incentive plans, net of forfeitures
137,837
-
-
2015 Senior note conversions
1,330,474
-
-
2015 Totals
25,987,604
$
1,808,535
$
1,755,722
2016 Dividend reinvestment plan issuances
4,145,457
$
70.34
$
291,852
$
291,571
2016 Option exercises
141,405
47.13
6,664
6,664
2016 Equity Shelf Program issuances
3,134,901
75.27
238,286
235,959
2016 Stock incentive plans, net of forfeitures
402,740
-
-
2016 Totals
7,824,503
$
536,802
$
534,194
Dividends. The increase in dividends is primarily attributable to increases in our common shares outstanding as described above. Please refer to Notes 2 and 18 for information related to federal income tax of dividends. The following is a summary of our dividend payments (in thousands, except per share amounts):
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Per Share
Amount
Per Share
Amount
Per Share
Amount
Common Stock
$
3.44000
$
1,233,519
$
3.30000
$
1,144,727
$
3.18000
$
969,661
Series H Preferred Stock
-
-
-
-
0.00794
Series I Preferred Stock
3.25000
46,719
3.25000
46,719
3.25000
46,719
Series J Preferred Stock
1.62510
18,687
1.62510
18,687
1.62510
18,688
Totals
$
1,298,925
$
1,210,133
$
1,035,069
Accumulated Other Comprehensive Income. The following is a summary of accumulated other comprehensive income/(loss) for the periods presented (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Unrecognized gains (losses) related to:
Foreign Currency Translation
Equity Investments
Actuarial losses
Cash Flow Hedges
Total
Balance at December 31, 2015
$
(85,484)
$
-
$
(1,343)
$
(1,416)
$
(88,243)
Other comprehensive income (loss) before reclassification adjustments
(90,528)
5,120
1,414
(83,804)
Reclassification amount to net income
2,516
-
-
-
2,516
Net current-period other comprehensive income (loss)
(88,012)
5,120
1,414
(81,288)
Balance at December 31, 2016
$
(173,496)
$
5,120
$
(1,153)
$
(2)
$
(169,531)
Balance at December 31, 2014
$
(74,770)
$
-
$
(1,589)
$
(650)
$
(77,009)
Other comprehensive income (loss) before reclassification adjustments
(10,714)
-
(2,626)
(13,094)
Reclassification amount to net income
-
-
-
1,860
1,860
Net current-period other comprehensive income (loss)
(10,714)
-
(766)
(11,234)
Balance at December 31, 2015
$
(85,484)
$
-
$
(1,343)
$
(1,416)
$
(88,243)
Other Equity. Other equity consists of accumulated option compensation expense, which represents the amount of amortized compensation costs related to stock options awarded to employees and directors.
14. Stock Incentive Plans
In May 2016, our shareholders approved the 2016 Long-Term Incentive Plan (“2016 Plan”), which 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. Awards granted after May 5, 2016 will be issued out of the 2016 Plan. The awards granted under the Amended and Restated 2005 Long-Term Incentive Plan continue to vest and options expire ten years from the date of grant. 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 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.
Under our long-term incentive plan, certain restricted stock awards are performance based. We will grant a target number of restricted stock units, with the ultimate award determined by the total shareholder return and operating performance metrics, measured in each case over a measurement period of three years. One third of the award will vest immediately at the end of the three year performance period, one third will vest a year after the performance period, and the remaining one third will vest two years after the performance period. Compensation expense for these performance grants is measured based on the probability of achievement of certain performance goals and is recognized over both the performance period and vesting period. For the portion of the grant for which the award is determined by the operating performance metrics, the estimated compensation cost was based on the grant date closing price and management’s estimate of corporate achievement for the financial metrics. If the estimated number of performance based restricted stock to be earned changes, an adjustment will be recorded to recognize the accumulated difference between the revised and previous estimates. For the portion of the grant determined by the total shareholder return, management used a Monte Carlo model to assess the compensation cost. The expected term represents the period from the grant date to the end of the three-year performance period.
The estimated compensation cost for each performance based plan was derived using the assumptions presented in the following table:
Risk Free Rates
Volatility(1)
Dividend Yield
2015-2017 Program
0.16% - 1.16%
13.64% - 42.75%
4.818%
2016-2018 Program
0.40% - 1.07%
15.75% - 38.61%
5.039%
(1) Figures use 50% historical and 50% implied volatility.
The following table summarizes compensation expense recognized for the periods presented (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
Stock options
$
$
$
Restricted stock
28,603
30,146
31,163
$
28,869
$
30,844
$
32,075
Stock Options
We have not granted stock options since the year ended December 31, 2012 but some remain outstanding. As of December 31, 2016, there was no unrecognized compensation expense related to unvested stock options. Stock options outstanding at December 31, 2016 have an aggregate intrinsic value of $5,553,000.
Restricted Stock
The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant and is amortized over the vesting periods. As of December 31, 2016, there was $32,830,000 of total unrecognized compensation expense related to unvested restricted stock that is expected to be recognized over a weighted-average period of three years. The following table summarizes information about non-vested restricted stock incentive awards as of and for the year ended December 31, 2016:
Restricted Stock
Number of
Weighted-Average
Shares
Grant Date
(000's)
Fair Value
Non-vested at December 31, 2015
$
62.00
Vested
(396)
64.36
Granted
59.42
Terminated
(40)
62.64
Non-vested at December 31, 2016
$
58.98
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
15. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Year Ended December 31,
Numerator for basic and diluted earnings per share -
net income attributable to common stockholders
$
1,012,397
$
818,344
$
446,745
Denominator for basic earnings per
share: weighted-average shares
358,275
348,240
306,272
Effect of dilutive securities:
Employee stock options
Non-vested restricted shares
Redeemable shares
1,393
-
Convertible senior unsecured notes
-
Dilutive potential common shares
1,952
1,184
1,475
Denominator for diluted earnings per
share: adjusted-weighted average shares
360,227
349,424
307,747
Basic earnings per share
$
2.83
$
2.35
$
1.46
Diluted earnings per share
$
2.81
$
2.34
$
1.45
Stock options outstanding were anti-dilutive for the years ended December 31, 2016, 2015 and 2014. The Series H Cumulative Convertible and Redeemable Preferred Stock and the Series I Cumulative Convertible Perpetual Preferred Stock were excluded from the calculations as the effect of the conversions also were anti-dilutive.
16. Disclosure about Fair Value of Financial Instruments
U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets and liabilities. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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 - The carrying amount approximates fair value.
Available-for-sale Equity Investments - Available-for-sale equity investments are recorded at their fair value based on Level 1 publicly available trading prices.
Borrowings Under Primary Unsecured Credit Facility - The carrying amount of the primary unsecured credit facility approximates fair value because the borrowings are interest rate adjustable.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Senior Unsecured Notes - The fair value of the senior unsecured notes payable was estimated based on Level 1 publicly available trading prices. The carrying amount of the variable rate senior unsecured notes approximates fair value because they are interest rate adjustable.
Secured Debt - The fair value of fixed rate secured debt is estimated using Level 2 inputs by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities. The carrying amount of variable rate secured debt approximates fair value because the borrowings are interest rate adjustable.
Foreign Currency Forward Contracts - Foreign currency forward contracts are recorded in other assets or other liabilities on the balance sheet at fair market value. Fair market value is determined using Level 2 inputs by estimating the future value of the currency pair based on existing exchange rates, comprised of current spot and traded forward points, and calculating a present value of the net amount using a discount factor based on observable traded interest rates.
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):
December 31, 2016
December 31, 2015
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Financial Assets:
Mortgage loans receivable
$
485,735
$
521,773
$
635,492
$
663,501
Other real estate loans receivable
136,893
138,050
184,000
185,693
Available-for-sale equity investments
27,899
27,899
22,779
22,779
Cash and cash equivalents
419,378
419,378
360,908
360,908
Foreign currency forward contracts
135,561
135,561
129,520
129,520
Financial Liabilities:
Borrowings under unsecured lines of credit arrangements
$
645,000
$
645,000
$
835,000
$
835,000
Senior unsecured notes
8,161,619
8,879,176
8,548,055
9,020,529
Secured debt
3,477,699
3,558,378
3,509,142
3,678,564
Foreign currency forward contracts
4,342
4,342
-
-
Redeemable OP unitholder interests
$
110,502
$
110,502
$
112,029
$
112,029
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 December 31, 2016
Total
Level 1
Level 2
Level 3
Available-for-sale equity investments(1)
$
27,899
$
27,899
$
-
$
-
Foreign currency forward contracts, net(2)
131,219
-
131,219
-
Redeemable OP unitholder interests
110,502
-
110,502
-
Totals
$
269,620
$
27,899
$
241,721
$
-
(1) Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date. During the year ended December 31, 2015, we recognized an other than temporary impairment charge of $35,648,000 on the Genesis Healthcare stock investment. Also, see Note 11 for details related to the gain on the derivative asset originally recognized.
(2) Please see Note 11 for additional information.
Items Measured at Fair Value on a Nonrecurring Basis
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
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 in business combinations (see Note 3) and asset impairments (see Note 5 for impairments of real property and Note 6 for impairments of loans receivable). 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 reside 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 secured debt assumed in business combinations using current interest rates at which similar borrowings could be obtained on the transaction date.
17. 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: triple-net, seniors housing operating and outpatient medical. During the year ended December 31, 2016, we reclassified four properties previously classified in the triple-net segment to the outpatient medical segment. In addition, we reclassified interest expense on our foreign-denominated senior notes from the seniors housing operating segment to non-segment. Accordingly, the segment information provided in this Note has been reclassified to conform to the current presentation for all periods presented.
Our triple-net properties include long-term/post-acute care facilities, assisted living facilities, independent living/continuing care retirement communities, care homes (United Kingdom), independent support living facilities (Canada), care homes with nursing (United Kingdom) and combinations thereof. 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 seniors housing operating properties include the seniors housing communities referenced above that are owned and/or operated through RIDEA structures (see Notes 3 and 18).
Our outpatient medical properties include outpatient medical buildings and, during past years, life science buildings which are aggregated into our outpatient medical reportable segment. Our outpatient medical buildings are typically leased to multiple tenants and generally require a certain level of property management. During the year ended December 31, 2015, we disposed of our life science investments.
We evaluate performance based upon 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 because 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). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments. There are no intersegment sales or transfers.
Summary information for the reportable segments (which excludes unconsolidated entities) during the years ended December 31, 2016, 2015 and 2014 is as follows (in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2016:
Triple-net
Seniors Housing Operating
Outpatient Medical
Non-segment / Corporate
Total
Rental income
$
1,112,325
$
-
$
536,490
$
-
$
1,648,815
Resident fees and services
-
2,504,731
-
-
2,504,731
Interest income
90,476
4,180
3,307
-
97,963
Other income
6,059
17,085
5,568
29,651
Total revenues
1,208,860
2,525,996
545,365
4,281,160
Property operating expenses
-
1,711,882
165,101
-
1,876,983
Net operating income from continuing operations
1,208,860
814,114
380,264
2,404,177
Interest expense
21,370
81,853
19,087
399,035
521,345
Loss (gain) on derivatives, net
-
-
(2,516)
(2,448)
Depreciation and amortization
297,197
415,429
188,616
-
901,242
General and administrative
-
-
-
155,241
155,241
Transaction costs
10,016
29,207
3,687
-
42,910
Loss (gain) on extinguishment of debt, net
(88)
-
16,439
17,214
Provision for loan losses
6,935
-
3,280
-
10,215
Impairment of assets
20,169
12,403
4,635
-
37,207
Other expenses
-
-
-
11,998
11,998
Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities
852,242
275,310
160,959
(579,258)
709,253
Income tax expense
(1,087)
(3,762)
(511)
24,488
19,128
(Loss) income from unconsolidated entities
9,767
(20,442)
-
(10,357)
Income (loss) from continuing operations
860,922
251,106
160,766
(554,770)
718,024
Gain (loss) on real estate dispositions, net
355,394
9,880
(1,228)
-
364,046
Net income (loss)
$
1,216,316
$
260,986
$
159,538
$
(554,770)
$
1,082,070
Total assets
$
10,713,032
$
12,851,414
$
4,951,538
$
349,200
$
28,865,184
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2015:
Triple-net
Seniors Housing Operating
Outpatient Medical
Non-segment / Corporate
Total
Rental income
$
1,094,827
$
-
$
504,121
$
-
$
1,598,948
Resident fees and services
-
2,158,031
-
-
2,158,031
Interest income
74,108
4,180
5,853
-
84,141
Other income
6,871
6,060
4,684
1,091
18,706
Total revenues
1,175,806
2,168,271
514,658
1,091
3,859,826
Property operating expenses
-
1,467,009
155,248
-
1,622,257
Net operating income from continuing operations
1,175,806
701,262
359,410
1,091
2,237,569
Interest expense
28,384
70,388
27,542
365,855
492,169
Loss (gain) on derivatives, net
(58,427)
-
-
-
(58,427)
Depreciation and amortization
288,242
351,733
186,265
-
826,240
General and administrative
-
-
-
147,416
147,416
Transaction costs
53,195
54,966
2,765
-
110,926
Loss (gain) on extinguishment of debt, net
10,095
(195)
-
24,777
34,677
Impairment of Assets
2,220
-
-
-
2,220
Other expenses
35,648
-
-
10,583
46,231
Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities
816,449
224,370
142,838
(547,540)
636,117
Income tax expense
(4,244)
(3,438)
(6,451)
(Loss) income from unconsolidated entities
8,260
(32,672)
2,908
-
(21,504)
Income (loss) from continuing operations
820,465
192,684
145,991
(550,978)
608,162
Gain (loss) on real estate dispositions, net
86,261
-
194,126
-
280,387
Net income (loss)
$
906,726
$
192,684
$
340,117
$
(550,978)
$
888,549
Total assets
$
12,358,605
$
11,519,902
$
5,060,676
$
84,662
$
29,023,845
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2014:
Triple-net
Seniors Housing Operating
Outpatient Medical
Non-segment / Corporate
Total
Rental income
$
992,638
$
-
$
413,129
$
-
$
1,405,767
Resident fees and services
-
1,892,237
-
-
1,892,237
Interest income
32,255
2,119
3,293
-
37,667
Other income
2,973
3,215
1,010
7,875
Total revenues
1,027,866
1,897,571
417,432
3,343,546
Property operating expenses
1,266,308
136,318
-
1,403,358
Net operating income from continuing operations
1,027,134
631,263
281,114
1,940,188
Interest expense
32,135
64,130
31,050
353,724
481,039
Loss (gain) on derivatives, net
(1,770)
-
-
(1,495)
Depreciation and amortization
273,296
418,199
152,635
-
844,130
General and administrative
-
-
-
142,943
142,943
Transaction costs
45,146
16,880
7,512
-
69,538
Loss (gain) on extinguishment of debt, net
8,672
9,558
Other expenses
8,825
1,437
-
-
10,262
Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities
669,404
129,959
89,512
(504,662)
384,213
Income tax expense
6,141
(3,047)
(1,827)
-
1,267
(Loss) income from unconsolidated entities
5,423
(38,204)
5,355
-
(27,426)
Income from continuing operations
680,968
88,708
93,040
(504,662)
358,054
Income (loss) from discontinued operations
7,135
-
-
-
7,135
Gain (loss) on real estate dispositions, net
146,205
-
-
147,111
Net income (loss)
$
834,308
$
88,708
$
93,946
$
(504,662)
$
512,300
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):
Year Ended
December 31, 2016
December 31, 2015
December 31, 2014
Revenues:
Amount
%
Amount
%
Amount
%
United States
$
3,453,485
80.6%
$
3,133,327
81.2%
$
2,801,474
83.8%
United Kingdom
388,383
9.1%
407,745
10.6%
305,275
9.1%
Canada
439,292
10.3%
318,754
8.3%
236,797
7.1%
Total
$
4,281,160
100.0%
$
3,859,826
100.0%
$
3,343,546
100.0%
As of
December 31, 2016
December 31, 2015
Assets:
Amount
%
Amount
%
United States
$
23,572,459
81.7%
$
23,513,498
81.0%
United Kingdom
2,782,489
9.6%
2,958,509
10.2%
Canada
2,510,236
8.7%
2,551,838
8.8%
Total
$
28,865,184
100.0%
$
29,023,845
100.0%
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
18. 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 are also subject to a 4% federal excise tax. The main differences between 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.
Cash distributions paid to common stockholders, for federal income tax purposes, are as follows for the periods presented:
Year Ended December 31,
Per Share:
Ordinary income
$
2.5067
$
1.9134
$
1.7861
Qualified dividend
0.0047
0.0529
-
Return of capital
0.0573
0.0503
0.8368
Long-term capital gains
0.4593
0.9352
0.1638
Unrecaptured section 1250 gains
0.4120
0.3482
0.3933
Totals
$
3.4400
$
3.3000
$
3.1800
Our consolidated provision for income taxes is as follows for the periods presented (dollars in thousands):
Year Ended December 31,
Current
$
14,944
$
10,177
$
2,672
Deferred
(34,072)
(3,726)
(3,939)
Totals
$
(19,128)
$
6,451
$
(1,267)
REITs generally are not subject to U.S. federal income taxes on that portion of REIT taxable income or capital gain that is distributed to stockholders. For the tax year ended December 31, 2016, as a result of acquisitions located in Canada and the United Kingdom, we were subject to foreign income taxes under the respective tax laws of these jurisdictions.
The provision for income taxes for the year ended December 31, 2016 primarily relates to state taxes, foreign taxes, and taxes based on income generated by entities that are structured as taxable REIT subsidiaries. For the tax years ended December 31, 2016, 2015 and 2014, the foreign tax provision/(benefit) amount included in the consolidated provision for income taxes was ($3,315,000), $7,385,000 and ($6,069,000), respectively.
A reconciliation of income tax expense, which is computed by applying the federal corporate tax rate for the years ended December 31, 2016, 2015 and 2014, to the income tax provision/(benefit) is as follows for the periods presented (dollars in thousands):
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
Tax at statutory rate on earnings from continuing operations before unconsolidated entities, noncontrolling interests and income taxes
$
372,030
$
313,250
$
178,862
Increase / (decrease) in valuation allowance(1)
(2,128)
13,759
9,133
Tax at statutory rate on earnings not subject to federal income taxes
(399,571)
(319,832)
(189,070)
Foreign permanent depreciation
9,205
7,500
4,383
Other differences
1,336
(8,226)
(4,575)
Totals
$
(19,128)
$
6,451
$
(1,267)
(1) Excluding purchase price accounting.
Each TRS and foreign entity subject to income taxes is a tax paying component for purposes of classifying deferred tax assets and liabilities. The tax effects of taxable and deductible temporary differences, as well as tax attributes, are summarized as follows for the periods presented (dollars in thousands):
Year Ended December 31,
Investments and property, primarily differences in investment basis, depreciation and amortization, the basis of land assets and the treatment of interests and certain costs
$
(7,089)
$
(30,564)
$
(1,020)
Operating loss and interest deduction carryforwards
82,469
75,455
47,528
Expense accruals and other
15,978
6,259
26,191
Valuation allowance
(96,838)
(98,966)
(85,207)
Totals
$
(5,480)
$
(47,816)
$
(12,508)
We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. As required under the provisions of ASC 740, we apply the concepts on an entity-by-entity, jurisdiction-by-jurisdiction basis. With respect to the analysis of certain entities in multiple jurisdictions, a significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2016. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.
On the basis of the evaluations performed as required by the codification, valuation allowances totaling $96,838,000 were recorded on U.S. taxable REIT subsidiaries as well as entities in other jurisdictions to limit the deferred tax assets to the amount that we believe is more likely that not realizable. However, the amount of the deferred tax asset considered realizable could be adjusted if (i) estimates of future taxable income during the carryforward period are reduced or increased or (ii) objective negative evidence in the form of cumulative losses is no longer present (and additional weight may be given to subjective evidence such as our projections for growth). The valuation allowance rollforward is summarized as follows for the periods presented (dollars in thousands):
Year Ended December 31,
Beginning balance
$
98,966
$
85,207
$
71,955
Additions:
Purchase price accounting
-
-
4,119
Expense
(2,128)
13,759
9,133
Ending balance
$
96,838
$
98,966
$
85,207
As a result of certain acquisitions, we are subject to corporate level taxes for any related asset dispositions that may occur during the five-year period immediately after such assets were owned by a C corporation (“built-in gains tax”). The amount of income potentially subject to this special corporate level tax is generally equal to the lesser of (a) the excess of the fair value of the asset over its adjusted tax basis as of the date it became a REIT asset, or (b) the actual amount of gain. Some but not all gains recognized during this period of time could be offset by available net operating losses and capital loss carryforwards. During the year ended December 31, 2016, we acquired certain additional assets with built-in gains as of the date of acquisition that could be subject to the built-in
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
gains tax if disposed of prior to the expiration of the applicable ten-year period. We have not recorded a deferred tax liability as a result of the potential built-in gains tax based on our intentions with respect to such properties and available tax planning strategies.
Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, the REIT may lease “qualified health care properties” on an arm’s-length basis to a TRS if the property is operated on behalf of such subsidiary 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 consolidated financial statements and are subject to federal and state income taxes as the operations of such facilities are included in a TRS. Certain net operating loss carryforwards could be utilized to offset taxable income in future years.
Given the applicable statute of limitations, we generally are subject to audit by the Internal Revenue Service (“IRS”) for the year ended December 31, 2013 and subsequent years. The statute of limitations may vary in the states in which we own properties or conduct business. We do not expect to be subject to audit by state taxing authorities for any year prior to the year ended December 31, 2010. We are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to May 2012 related to entities acquired or formed in connection with acquisitions, and by HM Revenue & Customs for periods subsequent to August 2012 related to entities acquired or formed in connection with acquisitions.
At December 31, 2016, we had a net operating loss (“NOL”) carryforward related to the REIT of $418,739,000. Due to our uncertainty regarding the realization of certain deferred tax assets, we have not recorded a deferred tax asset related to NOLs generated by the REIT. These amounts can be used to offset future taxable income (and/or taxable income for prior years if an audit determines that tax is owed), if any. The REIT will be entitled to utilize NOLs and tax credit carryforwards only to the extent that REIT taxable income exceeds our deduction for dividends paid. The NOL carryforwards will expire through 2035.
At December 31, 2016 and 2015, we had a net operating loss carryforward related to Canadian entities of $104,988,000, and $78,680,000, respectively. These Canadian losses have a 20-year carryforward period. At December 31, 2016 and 2015, we had a net operating loss carryforward related to United Kingdom entities of $158,156,000 and $179,598,000, respectively. These United Kingdom losses do not have a finite carryforward period.
19. Retirement Arrangements
We have a Supplemental Executive Retirement Plan (“SERP”), a non-qualified defined benefit pension plan, which provides one former executive officer with supplemental deferred retirement benefits. The SERP provides an opportunity for the participant to receive retirement benefits that cannot be paid under our tax-qualified plans because of the restrictions imposed by ERISA and the Internal Revenue Code of 1986, as amended. Benefits are based on compensation and length of service and the SERP is unfunded. Benefit payments are expected to total $4,179,000 during the next three fiscal years. We use a December 31 measurement date for the SERP. The accrued liability on our balance sheet for the SERP was $4,081,000 at December 31, 2016 ($5,474,000 at December 31, 2015).
On April 13, 2014, George L. Chapman, formerly the Chairman, Chief Executive Officer and President of the Company, informed the Board of Directors that he wished to retire from the Company, effective immediately. As a result of Mr. Chapman’s retirement, general and administrative expenses for the year ended December 31, 2014 included charges of $19,688,000 related to: (i) the acceleration of $9,223,000 of deferred compensation for restricted stock; and (ii) consulting, retirement payments and other costs of $10,465,000.
WELLTOWER
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
20. Quarterly Results of Operations (Unaudited)
The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2016 and 2015 (in thousands, except per share data). The sum of individual quarterly amounts may not agree to the annual amounts included in the consolidated statements of income due to rounding.
Year Ended December 31, 2016
1st Quarter
2nd Quarter
3rd Quarter(1)
4th Quarter
Revenues
$
1,047,050
$
1,076,657
$
1,079,133
$
1,078,321
Net income (loss) attributable to common stockholders
148,969
195,474
334,910
333,044
Net income (loss) attributable to common stockholders per share:
Basic
$
0.42
$
0.55
$
0.93
$
0.92
Diluted
0.42
0.54
0.93
0.91
Year Ended December 31, 2015
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Revenues
$
894,177
$
957,169
$
978,997
$
1,029,484
Net income attributable to common stockholders
190,799
312,573
182,043
132,929
Net income attributable to common stockholders per share:
Basic
$
0.57
$
0.89
$
0.52
$
0.38
Diluted
0.56
0.89
0.52
0.37
(1) The increase in net income and amounts per share are primarily attributable to gains on sales of real estate of $162,351,000 for the third quarter as compared to gains of $1,530,000 for the second quarter.
21. Variable Interest Entities
We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be variable interest entities (“VIE”). We have concluded that we are the primary beneficiary of these VIE’s 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 VIE’s in the aggregate (in thousands):
December 31, 2016
December 31, 2015
Assets
Net real property owned
$
989,596
$
453,889
Cash and cash equivalents
10,501
8,759
Receivables and other assets
12,102
8,082
Total assets(1)
$
1,012,199
$
470,730
Liabilities and equity
Secured debt
$
450,255
$
147,021
Accrued expenses and other liabilities
13,803
7,732
Redeemable noncontrolling interests
185,556
70,090
Total equity
362,585
245,887
Total liabilities and equity
$
1,012,199
$
470,730
(1) Note that assets of the consolidated variable interest entities can only be used to settle obligations relating to such variable interest entities. Liabilities of the consolidated variable interest entities represent claims against the specific assets of the variable interest entities.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) in a report entitled Internal Control - Integrated Framework.
The scope of management’s assessment as of December 31, 2016 did not include an assessment of the internal control over financial reporting for certain acquisitions because the business combinations occurred during the year ended December 31, 2016. The acquired businesses represent 4% of total assets at December 31, 2016 and less than 1% of revenues and net operating income for the year then ended. The scope of management’s assessment on internal control over financial reporting for the year ended December 31, 2017 will include the aforementioned acquired operations.
Based on this assessment, using the criteria above, management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2016.
The independent registered public accounting firm of Ernst & Young LLP, as auditors of the Company’s consolidated financial statements, has issued an attestation report on the Company’s internal control over financial reporting.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended) occurred during the fourth quarter of the one-year period covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Welltower Inc.
We have audited Welltower Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria, 2013 framework). Welltower Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of certain acquisitions, which are included in the 2016 consolidated financial statements of Welltower Inc. and subsidiaries and aggregate to 4% of total assets as of December 31, 2016 and less than 1% of revenues and net operating income for the year then ended. Our audit of the internal control over financial reporting of Welltower Inc. also did not include an evaluation of the internal control over financial reporting of the aforementioned acquisitions.
In our opinion, Welltower Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Welltower Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2016 of Welltower Inc. and subsidiaries and our report dated February 22, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Toledo, Ohio
February 22, 2017
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference to the information under the headings “Election of Directors,” “Corporate Governance,” “Executive Officers,” and “Security Ownership of Directors and Management and Certain Beneficial Owners - Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement, which will be filed with the Securities and Exchange Commission (the “Commission”) prior to May 1, 2017.
We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees. The code is posted on the Internet at www.welltower.com/investors/governance. Any amendment to, or waivers from, the code that relate to any officer or director of the Company will be promptly disclosed on the Internet at www.welltower.com.
In addition, the Board has adopted charters for the Audit, Compensation and Nominating/Corporate Governance Committees. These charters are posted on the Internet at www.welltower.com/investors/governance.
The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included as an inactive textual reference only.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the information under the headings “Executive Compensation” and “Director Compensation” in our definitive proxy statement, which will be filed with the Commission prior to May 1, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the information under the headings “Security Ownership of Directors and Management and Certain Beneficial Owners” and “Equity Compensation Plan Information” in our definitive proxy statement, which will be filed with the Commission prior to May 1, 2017.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated herein by reference to the information under the headings “Corporate Governance - Independence and Meetings” and “Security Ownership of Directors and Management and Certain Beneficial Owners - Certain Relationships and Related Transactions” in our definitive proxy statement, which will be filed with the Commission prior to May 1, 2017.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the information under the heading “Ratification of the Appointment of the Independent Registered Public Accounting Firm” in our definitive proxy statement, which will be filed with the Commission prior to May 1, 2017.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Our Consolidated Financial Statements are included in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2016 and 2015
Consolidated Statements of Comprehensive Income - Years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Equity - Years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows - Years ended December 31, 2016, 2015 and
Notes to Consolidated Financial Statements
2. The following Financial Statement Schedules are included in Item 15(c):
III - Real Estate and Accumulated Depreciation
IV - Mortgage Loans on Real Estate
The financial statement schedule required by Item15(a) (Schedule II, Valuation and Qualifying Accounts) is included in Item 8 of this Annual Report on Form 10-K.
3. Exhibit Index:
The information required by this item is set forth on the Exhibit Index that follows the Financial Statement Schedules to this Annual Report on Form 10-K.
(b) Exhibits:
The exhibits listed on the Exhibit Index are either filed with this Form 10-K or incorporated by reference in accordance with Rule 12b-32 of the Securities Exchange Act of 1934.
(c) Financial Statement Schedules:
Financial statement schedules are included beginning on page 105.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 22, 2017
WELLTOWER INC.
By: /s/ T homas J. DeRosa
Thomas J. DeRosa,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 22, 2017 by the following persons on behalf of the Registrant and in the capacities indicated.
/s/ Jeffrey H. Donahue **
/s/ Sergio D. Rivera **
Jeffrey H. Donahue, Chairman of the Board
Sergio D. Rivera, Director
/s/ Kenneth J. Bacon **
/s/ R. Scott Trumbull **
Kenneth J. Bacon, Director
R. Scott Trumbull, Director
/s/ Fred S. Klipsch **
/s/ Thomas J. DeRosa **
Fred S. Klipsch, Director
Thomas J. DeRosa, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Geoffrey G. Meyers **
/s/ Scott A. Estes **
Geoffrey G. Meyers, Director
Scott A. Estes, Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
/s/ Timothy J. Naughton **
/s/ Paul D. Nungester, Jr.**
Timothy J. Naughton, Director
Paul D. Nungester, Jr., Senior Vice President and
Controller (Principal Accounting Officer)
/s/ Sharon M. Oster **
**By: /s/ Thomas J. DeRosa
Sharon M. Oster, Director
Thomas J. DeRosa, Attorney-in-Fact
/s/ Judith C. Pelham **
Judith C. Pelham, Director
Welltower Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(Dollars in thousands)
Initial Cost to Company
Gross Amount at Which Carried at Close of Period
Description
Encumbrances
Land
Building & Improvements
Cost Capitalized Subsequent to Acquisition
Land
Building & Improvements
Accumulated Depreciation(1)
Year Acquired
Year Built
Address
Triple-net:
Abilene, TX
$
-
$
$
20,987
$
$
$
21,172
$
1,409
6565 Central Park Boulevard
Abilene, TX
-
8,187
8,987
1250 East N 10th Street
Aboite Twp, IN
-
1,770
19,930
1,601
1,770
21,531
3,483
611 W County Line Rd South
Agawam, MA
-
16,112
2,134
18,246
7,193
1200 Suffield St.
Agawam, MA
-
1,230
13,618
1,230
14,211
2,393
61 Cooper Street
Agawam, MA
-
15,304
15,596
2,524
55 Cooper Street
Agawam, MA
-
10,661
10,697
1,826
464 Main Street
Agawam, MA
-
10,562
10,607
1,811
65 Cooper Street
Albertville, AL
1,956
6,203
6,477
1,423
151 Woodham Dr.
Alexandria, IN
-
6,491
-
6,491
1912 South Park Avenue
Ames, IA
-
8,870
-
8,870
1,596
1325 Coconino Rd.
Anderson, SC
-
6,290
6,709
3,032
311 Simpson Rd.
Ankeny, IA
-
1,129
10,270
-
1,129
10,270
1275 SW State Street
Apple Valley, CA
10,250
16,639
16,801
3,770
11825 Apple Valley Rd.
Asheboro, NC
-
5,032
5,197
1,897
514 Vision Dr.
Asheville, NC
-
3,489
-
3,489
1,697
4 Walden Ridge Dr.
Asheville, NC
-
1,955
2,306
308 Overlook Rd.
Aspen Hill, MD
-
-
9,008
2,394
-
11,402
1,687
3227 Bel Pre Road
Atchison, KS
-
5,610
5,618
1301 N 4th St.
Atlanta, GA
7,294
2,058
14,914
1,143
2,080
16,035
11,207
1460 S Johnson Ferry Rd.
Aurora, OH
-
1,760
14,148
1,760
14,254
2,517
505 S. Chillicothe Rd
Aurora, CO
-
2,600
5,906
7,915
2,600
13,821
5,212
14101 E. Evans Ave.
Aurora, CO
-
2,440
28,172
-
2,440
28,172
9,071
14211 E. Evans Ave.
Austin, TX
18,076
9,520
1,216
10,731
5,113
12429 Scofield Farms Dr.
Avon, IN
-
1,830
14,470
-
1,830
14,470
2,719
182 S Country RD. 550E
Avon, IN
-
19,444
-
19,444
1,201
10307 E. CR 100 N
Avon Lake, OH
-
10,421
5,822
16,243
2,195
345 Lear Rd.
Ayer, MA
-
-
22,074
-
22,077
3,464
400 Groton Road
Baldwin City, KS
-
4,810
4,850
321 Crimson Ave
Bartlesville, OK
-
1,380
-
1,380
5420 S.E. Adams Blvd.
Beachwood, OH
-
1,260
23,478
-
1,260
23,478
9,511
3800 Park East Drive
Bellingham, WA
8,272
1,500
19,861
1,507
20,175
4,423
4415 Columbine Dr.
Benbrook, TX
-
1,550
13,553
1,148
1,550
14,701
2,065
4242 Bryant Irvin Road
Bend, OR
-
1,210
9,181
1,210
9,206
1801 NE Lotus Drive
Bethel Park, PA
-
1,700
16,007
-
1,700
16,007
3,399
5785 Baptist Road
Beverly Hills, CA
-
6,000
13,385
-
6,000
13,385
220 N Clark Drive
Bexleyheath, UKI
-
3,750
10,807
-
3,750
10,807
35 West Street
Birmingham, UKG
-
1,647
14,853
-
1,647
14,853
Clinton Street, Winson Green
Birmingham, UKG
-
1,591
19,092
-
1,591
19,092
Braymoor Road, Tile Cross
Birmingham, UKG
-
1,462
9,056
-
1,462
9,056
Clinton Street, Winson Green
Birmingham, UKG
-
1,184
10,085
-
1,184
10,085
122 Tile Cross Road, Garretts Green
Bloomington, IN
-
17,423
-
17,423
363 S. Fieldstone Boulevard
Boardman, OH
-
1,200
12,800
-
1,200
12,800
3,447
8049 South Ave.
Bowling Green, KY
-
3,800
26,700
3,800
26,849
5,751
1300 Campbell Lane
Bradenton, FL
-
3,298
-
3,298
1,838
6101 Pointe W. Blvd.
Bradenton, FL
-
9,953
-
9,953
1,187
2800 60th Avenue West
Braintree, MA
-
7,157
1,290
8,447
8,381
1102 Washington St.
Braintree, UKH
-
-
13,296
-
-
13,296
Meadow Park Tortoiseshell Way
Brandon, MS
-
1,220
10,241
-
1,220
10,241
1,730
140 Castlewoods Blvd
Brecksville, OH
-
19,353
-
19,353
1,185
8757 Brecksville Road
Bremerton, WA
-
2,210
2,354
3231 Pine Road
Bremerton, WA
-
10,420
11,370
1,982
3201 Pine Road NE
Bremerton, WA
-
2,899
2,912
3210 Rickey Road
Brentwood, UKH
47,467
8,537
45,869
-
8,537
45,869
-
London Road
Brick, NJ
-
1,290
25,247
1,290
25,907
3,649
458 Jack Martin Blvd.
Brick, NJ
-
1,170
17,372
1,323
1,184
18,681
3,038
515 Jack Martin Blvd
Brick, NJ
-
17,125
5,484
22,607
2,925
1594 Route 88
Bridgewater, NJ
-
1,850
3,050
1,850
3,087
1,485
875 Route 202/206 North
Bridgewater, NJ
-
1,730
48,201
1,289
1,752
49,469
7,660
2005 Route 22 West
Bridgewater, NJ
-
1,800
31,810
1,800
32,362
4,524
680 US-202/206 North
Broadview Heights, OH
-
12,400
2,393
14,793
5,414
2801 E. Royalton Rd.
Brookfield, WI
-
1,300
12,830
-
1,300
12,830
1,091
1185 Davidson Road
Brooks, AB
1,971
4,951
5,103
951 Cassils Road West
Brookville, IN
-
13,461
-
13,461
11049 State Road
Burleson, TX
-
13,985
14,330
2,159
300 Huguley Boulevard
Burleson, TX
-
3,150
10,437
3,150
11,013
621 Old Highway
Burlington, NC
-
4,297
5,004
1,798
3619 S. Mebane St.
Burlington, NC
-
5,467
-
5,467
2,012
3615 S. Mebane St.
Burlington, NJ
-
1,700
12,554
1,700
13,036
2,388
115 Sunset Road
Burlington, NJ
-
1,170
19,205
1,170
19,377
3,012
2305 Rancocas Road
Burlington, WA
-
3,860
31,722
3,860
31,805
1,518
400 Gilkey Road
Burnaby, BC
8,082
7,623
13,844
7,858
14,270
7195 Canada Way
Calgary, AB
16,716
2,341
42,768
1,408
2,413
44,105
2,549
1729-90th Avenue SW
Calgary, AB
27,724
4,569
70,199
2,300
4,709
72,358
4,144
500 Midpark Way SE
Canton, MA
-
8,201
8,464
5,743
One Meadowbrook Way
Canton, OH
-
2,098
-
2,098
1,016
1119 Perry Dr., N.W.
Cape Coral, FL
-
3,281
-
3,281
1,318
911 Santa Barbara Blvd.
Cape Coral, FL
8,716
18,868
-
18,868
2,273
831 Santa Barbara Boulevard
Cape May Court House, NJ
-
1,440
17,002
1,673
1,440
18,675
1,232
144 Magnolia Drive
Carmel, IN
-
1,700
19,491
-
1,700
19,491
Pennsylvania Street
Carrollton, TX
-
4,280
31,444
4,280
32,305
2,510
2105 North Josey Lane
Carrollton, TX
-
-
-
21,559
2,010
19,549
2645 East Trinity Mills Road
Carson City, NV
-
8,238
8,488
1111 W. College Parkway
Cary, NC
-
1,500
4,350
1,500
5,336
2,441
111 MacArthur
Castleton, IN
-
15,137
-
15,137
8405 Clearvista Lake
Cedar Grove, NJ
-
2,850
27,737
2,850
27,757
4,438
536 Ridge Road
Centreville, MD(2)
-
14,602
14,843
2,402
205 Armstrong Avenue
Chapel Hill, NC
-
2,646
3,429
1,348
100 Lanark Rd.
Charles Town, WV
-
22,834
22,896
3,471
219 Prospect Ave
Charleston, WV
-
17,575
17,879
2,726
1000 Association Drive, North Gate Business Park
Chatham, VA
-
14,039
-
14,039
100 Rorer Street
Chelmsford, MA
-
1,040
10,951
1,499
1,040
12,450
4,016
4 Technology Dr.
Chester, VA
-
1,320
18,127
-
1,320
18,127
1,177
12001 Iron Bridge Road
Chickasha, OK
-
1,395
-
1,395
801 Country Club Rd.
Cinnaminson, NJ
-
6,663
6,820
1,242
1700 Wynwood Drive
Citrus Heights, CA
14,252
2,300
31,876
2,300
32,465
7,280
7418 Stock Ranch Rd.
Claremore, OK
-
1,427
6,130
7,557
1,223
1605 N. Hwy. 88
Clarksville, TN
-
2,292
-
2,292
1,104
2183 Memorial Dr.
Clayton, NC
-
15,733
-
15,733
84 Johnson Estate Road
Cleburne, TX
-
5,369
-
5,369
1,379
402 S Colonial Drive
Clevedon, UKK
-
2,838
16,927
-
2,838
16,927
1,041
18/19 Elton Road
Cloquet, MN
-
4,660
4,780
705 Horizon Circle
Cobham, UKJ
-
9,808
24,991
-
9,808
24,991
2,232
Redhill Road
Colchester, CT
-
4,860
5,392
1,061
59 Harrington Court
Colleyville, TX
-
1,050
17,082
-
1,050
17,082
-
8100 Precinct Line Road
Colorado Springs, CO
-
4,280
62,168
-
4,280
62,168
2,132
1605 Elm Creek View
Colorado Springs, CO
-
1,730
25,493
1,730
26,186
2818 Grand Vista Circle
Colts Neck, NJ
-
14,733
1,244
1,028
15,729
2,613
3 Meridian Circle
Columbia, TN
-
2,295
-
2,295
1,112
5011 Trotwood Ave.
Columbia, SC
-
2,120
4,860
5,709
2,120
10,569
4,232
731 Polo Rd.
Columbia Heights, MN
-
14,175
14,338
1,980
3807 Hart Boulevard
Columbus, IN
-
3,190
-
3,190
2564 Foxpointe Dr.
Concord, NC
-
3,921
3,976
1,604
2452 Rock Hill Church Rd.
Concord, NH
-
1,760
43,179
1,760
43,785
6,683
239 Pleasant Street
Concord, NH
-
3,041
3,381
227 Pleasant Street
Congleton, UKD
-
2,036
5,120
-
2,036
5,120
Rood Hill
Conroe, TX
-
7,771
-
7,771
1,507
903 Longmire Road
Coppell, TX
-
1,550
8,386
1,550
8,432
1530 East Sandy Lake Road
Coventry, UKG
-
1,962
13,830
-
1,962
13,830
Banner Lane, Tile Hill
Crawfordsville, IN
-
17,239
1,426
18,665
1,149
517 Concord Road
Crown Point, IN
-
20,044
-
20,044
1555 South Main Street
Dallas, OR
-
9,427
1,000
10,428
664 SE Jefferson
Danville, VA
-
3,954
4,676
1,744
149 Executive Ct.
Danville, VA
-
8,436
-
8,436
508 Rison Street
Daphne, AL
-
2,880
8,670
2,880
8,862
1,119
27440 County Road 13
Dedham, MA
-
1,360
9,830
-
1,360
9,830
4,191
10 CareMatrix Dr.
Denton, TX
-
1,760
8,305
1,760
8,395
1,276
2125 Brinker Rd
Derby, UKF
-
-
-
10,542
2,282
8,260
Rykneld Road
Dover, DE
-
22,266
22,357
3,494
1080 Silver Lake Blvd.
Dresher, PA
-
2,060
40,236
2,083
41,210
6,361
1405 N. Limekiln Pike
Dundalk, MD(2)
-
1,770
32,047
1,770
32,831
5,091
7232 German Hill Road
Durham, NC
-
1,476
10,659
2,196
1,476
12,855
10,667
4434 Ben Franklin Blvd.
Dyer, IN
-
1,800
25,061
-
1,800
25,061
1532 Calumet Avenue
Eagan, MN
17,000
2,260
31,643
2,260
31,647
3810 Alder Avenue
East Brunswick, NJ
-
1,380
34,229
1,380
34,908
4,842
606 Cranbury Rd.
East Norriton, PA
-
1,200
28,129
1,387
1,262
29,454
4,582
2101 New Hope St
Eastbourne, UKJ
-
4,071
24,438
-
4,071
24,438
1,483
Carew Road
Eden, NC
-
4,877
-
4,877
1,816
314 W. Kings Hwy.
Edmond, OK
-
8,388
-
8,388
1,099
15401 North Pennsylvania Avenue
Edmond, OK
-
1,810
14,849
1,106
1,810
15,955
1,048
1225 Lakeshore Drive
Elizabeth City, NC
-
2,760
2,011
4,771
2,040
400 Hastings Lane
Emeryville, CA
-
2,560
57,491
2,560
58,052
3,683
1440 40th Street
Englewood, NJ
-
4,514
4,531
333 Grand Avenue
Englishtown, NJ
-
12,520
1,141
13,583
2,270
49 Lasatta Ave
Epsom, UKJ
39,189
20,159
34,803
-
20,159
34,803
-
450-458 Reigate Road
Eugene, OR
-
5,822
5,857
4550 West Amazon Drive
Eureka, KS
-
3,950
3,990
1820 E River St
Everett, WA
-
1,400
5,476
-
1,400
5,476
2,558
2015 Lake Heights Dr.
Fairfield, CA
-
1,460
14,040
1,541
1,460
15,581
5,898
3350 Cherry Hills St.
Fairhope, AL
-
9,119
9,165
1,152
50 Spring Run Road
Fall River, MA
-
5,829
4,856
10,685
4,960
1748 Highland Ave.
Fanwood, NJ
-
2,850
55,175
2,850
56,143
7,694
295 South Ave.
Faribault, MN
-
11,539
11,590
828 1st Street NE
Farnborough, UKJ
-
2,036
5,737
-
2,036
5,737
Bruntile Close, Reading Road
Fayetteville, PA
-
2,150
32,951
1,802
2,150
34,753
1,267
Chambersburg Road
Fayetteville, NY
-
3,962
4,462
1,759
5125 Highbridge St.
Findlay, OH
-
1,800
-
1,800
725 Fox Run Rd.
Fishers, IN
-
1,500
14,500
-
1,500
14,500
2,724
9745 Olympia Dr.
Florence, NJ
-
2,978
-
2,978
1,191
901 Broad St.
Florence, AL
6,879
13,049
13,217
2,888
3275 County Road
Flourtown, PA
-
1,800
14,830
1,800
15,066
2,436
350 Haws Lane
Flower Mound, TX
-
1,800
8,414
1,800
8,451
1,014
4141 Long Prairie Road
Folsom, CA
-
-
33,600
-
1,582
32,018
3,087
330 Montrose Drive
Forest City, NC
-
4,497
-
4,497
1,691
493 Piney Ridge Rd.
Fort Ashby, WV
-
19,566
19,694
2,983
Diane Drive, Box
Fort Collins, CO
-
3,680
58,608
-
3,680
58,608
2,003
4750 Pleasant Oak Drive
Fort Wayne, IN
-
8,232
-
8,232
2,167
2626 Fairfield Ave.
Fort Worth, TX
-
13,615
5,086
18,701
3,016
425 Alabama Ave.
Franconia, NH
-
11,320
11,390
1,805
93 Main Street
Fredericksburg, VA
-
1,000
20,000
1,200
1,000
21,200
6,351
3500 Meekins Dr.
Fredericksburg, VA
-
1,130
23,202
-
1,130
23,202
1,387
140 Brimley Drive
Fredonia, KS
-
2111 E Washington St
Fremont, CA
18,517
3,400
25,300
3,203
3,456
28,447
8,469
2860 Country Dr.
Fresno, CA
-
2,500
35,800
2,500
35,918
7,701
7173 North Sharon Avenue
Gardner, KS
-
2,800
2,858
869 Juniper Terrace
Gardnerville, NV
11,967
1,143
10,831
1,075
1,164
11,885
8,531
1565-A Virginia Ranch Rd.
Gastonia, NC
-
6,129
-
6,129
2,245
1680 S. New Hope Rd.
Gastonia, NC
-
3,096
3,118
1,212
1717 Union Rd.
Gastonia, NC
-
5,029
5,149
1,901
1750 Robinwood Rd.
Georgetown, TX
-
2,100
-
2,100
1,077
2600 University Dr., E.
Gettysburg, PA
-
8,913
9,029
1,568
867 York Road
Gig Harbor, WA
4,867
1,560
15,947
1,583
16,177
3,453
3213 45th St. Court NW
Glastonbury, CT
-
1,950
9,532
2,077
2,360
11,199
1,724
72 Salmon Brook Drive
Granbury, TX
-
2,040
30,670
2,040
30,928
4,646
100 Watermark Boulevard
Granbury, TX
-
2,550
2,940
2,550
3,420
916 East Highway
Grand Ledge, MI
-
1,150
16,286
5,119
1,150
21,405
3,150
4775 Village Dr
Granger, IN
-
1,670
21,280
2,401
1,670
23,681
3,773
6330 North Fir Rd
Grapevine, TX
-
-
-
19,803
2,220
17,583
4545 Merlot Drive
Grass Valley, CA
4,193
7,667
7,925
415 Sierra College Drive
Greenfield, WI
-
-
15,204
-
14,314
1,285
5017 South 110th Street
Greensboro, NC
-
2,970
3,524
1,343
5809 Old Oak Ridge Rd.
Greensboro, NC
-
5,507
1,013
6,520
2,467
4400 Lawndale Dr.
Greenville, SC
-
4,750
-
4,750
1,704
23 Southpointe Dr.
Greenville, NC
-
4,393
4,561
1,666
2715 Dickinson Ave.
Greenwood, IN
-
1,550
22,770
1,550
22,851
3,736
2339 South SR
Groton, CT
-
2,430
19,941
2,430
20,852
3,532
1145 Poquonnock Road
Haddonfield, NJ
-
-
-
16,883
16,363
132 Warwick Road
Hamburg, PA
-
10,543
10,758
1,932
125 Holly Road
Hamilton, NJ
-
4,469
-
4,469
1,774
Whitehorse-Mercerville Rd.
Hanford, UKG
-
1,382
9,829
-
1,382
9,829
Bankhouse Road
Harrow, UKI
-
7,402
8,266
-
7,402
8,266
177 Preston Hill
Hatboro, PA
-
-
28,112
1,746
-
29,858
4,501
3485 Davisville Road
Hatfield, UKH
-
2,924
7,527
-
2,924
7,527
St Albans Road East
Haverford, PA
-
1,880
33,993
1,883
34,977
5,374
731 Old Buck Lane
Hemet, CA
-
3,405
-
3,405
25818 Columbia St.
Herne Bay, UKJ
-
1,900
24,353
-
1,900
24,353
2,464
165 Reculver Road
Hiawatha, KS
-
4,210
4,232
400 Kansas Ave
Hickory, NC
-
1,219
2530 16th St. N.E.
High Point, NC
-
4,443
5,236
1,960
1568 Skeet Club Rd.
High Point, NC
-
2,185
2,595
1,032
1564 Skeet Club Rd.
High Point, NC
-
3,395
3,423
1,291
201 W. Hartley Dr.
High Point, NC
-
4,143
-
4,143
1,549
1560 Skeet Club Rd.
Highland Park, IL
-
2,820
15,832
2,820
16,021
1,714
1651 Richfield Avenue
Highlands Ranch, CO
-
3,721
4,983
8,704
1,879
9160 S. University Blvd.
Hinckley, UKF
-
2,159
4,194
-
2,159
4,194
Tudor Road
Hindhead, UKJ
38,700
17,852
48,645
-
17,852
48,645
-
Portsmouth Road
Hockessin, DE
-
1,120
6,308
1,234
1,120
7,542
100 Saint Claire Drive
Holton, KS
-
7,460
7,472
410 Juniper Dr
Howell, NJ
9,177
1,066
21,577
1,070
21,956
3,507
100 Meridian Place
Hutchinson, KS
-
10,590
10,784
3,453
2416 Brentwood
Indianapolis, IN
-
6,287
22,565
28,852
10,370
8616 W. Tenth St.
Indianapolis, IN
-
2,473
12,123
14,596
5,170
8616 W.Tenth St.
Indianapolis, IN
-
14,688
-
14,688
1635 N Arlington Avenue
Indianapolis, IN
-
18,781
-
18,781
1,104
5404 Georgetown Road
Jacksonville, FL
-
-
-
25,981
25,231
5939 Roosevelt Boulevard
Jacksonville, FL
-
-
-
26,381
-
26,381
4000 San Pablo Parkway
Kansas City, KS
-
20,116
-
20,116
8900 Parallel Parkway
Kenner, LA
-
1,100
10,036
1,100
10,364
8,536
1600 Joe Yenni Blvd
Kennett Square, PA
-
1,050
22,946
1,083
23,206
3,604
301 Victoria Gardens Dr.
Kent, WA
-
20,318
10,470
30,788
6,892
24121 116th Avenue SE
Kingston upon Thames, UKI
40,799
33,063
46,696
-
33,063
46,696
-
Coombe Lane West
Kirkland, WA
-
1,880
4,315
1,880
4,998
1,673
6505 Lakeview Dr.
Kirkstall, UKE
-
2,437
9,414
-
2,437
9,414
29 Broad Lane
Kokomo, IN
-
16,044
-
16,044
1,030
2200 S. Dixon Rd
Lafayette, LA
-
1,928
10,483
1,928
10,509
4,053
204 Energy Parkway
Lafayette, CO
-
1,420
20,192
-
1,420
20,192
329 Exempla Circle
Lafayette, IN
-
16,833
-
16,833
2402 South Street
Lakeway, TX
-
-
-
27,982
5,142
22,840
1,796
2000 Medical Dr
Lakewood, CO
-
2,160
28,091
2,160
28,140
2,086
7395 West Eastman Place
Lakewood Ranch, FL
-
6,714
1,988
8,702
8230 Nature's Way
Lakewood Ranch, FL
-
1,000
22,388
-
1,000
22,388
2,646
8220 Natures Way
Lancaster, CA
9,561
15,295
15,907
3,835
43051 15th St. West
Langhorne, PA
-
1,350
24,881
1,350
25,021
4,014
262 Toll Gate Road
LaPlata, MD(2)
-
19,068
19,534
3,108
One Magnolia Drive
Las Vegas, NV
-
23,420
-
23,420
3,341
2500 North Tenaya Way
Lawrence, KS
-
8,716
-
8,716
1,019
3220 Peterson Road
Lecanto, FL
-
6,900
-
6,900
2,378
2341 W. Norvell Bryant Hwy.
Lee, MA
-
18,135
19,061
7,491
600 & 620 Laurel St.
Leeds, UKE
-
1,974
13,239
-
1,974
13,239
100 Grove Lane
Leicester, UKF
-
3,060
24,410
-
3,060
24,410
2,569
307 London Road
Lenoir, NC
-
3,748
4,389
1,636
1145 Powell Rd., N.E.
Lethbridge, AB
1,469
1,214
2,750
1,251
2,835
785 Columbia Boulevard West
Lexana, KS
-
1,770
1,865
8710 Caenen Lake Rd
Lexington, NC
-
3,900
1,015
4,915
1,895
161 Young Dr.
Libertyville, IL
-
6,500
40,024
-
6,500
40,024
6,270
901 Florsheim Dr
Lichfield, UKG
-
1,382
30,324
-
1,382
30,324
1,365
Wissage Road
Lillington, NC
-
17,579
-
17,579
1,089
54 Red Mulberry Way
Lillington, NC
-
16,451
-
16,451
2041 NC-210 N
Lincoln, NE
-
13,807
13,902
2,424
7208 Van Dorn St.
Linwood, NJ
-
21,984
22,925
3,685
432 Central Ave
Litchfield, CT
-
1,240
17,908
10,969
1,254
28,864
3,283
19 Constitution Way
Little Neck, NY
-
3,350
38,461
1,235
3,357
39,689
6,221
55-15 Little Neck Pkwy.
Livermore, CA
-
4,100
24,996
-
4,100
24,996
1,374
35 Fenton Street
London, UKI
-
-
-
23,257
7,439
15,818
6 Victoria Drive
Longview, TX
-
5,520
-
5,520
1,427
311 E Hawkins Pkwy
Longwood, FL
-
1,260
6,445
-
1,260
6,445
425 South Ronald Reagan Boulevard
Louisburg, KS
-
4,320
4,340
202 Rogers St
Louisville, KY
-
10,010
2,768
12,778
4,245
4604 Lowe Rd
Lowell, MA
-
1,070
13,481
1,070
13,650
2,284
841 Merrimack Street
Lowell, MA
-
3,378
3,422
30 Princeton Blvd
Loxley, UKE
-
1,369
15,668
-
1,369
15,668
1,573
Loxley Road
Lutherville, MD
-
1,100
19,786
1,675
1,100
21,461
3,285
515 Brightfield Road
Lynchburg, VA
-
16,114
-
16,114
1,011
189 Monica Blvd
Macungie, PA
-
29,033
29,089
4,478
1718 Spring Creek Road
Mahwah, NJ
-
-
-
28,854
1,605
27,249
1,117
15 Edison Road
Manalapan, NJ
-
22,624
22,971
3,195
445 Route 9 South
Manassas, VA
-
7,446
7,976
2,706
8341 Barrett Dr.
Mankato, MN
12,512
1,460
32,104
1,460
32,117
100 Dublin Road
Mansfield, TX
-
5,251
-
5,251
1,373
2281 Country Club Dr
Manteca, CA
5,878
1,300
12,125
1,566
1,312
13,679
4,520
430 N. Union Rd.
Marietta, PA
-
1,050
13,633
-
1,050
13,633
2760 Maytown Road
Marion, IN
-
12,750
1,136
13,886
614 W. 14th Street
Marion, IN
-
9,190
10,014
505 N. Bradner Avenue
Marlborough, UKK
-
2,677
6,822
-
2,677
6,822
The Common
Marlow, UKJ
-
-
-
47,193
8,772
38,421
1,329
210 Little Marlow Road
Martinsville, VA
-
-
-
-
-
Rolling Hills Rd. & US Hwy. 58
Marysville, WA
4,355
4,780
5,683
1,905
9802 48th Dr. N.E.
Matawan, NJ
-
1,830
20,618
1,830
20,701
2,950
625 State Highway 34
Matthews, NC
-
4,738
-
4,738
1,810
2404 Plantation Center Dr.
McHenry, IL
-
1,576
-
-
1,576
-
-
5200 Block of Bull Valley Road
McKinney, TX
-
1,570
7,389
-
1,570
7,389
1,452
2701 Alma Rd.
McMinnville, OR
-
7,984
8,134
3121 NE Cumulus Avenue
McMurray, PA
-
1,440
15,805
3,894
1,440
19,699
2,544
240 Cedar Hill Dr
Mechanicsburg, PA
-
1,350
16,650
-
1,350
16,650
2,432
4950 Wilson Lane
Medicine Hat, AB
2,412
5,566
5,737
65 Valleyview Drive SW
Melbourne, FL
-
7,070
48,257
16,324
7,070
64,581
11,663
7300 Watersong Lane
Melville, NY
-
4,280
73,283
4,305
4,299
77,570
11,736
70 Pinelawn Rd
Mendham, NJ
-
1,240
27,169
1,240
27,807
4,260
84 Cold Hill Road
Menomonee Falls, WI
-
1,020
6,984
1,652
1,020
8,636
1,830
W128 N6900 Northfield Drive
Mercerville, NJ
-
9,929
10,096
1,709
2240 White Horse- Merceville Road
Meriden, CT
-
1,300
1,472
1,300
1,570
845 Paddock Ave
Meridian, ID
-
3,600
20,802
3,600
21,053
7,802
2825 E. Blue Horizon Dr.
Merrillville, IN
-
11,699
11,853
2,781
9509 Georgia St.
Mesa, AZ
5,805
9,087
9,888
4,367
7231 E. Broadway
Middleburg Heights, OH
-
7,780
-
7,780
2,571
15435 Bagley Rd.
Middleton, WI
-
4,006
4,606
1,689
6701 Stonefield Rd.
Midland, MI
-
11,025
5,522
16,547
2,118
2325 Rockwell Dr
Mill Creek, WA
18,239
10,150
60,274
10,179
61,179
15,746
Bothell-Everett Hwy
Millville, NJ
-
29,944
30,071
4,710
54 Sharp Street
Milton Keynes, UKJ
-
1,826
18,654
-
1,826
18,654
Tunbridge Grove, Kents Hill
Milwaukie, OR
-
6,782
6,897
5770 SE Kellogg Creek Drive
Mishawaka, IN
-
16,114
-
16,114
1,054
60257 Bodnar Blvd
Missoula, MT
-
7,490
7,867
2,367
3620 American Way
Monmouth Junction, NJ
-
6,209
6,288
1,125
2 Deer Park Drive
Monroe, NC
-
3,681
4,329
1,650
918 Fitzgerald St.
Monroe, NC
-
4,799
5,656
2,046
919 Fitzgerald St.
Monroe, NC
-
4,021
4,135
1,573
1316 Patterson Ave.
Monroe Township, NJ
-
3,250
27,771
3,250
27,862
319 Forsgate Drive
Monroe Twp, NJ
-
1,160
13,193
1,160
13,295
2,268
292 Applegarth Road
Montville, NJ
-
3,500
31,002
3,500
31,849
4,485
165 Changebridge Rd.
Moorestown, NJ
-
2,060
51,628
1,569
2,071
53,186
8,185
1205 N. Church St
Moorestown, NJ
-
6,400
23,875
-
6,400
23,875
1,824
250 Marter Avenue
Morehead City, NC
-
3,104
1,648
4,752
2,038
107 Bryan St.
Morton Grove, IL
-
1,900
19,374
1,900
19,533
2,673
5520 N. Lincoln Ave.
Mount Pleasant, SC
-
-
17,200
-
4,052
13,149
1,945
1200 Hospital Drive
Mount Vernon, WA
-
3,440
21,842
2,227
3,440
24,069
1,259
1810 E. Division Street
Mt. Vernon, WA
-
2,200
2,356
3807 East College Way
Murphy, TX
-
1,950
19,182
1,950
19,760
304 West FM 544
Nacogdoches, TX
-
5,754
-
5,754
1,480
5902 North St
Naperville, IL
-
3,470
29,547
-
3,470
29,547
4,718
504 North River Road
Nashville, TN
-
4,910
29,590
-
4,910
29,590
6,736
15 Burton Hills Boulevard
Naugatuck, CT
-
1,200
15,826
1,200
16,023
2,576
4 Hazel Avenue
Needham, MA
-
1,610
13,715
1,610
14,081
6,108
100 West St.
Neodesha, KS
-
400 Fir St
New Braunfels, TX
-
1,200
19,800
10,154
2,729
28,425
3,382
2294 East Common Street
New Haven, IN
-
3,524
-
3,524
1,559
1201 Daly Dr.
New Moston, UKD
-
1,480
4,378
-
1,480
4,378
90a Broadway
Newark, DE
-
21,220
1,488
22,708
6,946
200 E. Village Rd.
Newcastle Under Lyme, UKG
-
1,110
5,655
-
1,110
5,655
Hempstalls Lane
Newcastle-under-Lyme, UKG
-
1,125
5,537
-
1,125
5,537
Silverdale Road
Norman, OK
-
1,484
-
1,484
1701 Alameda Dr.
Norman, OK
-
1,480
33,330
-
1,480
33,330
3,858
800 Canadian Trails Drive
North Augusta, SC
-
2,558
-
2,558
1,228
105 North Hills Dr.
North Bend, OR
-
1,290
7,361
1,290
8,047
2290 Inland Drive
North Cape May, NJ
-
22,266
22,314
3,488
700 Townbank Road
North Cape May, NJ
-
610 Town Bank Road
Northampton, UKF
-
5,182
17,348
-
5,182
17,348
1,623
Cliftonville Road
Northampton, UKF
-
2,013
6,257
-
2,013
6,257
Cliftonville Road
Nuneaton, UKG
-
3,325
8,983
-
3,325
8,983
132 Coventry Road
Nuthall, UKF
-
1,628
6,263
-
1,628
6,263
172A Nottingham Road
Nuthall, UKF
-
2,498
10,436
-
2,498
10,436
172 Nottingham Road
Oakland, CA
-
4,760
16,143
4,760
16,200
1,065
468 Perkins Street
Ocala, FL
-
1,340
10,564
-
1,340
10,564
2,169
2650 SE 18TH Avenue
Ogden, UT
-
6,700
7,399
2,330
1340 N. Washington Blv.
Oklahoma City, OK
-
7,513
-
7,513
1,761
13200 S. May Ave
Oklahoma City, OK
-
7,017
-
7,017
1,584
11320 N. Council Road
Olathe, KS
-
1,930
19,765
1,930
20,318
21250 W 151 Street
Omaha, NE
-
10,230
-
10,230
1,823
11909 Miracle Hills Dr.
Omaha, NE
-
8,769
-
8,769
1,647
5728 South 108th St.
Ona, WV
-
15,998
-
15,998
100 Weatherholt Drive
Oneonta, NY
-
5,020
-
5,020
1,188
1846 County Highway 48
Orem, UT
-
2,150
24,107
-
2,150
24,107
250 East Center Street
Osage City, KS
-
1,700
1,802
1403 Laing St
Osawatomie, KS
-
2,970
3,037
1520 Parker Ave
Ottawa, KS
-
6,590
6,618
2250 S Elm St
Overland Park, KS
-
3,730
27,076
3,730
27,416
5,416
12000 Lamar Avenue
Overland Park, KS
-
4,500
29,105
7,295
4,500
36,400
6,277
6101 W 119th St
Overland Park, KS
-
2,840
2,867
14430 Metcalf Ave
Overland Park, KS
-
1,300
25,311
1,300
25,988
7600 Antioch Road
Owasso, OK
-
1,380
-
1,380
12807 E. 86th Place N.
Owensboro, KY
-
13,275
-
13,275
4,465
1205 Leitchfield Rd.
Owenton, KY
-
2,400
-
2,400
905 Hwy. 127 N.
Oxford, MI
-
1,430
15,791
-
1,430
15,791
2,719
701 Market St
Palestine, TX
-
4,320
1,300
5,620
1,512
1625 W. Spring St.
Palm Coast, FL
-
10,957
-
10,957
2,112
50 Town Ct.
Paola, KS
-
5,610
5,620
601 N. East Street
Paris, TX
-
5,452
-
5,452
3,694
750 N Collegiate Dr
Paso Robles, CA
-
1,770
8,630
1,770
9,323
3,591
1919 Creston Rd.
Pella, IA
-
6,716
6,805
2602 Fifield Road
Pennington, NJ
-
1,380
27,620
1,471
28,343
3,947
143 West Franklin Avenue
Pennsauken, NJ
-
10,780
10,959
1,992
5101 North Park Drive
Petoskey, MI
-
14,452
-
14,452
2,348
965 Hager Dr
Pewaukee, WI
-
4,700
20,669
-
4,700
20,669
6,858
2400 Golf Rd.
Philadelphia, PA
-
2,930
10,433
3,527
2,930
13,960
2,324
1526 Lombard Street
Phillipsburg, NJ
-
21,175
21,401
3,443
290 Red School Lane
Phillipsburg, NJ
-
8,114
8,191
1,312
843 Wilbur Avenue
Pinehurst, NC
-
2,690
3,174
1,248
17 Regional Dr.
Piqua, OH
-
1,885
-
1,885
1744 W. High St.
Pittsburgh, PA
-
1,750
8,572
1,750
8,687
2,881
100 Knoedler Rd.
Plainview, NY
-
3,990
11,969
3,990
12,787
1,958
150 Sunnyside Blvd
Plano, TX
-
1,840
20,152
1,840
20,712
3325 W Plano Parkway
Plattsmouth, NE
-
5,650
-
5,650
1,059
1913 E. Highway
Plymouth, MI
-
1,490
19,990
1,490
20,225
3,293
14707 Northville Rd
Port St. Lucie, FL
-
8,700
47,230
6,090
8,700
53,320
9,314
10685 SW Stony Creek Way
Post Falls, ID
-
2,700
14,217
2,181
2,700
16,398
3,695
460 N. Garden Plaza Ct.
Princeton, NJ
-
1,730
30,888
1,516
1,810
32,324
4,587
155 Raymond Road
Prior Lake, MN
14,250
1,870
29,849
1,870
29,862
4685 Park Nicollet Avenue
Puyallup, WA
10,968
1,150
20,776
1,156
21,216
4,713
123 Fourth Ave. NW
Raleigh, NC
-
3,530
59,589
-
3,530
59,589
6,682
5301 Creedmoor Road
Raleigh, NC
-
2,580
16,837
-
2,580
16,837
2,029
7900 Creedmoor Road
Reading, PA
-
19,906
20,026
3,180
5501 Perkiomen Ave
Red Bank, NJ
-
1,050
21,275
1,050
21,771
3,016
One Hartford Dr.
Rehoboth Beach, DE
-
24,248
8,632
32,864
4,296
36101 Seaside Blvd
Reidsville, NC
-
3,830
4,687
1,825
2931 Vance St.
Reno, NV
-
1,060
11,440
1,060
12,045
3,857
5165 Summit Ridge Road
Richardson, TX
-
1,800
16,562
1,800
16,893
1350 East Lookout Drive
Richmond, IN
-
14,222
14,615
400 Industries Road
Richmond, VA
-
-
12,000
-
11,750
1,229
2220 Edward Holland Drive
Ridgeland, MS
-
7,675
8,102
2,771
410 Orchard Park
Rochdale, MA
-
-
7,100
-
6,410
111 Huntoon Memorial Highway
Rockville, MD
-
-
16,398
-
16,408
2,195
9701 Medical Center Drive
Rockville, CT
-
1,500
4,835
1,500
4,967
1,056
1253 Hartford Turnpike
Rockville Centre, NY
-
4,290
20,310
4,290
21,091
3,064
260 Maple Ave
Rockwall, TX
-
-
-
19,801
2,220
17,581
720 E Ralph Hall Parkway
Rocky Hill, CT
-
1,090
6,710
1,500
1,090
8,210
2,690
60 Cold Spring Rd.
Rohnert Park, CA
13,024
6,500
18,700
2,116
6,546
20,769
6,372
4855 Snyder Lane
Romeoville, IL
-
1,895
-
-
1,895
-
-
Grand Haven Circle
Roseburg, OR
-
1,200
4,891
1,200
4,935
1901 NW Hughwood Drive
Roseville, MN
-
2,140
24,679
2,140
24,746
2750 North Victoria Street
Roswell, GA
7,489
1,107
9,627
1,086
1,114
10,706
7,739
655 Mansell Rd.
Rugeley, UKG
-
1,900
10,262
-
1,900
10,262
Horse Fair
Ruston, LA
-
9,790
-
9,790
1,551
1401 Ezelle St
Sacramento, CA
9,762
14,781
15,020
3,341
6350 Riverside Blvd
Salem, OR
-
5,171
-
5,172
2,463
1355 Boone Rd. S.E.
Salem, OR
-
4,726
4,796
3988 12th Street SE
Salisbury, NC
-
5,697
5,865
2,145
2201 Statesville Blvd.
San Angelo, TX
-
8,800
9,225
2,896
2695 Valleyview Blvd.
San Angelo, TX
-
1,050
24,689
1,050
25,241
1,650
6101 Grand Court Road
San Antonio, TX
-
6,120
28,169
2,281
6,120
30,450
4,358
2702 Cembalo Blvd
San Antonio, TX
-
-
17,303
-
-
17,303
6,432
8902 Floyd Curl Dr.
San Bernardino, CA
-
3,700
14,300
3,700
14,987
3,115
1760 W. 16th St.
San Diego, CA
-
-
22,003
1,845
-
23,848
4,875
555 Washington St.
Sanatoga, PA
-
30,695
30,770
4,725
225 Evergreen Road
Sand Springs, OK
6,431
19,654
-
19,654
2,317
4402 South 129th Avenue West
Sarasota, FL
-
3,175
-
3,175
1,769
8450 McIntosh Rd.
Sarasota, FL
-
3,360
19,140
-
3,360
19,140
2,677
6150 Edgelake Drive
Scranton, PA
-
17,609
-
17,609
1,056
2741 Blvd. Ave
Scranton, PA
-
12,144
-
12,144
2751 Boulevard Ave
Seattle, WA
7,344
5,190
9,350
5,199
9,905
3,119
11501 15th Ave NE
Seattle, WA
27,180
10,670
37,291
10,700
38,155
10,575
805 4th Ave N
Selbyville, DE
-
25,912
26,253
4,141
21111 Arrington Dr
Seven Fields, PA
-
4,663
4,722
2,254
500 Seven Fields Blvd.
Severna Park, MD(2)
-
2,120
31,273
2,120
32,081
4,897
24 Truckhouse Road
Shawnee, OK
-
1,400
-
1,400
3947 Kickapoo
Shelbyville, KY
-
3,870
4,500
1,357
1871 Midland Trail
Shelton, WA
-
17,049
17,521
2,157
900 W Alpine Way
Sherman, TX
-
5,221
-
5,221
1,414
1011 E. Pecan Grove Rd.
Shrewsbury, NJ
-
2,120
38,116
2,128
39,018
6,095
5 Meridian Way
Silvis, IL
-
16,420
16,559
2,802
1900 10th St.
Sittingbourne, UKJ
-
1,357
6,539
-
1,357
6,539
200 London Road
Smithfield, NC
-
5,680
-
5,680
2,094
830 Berkshire Rd.
Smithfield, NC
-
8,216
-
8,216
250 Highway 210 West
Sonoma, CA
14,278
1,100
18,400
1,700
1,109
20,090
6,132
800 Oregon St.
South Bend, IN
-
17,770
-
17,770
1,080
52565 State Road
South Boston, MA
-
2,002
5,218
7,220
3,486
804 E. Seventh St.
Southbury, CT
-
1,860
23,613
1,860
24,571
3,660
655 Main St
Sparks, NV
-
3,700
46,526
-
3,700
46,526
9,398
275 Neighborhood Way
Springfield, OR
-
1,790
8,865
1,790
8,954
770 Harlow Road
Springfield, IL
-
-
10,100
-
9,332
1,258
701 North Walnut Street
Springfield, IL
-
13,378
1,084
14,462
3089 Old Jacksonville Road
St. Paul, MN
-
2,100
33,019
2,100
33,097
750 Mississippi River
Stafford, UKG
-
-
-
9,909
1,943
7,966
Stone Road
Stamford, UKF
-
1,820
3,238
-
1,820
3,238
Priory Road
Statesville, NC
-
1,447
1,713
2441 E. Broad St.
Statesville, NC
-
6,183
6,191
2,216
2806 Peachtree Place
Statesville, NC
-
3,627
-
3,627
1,330
2814 Peachtree Rd.
Stillwater, OK
-
1,400
-
1,400
1616 McElroy Rd.
Stockton, CA
2,810
2,280
5,983
2,372
6,288
1,638
6725 Inglewood
Stratford-upon-Avon, UKG
-
14,508
-
14,508
Scholars Lane
Stroudsburg, PA
-
16,313
-
16,313
370 Whitestone Corner Road
Summit, NJ
-
3,080
14,152
-
3,080
14,152
2,238
41 Springfield Avenue
Superior, WI
-
1,020
13,735
6,159
1,020
19,894
1,813
1915 North 34th Street
Swanton, OH
-
6,370
-
6,370
2,245
401 W. Airport Hwy.
Terre Haute, IN
-
1,370
18,016
-
1,370
18,016
395 8th Avenue
Texarkana, TX
-
1,403
-
1,403
4204 Moores Lane
The Villages, FL
-
1,035
7,446
-
1,035
7,446
2450 Parr Drive
Tomball, TX
-
1,050
13,300
1,050
14,079
2,076
1221 Graham Dr
Toms River, NJ
-
1,610
34,627
1,679
35,371
5,584
1587 Old Freehold Rd
Tonganoxie, KS
-
3,690
3,759
120 W 8th St
Topeka, KS
-
12,712
-
12,712
1,548
1931 Southwest Arvonia Place
Towson, MD(2)
-
1,180
13,280
1,180
13,475
2,204
7700 York Road
Troy, OH
-
2,000
4,254
6,254
1,841
81 S. Stanfield Rd.
Troy, OH
-
16,730
-
16,730
5,678
512 Crescent Drive
Trumbull, CT
-
4,440
43,384
-
4,440
43,384
6,548
6949 Main Street
Tucson, AZ
-
1,190
18,318
1,190
18,985
8151 E Speedway Boulevard
Tulsa, OK
-
3,003
6,025
3,003
6,045
3,248
3219 S. 79th E. Ave.
Tulsa, OK
-
1,390
7,110
1,390
7,627
1,467
7220 S. Yale Ave.
Tulsa, OK
-
1,320
10,087
-
1,320
10,087
1,233
7902 South Mingo Road East
Tyler, TX
-
5,268
-
5,268
1,366
5550 Old Jacksonville Hwy.
Upper Providence, PA
-
-
-
30,095
1,900
28,195
1,226
1133 Black Rock Road
Vacaville, CA
13,392
17,100
1,651
18,751
5,857
799 Yellowstone Dr.
Vallejo, CA
13,407
4,000
18,000
2,344
4,030
20,315
6,287
350 Locust Dr.
Vallejo, CA
7,147
2,330
15,407
2,330
15,717
3,716
2261 Tuolumne
Valparaiso, IN
-
2,558
-
2,558
1,087
2601 Valparaiso St.
Valparaiso, IN
-
2,962
-
2,962
1,238
2501 Valparaiso St.
Vancouver, WA
11,214
1,820
19,042
1,821
19,311
4,339
10011 NE 118th Ave
Venice, FL
-
1,150
10,674
-
1,150
10,674
2,113
1600 Center Rd.
Vero Beach, FL
-
3,187
-
3,187
1,322
420 4th Ct.
Vero Beach, FL
-
3,263
-
3,263
1,363
410 4th Ct.
Vero Beach, FL
-
2,930
40,070
15,112
2,930
55,182
12,173
7955 16th Manor
Virginia Beach, VA
-
1,540
22,593
-
1,540
22,593
1,361
5520 Indian River Rd
Voorhees, NJ
-
1,800
37,299
1,800
37,956
5,987
2601 Evesham Road
Voorhees, NJ(2)
-
1,900
26,040
1,900
26,934
4,266
3001 Evesham Road
Voorhees, NJ
-
3,100
25,950
3,100
25,971
2,965
113 South Route
Voorhees, NJ
-
3,700
24,312
1,560
3,847
25,725
2,443
311 Route 73
Wabash, IN
-
14,588
-
14,588
20 John Kissinger Drive
Waconia, MN
-
14,726
4,495
19,221
2,567
500 Cherry Street
Wake Forest, NC
-
3,003
1,742
4,745
2,086
611 S. Brooks St.
Wall, NJ
-
1,650
25,350
2,421
1,692
27,729
3,774
2021 Highway 35
Wallingford, CT
-
1,210
1,275
35 Marc Drive
Walsall, UKG
-
1,184
8,562
-
1,184
8,562
Little Aston Road
Wamego, KS
-
2,510
2,524
1607 4th St
Wareham, MA
-
10,313
1,701
12,014
4,983
50 Indian Neck Rd.
Warren, NJ
-
2,000
30,810
2,000
31,537
4,322
274 King George Rd
Watchung, NJ
-
1,920
24,880
1,030
1,976
25,853
3,620
680 Mountain Boulevard
Waukee, IA
-
1,870
31,878
1,075
1,870
32,953
3,686
1650 SE Holiday Crest Circle
Waxahachie, TX
-
5,763
-
5,763
1,362
1329 Brown St.
Weatherford, TX
-
5,261
-
5,261
1,375
1818 Martin Drive
Wellingborough, UKF
-
1,480
5,724
-
1,480
5,724
159 Northampton
West Bend, WI
-
17,790
17,828
2,364
2130 Continental Dr
West Chester, PA
-
1,350
29,237
1,350
29,488
4,641
800 West Miner Street
West Orange, NJ
-
2,280
10,687
2,280
10,869
1,915
20 Summit Street
Westerville, OH
-
8,287
3,105
11,392
8,620
690 Cooper Rd.
Westfield, IN
-
15,964
-
15,964
1,019
937 E. 186th Street
Westfield, NJ(2)
-
2,270
16,589
2,270
17,086
2,961
1515 Lamberts Mill Road
Westlake, OH
-
1,330
17,926
-
1,330
17,926
7,346
Westchester Pkwy.
Weston Super Mare, UKK
-
2,517
7,054
-
2,517
7,054
141b Milton Road
Westworth Village, TX
-
2,060
31,296
-
2,060
31,296
1,705
25 Leonard Trail
White Lake, MI
-
2,920
20,179
2,920
20,271
3,386
935 Union Lake Rd
Wichita, KS
-
1,400
11,000
-
1,400
11,000
3,955
505 North Maize Road
Wichita, KS
-
8,873
-
8,873
1,261
10604 E 13th Street North
Wichita, KS
13,208
19,749
-
19,752
2,302
2050 North Webb Road
Wichita, KS
-
2,240
2,321
900 N Bayshore Dr
Wichita, KS
-
-
-
11,034
10,134
1,360
10604 E 13th Street North
Wilkes-Barre, PA
-
2,301
2,345
300 Courtright Street
Williamstown, KY
-
6,430
-
6,430
2,183
201 Kimberly Lane
Wilmington, DE
-
9,494
9,553
1,621
810 S Broom Street
Wilmington, NC
-
2,991
-
2,991
1,419
3501 Converse Dr.
Wilmington, NC
-
15,356
-
15,356
Independence Blvd
Windsor, CT
-
2,250
8,539
1,848
2,250
10,387
1,783
One Emerson Drive
Windsor, CT
-
1,800
1,800
1,544
One Emerson Drive
Winston-Salem, NC
-
2,514
2,973
1,130
2980 Reynolda Rd.
Winter Garden, FL
-
1,350
7,937
-
1,350
7,937
720 Roper Road
Witherwack, UKC
-
6,915
-
6,915
Whitchurch Road
Wolverhampton, UKG
-
1,573
6,678
-
1,573
6,678
378 Prestonwood Road
Worcester, MA
-
3,500
54,099
-
3,500
54,099
10,138
101 Barry Road
Worcester, MA
-
2,300
9,060
5,037
2,300
14,097
2,185
378 Plantation St.
Wyncote, PA
-
2,700
22,244
2,700
22,477
3,639
1245 Church Road
York, UKE
-
2,961
8,266
-
2,961
8,266
Rosetta Way, Boroughbridge Road
Youngsville, NC
-
10,689
-
10,689
100 Sunset Drive
Zionsville, IN
-
1,610
22,400
1,691
1,610
24,091
3,894
11755 N Michigan Rd
Triple-net total
$
594,199
$
804,007
$
7,794,067
$
718,637
$
853,984
$
8,462,729
$
1,317,149
Welltower Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(Dollars in thousands)
Initial Cost to Company
Gross Amount at Which Carried at Close of Period
Description
Encumbrances
Land
Building & Improvements
Cost Capitalized Subsequent to Acquisition
Land
Building & Improvements
Accumulated Depreciation(1)
Year Acquired
Year Built
Address
Seniors housing operating:
Acton, MA
$
-
$
-
$
31,346
$
1,107
$
$
32,440
$
4,201
10 Devon Drive
Agawam, MA
6,334
10,044
10,594
2,441
153 Cardinal Drive
Albuquerque, NM
-
1,270
20,837
1,543
1,275
22,375
5,044
500 Paisano St NE
Alhambra, CA
-
6,305
8,987
15,292
1,342
1118 N. Stoneman Ave.
Altrincham, UKD
-
4,244
25,187
-
4,244
25,187
4,127
295 Hale Road
Amherstview, ON
4,446
4,654
4567 Bath Road
Arlington, TX
21,090
1,660
37,395
2,990
1,709
40,336
8,632
1250 West Pioneer Parkway
Arnprior, ON
6,283
6,590
1,148
15 Arthur Street
Atlanta, GA
-
2,100
20,603
2,154
21,298
2,843
1000 Lenox Park Blvd NE
Austin, TX
-
1,560
21,413
1,560
21,526
1,840
11330 Farrah Lane
Austin, TX
-
4,200
74,850
4,200
75,268
3,964
4310 Bee Caves Road
Avon, CT
18,645
1,550
30,571
2,290
1,580
32,831
8,359
101 Bickford Extension
Azusa, CA
-
3,141
6,941
10,082
2,656
125 W. Sierra Madre Ave.
Bagshot, UKJ
-
4,960
29,881
-
4,960
29,881
5,347
14 - 16 London Road
Banstead, UKJ
-
6,695
55,113
-
6,695
55,113
8,492
Croydon Lane
Basingstoke, UKJ
-
3,420
18,853
-
3,420
18,853
1,395
Grove Road
Basking Ridge, NJ
-
2,356
37,710
1,000
2,389
38,677
5,871
404 King George Road
Bassett, UKJ
-
4,874
32,304
-
4,874
32,304
5,540
111 Burgess Road
Baton Rouge, LA
9,186
29,436
29,792
4,477
9351 Siegen Lane
Beaconsfield, UKJ
-
5,566
50,952
-
5,566
50,952
7,642
30-34 Station Road
Beaconsfield, QC
-
1,149
17,484
1,197
18,175
3,954
505 Elm Avenue
Bedford, NH
-
-
-
33,235
2,548
30,687
4,123
5 Corporate Drive
Bee Cave, TX
-
1,820
21,084
1,820
21,718
1,153
14058 A Bee Cave Parkway
Bellevue, WA
-
2,800
19,004
1,543
2,816
20,531
3,885
15928 NE 8th Street
Belmont, CA
-
3,000
23,526
1,889
3,000
25,415
5,447
1301 Ralston Avenue
Belmont, CA
-
-
35,300
1,206
-
36,506
5,883
1010 Alameda de Las Pulgas
Berkeley, CA
12,663
3,050
32,677
2,058
3,050
34,735
2235 Sacramento Street
Bethesda, MD
-
-
45,309
45,807
7,170
8300 Burdett Road
Bethesda, MD
-
-
-
-
8300 Burdett Road
Bethesda, MD
-
-
-
-
8300 Burdett Road
Billerica, MA
-
1,619
21,381
1,624
22,034
1,852
20 Charnstaffe Lane
Birmingham, UKG
-
21,321
-
21,321
3,631
5 Church Road, Edgbaston
Birmingham, UKG
-
-
-
14,494
1,480
13,014
47 Bristol Road South
Birmingham, UKG
-
-
-
14,119
2,807
11,313
-
134 Jockey Road
Blainville, QC
-
2,077
8,902
2,141
9,237
2,400
50 des Chateaux Boulevard
Bloomfield Hills, MI
-
2,000
35,662
2,000
36,266
5,510
6790 Telegraph Road
Borehamwood, UKH
-
5,367
41,937
-
5,367
41,937
6,423
Edgwarebury Lane
Bothell, WA
-
1,350
13,439
1,928
1,361
15,357
1,270
10605 NE 185th Street
Boulder, CO
-
2,994
27,458
1,821
3,014
29,259
5,621
3955 28th Street
Bournemouth, UKK
-
5,527
42,547
-
5,527
42,547
5,235
42 Belle Vue Road
Braintree, MA
20,617
-
41,290
41,841
6,713
618 Granite Street
Brampton, ON
43,804
10,256
60,021
-
10,256
60,021
4,334
100 Ken Whillans Drive
Brighton, MA
10,127
2,100
14,616
1,060
2,109
15,667
3,583
50 Sutherland Road
Brockport, NY
-
1,500
23,496
1,500
23,590
1,808
90 West Avenue
Brockville, ON
4,604
7,445
7,761
1026 Bridlewood Drive
Brookfield, CT
19,001
2,250
30,180
1,630
2,262
31,799
7,206
246A Federal Road
Broomfield, CO
-
4,140
44,547
10,646
10,054
49,279
12,387
400 Summit Blvd
Brossard, QC
11,401
5,499
31,854
-
5,499
31,854
2,272
2455 Boulevard Rome
Buckingham, UKJ
-
2,979
13,880
-
2,979
13,880
Church Street
Buffalo Grove, IL
-
2,850
49,129
2,850
49,914
7,822
500 McHenry Road
Burbank, CA
-
4,940
43,466
1,003
4,940
44,469
8,242
455 E. Angeleno Avenue
Burbank, CA
19,935
3,610
50,817
2,503
3,610
53,320
2721 Willow Street
Burlington, ON
12,810
1,309
19,311
1,349
20,156
3,377
500 Appleby Line
Burlington, MA
-
2,443
34,354
1,022
2,522
35,298
5,935
24 Mall Road
Burlington, MA
-
2,750
57,488
3,024
2,750
60,512
-
50 Greenleaf Way
Calabasas, CA
-
-
6,438
-
7,315
4,377
25100 Calabasas Road
Calgary, AB
12,534
2,252
37,415
1,566
2,324
38,909
6,804
20 Promenade Way SE
Calgary, AB
14,376
2,793
41,179
1,565
2,888
42,650
7,196
80 Edenwold Drive NW
Calgary, AB
11,364
3,122
38,971
1,461
3,229
40,325
6,743
150 Scotia Landing NW
Calgary, AB
23,014
3,431
28,983
1,292
3,551
30,155
4,188
9229 16th Street SW
Calgary, AB
24,579
2,385
36,776
1,348
2,463
38,047
3,082
2220-162nd Avenue SW
Camberley, UKJ
-
2,654
5,736
16,874
7,217
18,048
Fernhill Road
Cardiff, UKL
-
3,191
12,566
-
3,191
12,566
2,665
127 Cyncoed Road
Cardiff by the Sea, CA
38,767
5,880
64,711
1,174
5,880
65,885
12,242
3535 Manchester Avenue
Carol Stream, IL
-
1,730
55,048
1,420
1,730
56,468
9,664
545 Belmont Lane
Cary, NC
-
45,240
45,630
5,956
1206 West Chatham Street
Cedar Park, TX
-
1,750
15,664
1,750
15,782
800 C-Bar Ranch Trail
Centerville, MA
-
1,300
27,357
1,041
1,324
28,375
5,481
22 Richardson Road
Cerritos, CA
-
-
27,494
3,554
-
31,048
11000 New Falcon Way
Chatham, ON
1,422
1,098
12,462
1,114
1,139
13,536
1,253
25 Keil Drive North
Chelmsford, MA
-
1,589
26,432
1,594
27,141
2,148
199 Chelmsford Street
Chesterfield, MO
-
1,857
48,366
1,857
49,164
6,929
1880 Clarkson Road
Chorleywood, UKH
-
5,636
43,191
-
5,636
43,191
6,942
High View, Rickmansworth Road
Chula Vista, CA
-
2,072
22,163
2,128
22,802
3,583
3302 Bonita Road
Church Crookham, UKJ
-
2,591
14,215
-
2,591
14,215
1,690
Bourley Road
Cincinnati, OH
-
2,060
109,388
10,021
2,060
119,409
19,242
5445 Kenwood Road
Claremont, CA
-
2,430
9,928
1,100
2,438
11,019
1,963
2053 North Towne Avenue
Cohasset, MA
-
2,485
26,147
1,202
2,487
27,347
4,369
125 King Street (Rt 3A)
Colorado Springs, CO
-
14,756
1,409
16,125
2,433
2105 University Park Boulevard
Concord, NH
13,081
21,164
21,807
4,171
300 Pleasant Street
Coquitlam, BC
10,245
3,047
24,567
1,035
3,142
25,507
5,378
1142 Dufferin Street
Costa Mesa, CA
-
2,050
19,969
1,176
2,050
21,145
4,508
350 West Bay St
Crystal Lake, IL
-
12,461
1,040
13,483
2,575
751 E Terra Cotta Avenue
Dallas, TX
-
1,080
9,655
1,080
10,267
2,202
3611 Dickason Avenue
Dallas, TX
-
6,330
114,794
6,330
115,431
7,170
3535 N Hall Street
Danvers, MA
9,175
1,120
14,557
1,145
15,442
3,328
1 Veronica Drive
Danvers, MA
-
2,203
28,761
2,257
28,860
2,865
9 Summer Street
Davenport, IA
-
1,403
35,893
3,068
1,480
38,884
7,930
4500 Elmore Ave.
Decatur, GA
-
-
-
30,456
1,946
28,510
4,979
920 Clairemont Avenue
Denver, CO
12,283
1,450
19,389
3,009
1,470
22,379
3,490
4901 South Monaco Street
Denver, CO
-
2,910
35,838
1,002
2,933
36,817
7,299
8101 E Mississippi Avenue
Dix Hills, NY
-
3,808
39,014
1,059
3,809
40,072
6,394
337 Deer Park Road
Dollard-Des-Ormeaux, QC
-
1,957
14,431
2,017
15,000
3,932
4377 St. Jean Blvd
Dresher, PA
7,103
1,900
10,664
1,900
11,438
2,871
1650 Susquehanna Road
Dublin, OH
-
1,680
43,423
5,727
1,775
49,055
10,839
6470 Post Rd
East Haven, CT
22,079
2,660
35,533
2,234
2,681
37,746
10,112
111 South Shore Drive
East Meadow, NY
-
45,991
46,783
7,311
1555 Glen Curtiss Boulevard
East Setauket, NY
-
4,920
37,354
1,047
4,975
38,347
5,962
1 Sunrise Drive
Eastbourne, UKJ
-
4,145
33,744
-
4,145
33,744
5,511
6 Upper Kings Drive
Edgbaston, UKG
-
-
-
16,689
2,720
13,969
Pershore Road
Edgewater, NJ
-
4,561
25,047
1,000
4,564
26,044
4,349
351 River Road
Edison, NJ
-
1,892
32,314
1,051
1,896
33,361
7,579
1801 Oak Tree Road
Edmonds, WA
10,991
1,650
24,449
1,651
24,989
2,056
21500 72nd Avenue West
Edmonton, AB
9,222
1,589
29,819
1,176
1,638
30,946
5,496
103 Rabbit Hill Court NW
Edmonton, AB
11,914
2,063
37,293
1,587
2,127
38,816
8,990
10015 103rd Avenue NW
Encinitas, CA
-
1,460
7,721
2,377
1,460
10,098
4,102
335 Saxony Rd.
Encino, CA
-
5,040
46,255
1,195
5,040
47,450
8,407
15451 Ventura Boulevard
Escondido, CA
-
1,520
24,024
1,300
1,520
25,324
5,450
1500 Borden Rd
Esher, UKJ
-
5,783
48,361
-
5,783
48,361
6,956
42 Copsem Lane
Fairfax, VA
-
2,678
2,825
9207 Arlington Boulevard
Fairfield, NJ
-
3,120
43,868
3,175
44,747
7,192
47 Greenbrook Road
Fareham, UKJ
-
3,408
17,970
-
3,408
17,970
1,699
Redlands Lane
Flossmoor, IL
-
1,292
9,496
1,339
1,339
10,788
2,209
19715 Governors Highway
Folsom, CA
-
1,490
32,754
1,490
32,765
2,292
1574 Creekside Drive
Fort Worth, TX
-
2,080
27,888
3,217
2,085
31,100
6,747
2151 Green Oaks Road
Fort Worth, TX
-
1,740
19,799
1,740
20,760
-
7001 Bryant Irvin Road
Franklin, MA
-
2,430
30,597
2,416
2,442
33,000
4,550
4 Forge Hill Road
Frome, UKK
-
2,720
14,813
-
2,720
14,813
1,160
Welshmill Lane
Fullerton, CA
12,537
1,964
19,989
1,998
20,593
3,484
2226 North Euclid Street
Gahanna, OH
-
11,214
1,209
12,408
1,870
775 East Johnstown Road
Gilbert, AZ
16,042
2,160
28,246
2,160
28,718
6,703
580 S. Gilbert Road
Gilroy, CA
-
13,880
24,615
1,575
37,680
9,028
7610 Isabella Way
Glen Cove, NY
-
4,594
35,236
1,447
4,615
36,662
7,045
39 Forest Avenue
Glenview, IL
-
2,090
69,288
1,542
2,090
70,830
11,838
2200 Golf Road
Golden Valley, MN
19,396
1,520
33,513
1,545
34,314
5,088
4950 Olson Memorial Highway
Grimsby, ON
-
5,617
5,857
84 Main Street East
Grosse Pointe Woods, MI
-
13,662
13,912
2,025
1850 Vernier Road
Grosse Pointe Woods, MI
-
1,430
31,777
1,430
32,576
4,721
21260 Mack Avenue
Guelph, ON
4,313
1,190
7,597
1,237
7,930
1,098
165 Cole Road
Guildford, UKJ
-
5,361
56,494
-
5,361
56,494
8,384
Astolat Way, Peasmarsh
Gurnee, IL
-
27,931
1,005
28,891
4,033
500 North Hunt Club Road
Hamden, CT
14,857
1,460
24,093
1,296
1,487
25,362
5,965
35 Hamden Hills Drive
Hampshire, UKJ
-
4,172
26,035
-
4,172
26,035
4,104
22-26 Church Road
Haverhill, MA
-
1,720
50,046
1,723
50,873
4,973
254 Amesbury Road
Henderson, NV
-
29,809
30,265
4,784
1935 Paseo Verde Parkway
Henderson, NV
5,572
1,190
11,600
1,212
12,078
3,007
1555 West Horizon Ridge Parkway
Highland Park, IL
-
2,250
25,313
2,259
26,150
4,895
1601 Green Bay Road
Hingham, MA
-
1,440
32,292
1,440
32,356
2,840
1 Sgt. William B Terry Drive
Holbrook, NY
-
3,957
35,337
4,016
36,051
5,617
320 Patchogue Holbrook Road
Horley, UKJ
-
2,332
12,144
-
2,332
12,144
1,457
Court Lodge Road
Houston, TX
-
3,830
55,674
5,115
3,830
60,789
11,699
2929 West Holcombe Boulevard
Houston, TX
17,274
1,040
31,965
5,258
1,044
37,218
6,026
505 Bering Drive
Houston, TX
-
1,750
15,603
1,750
15,813
10120 Louetta Road
Houston, TX
-
27,598
1,538
29,136
6,194
Cypresswood Dr
Hove, UKJ
-
1,360
6,979
-
1,360
6,979
Furze Hill
Huntington Beach, CA
-
3,808
31,172
1,743
3,886
32,838
6,231
7401 Yorktown Avenue
Irving, TX
-
1,030
6,823
1,421
1,030
8,244
2,122
8855 West Valley Ranch Parkway
Johns Creek, GA
-
1,580
23,285
1,588
23,639
3,789
11405 Medlock Bridge Road
Kanata, ON
-
1,689
28,670
-
1,689
28,670
3,951
70 Stonehaven Drive
Kansas City, MO
-
1,820
34,898
4,138
1,845
39,011
8,933
12100 Wornall Road
Kansas City, MO
5,950
1,930
39,997
3,760
1,963
43,724
10,341
6500 North Cosby Ave
Kansas City, MO
-
23,962
24,015
1,713
6460 North Cosby Avenue
Kelowna, BC
5,802
2,688
13,647
2,771
14,184
3,047
863 Leon Avenue
Kennebunk, ME
-
2,700
30,204
3,199
3,022
33,081
9,952
One Huntington Common Drive
Kingston, ON
4,614
1,030
11,416
1,061
11,933
1,144
181 Ontario Street
Kingwood, TX
-
9,777
1,033
10,810
2,148
22955 Eastex Freeway
Kirkland, WA
24,600
3,450
38,709
3,515
39,239
6,861
14 Main Street South
Kitchener, ON
1,473
2,744
2,885
164 - 168 Ferfus Avenue
Kitchener, ON
4,645
1,130
9,939
1,167
10,338
1,870
20 Fieldgate Street
Kitchener, ON
3,539
1,093
7,327
1,129
7,663
1,801
290 Queen Street South
Kitchener, ON
13,146
1,341
13,939
2,419
1,341
16,358
1250 Weber Street E
La Palma, CA
-
2,950
16,591
2,966
17,216
2,835
5321 La Palma Avenue
Lafayette Hill, PA
-
1,750
11,848
1,738
1,867
13,469
2,909
429 Ridge Pike
Laguna Hills, CA
-
12,820
75,926
10,284
12,820
86,210
-
24903 Moulton Parkway
Laguna Woods, CA
-
11,280
76,485
7,142
11,280
83,627
1,628
24441 Calle Sonora
Laguna Woods, CA
-
9,150
57,842
5,246
9,150
63,088
1,358
24962 Calle Aragon
Lake Zurich, IL
-
1,470
9,830
2,799
1,470
12,629
2,074
550 America Court
Lawrenceville, GA
15,602
1,500
29,003
1,508
29,502
4,799
1375 Webb Gin House Road
Leawood, KS
15,328
2,490
32,493
3,191
5,690
32,484
6,775
4400 West 115th Street
Lenexa, KS
9,581
26,251
26,841
4,937
15055 West 87th Street Parkway
Leominster, MA
-
23,164
23,695
2,240
1160 Main Street
Lincroft, NJ
-
19,958
1,268
21,226
3,302
734 Newman Springs Road
Lombard, IL
16,603
2,130
59,943
2,130
60,444
9,202
2210 Fountain Square Dr
London, UKI
-
3,121
10,027
-
3,121
10,027
71 Hatch Lane
London, ON
8,228
1,037
8,651
760 Horizon Drive
London, ON
6,329
1,969
16,985
1,087
2,029
18,012
2,153
1486 Richmond Street North
London, ON
-
1,445
13,631
1,598
14,048
1,155
81 Grand Avenue
Longueuil, QC
9,905
3,992
23,711
4,166
24,388
1,771
70 Rue Levis
Los Angeles, CA
-
-
11,430
2,034
-
13,464
2,849
330 North Hayworth Avenue
Los Angeles, CA
62,843
-
114,438
1,599
-
116,037
22,542
10475 Wilshire Boulevard
Los Angeles, CA
-
3,540
19,007
1,151
3,540
20,158
3,470
2051 N. Highland Avenue
Los Angeles, CA
-
-
28,050
1,122
-
29,172
4061 Grand View Boulevard
Louisville, KY
-
2,420
20,816
1,039
2,420
21,855
3,954
4600 Bowling Boulevard
Louisville, KY
10,977
1,600
20,326
1,600
20,659
3,774
6700 Overlook Drive
Lynnfield, MA
-
3,165
45,200
1,817
3,165
47,016
7,489
55 Salem Street
Malvern, PA
-
1,651
17,194
1,318
1,708
18,454
4,281
324 Lancaster Avenue
Mansfield, MA
27,347
3,320
57,011
5,846
3,431
62,747
13,897
25 Cobb Street
Maple Ridge, BC
8,781
2,875
11,922
-
2,875
11,922
12241 224th Street
Marieville, QC
6,762
1,278
12,113
1,323
12,155
425 rue Claude de Ramezay
Markham, ON
39,383
3,727
48,939
1,801
3,848
50,620
11,766
7700 Bayview Avenue
Marlboro, NJ
-
2,222
14,888
2,222
15,568
2,772
3A South Main Street
Medicine Hat, AB
11,092
1,432
14,141
1,476
14,234
2,156
223 Park Meadows Drive SE
Memphis, TN
-
1,800
17,744
1,116
1,800
18,860
4,350
6605 Quail Hollow Road
Meriden, CT
9,056
1,500
14,874
1,032
1,538
15,868
4,645
511 Kensington Avenue
Metairie, LA
13,013
27,708
28,089
4,051
3732 West Esplanade Ave. S
Middletown, CT
14,916
1,430
24,242
1,226
1,439
25,458
6,148
645 Saybrook Road
Middletown, RI
15,863
2,480
24,628
1,577
2,511
26,174
6,217
303 Valley Road
Milford, CT
11,128
3,210
17,364
1,420
3,213
18,781
4,973
77 Plains Road
Milton, ON
14,760
4,542
25,321
2,068
4,687
27,244
1,920
611 Farmstead Drive
Minnetonka, MN
13,938
2,080
24,360
1,923
2,376
25,987
4,604
500 Carlson Parkway
Minnetonka, MN
15,959
29,344
29,908
4,241
18605 Old Excelsior Blvd.
Mission Viejo, CA
14,375
6,600
52,118
4,025
6,600
56,143
1,031
27783 Center Drive
Mississauga, ON
9,046
1,602
17,996
1,651
18,675
3,274
1130 Bough Beeches Boulevard
Mississauga, ON
3,046
4,655
4,899
Constitution Boulevard
Mississauga, ON
19,440
3,649
35,137
1,569
3,778
36,577
4,676
1490 Rathburn Road East
Mississauga, ON
6,191
2,548
15,158
2,626
15,922
2,359
85 King Street East
Mobberley, UKD
-
5,146
26,665
-
5,146
26,665
5,676
Barclay Park, Hall Lane
Monterey, CA
-
6,440
29,101
6,440
29,781
4,786
1110 Cass St.
Montgomery Village, MD
-
3,530
18,246
5,175
3,570
23,381
6,912
19310 Club House Road
Moose Jaw, SK
2,507
12,973
13,539
2,392
425 4th Avenue NW
Mystic, CT
11,128
1,400
18,274
1,427
19,107
4,431
20 Academy Lane Mystic
Naperville, IL
-
1,550
12,237
2,227
1,550
14,464
2,868
1936 Brookdale Road
Naperville, IL
-
1,540
28,204
1,540
29,091
4,868
535 West Ogden Avenue
Naples, FL
57,939
8,989
119,398
2,012
9,068
121,331
8,426
4800 Aston Gardens Way
Nashua, NH
-
1,264
43,026
1,264
43,519
3,149
674 West Hollis Street
Nashville, TN
-
3,900
35,788
2,004
3,900
37,792
7,958
4206 Stammer Place
Needham, MA
-
1,240
32,992
1,068
1,240
34,060
-
880 Greendale Avenue
Nepean, ON
5,794
1,575
5,770
1,638
6,090
1,101
1 Mill Hill Road
Newbury, UKJ
-
-
-
15,646
2,850
12,796
370 London Road
Newburyport, MA
-
1,750
29,187
1,063
1,750
30,250
-
4 Wallace Bashaw Junior Way
Newmarket, UKH
-
4,071
11,902
-
4,071
11,902
1,212
Jeddah Way
Newton, MA
26,992
2,250
43,614
2,263
44,593
9,596
2300 Washington Street
Newton, MA
15,558
2,500
30,681
1,897
2,514
32,564
7,387
280 Newtonville Avenue
Newton, MA
-
3,360
25,099
1,508
3,385
26,582
6,339
430 Centre Street
Newtown Square, PA
-
1,930
14,420
1,941
15,078
3,629
333 S. Newtown Street Rd.
Niagara Falls, ON
6,814
1,225
7,963
1,263
8,305
1,025
7860 Lundy's Lane
Niantic, CT
-
1,320
25,986
4,266
1,334
30,238
5,525
417 Main Street
North Andover, MA
21,901
1,960
34,976
1,459
2,019
36,377
7,872
700 Chickering Road
North Chelmsford, MA
11,542
18,478
19,271
3,938
2 Technology Drive
North Dartmouth, MA
-
1,700
35,337
1,463
1,700
36,800
-
239 Cross Road
North Tustin, CA
-
2,880
18,059
2,901
18,600
2,510
12291 Newport Avenue
Oak Park, IL
-
1,250
40,383
1,058
1,250
41,441
7,219
1035 Madison Street
Oakland, CA
-
3,877
47,508
2,539
3,900
50,024
8,007
11889 Skyline Boulevard
Oakton, VA
-
2,250
37,576
1,753
2,260
39,319
6,066
2863 Hunter Mill Road
Oakville, ON
5,890
1,252
7,382
1,291
7,666
1,400
289 and 299 Randall Street
Oakville, ON
10,145
2,134
29,963
1,310
2,214
31,192
5,960
25 Lakeshore Road West
Oakville, ON
5,306
1,271
13,754
1,310
14,389
2,227
345 Church Street
Oceanside, CA
-
2,160
18,352
3,518
2,202
21,829
4,566
3500 Lake Boulevard
Okotoks, AB
18,174
20,943
21,636
2,660
51 Riverside Gate
Oshawa, ON
3,119
7,570
7,892
1,464
649 King Street East
Ottawa, ON
10,221
1,341
15,425
1,018
1,395
16,388
1,400
110 Berrigan Drive
Ottawa, ON
19,153
3,454
23,309
1,033
3,606
24,190
3,854
2370 Carling Avenue
Ottawa, ON
22,027
4,305
39,106
-
4,305
39,106
2,868
751 Peter Morand Crescent
Ottawa, ON
6,720
2,103
18,421
2,337
2,176
20,685
1,506
1 Eaton Street
Ottawa, ON
12,149
2,963
26,424
2,093
3,054
28,425
2,127
691 Valin Street
Ottawa, ON
10,138
1,561
18,170
1,612
18,966
1,440
22 Barnstone Drive
Ottawa, ON
13,924
3,403
31,090
2,159
3,511
33,142
2,360
990 Hunt Club Road
Ottawa, ON
18,783
3,411
28,335
4,221
3,516
32,451
2,524
2 Valley Stream Drive
Ottawa, ON
2,991
4,710
4,902
1345 Ogilvie Road
Ottawa, ON
2,180
2,165
1,129
3,409
370 Kennedy Lane
Ottawa, ON
10,626
2,809
27,299
1,134
2,899
28,343
5,910
43 Aylmer Avenue
Ottawa, ON
4,795
1,156
9,758
1,221
10,132
1,620
1351 Hunt Club Road
Ottawa, ON
6,246
7,800
8,198
1,410
140 Darlington Private
Ottawa, ON
9,389
1,176
12,764
1,228
13,427
1,176
10 Vaughan Street
Overland Park, KS
3,405
1,540
16,269
1,177
1,728
17,258
2,992
9201 Foster
Palo Alto, CA
16,535
-
39,639
1,937
41,554
6,344
2701 El Camino Real
Paramus, NJ
-
2,840
35,728
1,457
2,851
37,174
5,520
567 Paramus Road
Parkland, FL
57,514
4,880
111,481
1,612
4,885
113,088
8,239
5999 University Drive
Peabody, MA
6,235
-
-
19,199
2,250
16,949
1,855
73 Margin Street
Pembroke, ON
-
1,931
9,427
-
1,931
9,427
1,320
1111 Pembroke Street West
Pittsburgh, PA
-
1,580
18,017
1,587
18,436
3,346
900 Lincoln Club Dr.
Placentia, CA
-
8,480
17,076
1,663
8,480
18,739
1180 N Bradford Avenue
Plainview, NY
-
3,066
19,901
3,174
20,390
2,923
1231 Old Country Road
Plano, TX
28,215
3,120
59,950
1,009
3,120
60,959
13,352
4800 West Parker Road
Plano, TX
-
1,750
15,390
1,750
15,808
3690 Mapleshade Lane
Playa Vista, CA
-
1,580
40,531
1,584
41,389
6,732
5555 Playa Vista Drive
Plymouth, MA
-
1,444
34,951
1,444
35,576
3,016
157 South Street
Plymouth, MA
13,742
2,550
35,055
2,004
2,550
37,059
-
60 Stafford Hill
Port Perry, ON
9,723
3,685
26,788
2,405
3,799
29,079
2,005
15987 Simcoe Street
Providence, RI
-
2,655
21,910
-
2,655
21,910
8,265
700 Smith Street
Purley, UKI
-
7,365
35,161
-
7,365
35,161
6,581
21 Russell Hill Road
Queensbury, NY
-
1,260
21,744
1,260
22,399
1,712
27 Woodvale Road
Quincy, MA
-
1,350
12,584
1,423
13,276
3,180
2003 Falls Boulevard
Rancho Cucamonga, CA
-
1,480
10,055
1,539
10,667
2,200
9519 Baseline Road
Rancho Palos Verdes, CA
-
5,450
60,034
1,681
5,450
61,715
10,709
5701 Crestridge Road
Randolph, NJ
-
1,540
46,934
1,540
47,570
7,337
648 Route 10 West
Red Deer, AB
12,215
1,247
19,283
1,285
19,984
1,585
3100 - 22 Street
Red Deer, AB
14,375
1,199
22,339
1,238
23,125
1,935
10 Inglewood Drive
Redondo Beach, CA
-
-
9,557
-
10,378
4,750
514 North Prospect Ave
Regina, SK
6,937
1,485
21,148
1,531
21,892
4,285
3651 Albert Street
Regina, SK
6,749
1,244
21,036
1,287
21,838
3,517
3105 Hillsdale Street
Regina, SK
13,241
1,539
24,053
2,709
1,586
26,715
1,931
1801 McIntyre Street
Renton, WA
21,150
3,080
51,824
3,103
52,407
9,093
104 Burnett Avenue South
Ridgefield, CT
-
3,100
80,614
1,892
3,150
82,456
8,965
640 Danbury Road
Riviere-du-Loup, QC
3,258
7,601
-
7,601
35 des Cedres
Riviere-du-Loup, QC
9,331
1,454
16,848
2,636
1,585
19,353
1,394
230-235 rue Des Chenes
Rocky Hill, CT
10,063
16,351
16,934
3,612
1160 Elm Street
Romeoville, IL
-
12,646
59,857
6,168
67,189
12,459
605 S Edward Dr.
Roseville, MN
-
1,540
35,877
1,585
36,553
5,273
2555 Snelling Avenue, North
Roseville, CA
-
3,300
41,652
2,785
3,300
44,437
5161 Foothills Boulevard
Roswell, GA
-
2,080
6,486
1,425
2,385
7,606
1,601
75 Magnolia Street
Sacramento, CA
-
1,300
23,394
1,334
24,321
3,601
345 Munroe Street
Saint-Lambert, QC
23,342
10,259
61,903
-
10,259
61,903
5,074
1705 Avenue Victoria
Salem, NH
20,184
32,721
2,031
1,051
34,680
6,651
242 Main Street
Salinas, CA
-
5,110
41,424
3,996
5,110
45,420
1,088
1320 Padre Drive
Salisbury, UKK
-
2,720
15,269
-
2,720
15,269
1,046
Shapland Close
Salt Lake City, UT
-
1,360
19,691
1,766
1,360
21,457
5,925
1430 E. 4500 S.
San Diego, CA
-
4,200
30,707
4,228
30,995
4,114
2567 Second Avenue
San Diego, CA
-
5,810
63,078
1,790
5,810
64,868
13,456
13075 Evening Creek Drive S
San Diego, CA
-
3,000
27,164
3,000
27,674
3,941
810 Turquoise Street
San Francisco, CA
-
5,920
91,639
8,480
5,920
100,120
1,674
1550 Sutter Street
San Francisco, CA
-
11,800
77,214
6,911
11,800
84,125
1,623
1601 19th Avenue
San Gabriel, CA
-
3,120
15,566
3,130
16,103
2,783
8332 Huntington Drive
San Jose, CA
-
2,850
35,098
2,856
35,545
6,132
1420 Curvi Drive
San Jose, CA
-
3,280
46,823
1,833
3,280
48,656
8,350
500 S Winchester Boulevard
San Jose, CA
-
11,900
27,647
2,606
11,900
30,253
4855 San Felipe Road
San Juan Capistrano, CA
-
1,390
6,942
1,304
1,390
8,246
3,324
30311 Camino Capistrano
San Rafael, CA
-
1,620
27,392
1,308
1,620
28,700
1,610
111 Merrydale Road
San Ramon, CA
-
8,700
72,223
6,220
8,700
78,443
1,388
9199 Fircrest Lane
Sandy Springs, GA
-
2,214
8,360
2,220
8,905
2,093
5455 Glenridge Drive NE
Santa Maria, CA
-
6,050
50,658
2,450
6,089
53,069
11,991
1220 Suey Road
Santa Monica, CA
19,551
5,250
28,340
5,263
29,094
4,526
1312 15th Street
Santa Rosa, CA
-
2,250
26,273
1,634
2,250
27,907
4225 Wayvern Drive
Saskatoon, SK
4,280
13,905
1,011
14,514
2,185
220 24th Street East
Saskatoon, SK
10,080
1,382
17,609
1,425
18,280
2,719
1622 Acadia Drive
Schaumburg, IL
-
2,460
22,863
2,479
23,824
4,509
790 North Plum Grove Road
Scottsdale, AZ
-
2,500
3,890
1,507
2,500
5,397
1,354
9410 East Thunderbird Road
Seal Beach, CA
-
6,204
72,954
1,232
6,229
74,161
15,443
3850 Lampson Avenue
Seattle, WA
48,540
6,790
85,369
2,103
6,825
87,437
15,599
5300 24th Avenue NE
Seattle, WA
10,539
1,150
19,887
1,002
1,150
20,889
1,499
11039 17th Avenue
Sevenoaks, UKJ
-
6,181
40,240
-
6,181
40,240
7,403
64 - 70 Westerham Road
Severna Park, MD
-
-
67,623
4,391
-
72,015
2,437
43 W McKinsey Road
Shelburne, VT
19,178
31,041
1,833
32,821
6,165
687 Harbor Road
Shelby Township, MI
16,207
1,040
26,344
1,093
26,777
3,961
46471 Hayes Road
Shrewsbury, MA
-
26,824
27,747
2,398
3111 Main Street
Sidcup, UKI
-
7,446
56,570
-
7,446
56,570
11,400
Frognal Avenue
Simi Valley, CA
-
3,200
16,664
3,217
17,227
3,877
190 Tierra Rejada Road
Simi Valley, CA
-
5,510
51,406
4,123
5,510
55,529
1,175
5300 E Los Angeles Avenue
Solihull, UKG
-
5,070
43,297
-
5,070
43,297
7,435
1270 Warwick Road
Solihull, UKG
-
3,571
26,053
-
3,571
26,053
4,584
1 Worcester Way
Solihull, UKG
-
-
-
12,436
1,851
10,585
Warwick Road
Sonning, UKJ
-
5,644
42,155
-
5,644
42,155
6,711
Old Bath Rd.
Sonoma, CA
-
2,820
21,890
1,352
2,820
23,241
91 Napa Road
South Windsor, CT
-
3,000
29,295
2,630
3,099
31,826
7,537
432 Buckland Road
Spokane, WA
-
3,200
25,064
3,271
25,551
6,047
3117 E. Chaser Lane
Spokane, WA
-
2,580
25,342
2,639
25,589
4,897
1110 E. Westview Ct.
St. Albert, AB
8,616
1,145
17,863
1,180
18,679
4,394
78C McKenney Avenue
St. John's, NL
6,063
11,765
-
11,765
64 Portugal Cove Road
Stittsville, ON
4,732
1,175
17,397
1,211
18,109
2,752
1340 - 1354 Main Street
Stockport, UKD
-
4,369
25,018
-
4,369
25,018
4,828
1 Dairyground Road
Studio City, CA
-
4,006
25,307
4,040
26,080
4,965
4610 Coldwater Canyon Avenue
Sugar Land, TX
-
31,423
1,535
32,958
7,509
1221 Seventh St
Sun City, FL
21,636
6,521
48,476
1,244
6,560
49,680
4,592
231 Courtyards
Sun City, FL
24,378
5,040
50,923
1,383
5,066
52,280
4,325
1311 Aston Gardens Court
Sun City West, AZ
12,026
1,250
21,778
1,030
1,271
22,787
3,630
13810 West Sandridge Drive
Sunnyvale, CA
-
5,420
41,682
1,564
5,420
43,246
7,780
1039 East El Camino Real
Surrey, BC
7,047
3,605
18,818
3,716
19,503
4,767
16028 83rd Avenue
Surrey, BC
16,391
4,552
22,338
1,380
4,692
23,578
6,114
15501 16th Avenue
Sutton, UKI
-
-
-
18,628
4,096
14,532
123 Westmead Road
Suwanee, GA
-
1,560
11,538
1,560
12,280
2,486
4315 Johns Creek Parkway
Sway, UKJ
-
4,145
15,508
-
4,145
15,508
2,033
Sway Place
Swift Current, SK
2,248
10,119
10,485
1,815
301 Macoun Drive
Tacoma, WA
18,080
2,400
35,053
2,457
35,408
6,180
7290 Rosemount Circle
Tacoma, WA
-
1,535
6,068
1,535
6,107
7290 Rosemount Circle
Tacoma, WA
-
4,170
73,377
7,687
4,170
81,064
8201 6th Avenue
Tampa, FL
69,330
4,910
114,148
1,699
4,950
115,807
8,042
12951 W Linebaugh Avenue
Tewksbury, MA
-
2,350
24,118
1,779
2,350
25,897
-
2000 Emerald Court
The Woodlands, TX
-
12,379
13,166
2,657
7950 Bay Branch Dr
Toledo, OH
-
2,040
47,129
3,125
2,144
50,150
12,012
3501 Executive Parkway
Toronto, ON
17,354
2,927
20,713
1,203
3,017
21,826
1,861
54 Foxbar Road
Toronto, ON
9,601
5,082
25,493
1,298
5,243
26,629
3,841
645 Castlefield Avenue
Toronto, ON
13,336
2,040
19,822
-
2,040
19,822
2,030
4251 Dundas Street West
Toronto, ON
22,989
5,132
41,657
3,422
5,290
44,921
5,740
10 William Morgan Drive
Toronto, ON
4,335
2,480
7,571
2,556
8,003
1,305
123 Spadina Road
Toronto, ON
1,445
1,079
5,364
1,112
5,588
25 Centennial Park Road
Toronto, ON
8,351
2,513
19,695
2,602
20,504
2,694
305 Balliol Street
Toronto, ON
18,699
3,400
32,757
1,483
3,509
34,131
6,106
1055 and 1057 Don Mills Road
Toronto, ON
1,027
1,361
2,915
1,405
3,104
3705 Bathurst Street
Toronto, ON
1,700
1,447
3,918
1,491
4,137
1340 York Mills Road
Toronto, ON
32,956
5,304
53,488
2,399
5,467
55,725
13,210
8 The Donway East
Trumbull, CT
23,795
2,850
37,685
1,395
2,927
39,004
9,228
2750 Reservoir Avenue
Tucson, AZ
4,528
6,179
3,645
9,749
1,453
5660 N. Kolb Road
Tulsa, OK
-
1,330
21,285
3,318
1,350
24,583
5,283
8887 South Lewis Ave
Tulsa, OK
-
1,500
20,861
2,912
1,551
23,722
5,481
9524 East 71st St
Tustin, CA
-
15,299
15,876
2,957
240 East 3rd St
Upland, CA
-
3,160
42,596
3,160
42,600
2,781
2419 North Euclid Avenue
Upper St Claire, PA
-
1,102
13,455
1,102
14,069
2,828
500 Village Drive
Vancouver, BC
14,862
24,122
42,675
2,620
37,543
31,874
5,207
2803 West 41st Avenue
Vankleek Hill, ON
2,960
3,164
48 Wall Street
Vaudreuil, QC
8,348
1,852
14,214
-
1,852
14,214
1,099
333 rue Querbes
Venice, FL
64,425
6,820
100,501
1,225
6,832
101,714
7,572
1000 Aston Gardens Drive
Victoria, BC
7,502
2,856
18,038
2,944
18,695
3,741
3000 Shelbourne Street
Victoria, BC
6,916
3,681
15,774
3,795
16,377
3,384
3051 Shelbourne Street
Victoria, BC
7,756
2,476
15,379
2,554
16,281
1,269
3965 Shelbourne Street
Virginia Water, UKJ
-
7,106
29,937
5,419
31,938
5,473
Christ Church Road
Walnut Creek, CA
-
3,700
12,467
1,397
3,794
13,770
3,120
2175 Ygnacio Valley Road
Walnut Creek, CA
-
10,320
100,890
9,225
10,320
110,115
2,085
1580 Geary Road
Waltham, MA
-
2,462
40,062
1,115
2,486
41,153
4,199
126 Smith Street
Warwick, RI
15,390
2,400
24,635
1,420
2,407
26,048
7,115
75 Minnesota Avenue
Washington, DC
31,489
4,000
69,154
4,002
70,061
10,870
5111 Connecticut Avenue NW
Waterbury, CT
23,854
2,460
39,547
2,511
2,495
42,023
12,656
180 Scott Road
Wayland, MA
-
1,207
27,462
1,163
1,307
28,525
4,755
285 Commonwealth Road
Welland, ON
6,637
7,530
-
7,530
110 First Street
Wellesley, MA
-
4,690
77,462
4,690
77,573
7,260
23 & 27 Washington Street
West Babylon, NY
-
3,960
47,085
3,960
47,997
6,886
580 Montauk Highway
West Bloomfield, MI
-
1,040
12,300
1,060
12,844
2,159
7005 Pontiac Trail
West Hills, CA
-
2,600
7,521
2,610
7,988
2,083
9012 Topanga Canyon Road
West Vancouver, BC
19,151
7,059
28,155
1,578
7,276
29,516
5,545
2095 Marine Drive
Westbourne, UKK
-
5,441
41,420
-
5,441
41,420
6,812
16-18 Poole Road
Westford, MA
-
1,440
32,607
1,440
32,674
2,480
108 Littleton Road
Weston, MA
-
1,160
6,200
1,160
7,012
1,004
135 North Avenue
Weybridge, UKJ
-
7,899
48,240
-
7,899
48,240
9,412
Ellesmere Road
Weymouth, UKK
-
2,591
16,551
-
2,591
16,551
1,099
Cross Road
White Oak, MD
-
2,304
24,768
1,417
2,316
26,173
3,846
11621 New Hampshire Avenue
Wilbraham, MA
10,773
17,639
18,449
3,935
2387 Boston Road
Wilmington, DE
-
1,040
23,338
1,129
23,940
3,910
2215 Shipley Street
Winchester, UKJ
-
6,009
29,405
-
6,009
29,405
5,367
Stockbridge Road
Winnipeg, MB
13,116
1,960
38,612
1,973
2,024
40,521
10,618
857 Wilkes Avenue
Winnipeg, MB
16,190
1,276
21,732
1,315
22,586
3,765
3161 Grant Avenue
Winnipeg, MB
13,111
1,317
15,609
1,631
1,357
17,200
2,245
125 Portsmouth Boulevard
Wolverhampton, UKG
-
2,941
8,922
-
2,941
8,922
2,316
73 Wergs Road
Woodbridge, CT
-
1,370
14,219
1,180
1,426
15,343
4,691
21 Bradley Road
Woodland Hills, CA
-
3,400
20,478
3,436
21,183
4,005
20461 Ventura Boulevard
Worcester, MA
13,496
1,140
21,664
1,156
22,640
4,797
340 May Street
Yarmouth, ME
16,811
27,711
1,185
28,876
5,706
27 Forest Falls Drive
Yonkers, NY
-
3,962
50,107
1,341
3,967
51,443
7,956
65 Crisfield Street
Yorkton, SK
3,384
8,762
9,102
1,536
94 Russell Drive
Seniors housing operating total
$
2,400,836
$
1,085,554
$
11,775,094
$
807,677
$
1,151,566
$
12,516,758
$
1,791,579
Welltower Inc.
Schedule III
Real Estate and Accumulated Depreciation
December 31, 2016
(Dollars in thousands)
Initial Cost to Company
Gross Amount at Which Carried at Close of Period
Description
Encumbrances
Land
Building & Improvements
Cost Capitalized Subsequent to Acquisition
Land
Building & Improvements
Accumulated Depreciation(1)
Year Acquired
Year Built
Address
Outpatient medical:
Akron, OH
$
-
$
$
12,105
$
-
$
$
12,105
$
2,050
701 White Pond Drive
Allen, TX
-
14,196
14,607
3,626
1105 N Central Expressway
Alpharetta, GA
-
14,757
14,789
3,798
11975 Morris Road
Alpharetta, GA
-
1,862
-
-
1,862
-
-
940 North Point Parkway
Alpharetta, GA
-
17,103
17,308
5,331
3300 Old Milton Parkway
Alpharetta, GA
-
18,902
19,424
4,755
3400-A Old Milton Parkway
Alpharetta, GA
-
1,769
36,152
1,769
36,745
10,190
3400-C Old Milton Parkway
Arcadia, CA
-
5,408
23,219
3,343
5,618
26,352
8,913
301 W. Huntington Drive
Arlington, TX
-
18,243
18,537
1,941
902 W. Randol Mill Road
Atlanta, GA
-
4,931
18,720
6,650
5,301
25,000
9,325
755 Mt. Vernon Hwy.
Atlanta, GA
-
1,947
24,248
1,687
1,947
25,934
5,558
975 Johnson Ferry Road
Atlanta, GA
25,347
-
43,425
-
44,036
10,358
Peachtree-Dunwoody Road
Bardstown, KY
1,928
-
-
8,238
7,964
4359 New Shepherdsville Rd
Bartlett, TN
-
15,015
1,889
16,904
5,734
2996 Kate Bond Rd.
Bel Air, MD
-
-
-
24,708
-
24,708
12 Medstar Boulevard
Bellevue, NE
-
-
16,680
-
-
16,680
4,032
2510 Bellevue Medical Center Drive
Bettendorf, IA
-
-
7,110
-
7,183
2140 53rd Avenue
Beverly Hills, CA
-
20,766
40,730
20,766
40,854
2,755
9675 Brighton Way
Beverly Hills, CA
-
18,863
1,192
-
18,863
1,192
415 North Bedford
Beverly Hills, CA
-
19,863
31,690
19,863
31,846
2,334
416 North Bedford
Beverly Hills, CA
33,729
32,603
28,639
32,603
28,642
2,918
435 North Bedford
Beverly Hills, CA
78,271
52,772
87,192
-
52,772
87,192
5,720
436 North Bedford
Birmingham, AL
-
10,201
10,704
3,496
801 Princeton Avenue SW
Birmingham, AL
-
11,733
1,235
12,967
4,127
817 Princeton Avenue SW
Birmingham, AL
-
18,726
1,881
20,607
6,776
833 Princeton Avenue SW
Boardman, OH
-
12,161
12,170
3,768
8423 Market St
Boca Raton, FL
-
12,312
12,381
2,548
9960 S. Central Park Boulevard
Boca Raton, FL
-
34,002
2,588
36,485
12,111
9970 S. Central Park Blvd.
Boerne, TX
-
13,120
-
13,120
3,067
134 Menger Springs Road
Boynton Beach, FL
-
2,048
7,692
2,048
8,280
3,253
8188 Jog Rd.
Boynton Beach, FL
-
2,048
7,403
1,261
2,048
8,664
3,324
8200 Jog Road
Boynton Beach, FL
-
5,611
8,279
13,834
4,708
10075 Jog Rd.
Boynton Beach, FL
25,399
13,324
40,369
2,175
13,963
41,905
7,314
10301 Hagen Ranch Road
Bradenton, FL
-
1,184
9,799
1,184
9,829
1,037
315 75th Street West
Bradenton, FL
-
1,035
4,298
-
1,035
4,298
7005 Cortez Road West
Bridgeton, MO
-
21,084
-
21,084
5,382
12266 DePaul Dr
Buckhurst Hill, UKH
-
11,597
49,243
-
11,597
49,243
2,263
High Road
Burleson, TX
-
12,611
13,012
3,068
12001 South Freeway
Burnsville, MN
-
-
31,596
-
31,987
4,373
14101 Fairview Dr
Carmel, IN
-
2,280
19,238
2,280
19,663
6,292
12188-A North Meridian Street
Carmel, IN
-
2,026
21,559
2,026
21,586
7,140
12188-B North Meridian Street
Castle Rock, CO
-
13,004
13,576
1,679
2352 Meadows Boulevard
Cedar Grove, WI
-
-
313 S. Main St.
Charleston, SC
-
2,773
25,928
2,815
25,939
2,900
325 Folly Road
Cincinnati, OH
-
-
17,880
-
18,015
2,151
3301 Mercy West Boulevard
Claremore, OK
-
12,829
13,640
4,900
1501 N. Florence Ave.
Clarkson Valley, MO
-
-
35,592
-
-
35,592
9,599
15945 Clayton Rd
Clear Lake, TX
-
-
13,882
-
-
13,882
1010 South Ponds Drive
Columbia, MD
-
2,333
19,232
2,333
19,243
3,412
10700 Charter Drive
Columbia, MD
-
33,885
-
33,885
1,039
5450 & 5500 Knoll N Drive
Coon Rapids, MN
-
-
26,679
1,106
-
27,785
3,124
11850 Blackfoot Street NW
Cypress, TX
-
1,287
-
-
1,287
-
-
14940 Mueschke Road
Cypress, TX
-
2,985
-
-
2,985
-
-
13105 Wortham Center Drive
Dade City, FL
-
1,211
5,511
-
1,211
5,511
1,078
13413 US Hwy 301
Dallas, TX
-
-
-
15,541
15,419
8196 Walnut Hill Lane
Dallas, TX
-
28,690
3,395
32,085
11,242
9330 Poppy Dr.
Dallas, TX
-
52,488
52,524
8,297
7115 Greenville Avenue
Dayton, OH
-
6,919
7,005
2,165
1530 Needmore Road
Deerfield Beach, FL
-
2,408
7,809
2,540
7,814
2,872
1192 East Newport Center Drive
Delray Beach, FL
-
1,882
34,767
6,015
2,152
40,512
15,966
5130-5150 Linton Blvd.
Durham, NC
-
1,212
22,858
1,212
22,859
2,375
1823 Hillandale Road
Edina, MN
-
15,132
15,395
3,791
8100 W 78th St
El Paso, TX
-
17,075
2,132
19,208
7,613
2400 Trawood Dr.
Everett, WA
-
4,842
26,010
-
4,842
26,010
5,637
13020 Meridian Ave. S.
Fenton, MO
11,258
27,485
27,814
4,826
1011 Bowles Avenue
Fenton, MO
5,345
13,911
13,961
1,666
1055 Bowles Avenue
Flower Mound, TX
-
9,654
9,724
2560 Central Park Avenue
Flower Mound, TX
-
4,164
27,529
4,164
27,609
2,525
4370 Medical Arts Drive
Flower Mound, TX
-
4,620
-
-
4,620
-
-
Medical Arts Drive
Fort Wayne, IN
-
1,105
22,836
-
1,105
22,836
3,707
7916 Jefferson Boulevard
Fort Worth, TX
-
26,020
26,238
2,785
10840 Texas Health Trail
Fort Worth, TX
-
6,099
-
6,099
7200 Oakmont Boulevard
Franklin, TN
-
2,338
12,138
2,449
2,338
14,587
4,973
100 Covey Drive
Franklin, WI
4,445
6,872
7,550
-
6,872
7,550
1,976
9200 W. Loomis Rd.
Frisco, TX
-
-
18,635
1,443
-
20,078
6,460
4401 Coit Road
Frisco, TX
-
-
15,309
2,314
-
17,623
6,401
4461 Coit Road
Gallatin, TN
-
21,801
22,334
6,053
300 Steam Plant Rd
Gig Harbor, WA
-
-
-
30,890
30,810
1,481
11511 Canterwood Blvd NW
Glendale, CA
-
18,398
1,207
19,605
5,747
222 W. Eulalia St.
Grand Prairie, TX
-
6,086
-
6,086
1,490
2740 N State Hwy
Grapevine, TX
-
-
5,943
4,778
2,081
8,640
2040 W State Hwy
Grapevine, TX
-
3,365
15,669
-
3,365
15,669
2,170
2020 W State Hwy
Green Bay, WI
6,053
-
14,891
-
-
14,891
3,442
2253 W. Mason St.
Green Bay, WI
-
-
20,098
-
-
20,098
4,557
2845 Greenbrier Road
Green Bay, WI
-
-
11,696
-
-
11,696
3,683
2845 Greenbrier Road
Greeneville, TN
-
10,104
10,178
2,894
438 East Vann Rd
Greenwood, IN
-
8,316
26,384
-
8,316
26,384
4,763
1260 Innovation Parkway
Greenwood, IN
-
1,262
7,045
1,262
7,691
333 E County Line Road
Grenwood, IN
-
2,098
21,538
2,098
21,538
1,761
3000 S State Road 135
Harker Heights, TX
-
1,907
3,575
-
1,907
3,575
E Central Texas Expressway
High Point, NC
-
2,659
29,069
2,659
29,232
4,463
4515 Premier Drive
Highland, IL
-
-
8,834
-
-
8,834
12860 Troxler Avenue
Houston, TX
-
-
-
10,403
10,403
-
15655 Cypress Woods Medical Drive
Houston, TX
-
5,837
33,128
5,837
33,137
8,093
15655 Cypress Woods Medical Drive
Houston, TX
-
3,102
32,323
3,242
33,094
3,999
1900 N Loop W Freeway
Houston, TX
-
31,206
-
31,206
6,893
18100 St John Drive
Houston, TX
-
10,613
1,217
11,830
3,098
2060 Space Park Drive
Houston, TX
-
3,688
13,313
3,688
13,405
2,374
10701 Vintage Preserve Parkway
Houston, TX
-
-
-
80,886
12,815
68,072
9,242
2727 W Holcombe Boulevard
Hudson, OH
-
2,587
13,720
2,587
14,116
3,403
5655 Hudson Drive
Humble, TX
-
-
9,941
-
-
9,941
8233 N. Sam Houston Parkway E.
Jackson, MI
-
17,367
17,389
2,917
1201 E Michigan Avenue
Jupiter, FL
-
2,252
11,415
2,903
2,608
13,962
4,344
550 Heritage Dr.
Jupiter, FL
-
2,825
5,858
3,005
6,562
2,579
600 Heritage Dr.
Kenosha, WI
6,110
-
18,058
-
-
18,058
4,086
10400 75th St.
Killeen, TX
-
22,878
22,954
6,000
2405 Clear Creek Rd
Kyle, TX
-
2,569
14,384
2,569
14,756
1,676
135 Bunton Road
La Jolla, CA
-
12,855
32,229
-
12,855
32,229
2,871
4150 Regents Park Row
La Jolla, CA
-
9,425
26,571
-
9,425
26,571
1,665
4120 & 4130 La Jolla Village Drive
La Quinta, CA
-
3,266
22,066
3,279
22,234
2,727
47647 Caleo Bay Drive
Lake St Louis, MO
-
14,249
14,355
3,919
400 Medical Dr
Lakeway, TX
-
-
-
2,801
2,801
-
-
Lohmans Crossing Road
Lakewood, CA
-
14,885
1,957
16,842
5,315
5750 Downey Ave.
Lakewood, WA
-
16,017
16,675
2,561
11307 Bridgeport Way SW
Las Vegas, NV
-
-
-
6,127
6,127
-
-
SW corner of Deer Springs Way and Riley Street
Las Vegas, NV
-
2,319
4,612
1,021
2,319
5,632
2,254
2870 S. Maryland Pkwy.
Las Vegas, NV
-
15,287
1,259
16,546
5,430
1815 E. Lake Mead Blvd.
Las Vegas, NV
-
6,921
7,133
2,763
1776 E. Warm Springs Rd.
Lenexa, KS
-
17,926
18,228
3,995
23401 Prairie Star Pkwy
Lenexa, KS
-
13,723
-
13,723
23351 Prairie Star Parkway
Lincoln, NE
-
1,420
29,723
1,420
29,876
8,758
575 South 70th St
London, UKI
-
17,395
152,642
-
17,395
152,642
7,015
53 Parkside
London, UKI
-
3,948
27,188
-
3,948
27,188
1,250
49 Parkside
London, UKI
-
5,058
11,174
-
5,058
11,174
17-19 View Road
Los Alamitos, CA
-
18,635
1,087
19,722
6,191
3771 Katella Ave.
Los Gatos, CA
-
22,386
1,761
24,147
9,201
555 Knowles Dr.
Loxahatchee, FL
-
1,637
5,048
1,024
1,719
5,990
2,272
12977 Southern Blvd.
Loxahatchee, FL
-
1,340
6,509
1,440
7,170
2,582
12989 Southern Blvd.
Loxahatchee, FL
-
1,553
4,694
1,121
1,650
5,719
2,083
12983 Southern Blvd.
Marietta, GA
-
2,682
20,053
-
2,682
20,053
-
4800 Olde Towne Parkway
Marinette, WI
5,455
-
13,538
-
-
13,538
3,685
4061 Old Peshtigo Rd.
Melbourne, FL
-
3,439
50,461
3,439
50,779
5,089
2222 South Harbor City Boulevard
Menasha, WI
-
1,374
13,861
3,119
1,374
16,980
1550 Midway Place
Merced, CA
-
-
14,585
-
-
14,585
3,858
315 Mercy Ave.
Merriam, KS
-
8,005
8,138
2,592
8800 West 75th Street
Merriam, KS
-
-
1,996
2,166
4,081
1,347
7301 Frontage Street
Merriam, KS
-
-
10,222
4,283
14,146
4,293
8901 West 74th Street
Merriam, KS
-
-
5,862
3,132
8,811
2,655
9119 West 74th Street
Merriam, KS
-
1,226
24,998
1,257
25,029
3,699
9301 West 74th Street
Merrillville, IN
-
-
22,134
-
22,823
5,749
101 E. 87th Ave.
Mesa, AZ
-
1,558
9,561
1,558
10,214
3,928
6424 East Broadway Road
Mesquite, TX
-
3,834
-
3,834
1575 I-30
Milwaukee, WI
3,658
8,457
-
8,457
2,069
1218 W. Kilbourn Ave.
Milwaukee, WI
8,062
1,425
11,520
-
1,425
11,520
3,676
3301-3355 W. Forest Home Ave.
Milwaukee, WI
2,016
2,185
-
2,185
840 N. 12th St.
Milwaukee, WI
15,896
-
44,535
-
-
44,535
9,857
2801 W. Kinnickinnic Pkwy.
Mission Hills, CA
24,796
-
42,276
2,080
4,791
39,565
4,793
11550 Indian Hills Road
Missouri City, TX
-
-
-
8,883
1,360
7,523
7010 Highway 6
Moline, IL
-
-
8,783
-
8,812
3900 28th Avenue Drive
Monticello, MN
8,021
18,489
18,537
2,651
1001 Hart Boulevard
Moorestown, NJ
-
50,896
50,902
8,377
401 Young Avenue
Mount Juliet, TN
2,479
1,566
11,697
1,173
1,566
12,870
4,749
5002 Crossings Circle
Mount Vernon, IL
-
-
24,892
-
-
24,892
4,238
4121 Veterans Memorial Dr
Murrieta, CA
-
3,800
-
-
3,800
-
-
28078 Baxter Rd.
Murrieta, CA
-
-
47,190
-
47,236
13,323
28078 Baxter Rd.
Muskego, WI
2,159
-
2,159
S74 W16775 Janesville Rd.
Nashville, TN
-
1,806
7,165
3,120
1,806
10,285
3,787
310 25th Ave. N.
New Albany, IN
-
2,411
16,494
2,411
16,524
1,656
2210 Green Valley Road
New Berlin, WI
3,738
3,739
8,290
-
3,739
8,290
2,035
14555 W. National Ave.
Niagara Falls, NY
-
1,433
10,891
1,731
11,042
4,807
6932 - 6934 Williams Rd
Niagara Falls, NY
-
8,362
8,683
2,662
6930 Williams Rd
Oklahoma City, OK
-
19,135
19,415
3,515
535 NW 9th Street
Oro Valley, AZ
-
18,339
19,195
6,000
1521 E. Tangerine Rd.
Oshkosh, WI
-
-
18,339
-
-
18,339
4,117
855 North Wethaven Dr.
Oshkosh, WI
6,749
-
15,881
-
-
15,881
3,528
855 North Wethaven Dr.
Palmer, AK
-
29,705
1,362
31,067
9,424
2490 South Woodworth Loop
Pasadena, TX
-
1,700
8,009
-
1,700
8,009
5001 E Sam Houston Parkway S
Pearland, TX
-
1,500
11,253
-
1,500
11,253
2515 Business Center Drive
Pearland, TX
-
9,594
32,753
9,807
32,731
2,569
11511 Shadow Creek Parkway
Pendleton, OR
-
-
10,312
-
10,318
3001 St. Anthony Drive
Phoenix, AZ
-
1,149
48,018
11,308
1,149
59,327
20,711
2222 E. Highland Ave.
Pineville, NC
-
6,974
2,463
1,077
9,321
3,747
10512 Park Rd.
Plano, TX
-
5,423
20,698
5,423
20,755
10,292
6957 Plano Parkway
Plano, TX
51,686
83,209
84,198
16,056
6020 West Parker Road
Plantation, FL
-
8,563
10,666
3,475
8,575
14,130
6,384
851-865 SW 78th Ave.
Plantation, FL
-
8,848
9,262
8,908
9,842
6,207
600 Pine Island Rd.
Plymouth, WI
1,131
1,250
1,870
-
1,250
1,870
2636 Eastern Ave.
Portland, ME
-
25,930
25,943
6,128
195 Fore River Parkway
Redmond, WA
-
5,015
26,709
5,015
26,993
6,187
18000 NE Union Hill Rd.
Reno, NV
-
1,117
21,972
2,070
1,117
24,042
7,907
343 Elm St.
Richmond, TX
-
-
-
11,118
2,000
9,118
22121 FM 1093 Road
Richmond, VA
-
2,969
26,697
3,004
26,722
5,926
7001 Forest Avenue
Rockwall, TX
-
17,197
17,719
3,516
3142 Horizon Road
Rogers, AR
-
1,062
29,277
-
1,062
29,277
7,493
2708 Rife Medical Lane
Rolla, MO
-
1,931
47,639
-
1,931
47,639
9,312
1605 Martin Spring Drive
Roswell, NM
-
5,851
-
5,851
1,368
601 West Country Club Road
Roswell, NM
-
15,984
16,014
3,346
350 West Country Club Road
Roswell, NM
-
17,171
17,171
2,916
300 West Country Club Road
Sacramento, CA
-
12,756
1,834
14,587
5,092
8120 Timberlake Way
Salem, NH
-
1,655
14,050
1,655
14,070
1,716
31 Stiles Road
San Antonio, TX
-
1,012
10,178
-
1,012
10,178
4,177
19016 Stone Oak Pkwy.
San Antonio, TX
-
1,038
9,173
1,777
1,038
10,950
4,777
540 Stone Oak Centre Drive
San Antonio, TX
-
4,518
31,041
2,610
4,548
33,621
7,824
5282 Medical Drive
San Antonio, TX
-
17,288
17,761
2,700
3903 Wiseman Boulevard
Santa Clarita, CA
-
-
2,338
19,914
5,196
17,056
1,932
23861 McBean Parkway
Santa Clarita, CA
-
-
28,384
1,926
5,250
25,060
2,736
23929 McBean Parkway
Santa Clarita, CA
-
11,595
11,872
23871 McBean Parkway
Santa Clarita, CA
25,000
40,257
-
40,257
2,745
23803 McBean Parkway
Santa Clarita, CA
-
-
20,618
4,407
16,586
1,957
24355 Lyons Avenue
Sarasota, FL
-
47,325
1,964
49,290
9,088
1921 Waldemere Street
Seattle, WA
-
4,410
38,428
4,410
38,820
11,598
5350 Tallman Ave
Sewell, NJ
-
57,929
58,209
18,809
Hurffville-Cross Keys Road
Shakopee, MN
6,132
11,412
11,687
3,201
1515 St Francis Ave
Shakopee, MN
10,363
18,089
18,089
3,781
1601 St Francis Ave
Sheboygan, WI
1,563
1,012
2,216
-
1,012
2,216
1813 Ashland Ave.
Shenandoah, TX
-
-
21,135
-
-
21,135
1,057
106 Vision Park Boulevard
Sherman Oaks, CA
-
-
32,186
2,423
3,121
31,488
3,439
4955 Van Nuys Boulevard
Somerville, NJ
-
3,400
22,244
3,400
22,246
4,681
30 Rehill Avenue
Southlake, TX
-
3,000
-
-
3,000
-
-
Central Avenue
Southlake, TX
-
18,243
18,581
3,616
1545 East Southlake Boulevard
Southlake, TX
17,534
30,549
3,840
34,389
5,370
1545 East Southlake Boulevard
Springfield, IL
-
-
-
11,919
1,568
10,351
1100 East Lincolnshire Blvd
Springfield, IL
-
-
-
3,728
3,551
2801 Mathers Rd
St Paul, MN
-
37,695
38,025
2,691
225 Smith Avenue N.
St. Louis, MO
-
17,247
1,501
18,748
6,141
2325 Dougherty Rd.
St. Paul, MN
-
2,706
39,507
2,701
39,523
9,139
435 Phalen Boulevard
Stamford, CT
-
-
-
41,153
-
41,153
-
29 Hospital Plaza
Suffern, NY
-
37,255
37,412
8,423
255 Lafayette Avenue
Suffolk, VA
-
1,566
11,511
1,566
11,537
3,829
5838 Harbour View Blvd.
Sugar Land, TX
8,076
3,543
15,532
-
3,543
15,532
3,526
11555 University Boulevard
Summit, WI
-
2,899
87,416
-
2,899
87,416
26,616
36500 Aurora Dr.
Tacoma, WA
-
-
64,307
-
-
64,307
11,469
1608 South J Street
Tallahassee, FL
-
-
17,449
-
-
17,449
4,335
One Healing Place
Tampa, FL
-
4,319
12,234
-
4,319
12,234
2,047
14547 Bruce B Downs Blvd
Temple, TX
-
2,900
9,954
2,900
9,980
1,122
2601 Thornton Lane
Tucson, AZ
-
1,302
4,925
1,325
5,749
2,429
2055 W. Hospital Dr.
Tustin, CA
-
3,345
-
3,345
14591 Newport Ave
Tustin, CA
-
3,361
12,039
1,374
3,361
13,413
1,294
14642 Newport Ave
Van Nuys, CA
-
-
36,187
-
-
36,187
7,655
6815 Noble Ave.
Voorhees, NJ
-
6,404
24,251
1,474
6,477
25,651
8,389
900 Centennial Blvd.
Voorhees, NJ
-
96,075
96,152
17,750
200 Bowman Drive
Waxahachie, TX
-
-
18,784
-
-
18,784
2460 N I-35 East
Wellington, FL
-
16,933
2,639
19,364
5,685
10115 Forest Hill Blvd.
Wellington, FL
-
13,697
1,572
15,077
4,256
1395 State Rd. 7
West Allis, WI
2,869
1,104
3,303
-
1,106
3,301
1,100
11333 W. National Ave.
West Seneca, NY
-
22,435
3,531
1,665
25,218
8,459
550 Orchard Park Rd
Zephyrhills, FL
-
3,875
27,270
-
3,875
27,270
4,992
38135 Market Square Dr
Outpatient medical total:
$
404,079
$
505,698
$
4,548,662
$
450,707
$
585,521
$
4,919,550
$
984,766
Assets held for sale:
Akron, OH
$
-
$
$
7,535
$
-
$
-
$
6,212
$
-
209 Merriman Road
Akron, OH
-
8,219
-
-
6,260
-
721 Hickory St.
Alliance, OH
-
7,723
-
-
5,764
-
1785 Freshley Ave.
Aventura, FL
-
4,540
33,986
-
-
35,599
-
2777 NE 183rd Street
Baltic, OH
-
8,709
-
-
6,339
-
130 Buena Vista St.
Bellingham, MA
-
9,270
-
-
-
1,372
-
Maple Street and High Street
Boca Raton, FL
-
1,440
31,048
-
-
30,214
-
1080 Northwest 15th Street
Boonville, IN
-
5,510
-
-
3,492
-
1325 N. Rockport Rd.
Chicago, IL
-
1,800
19,256
-
-
18,878
-
6700 South Keating Avenue
Chicago, IL
-
2,900
17,016
-
-
17,840
-
4239 North Oak Park Avenue
Columbus, OH
-
5,170
4,434
-
10,134
-
1425 Yorkland Rd.
Columbus, OH
-
1,010
5,022
-
-
4,386
-
1850 Crown Park Ct.
Columbus, OH
-
1,010
4,931
8,418
-
14,359
-
5700 Karl Rd.
Columbus, IN
-
6,710
-
-
4,703
-
2011 Chapa Dr.
Columbus, OH
-
-
-
7,023
-
7,023
-
750 Mt. Carmel Mall
Conyers, GA
-
2,740
19,302
-
-
20,186
-
1504 Renaissance Drive
Cortland, NY
-
18,041
-
-
16,935
-
839 Bennie Road
El Paso, TX
-
1,420
12,394
-
-
13,347
-
435 S Mesa Hills Drive
Fayetteville, GA
-
12,665
-
-
12,165
-
1967 Highway 54 West
Fredericksburg, VA
-
3,700
22,016
-
-
23,684
-
Chancellors Village
Germantown, TN
-
3,049
12,456
-
-
12,202
-
1325 Wolf Park Drive
Greendale, WI
-
2,060
35,383
-
-
33,762
-
5700 Mockingbird Lane
Hanover, IN
-
4,430
-
-
3,025
-
188 Thornton Rd
Hattiesburg, MS
-
-
-
11,863
-
11,863
-
217 Methodist Hospital Blvd
Hemet, CA
-
1,890
28,606
-
-
22,635
-
1001 N. Lyon Ave
Hemet, CA
-
9,630
-
-
8,993
-
1001 N. Lyon Ave
Hermitage, TN
-
-
-
10,121
-
10,121
-
4131 Andrew Jackson Parkway
Hollywood, FL
-
1,240
13,806
-
-
14,106
-
3880 South Circle Drive
Houston, TX
-
5,090
9,471
-
-
8,503
-
15015 Cypress Woods Medical Drive
Huron, OH
-
6,088
-
-
5,566
-
1920 Cleveland Rd. W.
Jackson, NJ
-
6,500
26,405
-
-
32,201
-
2 Kathleen Drive
Jacksonville Beach, FL
-
1,210
26,207
-
-
25,088
-
1700 The Greens Way
Jefferson, OH
-
9,120
-
-
6,402
-
222 Beech St.
Jupiter, FL
-
3,100
47,453
-
-
46,458
-
110 Mangrove Bay Way
Kennesaw, GA
-
10,848
-
-
10,943
-
5235 Stilesboro Road
Kennewick, WA
-
1,820
27,991
-
-
23,390
-
2802 W 35th Ave
Lake Barrington, IL
-
3,400
66,179
-
-
63,190
-
22320 Classic Court
Lancaster, NH
-
-
-
-
63 Country Village Road
Lexington, KY
-
1,980
21,258
-
-
21,928
-
2531 Old Rosebud Road
Loganville, GA
-
1,430
22,912
-
-
22,257
-
690 Tommy Lee Fuller Drive
Marietta, GA
-
1,270
10,519
-
-
11,054
-
3039 Sandy Plains Road
Monclova, OH
-
1,750
11,868
-
-
12,230
-
6935 Monclova Road
Monroe, WA
-
2,560
34,460
-
-
29,936
-
15465 179th Ave. SE
Morrow, GA
-
8,064
-
-
5,913
-
6635 Lake Drive
Naples, FL
-
1,716
17,306
-
-
4,055
-
1710 S.W. Health Pkwy.
Olympia, WA
-
16,689
-
-
13,830
-
616 Lilly Rd. NE
Orange Village, OH
-
7,419
-
-
6,096
-
3755 Orange Place
Palm Springs, FL
-
4,066
-
-
2,061
-
1640 S. Congress Ave.
Palm Springs, FL
-
1,182
7,765
-
-
3,062
-
1630 S. Congress Ave.
Panama City Beach, FL
-
-
-
6,367
-
6,367
-
6012 Magnolia Beach Road
Plano, TX
4,032
8,538
-
-
2,499
-
5521 Village Creek Dr
San Ramon, CA
-
2,430
17,488
-
-
16,188
-
18888 Bollinger Canyon Rd
Sarasota, FL
-
8,825
-
-
9,314
-
3221 Fruitville Road
Sarasota, FL
-
1,120
12,489
-
-
12,360
-
2290 Cattlemen Road
Sarasota, FL
-
9,854
-
-
9,998
-
3749 Sarasota Square Boulevard
Seattle, WA
-
3,420
15,555
-
-
15,455
-
2326 California Ave SW
Seattle, WA
-
2,630
10,257
-
-
10,996
-
4611 35th Ave SW
St. Louis, MO
-
-
-
12,522
-
12,522
-
6543 Chippewa St
Stanwood, WA
-
2,260
28,474
-
-
24,648
-
7212 265th St NW
Thomasville, GA
-
-
-
11,378
-
11,378
-
423 Covington Avenue
Uhrichsville, OH
-
6,716
-
-
4,763
-
5166 Spanson Drive S.E.
Victoria, BC
-
2,674
14,218
-
-
13,876
-
2638 Ross Lane
Webster, NY
-
8,968
-
-
8,847
-
100 Kidd Castle Way
Webster, NY
-
1,300
21,127
-
-
20,295
-
200 Kidd Castle Way
Webster Groves, MO
-
1,790
15,425
-
-
15,642
-
45 E Lockwood Avenue
West Chester, PA
-
3,290
42,258
-
-
41,176
-
1615 East Boot Road
West Chester, PA
-
11,894
-
-
11,065
-
1615 East Boot Road
West Worthington, OH
-
5,090
-
-
4,046
-
111 Lazelle Rd., E.
Whittier, CA
-
4,470
22,151
-
-
20,590
-
13250 E Philadelphia St
Wichita Falls, TX
-
1,070
26,167
-
-
25,898
-
3908 Kell W Boulevard
Willard, OH
-
6,447
-
-
6,317
-
1050 Neal Zick
Winter Haven, FL
-
10,038
-
-
10,364
-
650 North Lake Howard Drive
Assets held for sale total
$
4,032
$
112,022
$
1,044,065
$
72,126
$
-
$
1,044,859
-
Summary:
Triple-net
$
594,199
$
804,007
$
7,794,067
$
718,637
$
853,984
$
8,462,729
$
1,317,149
Seniors housing operating
2,400,836
1,085,554
11,775,094
807,677
1,151,566
12,516,758
1,791,579
Outpatient medical
404,079
505,698
4,548,662
450,707
585,521
4,919,550
984,766
Construction in progress
58,381
-
506,091
-
-
506,091
-
Total continuing operating properties
3,457,495
2,395,259
24,623,914
1,977,021
2,591,071
26,405,128
4,093,494
Assets held for sale
4,032
112,022
1,044,065
72,126
-
1,044,859
-
Total investments in real property owned
$
3,461,527
$
2,507,281
$
25,667,979
$
2,049,147
$
2,591,071
$
27,449,987
$
4,093,494
(1) Please see Note 2 to our consolidated financial statements for information regarding lives used for depreciation and amortization.
(2) Represents real property asset associated with a capital lease.
Year Ended December 31,
Reconciliation of real property:
(in thousands)
Investment in real estate:
Balance at beginning of year
$
29,865,490
$
25,491,935
$
23,734,733
Additions:
Acquisitions
2,145,590
3,364,891
2,210,600
Improvements
672,008
445,625
380,298
Assumed other items, net
172,095
389,256
160,897
Assumed debt
63,732
1,064,810
265,152
Total additions
3,053,425
5,264,582
3,016,947
Deductions:
Cost of real estate sold
(2,118,305)
(449,932)
(916,997)
Reclassification of accumulated depreciation and amortization for assets held for sale
(292,914)
(41,464)
(64,476)
Impairment of assets
(37,207)
(2,220)
-
Total deductions
(2,448,426)
(493,616)
(981,473)
Foreign currency translation
(429,431)
(397,411)
(278,272)
Balance at end of year(1)
$
30,041,058
$
29,865,490
$
25,491,935
Accumulated depreciation:
Balance at beginning of year
$
3,796,297
$
3,020,908
$
2,386,658
Additions:
.
Depreciation and amortization expenses
901,242
826,240
844,130
Amortization of above market leases
7,909
11,912
7,935
Total additions
909,151
838,152
852,065
Deductions:
Sale of properties
(221,737)
(69,735)
(123,582)
Reclassification of accumulated depreciation and amortization for assets held for sale
(292,914)
(41,464)
(64,476)
Total deductions
(514,651)
(111,199)
(188,058)
Foreign currency translation
(97,303)
48,436
(29,757)
Balance at end of year
$
4,093,494
$
3,796,297
$
3,020,908
(1) The unaudited aggregate cost for tax purposes for real property equals $24,887,189,000 at December 31, 2016.
Welltower Inc.
Schedule IV - Mortgage Loans on Real Estate
December 31, 2016
(in thousands)
Location
Segment
Interest Rate
Final Maturity Date
Monthly Payment Terms
Prior Liens
Face Amount of Mortgages
Carrying Amount of Mortgages
Principal Amount of Loans Subject to Delinquent Principal or Interest
First mortgages relating to 1 property located in:
California
Outpatient Medical
6.35%
12/22/17
$
348,542
$
-
$
65,000
$
60,500
$
63,553
United Kingdom
Triple-Net
7.25%
11/21/18
105,443
-
17,149
17,149
-
United Kingdom
Triple-Net
7.00%
12/31/19
133,193
-
28,047
22,273
-
United Kingdom
Triple-Net
8.55%
07/01/19
64,706
-
14,122
9,022
-
United Kingdom
Triple-Net
8.00%
07/06/19
48,485
-
18,506
7,202
-
United Kingdom
Triple-Net
8.04%
01/16/18
8,409
-
2,591
1,233
-
United Kingdom
Triple-Net
7.00%
02/28/21
107,010
-
26,074
17,680
-
Oklahoma
Triple-Net
8.72%
11/01/19
85,043
-
11,610
11,486
-
Oregon
Triple-Net
7.10%
05/01/17
1,357
-
-
Pennsylvania
Triple-Net
7.10%
06/01/17
1,479
-
-
Texas
Triple-Net
8.00%
02/28/21
53,507
-
7,875
7,875
-
Florida
Triple-Net
8.11%
06/23/21
13,955
-
17,100
2,029
-
First mortgages relating to multiple properties:
3 properties in two states
Triple-Net
10.00%
01/01/22
$
76,331
$
-
$
9,000
$
9,000
$
-
13 properties in Texas
Triple-Net
10.00%
01/01/22
878,820
-
103,620
103,620
-
11 properties in six states
Triple-Net
10.00%
01/01/22
558,025
-
65,796
65,796
-
18 properties in six states
Triple-Net
10.00%
01/01/22
1,175,775
-
138,634
138,634
-
Second mortgages relating to 1 property located in:
Connecticut
Triple-Net
8.11%
04/01/18
$
43,225
$
16,709
$
6,270
$
6,270
$
-
Texas
Triple-Net
12.17%
05/01/19
32,033
11,751
3,100
3,100
-
Texas
Triple-Net
10.00%
12/30/18
20,247
11,186
25,000
2,391
-
Totals
$
39,646
$
559,969
$
485,735
$
63,553
Year Ended December 31,
Reconciliation of mortgage loans:
(in thousands)
Balance at beginning of year
$
635,492
$
188,651
$
146,987
Additions:
New mortgage loans
8,223
524,088
113,996
Draws on existing loans
92,815
30,550
26,330
Total additions
101,038
554,638
140,326
Deductions:
Collections of principal
(191,134)
(80,552)
(49,974)
Conversions to real property
(45,044)
(23,288)
(45,836)
Charge-offs
(3,053)
-
-
Total deductions
(239,231)
(103,840)
(95,810)
Change in balance due to foreign currency translation
(11,564)
(3,957)
(2,852)
Balance at end of year
$
485,735
$
635,492
$
188,651
EXHIBIT INDEX
3.1(a) Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(b) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-K filed March 20, 2000 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(c) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed June 13, 2003 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(d) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.9 to the Company’s Form 10-Q filed August 9, 2007 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(e) Certificate of Change of Location of Registered Office and of Registered Agent of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 10-Q filed August 6, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(f) Certificate of Designation of 6.50% Series I Cumulative Convertible Perpetual Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed March 7, 2011 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(g) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed May 10, 2011 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(h) Certificate of Designation of 6.50% Series J Cumulative Redeemable Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed March 8, 2012 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(i) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed May 6, 2014 (File No. 001-08923), and incorporated herein by reference thereto).
3.1(j) Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (filed with the Commission as Exhibit 3.1 to the Company’s Form 8-K filed September 30, 2015 (File No. 001-08923), and incorporated herein by reference thereto).
3.2 Fifth Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.2 to the Company’s Form 10-Q filed October 30, 2015 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(a) Indenture, dated as of March 15, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.1 to the Company’s Form 8-K filed March 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(b) Supplemental Indenture No. 1, dated as of March 15, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed March 15, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(c) Amendment No. 1 to Supplemental Indenture No. 1, dated as of June 18, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to the Company’s Form 8-K filed June 18, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(d) Supplemental Indenture No. 2, dated as of April 7, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed April 7, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(e) Amendment No. 1 to Supplemental Indenture No. 2, dated as of June 8, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to the Company’s Form 8-K filed June 8, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(f) Supplemental Indenture No. 3, dated as of September 10, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed September 13, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(g) Supplemental Indenture No. 4, dated as of November 16, 2010, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 16, 2010 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(h) Supplemental Indenture No. 5, dated as of March 14, 2011, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed March 14, 2011 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(i) Supplemental Indenture No. 6, dated as of April 3, 2012, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed April 4, 2012 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(j) Supplemental Indenture No. 7, dated as of December 6, 2012, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed December 11, 2012 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(k) Supplemental Indenture No. 8, dated as of October 7, 2013, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed October 9, 2013 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(l) Supplemental Indenture No. 9, dated as of November 20, 2013, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 20, 2013 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(m) Supplemental Indenture No. 10, dated as of November 25, 2014, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed November 25, 2014 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(n) Supplemental Indenture No. 11, dated as of May 26, 2015, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed May 27, 2015 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(o) Amendment No. 1 to Supplemental Indenture No. 11, dated as of October 19, 2015, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.3 to the Company’s Form 8-K filed October 20, 2015 (File No. 001-08923), and incorporated herein by reference thereto).
4.1(p) Supplemental Indenture No. 12, dated as of March 1, 2016, between the Company and The Bank of New York Mellon Trust Company, N.A. (filed with the Commission as Exhibit 4.2 to the Company’s Form 8-K filed March 3, 2016 (File No. 001-08923), and incorporated herein by reference thereto).
4.2 Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as Exhibit 4.9 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto).
4.3 Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as Exhibit 4.10 to the Company’s Form S-3 (File No. 333-73936) filed November 21, 2001, and incorporated herein by reference thereto).
4.4(a) Indenture, dated as of November 25, 2015, by and among HCN Canadian Holdings-1 LP, the Company and BNY Trust Company of Canada (filed with the Commission as Exhibit 4.5(a) to the Company’s Form 10-K filed February 18, 2016 (File No. 001-08923), and incorporated herein by reference thereto).
4.4(b) First Supplemental Indenture, dated as of November 25, 2015, by and among HCN Canadian Holdings-1 LP, the Company and BNY Trust Company of Canada (filed with the Commission as Exhibit 4.5(b) to the Company’s Form 10-K filed February 18, 2016 (File No. 001-08923), and incorporated herein by reference thereto).
10.1 Credit Agreement dated as of May 13, 2016 by and among the Company; the lenders listed therein; KeyBank National Association, as administrative agent, L/C issuer and a swingline lender; Bank of America, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents; Deutsche Bank Securities Inc., as documentation agent; Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A., KeyBanc Capital Markets Inc. and Deutsche Bank Securities Inc., as U.S. joint lead arrangers; Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A., KeyBanc Capital Markets Inc. and RBC Capital Markets, as Canadian joint lead arrangers; and Merrill Lynch, Pierce, Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as joint book runners (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed May 16, 2016 (File No. 001-08923), and incorporated herein by reference thereto).
10.2 Equity Purchase Agreement, dated as of February 28, 2011, by and among the Company, FC-GEN Investment, LLC and FC-GEN Operations Investment, LLC (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 28, 2011 (File No. 001-08923), and incorporated herein by reference thereto).
10.3(a) Amended and Restated Health Care REIT, Inc. 2005 Long-Term Incentive Plan (filed with the Commission as Appendix A to the Company’s Proxy Statement for the 2009 Annual Meeting of Stockholders, filed March 25, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(b) Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.18 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(c) Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.6 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(d) Form of Stock Option Agreement (with Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.8 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(e) Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.19 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(f) Form of Amendment to Stock Option Agreements (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.7 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(g) Form of Stock Option Agreement (with Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.9 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(h) Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.20 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(i) Form of Stock Option Agreement (without Dividend Equivalent Rights) for the Chief Executive Officer under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(j) Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.21 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(k) Form of Stock Option Agreement (without Dividend Equivalent Rights) for Executive Officers under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(l) Form of Restricted Stock Agreement for the Chief Executive Officer under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.22 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(m) Form of Restricted Stock Agreement for Executive Officers under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.23 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(n) Form of Restricted Stock Agreement for the Chief Executive Officer under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(o) Form of Restricted Stock Agreement for Executive Officers under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(p) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.24 to the Company’s Form 10-K filed March 10, 2006 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(q) Form of Amendment to Deferred Stock Unit Grant Agreements for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.10 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(r) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.11 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.3(s) Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the Amended and Restated 2005 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.5 to the Company’s Form 10-Q filed May 10, 2010 (File No. 001-08923), and incorporated herein by reference thereto).*
10.4(a) Amended and Restated Employment Agreement, dated January 3, 2017, between the Company and Thomas J. DeRosa.*
10.4(b) Performance-Based Restricted Stock Unit Grant Agreement, dated effective as of July 30, 2014, between the Company and Thomas J. DeRosa (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed November 4, 2014 (File No. 001-08923), and incorporated herein by reference thereto).*
10.5 Second Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Scott A. Estes (filed with the Commission as Exhibit 10.4 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.6(a) Executive Retirement Agreement, effective July 1, 2015, between the Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed August 4, 2015 (File No. 001-08923), and incorporated herein by reference thereto).*
10.6(b) Consulting Agreement, effective July 1, 2015, between the Company and Charles J. Herman, Jr. (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed August 4, 2015 (File No. 001-08923), and incorporated herein by reference thereto).*
10.7 Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Jeffrey H. Miller (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.8 Executive Retirement Agreement, dated as of February 10, 2017, by and between Jeffery H. Miller and the Company.*
10.9 Employment Agreement, dated March 11, 2013, by and between the Company and Scott M. Brinker (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed May 7, 2013 (File No. 001-08923), and incorporated herein by reference thereto).*
10.10 Separation Agreement, dated as of February 6, 2017, by and between Scott M. Brinker and the Company.*
10.11 Third Amended and Restated Employment Agreement, dated December 29, 2008, between the Company and Erin C. Ibele (filed with the Commission as Exhibit 10.11 to the Company’s Form 10-K filed March 2, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.12 Transition Agreement, dated as of June 30, 2016, by and between Erin C. Ibele and the Company (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed August 2, 2016 (File No. 001-08923), and incorporated herein by reference thereto).*
10.13 Employment Agreement, dated as of October 4, 2016, by and between the Company and Mercedes T. Kerr (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed November 2, 2016 (File No. 001-08923), and incorporated herein by reference thereto).*
10.14 Amended and Restated Health Care REIT, Inc. Supplemental Executive Retirement Plan, dated December 29, 2008 (filed with the Commission as Exhibit 10.12 to the Company’s Form 8-K filed January 5, 2009 (File No. 001-08923), and incorporated herein by reference thereto).*
10.15 Form of Indemnification Agreement between the Company and each director, executive officer and officer of the Company (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed February 18, 2005 (File No. 001-08923), and incorporated herein by reference thereto).*
10.16 Summary of Director Compensation.*
10.17 Health Care REIT, Inc. 2013-2015 Long-Term Incentive Program, as Amended and Restated (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed May 8, 2014 (File No. 001-08923), and incorporated herein by reference thereto).*
10.18(a) Health Care REIT, Inc. 2015-2017 Long-Term Incentive Program (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed August 4, 2015 (File No. 001-08923), and incorporated herein by reference thereto).*
10.18(b) Form of Performance Restricted Stock Unit Award Agreement under the 2015-2017 Long-Term Incentive Program (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed August 4, 2015 (File No. 001-08923), and incorporated herein by reference thereto).*
10.19 Welltower Inc. 2016 Long-Term Incentive Plan (filed with the Commission as Exhibit 10.1 to the Company’s Form 8-K filed May 10, 2016 (File No. 001-08923), and incorporated herein by reference thereto).*
10.20 Welltower Inc. 2016-2018 Long-Term Incentive Program (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed August 2, 2016 (File No. 001-08923), and incorporated herein by reference thereto).*
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited).
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, independent registered public accounting firm.
24 Powers of Attorney.
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.1 Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer.
32.2 Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.
101.INS XBRL Instance Document**
101.SCH XBRL Taxonomy Extension Schema Document**
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**
101.LAB XBRL Taxonomy Extension Label Linkbase Document**
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document**
101.DEF XBRL Taxonomy Extension Definition Linkbase Document**
*
Management Contract or Compensatory Plan or Arrangement.
**
Attached as Exhibit 101 to this Annual Report on Form 10-K are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2016 and 2015, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014, (iii) the Consolidated Statements of Equity for the years ended December 31, 2016, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014, (v) the Notes to Consolidated Financial Statements, (vi) Schedule III - Real Estate and Accumulated Depreciation and (vii) Schedule IV - Mortgage Loans on Real Estate.