Welltower Annual Report 2017

Plain-text annual report

Annual Report WELL LISTED NYSE LETTER FROM THE CEO Dear Shareholders, As we look back on 2017, it was a year of great strides and signiﬁcant and positive transition for the Company. We continued to utilize our platform, the best in the industry, to invest with our premier operating partners in markets with high barriers to entry, as well as to introduce new partners and innovative structures as Welltower drives the changes that are needed in health care delivery to manage the aging population. No company is better positioned to drive wellness to this segment of the population than Welltower, through our best in class real estate portfolio, data and analytics capabilities, and people. Thomas J. DeRosa CEO, Welltower Inc. buildings. Approximately 200,000 frail to cognitively impaired seniors live and are cared for under the Welltower umbrella 365 days per year, and over 16 million outpatient visits take place in our outpatient medical office portfolio. The data that is collected in these settings can provide great insight into measuring outcomes and reducing costs in health Well Positioned in the Transition to Value Based Care care delivery. Welltower is the world leader in owning, As the shift to lower cost settings managing and developing real estate continues, our ongoing collaboration that is crucial to the shift in U.S. health with major health systems is expected care from a fee-for-service model to to drive value for our shareholders for value-based care with a sharp focus years to come. There has never been on outcomes. Our real estate holdings more acceptance of Welltower as a allow us to elect REIT tax status. What value-added partner in the health care differentiates Welltower, however, is delivery continuum. There is a growing that we are laser focused on driving understanding that we provide the lower value not only from the real estate, cost settings that health systems need but from what goes on inside the to achieve their goals in value-based care. One example of this is Welltower’s four rental CCRCs for $368 million in participation in the World Economic top metro markets, such as Washington, Forum pilot in Atlanta focusing on heart D.C. and Miami, and at an above-market failure, where we are working alongside 7% yield: great examples of what makes the nation’s leading health systems Welltower’s relationship investing model and foundations and superior to that of our peers. As the shift to lower cost settings continues, our ongoing collaboration with major health systems is expected to drive value for our shareholders for years to come. payors to make Atlanta a national leader in heart failure patient survival by 2022, while signiﬁcantly improving the quality of life and reducing the average cost per patient. We also are proud of how we enhanced and expanded our relationship with Sagora Senior Living, a resident-ﬁrst centered operator based in Fort Worth, TX. With Sagora, we used the security of a triple-net lease structure to incubate this outstanding team and business model, and then progressed them The importance of into a RIDEA structure to share in the driving health care future upside of this real estate and the delivery to lower cost resident-ﬁrst centered operator, as well settings is why I have as to align Welltower and Sagora to grow made public statements and enhance investment returns. that Welltower will not completely exit the post-acute care sector. Post-acute 2017 also marked a major milestone in care is a necessary part of the health care continuum and is deliverable at a fraction of the cost of a hospital health care real estate, as we delivered on our stated goal of announcing a major partnership with the nation’s bed. This sector, however, needs to be third largest health system, Providence reimagined in collaboration with leading St. Joseph Health, by building a world health care providers and payors, and we class cancer center on the campus of believe it is beneﬁcial for Welltower to The Shops at Mission Viejo, a high end have a continued presence in the sector. shopping and dining destination owned Innovation and Growth In 2017, we announced over $1.7 billion by Simon Property Group in Southern California. This innovative structure was hailed not only in our industry, but in the retail industry as such partnerships of new investments, a signiﬁcant amount are expected to drive foot traffic by of these investments was with our lead operating partner, Sunrise Senior Living, which was recognized “First” in customer satisfaction by J.D. Power and Associates in their inaugural Senior Living Report. Towards the end of the year, we announced the acquisition of bringing health care destinations to the world’s best retail locations. Another prime example of this strategy is having UCLA Health occupying a prime retail storefront in one of our premier Beverly Hills outpatient medical buildings. Another Strong Year of Financial Performance Welltower delivered solid ﬁnancial results in 2017, led by average total portfolio same store NOI growth of 2.7%*, at the high end of our original guidance, which was underpinned again by the consistent outperformance of our seniors housing operating portfolio. Our superior locations, buildings and operator capabilities once again delivered strong pricing power in our seniors housing portfolio in the U.S., as well as in the U.K. and Canada. leverage. At year end, our net debt to adjusted EBITDA was 5.4x* and our net debt to undepreciated book capitalization ratio was 36.3%*. Our balance sheet strength affords us signiﬁcant ﬂexibility to deploy capital to the advantage of our shareholders. Aging in Cities In 2017, we released our “Aging in Cities” survey, which is the ﬁrst of its kind. The results of this survey challenge many Options remain limited for the senior population in the urban core, which is why Welltower is committed to bringing these options to markets in which they do not exist: Manhattan, London and Toronto are good examples of markets where we are developing purpose- built, state-of-the-art preconceived ideas and show that most contemporary city dwellers want to age in their communities. We have heard about the desire to age in place for years, but what we found was aging in place to the modern senior means staying in his/her city, not his/ her house. With the rapid growth of the aging population, these preferences will shape the way our cities function for years to come. Options remain We took advantage throughout the year of favorable capital markets by generating $1.5 billion of proceeds from non-core asset dispositions and raising over $600 million through our ATM and DRIP programs at an average stock price of approximately $71 per share. With these proceeds, we selectively extinguished $1.4 billion of high coupon debt and preferred securities. Welltower’s balance sheet was further senior communities in limited for the senior prime locations. population in the urban core, which is why Welltower is committed to bringing these options to markets in which they do not exist: Manhattan, London and Toronto are good examples strengthened during 2017 and is now among the most pristine in the sector, near or at historically low levels of of markets where we are developing and hardworking colleagues who value purpose-built, state-of-the-art senior the Company’s mission as much as I do. communities in prime locations. Some All of us are focused on driving value further takeaways from the survey for you, the shareholder. It is our honor include: to do so and we greatly appreciate your conﬁdence and continued support. • Seven out of 10 city dwellers (and eight out of 10 Baby Boomers) want Sincerely, to live in their current city when they are 80+ years old Thomas J. DeRosa CEO, Welltower Inc. • City dwellers want the urban experience for their 80+ year-old selves – places to gather with friends, scenic areas, outdoor recreation and shopping, cultural experiences, farmers’ markets, etc. • 84 percent want to be in a community with a diverse population, with “a mix of different age groups” as the top criterion • 81 percent of city dwellers are open to living in an urban senior living community Providing modern healthcare settings that promote Wellness is our mission and we are pleased to have this ticker represent not just what we do, but who we are. We Are WELL On February 28, 2018, we changed our stock ticker from HCN to WELL. Providing modern health care settings that promote Wellness is our mission and we are pleased to have this ticker represent not just what we do, but who we are. I am fortunate to work alongside incredibly talented, diverse * Please see Non-GAAP Reconciliations Non-GAAP Reconciliations NON-GAAP RECONCILIATIONS The company believes that net income and net income attributable to common stockholders, as deﬁned by U.S. generally accepted accounting principles (U.S. GAAP), are the most appropriate earnings measurements. However, the company considers EBITDA, A-EBITDA, NOI and SSNOI to be useful supplemental measures of its operating performance. NOI and SSNOI are disclosed on a Welltower pro rata ownership basis. Pro rata amounts are derived by reducing consolidated amounts for minority partners’ noncontrolling ownership interests and adding Welltower’s minority ownership share of unconsolidated amounts. Welltower does not control unconsolidated investments. While the company considers pro rata disclosures useful, they may not accurately depict the legal and economic implications of Welltower’s joint venture arrangements and should be used with caution. The company deﬁnes 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 outpatient medical properties. These expenses include, but are not limited to, property-related payroll and beneﬁts, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations 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 relevant year-over-year reporting periods. Land parcels, loans, sub-leases and major capital restructurings 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. Normalizers include adjustments that in management’s opinion are appropriate in considering SSNOI, a supplemental, non-GAAP performance measure. None of these adjustments, which may increase or decrease SSNOI, are reﬂected in the company’s ﬁnancial statements prepared in accordance with U.S. GAAP. Signiﬁcant normalizers (deﬁned as any that individually exceed 0.50% of SSNOI growth per property type) are separately disclosed and explained in the company’s quarterly earnings supplements. The company believes NOI and SSNOI provide investors relevant and useful information because they measure the operating performance of the company’s properties at the property level on an unleveraged basis. The company uses NOI and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties. 1031 deposits. 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 EBITDA which stands for earnings (net income per income statement) before interest expense, income taxes, depreciation and amortization. Covenants in our senior unsecured notes contain ﬁnancial ratios based on a deﬁnition of EBITDA that is speciﬁc to those agreements. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or ﬁnancial condition. Due to the materiality of these debt agreements and the ﬁnancial covenants, we have deﬁned A-EBITDA to exclude unconsolidated entities and to include adjustments for stock-based compensation expense, provision for loan losses, gains/losses on extinguishment of debt, transactions costs, gains/losses/impairments on properties, gains/losses on derivatives and other non-recurring and/or non-cash income/charges. We believe that EBITDA and A-EBITDA, along with net income and cash ﬂow provided from operating activities, are important supplemental measures because they provide additional information to assess and evaluate the performance of our operations. Our leverage ratios include net debt to A-EBITDA, book capitalization and undepreciated book capitalization. Book capitalization represents the sum of net debt (deﬁned as total long-term debt less cash and cash equivalents and any IRC Section 1031 deposits), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Our leverage ratios are deﬁned as the proportion of net debt to total capitalization. The company’s 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. The company’s management uses these ﬁnancial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. None of the supplemental reporting 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 reporting measures, as deﬁned by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Multi-period amounts may not equal the sum of the individual quarterly amounts due to rounding. 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 The tables below reﬂect the reconciliations of certain Non-GAAP ﬁnancial measures used herein to the most directly comparable U.S. GAAP measure for the periods presented (dollars in thousands). Form 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 Commission File No. 1-8923 WELLTOWER INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 4500 Dorr Street, Toledo, Ohio (Address of principal executive offices) 34-1096634 (I.R.S. Employer Identification No.) 43615 (Zip Code) (419) 247-2800 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $1.00 par value 6.50% Series I Cumulative Convertible Perpetual Preferred Stock, $1.00 par value 4.800% Notes due 2028 4.500% Notes due 2034 New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No Í Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Í No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Í Accelerated filer ‘ Smaller reporting company ‘ Emerging growth company ‘ Non-accelerated filer ‘ (Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No Í The aggregate market value of the shares of voting common stock held by non-affiliates of the registrant, computed by reference to the closing sales price of such shares on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second fiscal quarter was $27,562,002,967. As of January 31, 2018, the registrant had 371,669,527 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive proxy statement for the annual stockholders’ meeting to be held May 3, 2018, are incorporated by reference into Part III. WELLTOWER INC. 2017 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Page 2 16 27 28 30 30 31 33 34 61 63 106 106 109 109 109 109 109 109 110 115 116 Item 1. Business General PART I Welltower Inc. (NYSE:WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The company invests with leading seniors housing operators, post- acute providers and health systems to fund 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 (“U.S.”), Canada and the United Kingdom (“U.K.”), 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. References herein to “we,” “us,” “our” or the “Company” refer to Welltower Inc., a Delaware corporation, 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, 2017. 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 (U.K.), 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 that obligate the tenant to pay all operating costs, utilities, real estate taxes, insurance, building repairs, maintenance costs and all obligations under certain ground 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. 2 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 or without Nursing (U.K.). Care homes without nursing, regulated by the Care Quality Commission (CQC”), are rental properties that provide essentially the same services as U.S. assisted living facilities. Care homes with nursing, also regulated by the CQC, 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. 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 22%, 28% and 31% of total revenues for the years ended December 31, 2017, 2016 and 2015, respectively. For the year ended December 31, 2017, our revenues related to our relationship with Genesis HealthCare (“Genesis”) accounted for approximately 20% of our triple-net segment revenues and 4% of our total revenues. As of December 31, 2017, our relationship with Genesis was comprised of a master lease for 86 properties owned 100% by us, three real estate loans totaling approximately $267 million, approximately 9.5 million shares of GEN Series A common stock (representing approximately 6% of total GEN common stock) and a 25% ownership stake in an unconsolidated joint venture that includes a master lease for 28 properties operated by Genesis. 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. Please see Notes 6 and 21 to our consolidated financial statements for additional information. 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 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. 3 Our seniors housing operating segment accounted for 65%, 59% and 56% of total revenues for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, we had relationships with 17 operators to manage our seniors housing operating properties. 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, 2017, our relationship with Sunrise Senior Living accounted for approximately 37% of our seniors housing operating segment revenues and 24% of our total revenues. See Note 7 to our consolidated financial statements for additional information. Outpatient Medical 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). We typically lease our outpatient medical buildings to multiple tenants and provide varying levels of property management. Our outpatient medical segment accounted for 13% of total revenues for each of the years ended December 31, 2017, 2016 and 2015. No single tenant exceeds 20% of segment revenues. Investments 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 seek to 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 monitor our investments through a variety of methods determined by the type of property. Our asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division manages and monitors the outpatient medical portfolio with a comprehensive process including review of, 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. 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, 2017, 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 4 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 its unexpired leases and executory contracts. In the context of integrated master leases such as ours, our tenants 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, 2017, 80% of our portfolio included leases with full pass through, 19% with a partial expense reimbursement (modified gross) and 1% 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, 2017 and are often credit enhanced by security deposits, guaranties and/or letters of credit. Construction. We provide for the construction of properties for tenants primarily 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, 2017, we had outstanding construction investments of $237,746,000 and were committed to provide additional funds of approximately $429,815,000 to complete construction for investment properties. See Note 3 to our consolidated financial statements for additional information. We also provide for construction loans which, depending on the terms and conditions, could be treated as loans, real property, or investments in unconsolidated entities. 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, 2017, we had gross outstanding real estate loans of $495,871,000. The interest yield averaged approximately 9.2% 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, 2017 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. See Note 6 to our consolidated financial statements for additional information. 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 5 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 are in conformity with U.S general accepted accounting principles (“U.S. GAAP”) and 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. 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, U.S. 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, 6 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” of this Annual Report on Form 10-K. Employees As of January 31, 2018, we had 392 employees. Credit Concentrations Please see Note 8 to our consolidated financial statements. Geographic Concentrations Please see “Item 2 — Properties” below and Note 17 to our consolidated financial statements. Health Care Industry The demand for health care services, and consequently health care properties, is projected to reach unprecedented levels in the near future. The Centers for Medicare and Medicaid Services (“CMS”) projects that national health expenditures will rise to approximately $3.7 trillion in 2018 or 18.5% of gross domestic product. The average annual growth in national health expenditures for 2015 through 2025 is expected to be 5.8%. While demographics are the primary driver of demand, economic conditions and availability of services contribute to health care service utilization rates. We believe the health care property market may be less susceptible to fluctuations and economic downturns relative to other property sectors. Investor interest in the market remains strong, especially in specific sectors such as private-pay seniors housing and outpatient medical buildings. The total U.S. population for 2015 through 2025 is projected to increase by 9.3%. The elderly population aged 65 and over is projected to increase by 36% through 2025. The elderly are an important component of health care utilization, especially independent living services, assisted living services, long-term/post-acute care services, inpatient and outpatient hospital services and physician ambulatory care. Most health care services are provided within a health care facility such as a hospital, a physician’s office or a seniors housing community. Therefore, we believe there will be continued demand for companies, such as ours, with expertise in health care real estate. Health care real estate investment opportunities tend to increase as demand for health care services increases. We recognize the need for health care real estate as it correlates to health care service demand. Health care providers require real estate to house their businesses and expand their services. We believe that investment opportunities in health care real estate will continue to be present due to: • The specialized nature of the industry, which enhances the credibility and experience of the Company; • The projected population growth combined with stable or increasing health care utilization rates, which ensures demand; and • The on-going merger and acquisition activity. Certain Government Regulations United States Health Law Matters — Generally Typically, operators of seniors housing facilities do not receive significant funding from government programs and are largely subject to state laws, as opposed to federal laws. Operators of long-term/post-acute care facilities and hospitals do receive significant funding from government programs, and these facilities are subject to extensive regulation, including federal and state laws covering the type and quality of medical and/or nursing care provided, ancillary services (e.g., respiratory, occupational, physical and infusion therapies), qualifications of the administrative personnel and nursing staff, the adequacy of the physical plant and equipment, reimbursement and rate setting and operating policies. In addition, as described below, operators of these facilities are subject to extensive laws and regulations pertaining to health care fraud and abuse, including, but not limited to, the federal Anti-Kickback Statute (“AKS”), the federal Stark Law (“Stark Law”), and the federal False Claims Act (“FCA”), as well as comparable state laws. Hospitals, physician group practice clinics, and other health care providers that operate in our portfolio are subject to extensive federal, state, and local licensure, 7 registration, certification, and inspection laws, regulations, and industry standards. Our tenants’ failure to comply with applicable laws and regulations could result in, among other things: 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. See risk factors “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” and “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” in “Item 1A — Risk Factors” below. Licensing and Certification The primary regulations that affect long-term and post-acute care facilities are state licensing and registration laws. For example, certain health care facilities are subject to a variety of licensure and certificate of need (“CON”) laws and regulations. Where applicable, CON laws generally require, among other requirements, that a facility demonstrate the need for (1) constructing a new facility, (2) adding beds or expanding an existing facility, (3) investing in major capital equipment or adding new services, (4) changing the ownership or control of an existing licensed facility, or (5) terminating services that have been previously approved through the CON process. Certain state CON laws and regulations may restrict the ability of operators to add new properties or expand an existing facility’s size or services. In addition, CON laws may constrain the ability of an operator to transfer responsibility for operating a particular facility to a new operator. With respect to licensure, generally our long-term/post-acute care facilities are required to be licensed and certified for participation in Medicare, Medicaid, and other federal and state health care programs. The failure of our operators to maintain or renew any required license or regulatory approval as well as the failure of our operators to correct serious deficiencies identified in a compliance survey could require those operators to discontinue operations at a property. In addition, if a property is found to be out of compliance with Medicare, Medicaid, or other federal or state health care program conditions of participation, the property operator may be excluded from participating in those government health care programs. Reimbursement The reimbursement methodologies applied to health care facilities continue to evolve. Federal and state authorities have considered and may seek to implement new or modified reimbursement methodologies, including value-based reimbursement methodologies that may negatively impact health care property operations. The impact of any such changes, if implemented, may result in a material adverse effect on our portfolio. No assurance can be given that current revenue sources or levels will be maintained. Accordingly, there can be no assurance that payments under a government health care program are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses. • to Medicaid waiver programs. For Seniors Housing Facilities. Approximately 60% of our overall revenues for the year ended December 31, 2017 were attributable to U.S. seniors housing facilities. The majority of the revenues received by the operators of these facilities are from private pay sources. The remaining revenue source is primarily Medicaid provided under state waiver programs for home and community based care. As of September 30, 2017, 14 of our 43 seniors housing operators received Medicaid reimbursement pursuant the twelve months ended September 30, 2017, approximately 1.2% of the revenues at our seniors housing facilities were from Medicaid reimbursement. There can be no guarantee that a state Medicaid program operating pursuant to a waiver will be able to maintain its waiver status. Rates paid by self-pay residents are set by the facilities and are determined by local market conditions and operating costs. Generally, facilities receive a higher payment per day for a private pay resident than for a Medicaid beneficiary who requires a comparable level of care. The level of Medicaid reimbursement varies from state to state. Thus, the revenues generated by operators of our assisted living facilities may be adversely affected by payor mix, acuity level, changes in Medicaid eligibility, and reimbursement levels. In addition, a state 8 could lose its Medicaid waiver and no longer be permitted to utilize Medicaid dollars to reimburse for assisted living services. • Long-Term/Post-Acute Care Facilities. Approximately 8% of our overall revenues for the year ended December 31, 2017 were attributable to U.S. long-term/post-acute care facilities. The majority of the revenues received by the operators of these facilities are from the Medicare and Medicaid programs, with the balance representing reimbursement payments from private payors. Consequently, changes in federal or state reimbursement policies may adversely affect an operator’s ability to cover its expenses, including our rent or debt service. Long-term/post-acute care facilities are subject to periodic pre- and post-payment reviews, and other audits by federal and state authorities. A review or audit of a property operator’s claims could result in recoupments, denials, or delay of payments in the future. Due to the significant judgments and estimates inherent in payor settlement accounting, no assurance can be given as to the adequacy of any reserves maintained by our property operators to cover potential adjustments to reimbursements, or to cover settlements made to payors. Recent focus on billing practices, payments, and quality of care, or ongoing government pressure to reduce spending by government health care programs, could result in lower payments to long-term/post-acute care facilities and, as a result, may impair an operator’s ability to meet its financial obligations to us. • Medicare Reimbursement. For the twelve months ended September 30, 2017, approximately 35% of the revenues at our long-term/post-acute care facilities were paid by Medicare. Generally, long-term/post-acute care facilities are reimbursed under the Medicare Skilled Nursing Facility Prospective Payment System (“SNF PPS”), the Inpatient Rehabilitation Facility Prospective Payment System (“IRF PPS”), or the Long-Term Care Hospital Prospective Payment System (“LTCH PPS”), which generally provide reimbursement based upon a predetermined fixed amount per episode of care and are updated by CMS, an agency of the Department of Health and Human Services (“HHS”) annually. In August 2017, CMS made some positive payment updates for fiscal year (“FY”) 2017 under the SNF PPS, the IRF PPS and the LTCH PPS. In particular, CMS published a final rule regarding FY 2018 Medicare payment policies and rates for: • • SNF PPS. Under the final SNF PPS rule, CMS projects that payments to SNFs will increase in FY 2018 on an aggregate basis by 1.0% from payments in FY 2017. IRF PPS. Under the IRF PPS rule, CMS estimates that aggregate payments to IRFs will increase in FY 2018 on an aggregate basis by 0.9% relative to payments in FY 2017. • LTCH PPS. As a result of the continuation of the phase-in of site neutral payment rates for specified cases in LTCHs, CMS projects FY 2018 Medicare payments to LTCHs will decrease by 2.4%. Payment rates will increase by 1.0% for cases that qualify for the higher standard LTCH PPS rate. CMS also finalized its proposal to remove from FY 2018 payment rates the temporary 0.6% Medicare Part A hospital payment increase to FY 2017 payment rates implemented in connection with a federal district court’s review of the “Two Midnight” payment policy. There is a risk under these payment systems that costs will exceed the fixed payments, or that payments may be set below the costs to provide certain items and services. In addition, the HHS Office of Inspector General has released recommendations to address SNF billing practices and Medicare payment rates. If followed, these recommendations regarding SNF payment reform may impact our tenants and operators. • Medicaid Reimbursement. For the twelve months ended September 30, 2017, approximately 36% of the revenues of our long-term/post-acute care facilities were paid by Medicaid. Many states reimburse SNFs, for example, using fixed daily rates, which are applied prospectively based on patient acuity and the historical costs incurred in providing patient care. In most states, Medicaid does not fully reimburse the cost of providing services. Certain states are attempting to slow the rate of Medicaid growth by freezing rates or restricting eligibility and benefits. In addition, Medicaid reimbursement rates may decline if state revenues in a particular state are not sufficient to fund budgeted expenditures. 9 • Medicare Reimbursement for Physicians, Hospital Outpatient Departments (“HOPDs”), and Ambulatory Surgical Centers (“ASCs”). Changes in reimbursement to physicians, HOPDs, and ASCs may further affect our tenants and operators. Generally, Medicare reimburses physicians under the Physician Fee Schedule, while HOPDs and ASCs are reimbursed under prospective payment systems. The Physician Fee Schedule and the HOPD and ASC prospective payment systems are updated annually by CMS. These annual Medicare payment regulations have resulted in lower net pay increases than providers of those services have often expected. In addition, the Medicare and Children’s Health Insurance Program Reauthorization Act of 2015 (“MACRA”) includes payment reductions for providers who do not meet government quality standards. The implementation of pay-for-quality models like those required under MACRA is expected to produce funding disparities that could adversely impact some provider tenants in outpatient medical buildings and other health care properties. Changes in Medicare Advantage plan payments may also indirectly affect our operators and tenants that contract with Medicare Advantage plans. • Health Reform Laws. The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Laws”) dramatically altered how health care is delivered and reimbursed in the U.S. and contained various provisions, including Medicaid expansion and the establishment of Health Insurance Exchanges (“HIEs”) providing subsidized health insurance, that may directly impact us or the operators and tenants of our properties. Since taking office, President Trump and the current U.S. Congress have sought to modify, repeal, or otherwise invalidate all or portions of the Health Reform Laws. For example, in October 2017, President Trump 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 the Health Reform Laws to the maximum extent permitted by law. On the same day, the federal government separately announced that cost-sharing reduction payments to insurers offering qualified health plans through the HIEs would end, effective immediately, unless Congress appropriated the funds. Further, in December 2017, the U.S. Congress passed the Tax Cuts and Jobs Act, which included a provision that eliminates the penalty under the Health Reform Laws’ individual mandate and could impact the future state of the HIEs established by the Health Reform Laws. There is still uncertainty with respect to the additional 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. Fraud & Abuse Enforcement Long-term/post-acute care facilities (and seniors housing facilities that receive Medicaid payments) are subject to federal, state, and local laws, regulations, and applicable guidance that govern the operations and financial and other arrangements that may be entered into by health care providers. Certain of these laws, such as the AKS and Stark Law, prohibit direct or indirect payments of any kind for the purpose of inducing or encouraging the referral of patients for medical products or services reimbursable by government health care programs. Other laws require providers to furnish only medically necessary services and submit to the government valid and accurate statements for each service. Specifically, our operators and tenants that receive payments from federal healthcare programs, such as Medicare and Medicaid, are subject to substantial financial penalties under the Civil Monetary Penalties Act and the FCA and, in particular, actions under the FCA’s “whistleblower” provisions. Private enforcement of health care fraud has increased due in large part to amendments to the FCA that encourage private individuals to sue on behalf of the government. In addition, states may also have separate false claims acts, which, among other things, generally prohibit health care providers from filing false claims or making false statements to receive payments. Still other laws require providers to comply with a variety of safety, health and other requirements relating to the condition of the licensed property and the quality of care provided. Sanctions for violations of these laws, regulations, and other applicable 10 guidance may include, but are not limited to, criminal and/or civil penalties and fines, loss of licensure, immediate termination of government payments, exclusion from any government health care program, damage assessments, and imprisonment. In certain circumstances, violation of these rules (such as those prohibiting abusive and fraudulent behavior) with respect to one property may subject other facilities under common control or ownership to sanctions, including exclusion from participation in the Medicare and Medicaid programs, as well as other government health care programs. In the ordinary course of its business, a property operator is regularly subjected to inquiries, investigations, and audits by the federal and state agencies that oversee these laws and regulations. Prosecutions, investigations, or whistleblower actions could have a material adverse effect on a property operator’s liquidity, financial condition, and operations, which could adversely affect the ability of the operator to meet its financial obligations to us. In addition, government investigations and enforcement actions brought against the health care industry have increased dramatically over the past several years and are expected to continue. Although the responsibility for enforcing these laws and regulations lies with a variety of federal, state and local governmental agencies, some may be enforced by private litigants through federal and state false claims acts and other laws, including some state privacy laws, that allow for private individuals to bring actions. The costs for an operator of a health care property associated with both defending such enforcement actions and the undertakings in settling these actions can be substantial and could have a material adverse effect on the ability of an operator to meet its obligations to us. Federal and State Data Privacy and Security Laws The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act, and numerous other state and federal laws govern the collection, security, dissemination, use, access to and confidentiality of individually identifiable health information. Violations of these laws may result in substantial civil and/or criminal fines and penalties. The costs for an operator of a health care property associated with developing and maintaining HIPAA compliance systems, defending enforcement actions and paying any assessed fines, can be substantial and could have a material adverse effect on the ability of an operator to meet its obligations to us. United Kingdom In the U.K., care home services are principally regulated by the Health and Social Care Act 2008 (as amended) and other regulations. This legislation subjects service providers to a number of legally binding “Fundamental Standards” and requires, amongst other things, that all persons carrying out “Regulated Activities” in the U.K., and the managers of such persons, be registered. Providers of care home services are also subject (as data controllers) to laws governing their use of personal data (including in relation to their employees, clients and recipients of their services). These laws currently take the form of the U.K.’s Data Protection Act 1998, enforced by the U.K.’s Information Commissioner’s Office, but are expected to be replaced by the European Union’s (“EU”) new General Data Protection Regulation (“GDPR”). The GDPR will impose a significant number of new obligations with the potential for fines of up to 4% of annual worldwide turnover or €20 million, whichever is greater. Entities incorporated in or carrying on a business in the U.K. as well as individuals residing in the U.K. are also subject to the U.K. Bribery Act 2010. The U.K. recently introduced a new national minimum wage with a maximum fine for non-payment of £20,000 per worker and employers who fail to pay will be banned from being a company director for up to 15 years. The U.K. recently voted to exit from the EU (“Brexit”). Negotiations on the exit agreement are underway but at present it is not possible to predict whether Brexit will have a material impact on our operators’ or tenants’ property or business. Canada Retirement homes and long-term care homes are subject to regulation, and long-term care homes receive funding, under provincial law. There is no federal regulation in this area. Set out below are summaries of the principal regulatory requirements in the provinces where we have a material number of facilities. 11 Licensing and Regulation Alberta In Alberta, there are three relevant designations for seniors’ living arrangements, ordered below from the most independent to the highest level of care. • Retirement Homes (also called independent living) are designed for older adults able to live on their own, and may offer various lifestyle amenities. These residences may be rented, privately owned, or life-leased, and may be operated for profit or non-profit. Support services are not usually offered, but can be arranged by residents. Retirement homes do not generally receive government funding; residents pay for tenancy and services received. Rental subsidies may be available to qualified seniors. Independent living residences are subject to provincial tenancy and housing laws. • Supportive Living (also called assisted living) provides home-like accommodation for residents who wish or need to access care, assistance, and services. Operators provide at least one meal a day and/or housekeeping services. There are four levels of supportive living, addressing care needs from basic to advanced. In addition, there are two specialized designations of supportive care to address the needs of residents who require the highest level of care including for those who have cognitive impairments. Supportive living can include senior lodges, group homes, and mental health and designated supportive living accommodations, which can be operated by private for-profit or not-for-profit, or public operators. Supportive living services are licensed and regulated under provincial laws, and governed by the Ministry of Health. Operators receiving public funds for health and personal care services must also to legislated safeguards aimed at legislation, and are subject comply with additional provincial investigation of suspected abuse. The maximum accommodation fee in publicly-funded designated supportive living is regulated by Alberta Health. In other supportive living settings, the operator sets the cost of accommodation. Health services are publicly-funded and provided through Alberta Health Services. Private sector operators are eligible to apply for government funding under a government capital grant program that provides funding to develop long-term care and affordable supportive living spaces. • Nursing Homes (also called long-term care) are for residents who have complex, unpredictable medical needs and who require 24-hour on-site registered nurse assessment or treatment. Nursing homes are regulated by provincial laws, and governed by the Ministry of Health. Operators are not licensed, but enter into agreements with the Ministry for the operation of nursing homes and must comply with certain accommodation standards. Homes can be operated by private for-profit or not-for-profit, or public operators. Operators that receive public funds for health and personal care services must also comply with certain health service standards and legislation aimed at protecting residents. Alberta Health regulates the maximum accommodation fee in publicly-funded nursing homes. Health services in long-term care are publicly-funded, provided through Alberta Health Services. Private sector operators are eligible to apply for government funding, and the Minister may make grants to an operator in respect of its operating or capital costs. Ontario Retirement homes are regulated and licensed under a provincial law aimed at protecting residents. Retirement homes do not receive government funding; residents enter into tenancy agreements under provincial tenancy law, and pay for tenancy and services received. Residents may access publicly-funded external care services at the home from external suppliers. Retirement home licenses are granted by the Retirement Homes Regulatory Authority (“RHRA”), and are non-transferable. The RHRA administers the law governing retirement homes, to ensure that licensees are meeting certain standards, generally with respect to care and safety. The law requires any person to report to the RHRA when there are reasonable grounds to suspect abuse of a resident by anyone, or neglect of a resident by staff. The RHRA conducts a mandatory inspection and issues a report that is posted on the RHRA’s public website, and also must be posted in the subject home if it is the most recent report. The Registrar of the RHRA can receive complaints about a retirement home contravening a provision of the law, 12 and if such a complaint is received, it must be reviewed promptly. The Registrar has broad powers relating to complaint investigation and action. The RHRA Registrar has the power to inspect a retirement home at any time without warning or issue a warrant to ensure compliance. Compliance inspections occur at least every three years. The Registrar has the power to make a variety of orders including the imposition of a fine or an order revoking the operator’s license. The applicable law also enumerates offenses, such as operating without a license, and provides for penalties for offenses. British Columbia Provincial laws regulate and license “community care facilities” (long-term care homes) in substantially the same manner as retirement homes are regulated under Ontario laws. Community care facilities are defined as premises used for the purpose of supervising vulnerable persons who require three or more prescribed services (from a list that includes regular assistance with activities of daily living; distribution of medication; management food intake; structured behavior management and intervention; and of cash resources; monitoring of psychosocial or physical rehabilitative therapy). Provincial law also recognizes and regulates “assisted living residences,” for seniors who can live independently, but require assistance with certain activities. Services available can include meals, housekeeping, monitoring and emergency support, social/recreational opportunities, and transportation. Assisted living residences do not require a license, but must be registered with the registrar of assisted living residences and must be operated in a manner that does not jeopardize the health or safety of residents. If the registrar believes the standard is not being met, the residence and may suspend or cancel a registration. Independent living residences offer housing and hospitality services for retired adults who are functionally independent and able to direct their own care. the registrar may inspect Québec Provincial laws in Québec regulate retirement homes (private seniors’ residences) as well as long-term care homes (residential and long-term care centers). Private seniors’ residences are required to obtain a certificate of compliance based on prescribed operating standards. A certificate of compliance is issued for a period of four years and is renewable. The regional health and social agency may revoke or refuse to issue or renew a certificate of compliance if, among other things, the operator fails to comply with the applicable law. The agency may also order corrective measures, further to an inspection, complaint or investigation. The agency is authorized to inspect a residence, at any reasonable time of day, in order to ascertain whether it complies with the law. Private seniors’ residences may belong to either or both of the following categories: (i) those offering services to independent elderly persons and (ii) those offering services to semi-independent elderly persons. The operator must, for each category, comply with the applicable criteria and standards, with some exceptions for residences with fewer than six or ten rooms or apartments. There are requirements with respect to residents’ health and safety, meal services and recreation, content of residents’ files, disclosure of information to residents, and staffing, among other things. In May 2017, Quebec adopted the Act to combat maltreatment of seniors and other persons of full age in vulnerable situations, which aims to implement a Quebec-wide framework agreement to combat maltreatment, targets all facilities that provide health services and social services to seniors and vulnerable persons, including health establishments and private residences. We expect that it will affect private seniors’ residences in the following ways: • Health establishments are required to adopt an “Anti-Maltreatment Policy”, providing notably for the measures put in place to prevent maltreatment of persons in vulnerable situations; • The policy adopted by health establishments will notably have to include the required adaptation for the implementation of the policy in private sector residences; and • Operators of private seniors’ residences will be required to apply the policy adopted by the integrated health and social services center in their territory, as well as ensure that the policy is known by residents, their family members and their employees. 13 Other Related Laws Privacy The services provided in our facilities are subject to privacy legislation in Canada, including, in certain provinces, privacy laws specifically related to personal health information. Although the obligations of custodians of personal information in the various provinces differ, they all include the obligation to protect the information. The organizations with which we have management agreements may be the custodian of personal information collected in connection with the operation of our facilities. Privacy laws in Canada are consent-based and require the implementation of a privacy program involving policies, procedures and the designation of an individual or team with primary responsibility for privacy law compliance. Mandatory breach notification to affected individuals is a requirement under some laws. Mandatory breach notification to the applicable regulator is a requirement in some provinces. Some laws require notification where personal information is processed or stored outside of Canada. One provincial law (in Quebec) provides for fines where an organization fails to perform due diligence before outsourcing activities involving personal information to a service provider outside of the province. The powers of privacy regulators and penalties for violations of privacy law vary according to the applicable law or are left to the courts. To date, monetary penalties granted have been on the low side, although that is changing with civil actions for breach of privacy and may change further as a result of class action activity. There are over 60 privacy class actions which have been filed in Canada over recent years although none have yet been decided on their merits. Regulators have the authority to make public the identity of a custodian that has been found to have committed a breach, so there is a reputational risk associated with privacy law violations even where no monetary damages are incurred. The notification of residents (mandatory under some privacy laws) and other activities required to manage a privacy breach can give rise to significant costs. Other Legislation Retirement homes may be subject to residential tenancy laws, such that there can be restrictions on rent increases and termination of tenancies, for instance. Other provincial and/or municipal laws applicable to fire safety, food services, zoning, occupational health and safety, public health, and the provision of community health care and funded long-term/post-acute care may also apply to retirement homes. Taxation U.S. Federal Income Tax Considerations General We elected to be taxed as a REIT commencing with our first taxable year. We intend to continue to operate in such a manner as to qualify as a REIT, but there is no guarantee that we will qualify or remain qualified as a REIT for subsequent years. Qualification and taxation as a REIT depends upon our ability to meet a variety of complex qualification tests imposed under federal income tax law with respect to income, assets, distribution level and diversity of share ownership. There can be no assurance that we will be owned and organized and will operate in a manner so as to qualify or remain qualified. Failure to Qualify as a REIT If we fail to qualify for taxation as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. Distributions to stockholders in any year in which we fail to qualify as a REIT will not be deductible nor will any particular amount of distributions be required to be made in any year. All distributions to stockholders will be taxable as ordinary income to the extent of current and accumulated earnings and profits allocable to these distributions and, subject to certain limitations, will be eligible for the dividends received deduction for corporate stockholders. Unless entitled to relief under specific statutory provisions, we also will be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances we would be entitled 14 to statutory relief. Failure to qualify for even one year could result in our need to incur indebtedness or liquidate investments in order to pay potentially significant resulting tax liabilities. The Tax Cuts and Jobs Act (“Tax Act”) The Tax Act made significant changes to the U.S. federal income tax laws applicable to businesses and their owners, including REITs and their shareholders. Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review may have led to drafting errors, issues needing clarification and unintended consequences that may need to be addressed subsequent tax legislation. It is unknown when Congress may address these issues or when the Internal Revenue Service (“IRS”) may issue guidance regarding the interpretation and implementation of the Tax Act. We cannot predict what impact future legislation and guidance will have on us or our shareholders. Internet Access to Our SEC Filings Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as our proxy statements and other materials that are filed with, or furnished to, the Securities and Exchange Commission (“SEC”) are made available, free of charge, on the Internet at www.welltower.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC. We routinely post important information on our website at www.welltower.com in the “Investors” section, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website under the heading “Investors.” Accordingly, investors should monitor such portion of our website in addition to following our press releases, public conference calls, and filings with the Securities and Exchange Commission. 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. Cautionary Statement Regarding Forward-Looking Statements This Annual Report on Form 10-K and the documents incorporated by reference contain statements that constitute “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995. When we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, we are making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to our opportunities to acquire, develop or sell properties; our ability to close our anticipated acquisitions, investments the expected or dispositions on currently anticipated terms, or within currently anticipated timeframes; performance of our operators/tenants and properties; our expected occupancy rates; our ability to declare and to make distributions to stockholders; our investment and financing opportunities and plans; our continued qualification as a REIT; and our ability to access capital markets or other sources of funds. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause our actual results to differ materially from our expectations discussed in the forward-looking statements. This may be a result of various factors, including, but not limited to: • • • • • • the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/ tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care and seniors housing industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; 15 • • • • • • • • • • • • • • • • our ability to transition or sell properties with profitable results; the failure to make new investments or acquisitions as and when anticipated; natural disasters and other acts of God affecting our properties; our ability to re-lease space at similar rates as vacancies occur; our ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government requirements; regulations affecting Medicare and Medicaid reimbursement rates and operational liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting our properties; changes in rules or practices governing our financial reporting; the movement of U.S. and foreign currency exchange rates; our ability to maintain our qualification as a REIT; key management personnel recruitment and retention; and the risks described under “Item 1A — Risk Factors.” We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise. 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 addressed in this section or that we have not yet identified, actually occur, we could be materially adversely affected and 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. Investments in and acquisitions of seniors housing and health care properties entail risks associated with real estate investments generally, including risks that the investment will not achieve expected returns, that the cost estimates for necessary property improvements will prove inaccurate or that the tenant, operator or manager will fail to meet performance expectations. Furthermore, there can be no 16 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. Health care properties are often highly customizable and the development or redevelopment of such properties may require costly tenant-specific improvements. 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. As a result, we cannot assure you that we will achieve the economic benefit we expect from acquisitions, investment, development and redevelopment opportunities. All of the foregoing could affect our ability to continue paying dividends at the current rate. 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 17 property, such sale may result in a loss. Any such impairment or loss on sale would negatively affect our financial results. All of the foregoing could affect our ability to continue paying dividends at the current rate. Increased competition and oversupply 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 for residents and patients, including on the basis of the scope and quality of care and services provided, reputation and financial condition, physical appearance of the properties, price, and location. Our operators are expected to encounter increased competition in the future that could limit their ability to attract residents or expand their businesses. In addition, we expect that there will continue to be a more than adequate inventory of seniors housing facilities. 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. If our operators cannot compete effectively or if there is an oversupply of facilities, their financial performance and ability to meet their obligations to us could have a material adverse effect on our financial results. 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. In addition, a flu pandemic could significantly increase the cost burdens faced by our operators, including if they are required to implement quarantines for residents, and adversely affect their ability to meet their obligations to us, which would have a material adverse effect on our financial results. The insolvency or bankruptcy of our tenants, operators, borrowers, managers and other obligors may adversely affect our business, results of operations and financial condition We are exposed to the risk that our tenants, operators, borrowers, managers or other obligors may not be able to meet the rent, principal and interest or other payments due us, which may result in a tenant, operator, borrower, manager or other obligor bankruptcy or insolvency, or that a tenant, operator, borrower, manager or other 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. A tenant, operator, borrower, manager or other 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. In addition, if a lease is rejected in a tenant bankruptcy, our claim against the tenant may be limited by applicable provisions of the bankruptcy law. 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. All of the foregoing could affect our ability to continue paying dividends at the current rate. 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 the proceeds of sales of our securities, principal payments on our loans receivable or the sale of properties, including non-elective dispositions, under the terms of 18 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, including other health care REITs, real estate partnerships, health care providers, health care lenders and other investors, including developers, banks, insurance companies, pension funds, government-sponsored entities and private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. This competition for attractive investments may negatively affect our ability to make timely investments on terms acceptable to us. We depend on Genesis HealthCare (“Genesis”) and Brookdale Senior Living (“Brookdale”) for a significant portion of our revenues and any failure, inability or unwillingness by them to satisfy obligations under their agreements with us could adversely affect us The properties we lease to Genesis and Brookdale account for a significant portion of our revenues, and because our leases with Genesis and Brookdale are triple-net leases, we also depend on Genesis and Brookdale 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 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 failure, inability or unwillingness by Genesis or Brookdale to do so could have an adverse effect on our business, results of operations and financial condition. Although the most recent publicly available financial statements of Genesis reflect going concern disclosures, the operator remains current on rent and the coverage remains above 1.0. Genesis and Brookdale 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 will have sufficient assets, income, access to financing and insurance coverage to enable them to satisfy their respective indemnification obligations. Genesis’s and Brookdale’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. Additionally, we have made real estate and other loans to Genesis and their operational or other failures could adversely impact their ability to repay these loans when due. See Note 21 to our consolidated financial statements for additional information regarding Genesis. The properties managed by Sunrise Senior Living, LLC (“Sunrise”) 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 As of December 31, 2017, Sunrise managed 158 of our seniors housing operating properties. These properties account for a significant portion of our revenues, and we rely on Sunrise to manage these properties efficiently and effectively. We also rely on Sunrise 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’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 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. See Note 7 to our consolidated financial statements for additional information. Ownership of property outside the U.S. may subject us to different or greater risks than those associated with our domestic operations We have operations in Canada and the U.K. 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 19 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 (regionally, nationally and locally) including, but not limited to, the U.K.’s June 2016 vote to exit the EU; 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 U.S. 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. If our tenants do not renew their existing leases, or if we are required to sell properties for liquidity reasons, we may be unable to lease or sell the properties on 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. Real estate investments are relatively illiquid and most of the property we own is highly customized for specific uses. Our ability to quickly sell or exchange any of our properties in response to changes in operator, 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. 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. All of the foregoing could affect our ability to continue paying dividends at the current rate. Our tenants, operators and managers may not have the necessary insurance coverage to insure adequately against losses We maintain or require our tenants, 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 frequently review our insurance programs and requirements. That said, we cannot assure you that we or our tenants, operators or managers will continue to be able to maintain adequate levels of insurance and required coverages or that we will continue to require the same levels of insurance coverage under our lease, management and other agreements, 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 tenants’, operators’ and managers’ future operations, cash flows and financial condition, and may have a material adverse effect on the tenants’, 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. 20 The requirements of, or changes to, governmental reimbursement programs, such as Medicare, Medicaid or government funding, 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 to specific facilities) and interruption or delays in payments due to any ongoing government respect 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 Health Reform Laws, provide 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 2018, more than 60% 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 current 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. See “Item 1 — Business — Certain Government Regulations — United States — Reimbursement” above for additional information. 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. 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, province, 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 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 or other obligatory payments to us. State and local laws also may 21 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. The real estate market and our business may be negatively impacted by changes to U.S. tax laws The Tax Act adopted on December 22, 2017 significantly changes the U.S. income tax rules for individuals and corporations. We are continuing to evaluate the impact of the Tax Act and, as such, its implications for our business remain uncertain. Although the Tax Act involves comprehensive changes to the system of corporate income tax, it does not substantively change the manner in which REITs are taxed. Although numerous provisions of the Tax Act do affect REITs, we are generally not subject to pay federal taxes applicable to regular corporations if we comply with the tax regulations governing REIT status. Nonetheless, the Tax Act makes numerous changes to the individual income tax rules that may affect the real estate market in the U.S., including limitations on the deductibility of state and local property taxes, the elimination of the deductibility of interest on new home equity loans and a reduction in the limit for an individual’s mortgage interest expense to interest on $750,000 of mortgages. Although the impact of these changes is likely to be most significant in the residential real estate market, rather than in the sectors where we operate, the effects of these changes on the broader real estate market in the geographic areas in which we operate and on our tenants remain uncertain. Changes in applicable tax regulations could negatively affect our financial results We are subject to taxation in the U.S. and numerous foreign jurisdictions. Because, even with the passage of the Tax Act, the U.S. maintains a worldwide corporate tax system, the foreign and U.S. tax systems are somewhat interdependent. Longstanding international norms that determine each country’s jurisdiction to tax cross-border international trade are evolving, such as the Base Erosion and Profit Shifting project (“BEPS”) currently being undertaken by the G8, G20 and Organization for Economic Cooperation and Development. Tax changes pursuant to BEPS could reduce the ability of our foreign subsidiaries to deduct for foreign tax purposes the interest they pay on loans from us, thereby, increasing the foreign tax liability of the subsidiaries; it is also possible that foreign countries could increase their withholding taxes on dividends and interest. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess the overall effect of such potential tax changes on our earnings and cash flow, but such changes could adversely impact our financial results. 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 or legal proceedings 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 22 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 frequently 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, including the effects of climate change. 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 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 23 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, including those resulting from human error, product defects and technology failures. 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, compromise the confidential information of our employees, operators, tenants and partners, damage our reputation and have a materially adverse effect on our business, financial condition and results of operations. Our success depends on key personnel whose continued service is not guaranteed Our success depends on the continued availability and service of key personnel, including our executive officers and other highly qualified employees, and competition for their talents is intense. We cannot assure you that we will retain our key personnel or that we will be able to recruit and retain other highly qualified employees in the future. Losing any key personnel could, at least temporarily, have a material adverse effect on our business, financial position and results of operations. Risks Arising from Our Capital Structure 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. 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. Cash available for distributions to stockholders may be insufficient to make dividend contributions at expected levels and are made at the discretion of the Board of Directors If cash available for distribution generated by our assets decreases due to dispositions or otherwise, we may be unable to make dividend distributions at expected levels. Our inability to make expected distributions would likely result in a decrease in the market price of our common stock. All distributions are made at the discretion of our Board of Directors in accordance with Delaware law and depend on our earnings, our financial condition, debt and equity capital available to us, our expectation of our future capital requirements and operating performance, restrictive covenants in our financial and other contractual arrangements, maintenance of our REIT qualification, restrictions under Delaware law and other factors as our Board of Directors may deem relevant from time to time. Additionally, our ability to make distributions will be adversely affected if any of the risks described herein, or other significant adverse events, occur. 24 We are subject to covenants in our debt agreements that 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 U.S. 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 results of operations, liquidity and/or financial condition. Increases in interest rates could have a material adverse impact on our cost of capital An increase in interest rates may increase interest cost on new and existing variable rate debt. Such increases in the cost of capital could adversely impact our ability to finance operations, the acquisition and development of properties, and refinance existing debt. Additionally, increased interest rates may also result in less liquid property markets, limiting our ability to sell existing assets. Fluctuations in the value of foreign currencies could adversely affect our results of operations and financial position Currency exchange rate fluctuations could affect our results of operations and financial position. We generate a portion of our revenue and expenses in such foreign currencies as the Canadian dollar and the British pound sterling. 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 hedge agreements may not effectively reduce our exposure to changes in interest rates or foreign currency exchange rates We enter into hedge agreements from time to time to manage some of our exposure to interest rate and foreign currency exchange rate volatility. These 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 25 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. 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. 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 U.S. 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. 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. 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 26 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. If certain sale-leaseback transactions are not characterized by the Internal Revenue Service (“IRS”) 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 IRS 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 IRS, 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. 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. We could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities We are subject to taxes in the U.S. and foreign jurisdictions. Our analysis of the Tax Act may be impacted by any corrective legislation and any guidance provided by the U.S. Treasury, the IRS or by the General Explanation of the Tax Act, which is under preparation by the Staff of the Congressional Joint Committee on Taxation. Our effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. We are also subject to the examination of our tax returns and other tax matters by the IRS and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. If we were subject to review or examination by the IRS or applicable foreign jurisdiction as the result of any new tax law changes (including the recently enacted Tax Act) the ultimate determination of which may change our taxes owed for an amount in excess of amounts previously accrued or recorded, our financial condition, operating results, and cash flows could be adversely affected. Item 1B. Unresolved Staff Comments None. 27 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, 2017 (dollars in thousands and annualized revenues adjusted for timing of investment): Triple-net Seniors Housing Operating Number of Properties Total Investment Annualized Revenues Number of Properties Total Investment Annualized Revenues $ — $ Property Location Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . California . . . . . . . . . . . . . . . . . . . . . . . . . . Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . Connecticut . . . . . . . . . . . . . . . . . . . . . . . . . District Of Columbia . . . . . . . . . . . . . . . . . Delaware . . . . . . . . . . . . . . . . . . . . . . . . . . . Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Idaho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . Massachusetts . . . . . . . . . . . . . . . . . . . . . . . Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Missouri Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . Montana . . . . . . . . . . . . . . . . . . . . . . . . . . . North Carolina . . . . . . . . . . . . . . . . . . . . . . Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . New Hampshire . . . . . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . New Mexico . . . . . . . . . . . . . . . . . . . . . . . . Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . Rhode Island . . . . . . . . . . . . . . . . . . . . . . . . South Carolina . . . . . . . . . . . . . . . . . . . . . . Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vermont Washington . . . . . . . . . . . . . . . . . . . . . . . . . Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . West Virginia . . . . . . . . . . . . . . . . . . . . . . . Total domestic . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total international Grand total . . . . . . . . . . . . . . . . . . . . . . . . . — 4 71 5 17 1 1 9 7 1 — 14 — 3 2 2 39 4 2 5 4 5 — — 1 — 4 8 1 2 10 5 2 — 6 3 — 2 30 1 3 1 12 — — 287 103 53 156 443 4 2 25 8 13 — 6 21 3 4 2 9 32 27 6 3 20 8 — 6 10 1 3 1 50 4 4 56 — 5 6 16 21 10 31 — 5 4 37 2 12 — 18 7 4 506 6 61 67 573 $ 34,374 26,771 425,291 253,330 162,800 — 102,090 208,011 21,769 55,228 21,801 157,493 462,707 259,364 50,832 19,168 185,084 133,528 — 96,814 222,546 11,926 26,661 5,841 369,065 31,942 51,186 1,229,004 — 80,918 147,412 125,308 225,662 74,169 766,860 — 31,653 39,654 387,507 30,108 179,684 — 318,379 108,644 66,949 7,207,533 160,418 1,220,528 1,380,946 $ 4,198 2,349 50,368 22,718 20,314 — 12,340 22,468 4,435 5,588 3,547 16,926 50,889 26,624 8,676 3,328 32,601 8,969 — 10,165 18,809 186 1,887 959 41,964 4,067 7,599 132,850 — 12,785 15,993 31,430 20,181 7,125 12,909 — 5,698 3,839 48,760 2,582 13,229 — 33,773 14,650 8,454 746,232 11,023 107,728 118,751 $8,588,479 $864,983 28 59,180 2,629,870 137,842 420,700 62,508 20,657 714,900 119,906 31,736 — 438,607 — 68,739 38,366 49,858 1,124,085 149,237 49,437 108,521 111,503 147,090 — — 39,461 — 117,062 233,766 18,199 35,919 334,217 216,731 39,679 — 80,343 59,215 — 48,830 928,494 16,315 92,020 26,501 403,565 — — 9,173,059 2,077,853 1,542,910 3,620,763 — 22,940 636,760 39,864 135,459 14,169 6,750 110,064 35,284 11,292 — 111,523 — 17,284 14,209 12,373 253,943 51,050 18,715 24,860 21,595 23,376 — — 7,239 — 29,986 65,306 1,375 10,995 87,283 36,858 3,374 — 39,962 20,345 — 15,741 205,362 10,546 11,062 6,710 78,355 — — 2,192,009 440,222 312,009 752,231 $12,793,822 $2,944,240 Property Location Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Connecticut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kentucky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maryland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nebraska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Hampshire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Washington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient Medical Number of Properties Total Investment Annualized Revenues 2 3 1 4 32 2 1 36 10 1 5 9 7 1 5 1 2 8 8 3 2 1 8 3 5 8 5 2 1 1 6 55 2 6 20 $ 23,414 30,119 22,730 62,649 866,727 32,967 41,686 436,149 169,521 6,615 49,505 162,463 72,142 7,297 93,869 19,290 30,159 165,704 144,391 53,499 33,727 13,344 266,546 31,760 43,466 109,193 51,894 23,633 9,279 24,844 64,569 892,224 31,824 170,665 244,483 $ 2,423 5,515 2,067 9,453 91,492 5,025 3,939 50,703 28,178 1,303 8,749 20,157 12,695 679 11,817 2,824 4,141 26,127 17,451 7,086 5,379 1,758 44,194 3,731 4,200 7,214 9,845 3,318 1,453 2,615 7,831 89,447 4,846 20,456 32,779 Total domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 4 270 4,502,347 286,434 550,890 25,880 $4,788,781 $576,770 29 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) 2017 2016 2017 2016 2017 2016 . . . . . . . . . . . . . . . . . . . Triple-net(4) Seniors housing operating(5) . . . . . . . . . . . . . . . . . . . Outpatient medical(6) 85.8% 86.5% 1.34x n/a 86.5% 88.7% n/a 93.7% 94.7% 1.43x n/a n/a $15,663 60,828 33 $16,841 per bed/unit 59,627 per unit 33 per sq. ft. (1) We use unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy and coverages for properties other than outpatient medical 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 twelve 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 represents average occupancy for the three months ended December 31. (6) 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, 2017 (dollars in thousands): 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Thereafter Expiration Year(1) Triple-net: . . . . . . . $ 107,517 $ 100 12.1% 8,715 16.2% — — $ 0.0% — 0.0% 14 17,740 $ 2.0% 1,225 2.3% 10 16,576 $ 1.9% 1,620 3.0% 13 9,895 $ 1.1% 1,220 2.3% 11 8,348 $ 0.9% 1,432 2.7% 4 59 10,842 $ 76,589 $ 31 272 45 63,138 $ 95,730 $ 482,337 1.2% 692 1.3% 8.6% 4,489 8.3% 7.1% 3,662 6.8% 10.8% 4,647 8.6% 54.3% 26,065 48.5% 1,173,527 1,312,277 1,502,213 1,701,977 1,048,663 1,143,704 736,777 1,133,674 402,904 50,744 $ 12.0% 317 13.7% 32,011 $ 7.5% 310 13.4% 35,425 $ 8.3% 311 13.5% 39,984 $ 9.4% 268 11.6% 45,079 $ 10.6% 302 13.1% 28,599 $ 6.7% 203 8.8% 32,946 $ 21,255 $ 7.8% 122 5.3% 5.0% 108 4.7% 28,705 $ 11,425 $ 4,359,985 98,411 6.8% 126 5.5% 2.7% 78 3.4% 23.2% 162 6.9% Properties . . . . . . . . Base rent(2) % of base rent . . . . . Units . . . . . . . . . . . . % of units . . . . . . . . Outpatient medical: Square feet Base rent(2) % of base rent . . . . . Leases . . . . . . . . . . . % of leases . . . . . . . . . . . . . . 2,382,066 . . . . . . . $ (1) Excludes investments in unconsolidated entities. Investments classified as held for sale are included in 2018. (2) 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. Further, from time to time, we are party to certain legal proceedings for which third parties, such as tenants, operators and/or managers are contractually obligated to indemnify, defend and hold us harmless. In some of these matters, the indemnitors have insurance for the potential damages. In other matters, we are being defended by tenants and other obligated third parties and these indemnitors may not have sufficient insurance, assets, income or resources to satisfy their defense and indemnification obligations to us. The unfavorable resolution of such legal proceedings could, individually or in the aggregate, materially adversely affect the indemnitors’ ability to satisfy their respective obligations to us, which, in turn, could have a material adverse effect on our business, results of operations or financial condition. It is management’s opinion that there are currently no such legal proceedings pending that will, individually or in the aggregate, have such a material adverse effect. Despite management’s view of the ultimate resolution of these legal proceedings, we may have significant legal expenses and costs associated with the defense of such matters. Further, management cannot predict the outcome of these legal proceedings and if management’s expectation regarding such matters is not correct, such proceedings could have a material adverse effect on our business, results of operations or financial condition. Item 4. Mine Safety Disclosures None. 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities There were 4,761 stockholders of record as of January 31, 2018. The following table sets forth, for the the high and low prices of our common stock on the New York Stock Exchange periods indicated, (NYSE:WELL), and common dividends paid per share: 2017 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter 2016 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter Sales Price Dividends Paid High Low Per Share $71.17 78.17 75.91 70.87 $70.45 76.24 80.19 74.85 $64.63 68.66 69.77 63.06 $52.80 66.55 72.34 59.39 $0.87 0.87 0.87 0.87 $0.86 0.86 0.86 0.86 Our Board of Directors has approved a 2018 quarterly cash dividend rate of $0.87 per share of common stock per quarter, commencing with the February 2018 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, 2017, 157 companies comprised the FTSE NAREIT Equity Index, which 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. 2012 equals $100 and dividends are assumed to be reinvested. S&P 500 Welltower Inc. FTSE NAREIT Equity 250 200 s r a l l o D 150 100 50 2012 2013 2014 2015 2016 2017 S & P 500 Welltower Inc. FTSE NAREIT Equity 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 100.00 100.00 100.00 132.39 91.58 102.47 150.51 136.01 133.35 152.59 128.23 137.61 170.84 132.55 149.33 208.14 132.81 157.14 31 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 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 Period October 1, 2017 through October 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . November 1, 2017 through November 30, 2017 . . . . . . . . . . . . . December 1, 2017 through — 249 December 31, 2017 . . . . . . . . . . . . . 32,072 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . 32,321 $ — 68.46 67.94 $67.94 (1) During the three months ended December 31, 2017, 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. 32 Item 6. Selected Financial Data The following selected financial data for the five years ended December 31, 2017 are derived from our audited consolidated financial statements (in thousands, except per share data): Operating Data Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . Income (loss) from unconsolidated entities . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations, net . . . . . . . . . . . Gain (loss) on real estate dispositions, net Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . Preferred stock redemption charge . . . . . . . . . . . . . . . . . Net income (loss) attributable to noncontrolling Year Ended December 31, 2013 2014 2015 2016 2017 $2,880,608 2,778,363 $3,343,546 2,959,333 $3,859,826 3,223,709 $4,281,160 3,571,907 $4,316,641 4,017,025 102,245 (7,491) (8,187) 86,567 51,713 — 138,280 66,336 — 384,213 1,267 (27,426) 358,054 7,135 147,111 512,300 65,408 — 636,117 (6,451) (21,504) 608,162 — 280,387 888,549 65,406 — 709,253 19,128 (10,357) 718,024 — 364,046 1,082,070 65,406 — 299,616 (20,128) (83,125) 196,363 — 344,250 540,613 49,410 9,769 interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,770) 147 4,799 4,267 17,839 Net income attributable to common stockholders . . . . . . $ 78,714 $ 446,745 $ 818,344 $1,012,397 $ 463,595 Other Data Average number of common shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,929 278,761 306,272 307,747 348,240 349,424 358,275 360,227 367,237 369,001 Per Share Data Basic: Income from continuing operations attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations, net . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders * . . Diluted: Income from continuing operations attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations, net . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders * . . Cash distributions per common share . . . . . . . . . . . . . . . $ $ $ $ $ 0.10 0.19 0.28 0.10 0.19 0.28 3.06 $ $ $ $ $ 1.44 0.02 1.46 1.43 0.02 1.45 3.18 $ $ $ $ $ 2.35 — 2.35 2.34 — 2.34 3.30 $ $ $ $ $ 2.83 — 2.83 2.81 — 2.81 3.44 $ $ $ $ $ 1.26 — 1.26 1.26 — 1.26 3.48 2013 2014 2015 2016 2017 December 31, Balance Sheet Data Net real estate investments . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . Total long-term obligations . . . . . . . Total liabilities . . . . . . . . . . . . . . . . Total preferred stock . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . $21,680,221 23,026,666 10,594,723 11,235,296 1,017,361 11,756,331 $22,851,196 24,962,923 10,776,640 11,403,465 1,006,250 13,473,049 $26,888,685 29,023,845 12,967,686 13,664,877 1,006,250 15,175,885 $26,563,629 28,865,184 12,358,245 13,185,279 1,006,250 15,281,472 $26,171,077 27,944,445 11,731,936 12,643,799 718,503 14,925,452 * Amounts may not sum due to rounding 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE SUMMARY Company Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Key Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 35 36 37 39 40 41 41 42 42 44 47 49 52 OTHER Non-GAAP Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 59 34 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. presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) 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:WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post- acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. WelltowerTM, a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties. 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, 2017 (dollars in thousands): Type of Property NOI(1) Percentage of NOI Number of Properties Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 967,084 880,026 384,068 43.3% 39.5% 17.2% 573 443 270 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,231,178 100.0% 1,286 (1) Represents consolidated NOI and excludes our share of investments in unconsolidated entities. Entities in which we have a joint venture with a minority partner are shown at 100% of the joint venture amount. See Non-GAAP Financial Measures for additional information and reconciliation. Business Strategy Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in 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/services, and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our obligors/partners experience operating difficulties and become unable to generate sufficient cash to make payments or operating distributions to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/ partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division manages and monitors the outpatient medical portfolio with a comprehensive process including review of tenant relations, 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things. We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we 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 relevant 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, 2017, rental income and resident fees/services represented 33% and 64%, 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 outstanding during the term of the loan, and any interest rate adjustments. Our primary sources of cash include rent and interest receipts, resident fees/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 loan advances, property acquisitions, capital expenditures, construction advances, and transaction costs), 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 exceed new investment dispositions may occur in the future. To the extent 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, 2017, we had $243,777,000 of cash and cash equivalents, $65,526,000 of restricted cash and $2,258,635,000 of available borrowing capacity under our primary unsecured credit facility. that Key Transactions Capital. During the year ended December 31, 2017, we extinguished $1,080,268,000 of secured debt at a blended average interest rate of 5.2%. In addition, we redeemed all 11,500,000 shares of our 6.5% Series J Cumulative Redeemable Preferred Stock. Also, for the year ended December 31, 2017, we raised $611,443,000 through our dividend reinvestment program and our Equity Shelf Program (as defined below). The capital raised, in combination with available cash and borrowing capacity under our primary unsecured credit facility and proceeds from dispositions, supported new investment activity for the year. 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Investments. The following summarizes our property acquisitions and joint venture investments made during the year ended December 31, 2017 (dollars in thousands): Properties Investment Amount(1) Capitalization Rates(2) Book Amount(3) Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . . Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 8 9 26 $170,076 375,400 196,544 $742,020 6.4% 6.6% 5.9% 6.3% $ 281,875 539,173 224,232 $1,045,280 (1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP. (2) Represents annualized contractual or projected net operating income to be received in cash divided by investment amounts. (3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Note 3 to our consolidated financial statements for additional information. Dispositions. The following summarizes property dispositions made during the year ended December 31, 2017 (dollars in thousands): Properties Proceeds(1) Capitalization Rates(2) Book Amount(3) Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 3 3 65 $1,190,791 105,349 23,590 $1,319,730 6.9% 4.6% 8.3% 6.7% $ 916,689 74,832 19,697 $1,011,218 (1) Represents pro rata proceeds received upon disposition including any seller financing. (2) Represents annualized contractual net operating 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 announced the 2018 annual cash dividend of $3.48 per common share ($0.87 per share quarterly), consistent with 2017, beginning in February 2018. The dividend declared for the quarter ended December 31, 2017 represents the 187th 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 and net income attributable to common stockholders (“NICS”) per the Statement of Comprehensive Income are the most appropriate earnings measures. Other useful supplemental measures of our operating performance include funds from operations attributable to common stockholders (“FFO”), consolidated net operating income (“NOI”) and same store NOI (“SSNOI”); however, these supplemental measures are not defined by U.S. GAAP. Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations. These earnings measures are widely used by investors and analysts in the valuation, comparison, and investment recommendations of companies. The 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands): Year Ended December 31, 2015 2016 2017 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 888,549 $1,082,070 $ 540,613 463,595 Net income attributable to common stockholders . . . . . . . . . . . . 1,165,576 Funds from operations attributable to common stockholders . . . 2,232,716 Consolidated net operating income . . . . . . . . . . . . . . . . . . . . . . . 1,519,193 Same store net operating income . . . . . . . . . . . . . . . . . . . . . . . . . 1,012,397 1,582,940 2,404,177 1,499,511 818,344 1,409,640 2,237,569 1,523,666 Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. The leverage ratios indicate how much of our balance sheet capitalization is related to long-term debt, net of cash and Internal Revenue Code (“IRC”) section 1031 deposits. The coverage ratios indicate our ability to service interest and fixed charges (interest, secured debt principal amortization and preferred dividends). We expect to maintain capitalization ratios and coverage ratios sufficient to maintain a capital structure consistent with our current profile. The coverage ratios are based on adjusted earnings before interest, taxes, depreciation and amortization (“AEBITDA”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliation of these measures. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations, and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented: Year Ended December 31, 2015 2016 2017 Net debt to book capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.8% 42.9% 42.9% Net debt to undepreciated book capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . 39.5% 37.4% 36.3% Net debt to market capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.5% 31.1% 31.2% 4.36x Adjusted interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.24x 3.54x Adjusted fixed charge coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.35x 4.21x 3.34x 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 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below: December 31,(1) 2015 2016 2017 Property mix: Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54% 50% 43% 31% 34% 40% 15% 16% 17% Relationship mix: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sunrise Senior Living(2) Genesis HealthCare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revera(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brookdale Senior Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benchmark Senior Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13% 13% 14% 9% 17% 16% 7% 6% 5% 7% 6% 7% 4% 4% 4% 54% 55% 59% Geographic mix: California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remaining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13% 10% 13% 9% 8% 9% 8% 8% 8% 8% 7% 8% 7% 7% 7% 55% 60% 55% (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. See Note 8 to our consolidated financial statements for additional information. 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” 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. 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Sources and Uses of Cash During the fourth quarter of 2017, we adopted Accounting Standards Update (“ASU”) No. 2016-18, “Restricted Cash,” and ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” See Note 2 to the consolidated financial statements for further information. Our primary sources of cash include rent and interest receipts, resident fees/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. 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 for the periods presented (dollars in thousands): Year Ended One Year Change December 31, 2015 December 31, 2016 $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Beginning cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . $ Net cash provided from (used in): Operating activities . . . . . . . Investing activities . . . . . . . Financing activities . . . . . . . Effect of foreign currency 553,423 $ 422,690 $ (130,733) -24% $ 607,220 $ 184,530 44% $ 53,797 10% 1,382,599 (3,502,075) 1,997,318 256,465 1,639,064 (183,443) 3,318,632 -95% (1,250,817) (3,248,135) n/a 19% 1,434,177 (204,887) -13% n/a 4% n/a (1,913,527) (662,710) 53% (3,910,845) n/a 51,578 3,656,656 154,581 338,024 translation . . . . . . . . . . . . . . (8,575) (20,274) (11,699) 136% 26,852 47,126 n/a 35,427 n/a Ending cash, cash equivalents and restricted cash . . . . . . . . $ 422,690 $ 607,220 $ 184,530 44% $ 309,303 $(297,917) -49% $ (113,387) -27% Operating Activities. The change in net cash provided from operating activities is attributable to changes in NOI, which is primarily due to dispositions in 2016 and 2017, partially offset by acquisitions and annual rent increasers. Please see “Results of Operations” below for further discussion. For the years ended December 31, 2015, 2016 and 2017, 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 2017.” Please refer to Notes 3, 6, and 7 of our consolidated financial statements for additional information. The following is a summary of cash used in non-acquisition capital improvement activities for the periods presented (dollars in thousands): Year Ended One Year Change December 31, 2015 December 31, 2016 $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % $244,561 $403,131 $158,570 65% $232,715 $(170,416) -42% $ (11,846) -5% 64,458 66,332 1,874 3% — (66,332) -100% (64,458) -100% 123,294 152,814 29,520 24% 250,276 97,462 64% 126,982 103% New development . . . . . . . . . . Recurring capital expenditures, tenant improvements and lease commissions . . . . . . . . . . . . Renovations, redevelopments and other capital improvements . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . $432,313 $622,277 $189,964 44% $482,991 $(139,286) -22% $ 50,678 12% 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 2017.” Please refer to Notes 9, 10 and 13 of our consolidated financial statements for additional information. Off-Balance Sheet Arrangements At December 31, 2017, we had investments in unconsolidated entities with our ownership generally 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, 2017, we had fourteen 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, 2017 (in thousands): Contractual Obligations Total 2018 2019-2020 2021-2022 Thereafter Payments Due by Period . . . . . . . . . . . $ Unsecured revolving credit facility(1) Senior unsecured notes and term credit facilities:(2) U.S. Dollar senior unsecured notes . . . . . . . . . . . Canadian Dollar senior unsecured notes(3) . . . . . Pounds Sterling senior unsecured notes(3) . . . . . . U.S. Dollar term credit facility . . . . . . . . . . . . . . Canadian Dollar term credit facility(3) . . . . . . . . . Secured debt:(2,3) 719,000 $ — $ — $ 719,000 $ — 6,050,000 239,674 1,420,545 507,500 199,728 450,000 1,050,000 1,050,000 3,500,000 — — — 1,420,545 — — — 239,674 — — — 7,500 — 500,000 — 199,728 Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unconsolidated . . . . . . . . . . . . . . . . . . . . . . . . . . 2,618,408 753,807 396,588 31,087 707,184 133,312 456,634 1,058,002 552,780 36,628 Contractual interest obligations:(4) Unsecured revolving credit facility . . . . . . . . . . . Senior unsecured notes and term loans(3) . . . . . . . . . . . . . . . . . . . . . . Consolidated secured debt(3) . . . . . . . . . . . . . . Unconsolidated secured debt(3) . . . . . . . . . . . . . . . . . . . Capital lease obligations(5) . . . . . . . . . . . . . . . . . Operating lease obligations(5) Purchase obligations(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities(6) 80,485 3,124,832 502,477 194,923 89,104 1,125,098 441,647 2,704 20,121 359,943 96,372 28,840 4,678 17,871 304,188 1,475 40,243 665,295 145,563 51,220 8,507 35,675 137,459 1,229 — 20,121 510,717 1,588,877 158,570 101,972 73,007 41,856 8,346 67,573 34,184 1,037,368 — — — — Total contractual obligations . . . . . . . . . . . . . . . . . . $18,069,932 $1,711,163 $3,222,861 $3,679,186 $9,456,722 (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. 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (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 December 31, 2017. (5) See Note 12 to our consolidated financial statements. (6) Primarily relates to payments to be made under a supplemental executive retirement plan for one former executive officer. Capital Structure Please refer to “Credit Strength” above for 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, 2017, we believe 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 (“SEC”) (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 (“DRIP”) under which we may issue up to 15,000,000 shares of common stock. As of January 31, 2018, 2,108,286 shares of common stock remained available for issuance under the DRIP registration statement. We have entered into separate Equity Distribution Agreements with each of Morgan Stanley & Co. LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC relating to the offer and sale from time to time of up to $1,000,000,000 aggregate amount of our common stock (“Equity Shelf Program”). The Equity Shelf Program also allows us to enter into forward sale agreements. We expect that, if entered into, we will physically settle each forward sale agreement on one or more dates on or prior to the maturity date of that particular forward sale agreement, in which case we will expect to receive per share cash proceeds at settlement equal to the forward sale price under the relevant forward sale agreement. However, we may elect to cash settle or net share settle a forward share agreement. As of January 31, 2018, we had $784,083,000 of remaining capacity under the Equity Shelf Program and there were no outstanding forward sales agreements. 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/services, and interest income. Our primary expenses include interest expense, depreciation and amortization, property operating expenses, other expenses, 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 and other supplemental measures include FFO and AEBITDA, which are further discussed below. Please see Non-GAAP Financial Measures for additional information and 42 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations reconciliations. The following is a summary of our results of operations for the periods presented (dollars in thousands, except per share amounts): Year Ended One Year Change December 31, 2015 December 31, 2016 Amount % Year Ended December 31, 2017 One Year Change Two Year Change Amount % Amount % Net income attributable to common stockholders . . . $ 818,344 $1,012,397 $194,053 24% $ 463,595 $(548,802) -54%$(354,749) -43% 888,549 1,082,070 193,521 22% 540,613 (541,457) -50% (347,936) -39% Net income . . . . . . . . . . . . . Funds from operations attributable to common stockholders . . . . . . . . . . 1,409,640 1,582,940 173,300 12% 1,165,576 (417,364) -26% (244,064) -17% 1% 0% 0% Adjusted EBITDA . . . . . . . 2,113,258 2,256,864 143,606 Consolidated NOI . . . . . . . . 2,237,569 2,404,177 166,608 Same store NOI Per share data (fully 7% 2,128,429 (128,435) 7% 2,232,716 (171,461) 19,682 -6% 15,171 -7% (4,853) 1% (4,473) . . . . . . . . . 1,523,666 1,499,511 (24,155) -2% 1,519,193 diluted): Net income attributable to common stockholders . . . . . . . . $ Funds from operations attributable to common stockholders . . . . . . . . Adjusted interest coverage 2.34 $ 2.81 $ 0.47 20% $ 1.26 $ (1.55) -55%$ (1.08) -46% 4.03 4.39 0.36 9% 3.16 (1.23) -28% (0.87) -22% ratio . . . . . . . . . . . . . . . . . 4.24x 4.21x -0.03x -1% 4.36x 0.15x 4% 0.12x 3% Adjusted fixed charge coverage ratio . . . . . . . . . 3.35x 3.34x -0.01x 0% 3.54x 0.20x 6% 0.19x 6% The following table represents the changes in outstanding common stock for the period from January 1, 2015 to December 31, 2017 (in thousands): December 31, 2015 Year Ended December 31, 2016 December 31, 2017 Beginning balance . . . . . . . . . . . . . . . . . . . . . Public offerings . . . . . . . . . . . . . . . . . . . . . . . Dividend reinvestment plan issuances . . . . . . Senior note conversions . . . . . . . . . . . . . . . . . Preferred stock conversions . . . . . . . . . . . . . . Redemption of equity membership units . . . . Option exercises . . . . . . . . . . . . . . . . . . . . . . . Equity Shelf Program issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net 328,790 19,550 4,024 1,330 — — 249 696 139 Ending balance . . . . . . . . . . . . . . . . . . . . . . . . 354,778 Average number of shares outstanding: 354,778 — 4,145 — — — 141 3,135 403 362,602 362,602 — 5,640 — 4 91 253 2,987 155 Totals 328,790 19,550 13,809 1,330 4 91 643 6,818 697 371,732 371,732 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,240 349,424 358,275 360,227 367,237 369,001 During the past three years, inflation has not significantly affected our earnings because of the moderate inflation rate. Additionally, a portion of our earnings are derived primarily from long-term investments with 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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. Triple-net The following is a summary of our NOI and SSNOI for the triple-net segment for the periods presented (dollars in thousands): Year Ended One Year Change December 31, 2015 December 31, 2016 $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % NOI . . . . . . . . . . . . . . . . . . . . $1,175,806 $1,208,860 $ 33,054 Non-cash NOI attributable to same store properties(1) . . . NOI attributable to non same store properties(2) . . . . . . . . (498,131) (48,890) (38,899) 9,991 -20% (28,602) (574,049) (75,918) 15% (333,279) 10,297 -26% 20,288 -41% 240,770 -42% 164,852 -33% 3% $ 967,084 $(241,776) -20%$(208,722) -18% SSNOI(1) . . . . . . . . . . . . . . . . $ 628,785 $ 595,912 $(32,873) -5% $ 605,203 $ 9,291 2%$ (23,582) -4% (1) Relates to 418 same store properties. (2) Primarily relates to the acquisition of 74 properties and the conversion of 17 construction projects into revenue-generating properties subsequent to January 1, 2015 as well as 48 properties sold or held for sale at December 31, 2017. 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a summary of our results of operations for the triple-net segment for the periods presented (dollars in thousands): Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Revenues: Rental income . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . $1,094,827 74,108 6,871 $1,112,325 90,476 6,059 $ 17,498 16,368 (812) 2% $885,811 73,742 7,531 22% -12% $(226,514) (16,734) 1,472 -20% $(209,016) (366) -18% 660 24% -19% 0% 10% NOI(1) . . . . . . . . . . . . . . . . . . . . . 1,175,806 1,208,860 33,054 3% 967,084 (241,776) -20% (208,722) -18% 1,175,806 1,208,860 33,054 3% 967,084 (241,776) -20% (208,722) -18% Other expenses: Interest expense . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net Depreciation and amortization . . Transaction costs(2) . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . Provision for loan losses(3) . . . . . Impairment of assets(4) . . . . . . . . Other expenses(2) . . . . . . . . . . . . . 28,384 (58,427) 288,242 53,195 10,095 — 2,220 35,648 21,370 68 297,197 10,016 (7,014) 58,495 8,955 (43,179) -25% 15,194 2,284 n/a 3% 243,830 — -81% (6,176) -46% -29% (13,190) 2,216 3259% 60,711 -104% (53,367) -15% -18% (44,412) (10,016) -100% (53,195) -100% 863 6,935 20,169 -91% (9,232) 6,935 n/a 17,949 809% 29,083 62,966 96,909 — (35,648) -100% 116,689 188% 28,220 3270% 18,988 808% 62,966 56,031 n/a 380% 94,689 4265% 76,740 227% 81,041 116,689 n/a 359,357 356,618 (2,739) -1% 566,955 210,337 59% 207,598 58% Income from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . Income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . Income from continuing 816,449 (4,244) 852,242 (1,087) 35,793 3,157 4% 400,129 (4,291) -74% (452,113) -53% (416,320) (47) -51% 1% (3,204) 295% 8,260 9,767 1,507 18% 19,428 9,661 99% 11,168 135% operations . . . . . . . . . . . . . . . . . . 820,465 860,922 40,457 5% 415,266 (445,656) -52% (405,199) -49% Gain (loss) on real estate dispositions, net(4) . . . . . . . . . . . . 86,261 355,394 269,133 312% 286,325 (69,069) -19% 200,064 232% Net income . . . . . . . . . . . . . . . . . . . Less: Net income attributable to noncontrolling interests . . . . . . . . Net income attributable to common stockholders . . . . . . . . . . . . . . . . 906,726 1,216,316 309,590 34% 701,591 (514,725) -42% (205,135) -23% 6,348 1,221 (5,127) -81% 4,603 3,382 277% (1,745) -27% $ 900,378 $1,215,095 $314,717 35% $696,988 $(518,107) -43% $(203,390) -23% (1) See Non-GAAP Financial Measures below. (2) See Note 3 to our consolidated financial statements. (3) See Note 6 to our consolidated financial statements. (4) See Note 5 to our consolidated financial statements. The 2017 decrease in rental income is primarily attributable to the disposition of properties exceeding new acquisitions and conversions of newly constructed triple-net properties. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index (“CPI”) 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; 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 CPI do not increase, a portion of our revenues may not continue to increase. 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, 2017, we had no triple-net lease renewals but we had 25 leases with rental rate increasers ranging from 0.15% to 0.36% in our triple-net portfolio. The 2017 decrease in interest income is primarily attributable to the volume of loan payoffs during 2016 and 2017 and the 2016 increase is attributable to higher loan volumes during the majority of 2016. During the year ended December 31, 2017, we completed seven triple-net construction projects totaling $283,472,000 or $347,818 per bed/unit and two expansion projects totaling $10,336,000. The following is a summary of triple-net construction projects pending as of December 31, 2017 (dollars in thousands): Location Alexandria,VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exton, PA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Westerville, OH . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Units/ Beds 116 120 90 326 Commitment Balance Est. Completion $ 60,156 34,175 22,800 $46,631 18,560 3,595 $117,131 $68,786 2Q18 2Q18 4Q18 Total interest expense represents secured debt interest expense and related fees. 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 fluctuations in loss (gain) on extinguishment of debt is primarily attributable to the volume of extinguishments and terms of the related secured debt. The following is a summary of our triple-net secured debt principal activity for the periods presented (dollars in thousands): Year Ended December 31, 2015 Year Ended December 31, 2016 Year Ended December 31, 2017 Beginning balance . . . . . Debt issued . . . . . . . . . . . Debt assumed . . . . . . . . . Debt extinguished . . . . . Foreign currency . . . . . . Principal payments . . . . . Amount $ 670,769 — 44,142 (132,545) (15,633) (12,719) Weighted Avg. Interest Rate 5.337% 0.000% 5.046% 4.695% 5.315% 5.450% Amount $ 554,014 166,155 — (118,500) 3,157 (10,627) Weighted Avg. Interest Rate 5.488% 2.205% 0.000% 5.562% 5.247% 5.682% Amount $ 594,199 13,000 — (274,048) 20,186 (5,863) Ending balance . . . . . . . . $ 554,014 5.488% $ 594,199 4.580% $ 347,474 Weighted Avg. Interest Rate 4.580% 4.570% 0.000% 5.954% 2.909% 5.657% 3.546% Monthly averages . . . . . . $ 551,803 5.518% $ 497,213 5.414% $ 408,688 3.909% Depreciation and amortization decreased in 2017 primarily as a result of the disposition of triple-net properties. To the extent that we acquire or dispose of additional properties in the future, our provision for depreciation and amortization will change accordingly. Changes in gains on sales of properties are related to the volume of property sales and the sales prices. During the years ended December 31, 2017, 2016 and 2015, we recorded impairment charges totaling $96,909,000 related to 21 properties, $20,169,000 related to 22 properties, and $2,220,000 related to two properties, respectively. 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” below and Note 6 to our consolidated financial statements. During the years ended December 31, 2017 and 2016, we recorded provision for loan losses related to certain first mortgage loans to Genesis HealthCare (“Genesis”) of $62,966,000 and $6,935,000, respectively. 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations During the year ended December 31, 2017, other expenses primarily represents non-capitalizable transaction costs, including $88,316,000 related to a joint venture transaction with an existing seniors housing operator, including the conversion of properties from triple-net to seniors housing operating, an exchange of PropCo/OpCo interests and termination/restructuring of pre-existing relationships. In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis. In February 2015, Genesis 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 was recorded in other expense. During the fourth quarter of 2017, management recorded an additional other than temporary charge of $18,294,000 in other expenses on the Genesis equity investment. 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. Seniors Housing Operating The following is a summary of our NOI and SSNOI for the seniors housing operating segment for the periods presented (dollars in thousands): Year Ended One Year Change December 31, 2015 December 31, 2016 $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % NOI . . . . . . . . . . . . . . . . . $701,262 Non-cash NOI $ 814,114 $ 112,852 16% $ 880,026 $ 65,912 8% $ 178,764 25% attributable to same store properties(1) NOI attributable to non . . . . same store properties(2) . . . . . . . . . 1,003 1,990 987 98% 1,242 (748) -38% 239 24% (83,880) (190,459) (106,579) 127% (246,731) (56,272) 30% (162,851) 194% SSNOI(1) . . . . . . . . . . . . . $618,385 $ 625,645 $ 7,260 1% $ 634,537 $ 8,892 1% $ 16,152 3% (1) Relates to 294 same store properties. (2) Primarily relates to the acquisition of 129 properties subsequent to January 1, 2015. 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a summary of our results of operations for the seniors housing operating segment for the periods presented (dollars in thousands): Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Revenues: Resident fees and services . . . . . . . . . $2,158,031 $2,504,731 $346,700 16% $2,779,423 $274,692 11% $621,392 Interest income . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . 4,180 6,060 4,180 17,085 — 0% 69 (4,111) -98% (4,111) 11,025 182% 5,127 (11,958) -70% (933) Property operating expenses . . . . . . . . . . 1,467,009 1,711,882 244,873 17% 1,904,593 192,711 11% 437,584 2,168,271 2,525,996 357,725 16% 2,784,619 258,623 10% 616,348 NOI(1) . . . . . . . . . . . . . . . . . . . . . . . . . 701,262 814,114 112,852 16% 880,026 65,912 8% 178,764 29% -98% -15% 28% 30% 25% Other expenses: Interest expense . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . Transaction costs(2) . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . Impairment of assets(3) . . . . . . . . . . . . Other expenses(2) . . . . . . . . . . . . . . . . Income (loss) from continuing operations before income from unconsolidated entities . . . . . . . . . . . . 70,388 351,733 54,966 81,853 11,465 415,429 29,207 63,696 (25,759) 16% 18% -47% 63,265 (18,588) -23% (7,123) -10% 484,796 69,367 — (29,207) 17% 133,063 -100% (54,966) 38% -100% (195) — — (88) 107 -55% 12,403 12,403 n/a — — n/a 3,785 21,949 8,347 3,873 -4401% 3,980 -2041% 9,546 8,347 77% 21,949 n/a 8,347 n/a n/a 476,892 538,804 61,912 13% 582,142 43,338 8% 105,250 22% 224,370 275,310 50,940 23% 297,884 22,574 8% 73,514 33% Income tax benefit (expense) . . . . . . . . . 986 (3,762) (4,748) -482% (16,430) (12,668) 337% (17,416) -1766% Income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . (32,672) (20,442) 12,230 -37% (105,236) (84,794) 415% (72,564) 222% Income from continuing operations . . . . 192,684 251,106 58,422 30% 176,218 (74,888) -30% (16,466) -9% Gain (loss) on real estate dispositions, net(3) . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,880 9,880 n/a 56,295 46,415 470% 56,295 n/a Net income (loss) . . . . . . . . . . . . . . . . . . 192,684 260,986 68,302 35% 232,513 (28,473) -11% 39,829 21% Less: Net income (loss) attributable to noncontrolling interests . . . . . . . . . . . (1,438) 2,292 3,730 -259% 8,472 6,180 270% 9,910 -689% Net income (loss) attributable to common stockholders . . . . . . . . . . . . . $ 194,122 $ 258,694 $ 64,572 33% $ 224,041 $ (34,653) -13% $ 29,919 15% (1) See Non-GAAP Financial Measures below. (2) See Note 3 to our consolidated financial statements. (3) See Note 5 to our consolidated financial statements. Fluctuations in resident fees/services and property operating expenses are primarily a result of acquisitions and the movement of U.S. and foreign currency exchange rates. The fluctuations in depreciation and amortization are due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly. 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 majority of our seniors housing operating properties are formed through partnership interests. The fluctuations in income (loss) from unconsolidated entities are largely due to the recognition of impairments related to one of our investments in unconsolidated entities during the year ended December 31, 2017. In addition, losses are also attributable to depreciation and amortization of short-lived intangible assets related to 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations certain investments in unconsolidated joint ventures in 2013 and 2014. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures. During the year ended December 31, 2017, we completed one seniors housing operating construction project representing $3,634,000 or $302,820 per unit. The following is a summary of our seniors housing operating construction projects, excluding expansions, pending as of December 31, 2017 (dollars in thousands): Location Units/Beds Commitment Balance Est. Completion Chertsey, UK . . . . . . . . . . . . . . . . . . . . . . . . Bushey, UK . . . . . . . . . . . . . . . . . . . . . . . . . Wandsworth, UK . . . . . . . . . . . . . . . . . . . . . 94 95 98 $ 42,210 55,131 78,739 $ 35,814 36,784 29,502 1Q18 3Q18 1Q20 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 $176,080 102,100 Interest expense represents secured debt interest expense which fluctuates based on the net effect and timing of assumptions, segment transitions, fluctuations in foreign currency rates, extinguishments and principal amortizations. The fluctuations in loss (gain) on extinguishment of debt is primarily attributable the volume of extinguishments and terms of the related secured debt. The following is a summary of our seniors housing operating property secured debt principal activity (dollars in thousands): Year Ended December 31, 2015 Year Ended December 31, 2016 Year Ended December 31, 2017 Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Beginning balance . . . . . . . . $1,654,531 228,685 Debt issued . . . . . . . . . . . . . 842,316 Debt assumed . . . . . . . . . . . (285,599) Debt extinguished . . . . . . . . — Debt deconsolidated . . . . . . (110,691) Foreign currency . . . . . . . . . (38,690) Principal payments . . . . . . . 4.422% $2,290,552 293,860 2.776% 60,898 3.420% (159,498) 4.188% — 0.000% 26,549 3.625% (49,112) 4.126% 3.958% $2,463,249 228,772 2.895% — 4.301% (668,804) 3.656% (60,000) 0.000% 72,636 3.483% (47,153) 3.888% Ending balance . . . . . . . . . . $2,290,552 3.958% $2,463,249 3.936% $1,988,700 3.936% 2.722% 0.000% 4.805% 3.799% 3.234% 3.601% 3.661% Monthly averages . . . . . . . . $1,894,609 4.261% $2,391,706 3.926% $2,065,477 3.662% The increases in gains on real estate dispositions is due to higher volumes of property sales. During the years ended December 31, 2017, and 2016, we recorded impairment charges totaling $21,949,000 and $12,403,000, relating to three and two properties, respectively. Outpatient Medical The following is a summary of our NOI and SSNOI for the outpatient medical segment for the periods presented (dollars in thousands): Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % NOI(1) . . . . . . . . . . . . . . . . . . . $359,410 Non-cash NOI attributable to same store properties(1) . . . NOI attributable to non same store properties(2) . . . . . . . . (76,819) (6,095) $380,264 $ 20,854 6% $ 384,068 $ 3,804 1% $ 24,658 7% (3,073) 3,022 -50% (1,764) 1,309 -43% 4,331 -71% (99,237) (22,418) 29% (102,851) (3,614) 4% (26,032) 34% SSNOI(1) . . . . . . . . . . . . . . . . . $276,496 $277,954 $ 1,458 1% $ 279,453 $ 1,499 1% $ 2,957 1% 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (1) Relates to 202 same store properties. (2) Primarily relates to the acquisition of 28 properties and the conversion of 12 construction projects into revenue-generating properties subsequent to January 1, 2015 as well as 20 properties sold or held for sale at December 31, 2017. The following is a summary of our results of operations for the outpatient medical segment for the periods presented (dollars in thousands): Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Revenues: Rental income . . . . . . . . . . . . . . . . . . . . . $504,121 $536,490 $ 32,369 6% $560,060 $23,570 4% $ 55,939 11% Interest income . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . . . 5,853 4,684 514,658 155,248 3,307 5,568 545,365 165,101 NOI(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,410 380,264 Other expenses: Interest expense . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . Transaction costs(2) . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses(3) . . . . . . . . . . . . Impairment of assets(4) . . . . . . . . . . . . . . . Other expenses(2) . . . . . . . . . . . . . . . . . . . 27,542 186,265 2,765 — — — — 19,087 188,616 3,687 — 3,280 4,635 — (2,546) -43% — (3,307) -100% (5,853) -100% 884 19% 3,340 (2,228) -40% (1,344) -29% 30,707 9,853 20,854 6% 6% 6% 563,400 179,332 18,035 14,231 384,068 3,804 3% 9% 1% 48,742 24,084 9% 16% 24,658 7% (8,455) -31% 10,015 (9,072) -48% (17,527) -64% 2,351 1% 193,094 4,478 2% 6,829 4% 922 33% — (3,687) -100% (2,765) -100% — n/a 4,373 4,373 n/a 4,373 n/a 3,280 4,635 n/a n/a — n/a — (3,280) -100% — n/a 5,625 1,911 990 1,911 21% n/a 5,625 1,911 n/a n/a 216,572 219,305 2,733 1% 215,018 (4,287) -2% (1,554) -1% Income from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . . . . . . . . . . 142,838 160,959 18,121 13% 169,050 8,091 5% 26,212 18% Income tax benefit (expense) . . . . . . . . . . . 245 (511) (756) n/a (1,477) (966) 189% (1,722) n/a Income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,908 318 (2,590) -89% 2,683 2,365 744% (225) -8% Income from continuing operations . . . . . . 145,991 160,766 14,775 10% 170,256 9,490 6% 24,265 17% Gain (loss) on real estate dispositions, net(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,126 (1,228) (195,354) n/a 1,630 2,858 n/a (192,496) -99% Net income (loss) . . . . . . . . . . . . . . . . . . . . . 340,117 159,538 (180,579) -53% 171,886 12,348 8% (168,231) -49% Less: Net income (loss) attributable to noncontrolling interests . . . . . . . . . . . . . . (110) 768 878 n/a 4,765 3,997 520% 4,875 n/a Net income (loss) attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . $340,227 $158,770 $(181,457) -53% $167,121 $ 8,351 5% $(173,106) -51% (1) See Non-GAAP Financial Measures below. (2) See Note 3 to our consolidated financial statements. (3) See Note 6 to our consolidated financial statements. (4) See Note 5 to our consolidated financial statements. The increases 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 CPI. 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 50 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations the CPI 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 three months ended December 31, 2017, our consolidated outpatient medical portfolio signed 79,129 square feet of new leases and 270,505 square feet of renewals. The weighted-average term of these leases was six years, with a rate of $32.92 per square foot and tenant improvement and lease commission costs of $11.43 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 3.5%. The fluctuation in property operating expenses is primarily attributable to acquisitions and construction conversions of new outpatient medical facilities for which we incur certain property operating expenses. The fluctuations in depreciation and amortization are due to acquisitions and variations in amortization of short-lived intangible assets. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly. 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” below and Note 6 to our consolidated financial statements. Changes in gains/losses on sales of properties are related to volume of property sales and the sales prices. During 2016 and 2017, we recognized impairment charges related to certain held-for-sale properties as the carrying values exceeded the estimated fair values less costs to sell. During the year ended December 31, 2017, we completed four outpatient medical construction projects representing $63,036,000 or $311 per square foot. The following is a summary of outpatient medical construction projects pending as of December 31, 2017 (dollars in thousands): Location Square Feet Commitment Balance Est. Completion Palmer, AK . . . . . . . . . . . . . . . . . . . . . . . . . . Brooklyn, NY . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,376 140,955 179,331 $ 12,345 105,177 $117,522 $ 2,329 49,901 $52,230 3Q18 3Q19 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 fluctuations in loss (gain) on extinguishment of debt is primarily attributable the volume of extinguishments and terms of the related secured debt. The following is a summary of our outpatient medical secured debt principal activity for the periods presented (dollars in thousands): Year Ended December 31, 2015 Year Ended December 31, 2016 Year Ended December 31, 2017 Beginning balance . . . . . Debt assumed . . . . . . . . . Debt extinguished . . . . . Principal payments . . . . . Amount $609,268 120,959 (88,182) (14,356) Weighted Avg. Interest Rate 5.838% 2.113% 5.257% 5.975% Amount $ 627,689 — (210,115) (13,495) Weighted Avg. Interest Rate 5.177% 0.000% 5.970% 6.552% Amount $ 404,079 23,094 (137,416) (9,806) Ending balance . . . . . . . . $627,689 5.177% $ 404,079 4.846% $ 279,951 Weighted Avg. Interest Rate 4.846% 6.670% 5.990% 6.850% 4.720% Monthly averages . . . . . . $613,155 5.434% $ 536,774 5.106% $ 294,694 4.624% A portion of our outpatient medical properties were formed through partnerships. Income or loss from unconsolidated entities represents our share of net income or losses from partnerships where we are the noncontrolling partner. Net income attributable to noncontrolling interests represents our partners’ share of net income or loss relating to those partnerships where we are the controlling partner. 51 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): Revenues: Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Other income . . . . . . . . . . . . . . . . . . $ 1,091 $ 939 $ (152) -14% $ 1,538 $ 599 64% $ 447 41% Expenses: Interest expense . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net . . . . . General and administrative . . . . . . . . Loss (gain) on extinguishments of debt, net . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . 365,855 — 147,416 24,777 10,583 399,035 (2,516) 155,241 33,180 (2,516) 7,825 9% 396,148 n/a — 5% 122,008 (2,887) 2,516 -100% -1% 30,293 8% — n/a -21% (25,408) -17% (33,233) 16,439 11,998 (8,338) -34% 1,415 13% — (16,439) -100% (24,777) -100% 38,831 324% 40,246 380% 50,829 548,631 580,197 31,566 6% 568,985 (11,212) -2% 20,354 4% Loss from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . Preferred stock dividends . . . . . . . . . . . Preferred stock redemption charge . . . . (547,540) (3,438) (550,978) 65,406 — Net loss attributable to common (579,258) 24,488 (31,718) 27,926 6% (567,447) 2,070 n/a 11,811 (22,418) -2% (19,907) -92% 5,508 4% n/a (554,770) 65,406 — (3,792) 1% (565,377) 49,410 9,769 — 0% — n/a (10,607) (15,996) 9,769 2% (14,399) 3% -24% (15,996) -24% n/a 9,769 n/a stockholders . . . . . . . . . . . . . . . . . . . $(616,384) $(620,176) $ (3,792) 1% $(624,556) $ (4,380) 1% $ (8,172) 1% The following is a summary of our non-segment/corporate interest expense for the periods presented (dollars in thousands): Year Ended December 31, 2015 December 31, 2016 One Year Change $ % Year Ended December 31, 2017 One Year Change Two Year Change $ % $ % Senior unsecured notes . . . . . . . $341,265 Secured debt . . . . . . . . . . . . . . . 357 Primary unsecured credit facility . . . . . . . . . . . . . . . . . . Loan expense . . . . . . . . . . . . . . 10,812 13,421 $368,775 $27,510 8% $364,773 127 (47) -13% $(4,002) 7% -1% $23,508 (183) -59% (230) -65% 310 16,811 13,139 5,999 55% 17,863 -2% 13,385 (282) 1,052 246 6% 7,051 65% 0% 2% (36) Totals . . . . . . . . . . . . . . . . . . . . $365,855 $399,035 $33,180 9% $396,148 $ (2,887) -1% $30,293 8% The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, primarily the $450,000,000 of 4.70% senior unsecured notes extinguished in December 2016. Please refer to Note 10 to consolidated financial statements for additional information. 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. 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. 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations General and administrative expenses as a percentage of consolidated revenues for the years ended December 31, 2017, 2016 and 2015 were 2.83%, 3.63% and 3.82%, respectively. The 2017 decrease in general and administrative expenses is primarily related to a reduction in professional service fees for tax and legal consulting and compensation costs as a result of execution of our strategic initiatives. Other expenses for 2017 primarily represents $40,730,000 of costs related to finalization of an agreement with the University of Toledo Foundation to transfer our corporate headquarters as a donation. Other expenses for all years also includes severance-related costs associated with the departure of certain executive officers and key employees. During 2017, we incurred expenses totaling approximately $3,811,000 in connection with the litigation captioned Welltower v. Brinker, Case No. G-4801-CI-0201702692-000 (Ct. Common Pleas, Toledo, Ohio). These expenses were offset by: 1) $4,000,000 we received pursuant to the terms of the settlement of the litigation; and 2) approximately $2,848,000 that Mr. Brinker was owed under his Separation Agreement with us, which was forgiven pursuant to the terms of the settlement of the litigation. Other expenses in 2015 also included costs associated with the termination of our investment in a strategic outpatient medical partnership. The fluctuations in income taxes are primarily due to benefits recognized in the year ended December 31, 2016 related to the release of a valuation allowance reserve on a taxable subsidiary and the restructuring of an unconsolidated investment. The decrease in preferred dividends and the preferred stock redemption charge are due to the redemption of our 6.5% Series J preferred stock during the three months ended March 31, 2017. Other Non-GAAP Financial Measures We believe that net income and net income attributable to common stockholders (“NICS”), as defined by U.S. GAAP, are the most appropriate earnings measurements. However, we consider FFO, NOI, SSNOI, EBITDA and Adjusted EBITDA (“AEBITDA”) to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created funds from operations attributable to common stockholders (“FFO”) as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means NICS, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests. Consolidated net operating income (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our seniors housing operating and outpatient medical facility properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees paid to operators, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses (excluded from NOI) represent costs unrelated to property operations. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses, and depreciation of corporate fixed assets. Same store NOI (“SSNOI”) is used to evaluate the operating performance of our properties 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, sub-leases and major capital restructurings 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 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and SSNOI to make decisions about resource allocations and to assess the property level performance of our properties. EBITDA stands for earnings (net income) before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization, and preferred dividends. Covenants in our senior unsecured notes contain financial ratios based on a definition of EBITDA that is specific to those agreements. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial covenants, we have disclosed AEBITDA, which represents EBITDA as defined above excluding unconsolidated entities and adjusted for items per our covenant. We use AEBITDA to measure our adjusted fixed charge coverage ratio, which represents AEBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge coverage ratio of at least 1.50 times. Our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other REITs or other companies. in the valuation, comparison, The table below reflects the reconciliation of FFO to NICS, the most directly comparable U.S. GAAP measure, for the periods presented. Noncontrolling interest and unconsolidated entity amounts represent adjustments to reflect our share of depreciation and amortization, gains/loss on real estate dispositions and impairments of assets. Amounts are in thousands except for per share data. Year Ended December 31, 2015 2016 2017 FFO Reconciliation: Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on real estate dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Funds from operations attributable to common stockholders . . . . . . . . . . . . . . . . . . . Average common shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 818,344 826,240 2,220 (280,387) (39,271) 82,494 $1,012,397 901,242 37,207 (364,046) (71,527) 67,667 $ 463,595 921,720 124,483 (344,250) (60,018) 60,046 $1,409,640 $1,582,940 $1,165,576 348,240 349,424 358,275 360,227 367,237 369,001 Per share data: Net income attributable to common stockholders Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Funds from operations attributable to common stockholders Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ 2.35 2.34 4.05 4.03 $ $ 2.83 2.81 4.42 4.39 1.26 1.26 3.17 3.16 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The table below reflects the reconciliation of AEBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Dollars are in thousands. AEBITDA Reconciliation: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on real estate dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (income) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . Additional other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AEBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted Interest Coverage Ratio: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized interest Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2015 2016 2017 $ 888,549 492,169 6,451 826,240 $1,082,070 521,345 (19,128) 901,242 $ 540,613 484,622 20,128 921,720 2,213,409 30,844 110,926 — 34,677 2,220 (280,387) (58,427) 40,636 21,504 (2,144) 2,485,529 28,869 42,910 10,215 17,214 37,207 (364,046) (2,448) 7,721 10,357 (16,664) 1,967,083 19,102 — 62,966 37,241 124,483 (344,250) 2,284 176,395 83,125 — $2,113,258 $2,256,864 $2,128,429 $ 492,169 8,670 (2,586) $ 521,345 16,943 (1,681) $ 484,622 13,489 (10,359) Total interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AEBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498,253 $2,113,258 536,607 $2,256,864 487,752 $2,128,429 Adjusted interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.24x 4.21x 4.36x Adjusted Fixed Charge Coverage Ratio: Total interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 498,253 67,064 65,406 $ 536,607 74,466 65,406 $ 487,752 64,078 49,410 Total fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AEBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630,723 $2,113,258 676,479 $2,256,864 601,240 $2,128,429 Adjusted fixed charge coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 3.35x 3.34x 3.54x 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our leverage ratios include book capitalization, undepreciated book capitalization, and market capitalization. Book capitalization represents the sum of net debt (defined as total long-term debt less cash and cash equivalents and any IRC section 1031 deposits), total equity and redeemable noncontrolling interests. Undepreciated book capitalization represents book capitalization adjusted for accumulated depreciation and amortization. Market capitalization represents book capitalization adjusted for the fair market value of our common stock. Our leverage ratios are defined as the proportion of net debt to total capitalization. The table below reflects the reconciliation of our leverage ratios to our balance sheets for the periods presented. Amounts are in thousands, except share price. Year Ended December 31, 2015 2016 2017 Book capitalization: Borrowings under primary unsecured credit facility . . . . . . . . . . . . . Long-term debt obligations(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash & cash equivalents(2) $ 835,000 12,132,686 (484,754) $ 645,000 11,713,245 (557,659) $ 719,000 11,012,936 (249,620) Total net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . 12,482,932 15,175,885 183,083 11,800,586 15,281,472 398,433 11,482,316 14,925,452 375,194 Book capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,841,900 $27,480,491 $26,782,962 Net debt to book capitalization ratio . . . . . . . . . . . . . . . . . . . . . . . . 44.8% 42.9% 42.9% Undepreciated book capitalization: Total net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . $12,482,932 3,796,297 15,175,885 183,083 $11,800,586 4,093,494 15,281,472 398,433 $11,482,316 4,838,370 14,925,452 375,194 Undepreciated book capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,638,197 $31,573,985 $31,621,332 Net debt to undepreciated book capitalization ratio . . . . . . . . . . . . 39.5% 37.4% 36.3% Market capitalization: Common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Period end share price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354,778 68.03 $ 362,602 66.93 $ 371,732 63.77 $ Common equity market capitalization . . . . . . . . . . . . . . . . . . . . . . . . Total net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,135,547 12,482,932 768,408 1,006,250 $24,268,952 11,800,586 873,512 1,006,250 $23,705,350 11,482,316 877,499 718,503 Market capitalization: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,393,137 $37,949,300 $36,783,668 Net debt to market capitalization ratio . . . . . . . . . . . . . . . . . . . . . . 32.5% 31.1% 31.2% (1) Amounts include senior unsecured notes, secured debt and capital lease obligations as reflected on our consolidated balance sheet. (2) (3) Inclusive of IRC section 1031 deposits, if any. Includes all noncontrolling interests (redeemable and permanent) as reflected on our consolidated balance sheet. 56 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 income, the most directly comparable U.S. GAAP measure, for the years presented. Dollar amounts are in thousands. Year Ended December 31, 2015 2016 2017 NOI Reconciliation: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on real estate dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . Loss (income) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 888,549 (280,387) 21,504 6,451 46,231 2,220 — 34,677 (58,427) 110,926 147,416 826,240 492,169 $1,082,070 (364,046) 10,357 (19,128) 11,998 37,207 10,215 17,214 (2,448) 42,910 155,241 901,242 521,345 $ 540,613 (344,250) 83,125 20,128 177,776 124,483 62,966 37,241 2,284 — 122,008 921,720 484,622 Consolidated net operating income (NOI) . . . . . . . . . . . . . . . . . . . . . . . . $2,237,569 $2,404,177 $2,232,716 NOI by segment: Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-segment/corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,175,806 701,262 359,410 1,091 $1,208,860 814,114 380,264 939 $ 967,084 880,026 384,068 1,538 Total NOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,237,569 $2,404,177 $2,232,716 57 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations SSNOI Reconciliation: NOI: Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical $1,175,806 701,262 359,410 $1,208,860 814,114 380,264 $ 967,084 880,026 384,068 Year Ended December 31, 2015 2016 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,236,478 2,403,238 2,231,178 Total Adjustments: Triple-net: Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . NOI attributable to non same store properties . . . . . . . . . . . . . . . . . (48,890) (498,131) (38,899) (574,049) (28,602) (333,279) Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (547,021) (612,948) (361,881) Seniors housing operating: Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . NOI attributable to non same store properties . . . . . . . . . . . . . . . . . 1,003 (83,880) 1,990 (190,459) 1,242 (246,731) Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,877) (188,469) (245,489) Outpatient medical: Non-cash NOI on same store properties . . . . . . . . . . . . . . . . . . . . . . NOI attributable to non same store properties . . . . . . . . . . . . . . . . . (6,095) (76,819) (3,073) (99,237) (1,764) (102,851) Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,914) (102,310) (104,615) Total SSNOI by segment: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (712,812) (903,727) (711,985) Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical 628,785 618,385 276,496 595,912 625,645 277,954 605,203 634,537 279,453 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,523,666 $1,499,511 $1,519,193 SSNOI Property Reconciliation: Total properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals/Held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment transitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Same store properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,286 (231) (33) (71) (28) (9) 914 (1) Includes eight land parcels and one loan. 58 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 VIE, our assumptions may be different and may result in the identification of a different primary beneficiary. 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Nature of Critical Accounting Estimate Assumptions/ Approach Used 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 the amount of these components will affect 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 or lease-up period. loan charge-offs, 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. We evaluate the collectability of our loans receivable based on a combination of factors, including, but not limited to, delinquency status, historical the borrower and guarantors, and value of the underlying collateral. 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. financial strength of Real Estate Acquisitions On January 1, 2017, we adopted Accounting Standards Update 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recording the asset acquisition at relative fair value, capitalizing transaction costs, and the elimination of the measurement period in which to record adjustments to the transaction. We believe that substantially all our real estate acquisitions are considered asset acquisitions. We are applying ASU 2017-01 prospectively for January 1, 2017. Regardless of whether an acquisitions after acquisition is a business combination, 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 our overall relationship with that respective tenant. Real property developed by us is recorded at cost, including the capitalization of construction period interest. considered an asset acquisition or 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 losses in our loans receivable. The adequate to absorb potential 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 income accrual status. 60 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 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. lease period, the initial subject impairment for potential long-lived assets Impairment of Long-Lived Assets We review our 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. 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 the underlying flows and payment coverages, collateral and guaranties, and current economic conditions. the value of 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. life, and changes in the market 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 that may permanently reduce the value of the property. If indicators of impairment exist, then the undiscounted future cash flows from the most likely uses 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. Properties that meet the held-for-sale criteria are recorded at the lesser of fair value less costs to sell or carrying value. 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 more information, see 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. 61 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, 2017 December 31, 2016 Principal balance Fair value change Principal balance Fair value change Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,710,219 1,749,958 $(500,951) $ 7,568,832 2,489,276 (63,492) $(521,203) (73,944) Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,460,177 $(564,443) $10,058,108 $(595,147) Our variable rate debt, including our primary unsecured credit facility, is reflected at fair value. At December 31, 2017, we had $2,294,678,000 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 $22,947,000. At December 31, 2016, we had $2,311,996,000 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 $23,120,000. 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 British 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, 2017, 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 $12,000,000. 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 British 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, 2017 December 31, 2016 Carrying value Fair value change Carrying value Fair value change Foreign currency exchange contracts . . . . . . . . . . . . . . . . . . . . . Debt designated as hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,238 1,620,273 $12,929 16,203 $ 87,962 1,481,591 $ 722 13,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,643,511 $29,132 $1,569,553 $13,722 62 Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Welltower Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Welltower Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, 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 28, 2018 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 1970. Toledo, Ohio February 28, 2018 /s/ ERNST & YOUNG LLP 63 CONSOLIDATED BALANCE SHEETS WELLTOWER INC. AND SUBSIDIARIES December 31, 2017 December 31, 2016 (In thousands) Assets Real estate investments: Real property owned: Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real property held for sale, net of accumulated depreciation . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,734,467 25,373,117 1,502,471 734,147 237,746 $ 2,591,071 24,496,153 1,402,884 1,044,859 506,091 Gross real property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . Net real property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less allowance for losses on loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Net real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,581,948 (4,838,370) 25,743,578 495,871 (68,372) 427,499 26,171,077 30,041,058 (4,093,494) 25,947,564 622,628 (6,563) 616,065 26,563,629 Other assets: Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Straight-line receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,585 68,321 243,777 65,526 389,168 560,991 1,773,368 $27,944,445 457,138 68,321 419,378 187,842 342,578 826,298 2,301,555 $28,865,184 Liabilities and equity Liabilities: Borrowings under primary unsecured credit facility . . . . . . . . . . . . . . . . . . . . . Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity: Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . Other equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Welltower Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 719,000 8,331,722 2,608,976 72,238 911,863 12,643,799 375,194 $ 645,000 8,161,619 3,477,699 73,927 827,034 13,185,279 398,433 718,503 372,449 17,662,681 (64,559) 5,316,580 (9,471,712) (111,465) 670 14,423,147 502,305 14,925,452 $27,944,445 1,006,250 363,071 16,999,691 (54,741) 4,803,575 (8,144,981) (169,531) 3,059 14,806,393 475,079 15,281,472 $28,865,184 See accompanying notes 64 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME WELLTOWER INC. AND SUBSIDIARIES (In thousands, except per share data) Year Ended December 31, 2017 2016 2015 Revenues: Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Resident fees and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,445,871 2,779,423 73,811 17,536 $1,648,815 2,504,731 97,963 29,651 $1,598,948 2,158,031 84,141 18,706 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,316,641 4,281,160 3,859,826 Expenses: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484,622 2,083,925 921,720 122,008 — 2,284 37,241 62,966 124,483 177,776 521,345 1,876,983 901,242 155,241 42,910 (2,448) 17,214 10,215 37,207 11,998 492,169 1,622,257 826,240 147,416 110,926 (58,427) 34,677 — 2,220 46,231 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,017,025 3,571,907 3,223,709 Income from continuing operations before income taxes and income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on real estate dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Preferred stock redemption charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Net income (loss) attributable to noncontrolling interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299,616 (20,128) (83,125) 196,363 344,250 540,613 49,410 9,769 17,839 709,253 19,128 (10,357) 718,024 364,046 1,082,070 65,406 — 4,267 636,117 (6,451) (21,504) 608,162 280,387 888,549 65,406 — 4,799 Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 463,595 $1,012,397 $ 818,344 Average number of common shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,237 369,001 358,275 360,227 348,240 349,424 Earnings per share: Basic: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ 0.53 1.26 0.53 1.26 $ $ $ $ 2.00 2.83 1.99 2.81 $ $ $ $ 1.75 2.35 1.74 2.34 (1) Includes amounts attributable to redeemable noncontrolling interests See accompanying notes 65 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED) WELLTOWER INC. AND SUBSIDIARIES (In thousands) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): Unrecognized gain (loss) on equity investments . . . . . . . . . . . . . . . . . . . . Reclassification adjustment for write down of equity investment . . . . . . . Unrecognized gain (loss) on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . Unrecognized actuarial gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Total comprehensive income (loss) attributable to noncontrolling Year Ended December 31, 2017 2016 2015 $540,613 $1,082,070 $888,549 — (5,120) 2 269 85,263 80,414 5,120 — 1,414 190 (85,557) — — (766) 246 (46,679) (78,833) (47,199) 621,027 1,003,237 841,350 interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total comprehensive income attributable to stockholders . . . . . . . . . . . . . . . 40,187 $580,840 6,722 $ 996,515 (31,166) $872,516 (1) Includes amounts attributable to redeemable noncontrolling interests. See accompanying notes 66 CONSOLIDATED STATEMENTS OF EQUITY WELLTOWER INC. AND SUBSIDIARIES (in thousands) Preferred Stock Common Stock Capital in Excess of Par Value Treasury Stock Cumulative Net Income Cumulative Dividends Accumulated Other Comprehensive Income (Loss) Other Equity Noncontrolling Interests Total Balances at December 31, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . Total comprehensive income . . . . . . . . . . . . . . . Net change in noncontrolling interests . . . . . . . Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures . . . . . . . . . Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity component of convertible debt . . . . . . . Option compensation expense . . . . . . . . . . . . . . Cash dividends paid: Common stock dividends Preferred stock dividends . . . . . . . . . . . . . . . 883,750 (11,234) (23,077) 126 25,053 (9,131) 24,520 1,730,181 1,330 5,431 (1,144,727) (65,406) 4,878 (35,965) 888,628 (47,199) 841,429 318,516 295,439 13,941 1,754,701 6,761 698 (1,144,727) (65,406) (2,107) 698 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 . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . Total comprehensive income . . . . . . . . . . . . . . . Net change in noncontrolling interests . . . . . . . Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures . . . . . . . . . Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Option compensation expense . . . . . . . . . . . . . . Cash dividends paid: Common stock dividends . . . . . . . . . . . . . . . Preferred stock dividends . . . . . . . . . . . . . . . 1,077,803 (81,288) (51,478) 839 46,938 (10,369) 7,421 525,931 (1,233,519) (65,406) 9,277 2,455 1,087,080 (78,833) 1,008,247 (121,978) (173,456) 36,103 533,352 266 (1,233,519) (65,406) (1,305) 266 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 Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . Total comprehensive income . . . . . . . . . . . . . . . Net change in noncontrolling interests . . . . . . . Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures . . . . . . . . . Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redemption of equity membership units . . . . . . Redemption of preferred stock . . . . . . . . . . . . . (287,500) Conversion of preferred stock . . . . . . . . . . . . . . (247) Option compensation expense . . . . . . . . . . . . . . Cash dividends paid: Common stock dividends . . . . . . . . . . . . . Preferred stock dividends . . . . . . . . . . . . . 522,774 58,066 13,473 402 21,494 (9,807) (2,399) 8,881 612,555 91 4 5,465 9,760 243 (11) (9,769) 10 (1,277,321) (49,410) 20,819 22,348 543,593 80,414 624,007 (15,941) (2,468) 9,690 621,436 5,545 (287,509) — 10 (1,277,321) (49,410) Balances at December 31, 2017 . . . . . . . . . . . . $ 718,503 $372,449 $17,662,681 $(64,559) $5,316,580 $(9,471,712) $(111,465) $ 670 $ 502,305 $14,925,452 See accompanying notes 67 CONSOLIDATED STATEMENTS OF CASH FLOWS WELLTOWER INC. AND SUBSIDIARIES (In thousands) Operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (income) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rental income in excess of cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization related to above (below) market leases, net . . . . . . . . . . . . . . . . . . . . . Loss (gain) on sales of properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions by unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . Decrease (increase) in receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided from (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing activities: Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash disbursed for capital improvements to existing properties . . . . . . . . . . . . . . . . . . . Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments, net of payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal collected on real estate loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions to unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions by unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from (payments on) derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sales of real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided from (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing activities: Net increase (decrease) under unsecured credit facilities . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments to extinguish senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from the issuance of secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments on secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from the issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in deferred loan expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributions by noncontrolling interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions to noncontrolling interests(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash distributions to stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided from (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign currency translation on cash and cash equivalents . . . . . . . . . . . . . . . . . Increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . Supplemental cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Includes amounts attributable to redeemable noncontrolling interests. Year Ended December 31, 2017 2016 2015 $ 540,613 $ 1,082,070 $ 888,549 921,720 16,521 62,966 124,483 19,102 2,284 37,241 83,125 (80,398) 357 (344,250) 2 116 26,809 23,486 901,242 8,822 10,215 37,207 28,869 (2,448) 17,214 10,357 (83,233) 322 (364,046) (4,853) 1,065 14,298 (18,037) 826,240 4,991 — 2,220 30,844 (58,427) 34,677 21,504 (115,756) 4,018 (280,387) 31,979 637 (8,968) 478 1,434,177 1,639,064 1,382,599 (805,264) (250,276) (232,715) (13,489) (83,738) 57,385 96,023 (114,365) 70,287 52,719 1,378,014 (2,145,374) (219,146) (403,131) (16,943) (129,884) 4,760 249,552 (101,415) 119,723 108,347 2,350,068 (3,353,087) (187,752) (244,561) (8,670) (598,722) (141,994) 131,830 (160,323) 130,880 106,360 823,964 154,581 (183,443) (3,502,075) 74,000 7,500 (5,000) 241,772 (1,144,346) 621,987 (287,500) (54,333) 56,560 (87,711) — (1,325,617) (10,839) (1,913,527) 26,852 (190,000) 693,560 (865,863) 460,015 (563,759) 534,194 — (22,196) 148,666 (134,578) — (1,298,925) (11,931) (1,250,817) (20,274) 835,000 1,451,434 (558,830) 228,685 (573,390) 1,755,722 — (11,513) 173,018 (50,877) (5,663) (1,210,133) (36,135) 1,997,318 (8,575) (297,917) 607,220 309,303 488,265 10,410 $ $ $ $ 184,530 422,690 607,220 541,545 8,011 (130,733) 553,423 422,690 492,771 12,214 $ $ See accompanying notes. 68 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 (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties. 2. Accounting Policies and Related Matters Use of Estimates The preparation of the consolidated 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 consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 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. 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, U.S. 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. 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 69 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 under Internal Revenue Code (“IRC”) section 1031. At December 31, 2017, $5,843,000 of sales proceeds is on deposit in a IRC section 1031 exchange escrow account with a qualified intermediary. Deferred Loan Expenses 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. When we determine declines in fair value of marketable securities are other-than- temporary, a loss is recognized in earnings. 70 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. the redeemable noncontrolling interests are classified outside of permanent equity, as a mezzanine item, in the balance sheet. At December 31, 2017, the current redemption value of redeemable noncontrolling interests exceeded the carrying value of $375,194,000 by $29,587,000. In accordance with ASC 810, 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 On January 1, 2017, we adopted Accounting Standards Update (“ASU”) 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”) which narrows the Financial Accounting Standards Board’s (“FASB”) definition of a business and provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired asset is not a business. If this initial test is not met, an acquired asset cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output. The primary differences between business combinations and asset acquisitions include recording the asset acquisition at relative fair value, capitalizing transaction costs, and the elimination of the measurement period in which to record adjustments to the transaction. We believe that substantially all our real estate acquisitions are considered asset acquisitions. We are applying ASU 2017-01 prospectively for acquisitions after January 1, 2017. 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. Regardless of whether an acquisition is considered an asset acquisition or a business combination, 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 relative 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 including tenant improvements and lease commissions, to represent the acquisition of productive assets and, accordingly, such costs are reflected as investment activities in our consolidated statement of cash flows. leases. We consider costs incurred in conjunction with re-leasing properties, 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 leases. 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 or lease-up period. 71 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS relationship values for in-place tenants based on management’s evaluation of The total amount of other intangible assets acquired is further allocated to in-place lease values and the specific customer 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 assets over the remaining depreciation period indicate that the assets 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. Additionally, properties that meet the held-for-sale criteria are recorded at the lessor of fair value less costs to sell or the carrying value. 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 Company-wide cost of financing. Our interest expense reflected in the consolidated statements of comprehensive income has been reduced by the amounts capitalized. Gain on Real Estate Dispositions We recognize sales of real estate 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 real estate 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 72 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 income 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 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 IRC, commencing with our first taxable year, and made no provision for U.S. federal income tax purposes prior to our acquisition of our taxable REIT subsidiaries (“TRSs”). 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 TRSs 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 consolidated 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 73 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. New Accounting Standards During the year ended December 31, 2017, we adopted the following additional accounting standards, each of which did not have a material impact on our consolidated financial statements: • We adopted ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” on January 1, 2017, which allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. We elected to account for forfeitures as they occur. This election had an immaterial impact on our consolidated financial statements. The standard also requires an employer to classify as a financing activity in the consolidated statement of cash flow the cash paid to a tax authority when shares are withheld to satisfy the employer’s statutory income tax withholding obligation. This aspect of the standard is required to be applied on a retrospective basis and resulted in an increase in net cash provided by operating activities and a decrease in net cash used in financing activities of $10,369,000 and $9,131,000 for the years ended December 31, 2016 and 2015, respectively. Upon adoption, no other provisions of ASU 2016-09 had an effect on our consolidated financial statements or related footnote disclosures. • During the three months ended December 31, 2017, we adopted ASU No. 2016-18, “Restricted Cash,” and ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASU No. 2016-18 requires an entity to reconcile and explain the period over period change in total cash, cash equivalents and restricted cash within its consolidated statement of cash flows and ASU 2016-15 provides guidance clarifying how certain cash receipts and cash payments should be classified. We adopted these accounting standards retrospectively and, accordingly, certain line items in the consolidated statement of cash flows have been reclassified to conform to the current presentation. The 74 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS following table summarizes the change in cash flows as reported and as previously reported prior to the adoption of these standards (in thousands): Year Ended December 31, 2016 December 31, 2015 As Reported As Previously Reported As Reported As Previously Reported Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . Decrease (increase) in restricted cash . . . . . . . . . . . . . . Net cash provided from (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in balance(1) . . . . . . . . . . . . . . . . . . Balance at beginning of period(1) . . . . . . . . . . . . . . . . . . Balance at end of period(1) . . . . . . . . . . . . . . . . . . . . . . . $(2,145,374) $(2,145,590) $(3,353,087) $(3,364,891) 29,719 (125,844) — — (183,443) 184,530 422,690 607,220 (309,503) 58,470 360,908 419,378 (3,502,075) (130,733) 553,423 422,690 (3,484,160) (112,818) 473,726 360,908 (1) Amounts in As Reported column include cash and cash equivalents and restricted cash as required. Amounts in the As Previously Reported column reflect only cash and cash equivalents. The following ASUs have been issued but not yet adopted: • • • In 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (ASC 606),” which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer 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. ASC 606 is effective for us beginning January 1, 2018 and we will use the modified retrospective method of adoption. We have evaluated our various revenue streams to identify whether they would be subject to the provisions of ASC 606 and any differences in timing, measurement, or presentation of revenue recognition. A significant source of our revenue is generated through leasing arrangements, which are specifically excluded from ASU 2014-09. Management contracts are present in our seniors housing operating and outpatient medical segments and represent agreements to provide asset and property management, leasing, marketing and other services. We do not believe that the pattern and timing of recognition of income for these contracts will change under the provisions of ASC 606. In addition, revenue recognition for real estate sales is mainly based on the transfer of control and when it is probable that we will collect substantially all of the related consideration. 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 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 financial instrument 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. This standard will require us to recognize gains and losses from changes in the fair value of our available-for-sale equity securities through the consolidated statement of comprehensive income rather than through accumulated other comprehensive income beginning in 2018. In 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets and liabilities on their consolidated balance sheet related to the rights and obligations created by most leases, while continuing to recognize expenses on their consolidated statements of comprehensive income over the lease term. It will also require disclosures designed to give financial 75 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS statement users information regarding amount, timing, and uncertainty of cash flows arising from leases. The FASB issued an Exposure Draft in January 2018 proposing to amend ASU 2016-02, which would provide lessors with a practical expedient, by class of underlying assets, to not separate non-lease components from the related lease components and, instead, to account for those components as a single lease component, if certain criteria are met. ASU 2016-02 and the Exposure Draft are effective for us beginning January 1, 2019, with early adoption 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 consolidated financial statements. We are currently evaluating the impact of this guidance on our consolidated financial statements from both the lessee and lessor perspective. We believe that adoption will likely have a material impact to our consolidated financial statements for the recognition of certain operating leases as right-of-use assets and lease liabilities and related amortizations. We expect to utilize the practical expedients proposed in the Exposure Draft as part of our adoption of this guidance. the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial In 2016, 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 2017, the FASB issued ASU No. 2017-05, “Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” The standard clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. The standard also defines the term in substance nonfinancial asset and clarifies that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control over it. ASU 2017-05 is effective for annual periods beginning after December 15, 2017 and interim periods therein. Entities may use either a full or modified adoption approach. We are assessing the impact of the standard but do not expect it to have a material impact on our consolidated financial statements or disclosures. • • 3. Real Property Acquisitions and Development The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their relative fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees, and other acquisition-related costs. Effective January 1, 2017, with our adoption of ASU 2017-01, transaction costs incurred for asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in “Other Expenses” on our consolidated statement of comprehensive income. Acquisitions that occurred prior to January 1, 2017, were accounted for as business combinations. Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Notes 2 and 11 for information regarding our foreign currency policies. During the year ended December 31, 2017, we finalized our purchase price allocation of certain previously reported acquisitions and there were no material changes from those previously disclosed. 76 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2017 2016 2015 Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,416 248,459 — — $104,754 418,633 2,876 551 $ 95,835 1,061,431 4,408 194 Total assets acquired(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash acquisition related activity(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Capitalized interest Accruals Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . 281,875 — (21,236) (21,236) (7,275) (54,901) 198,463 120,797 (4,713) (610) 526,814 — (3,384) (3,384) (26,771) (51,733) 444,926 181,084 (8,729) (3,665) 1,161,868 (47,741) (2,905) (50,646) (13,465) (38,355) 1,059,402 143,140 (5,699) (167) Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . . . . . 115,474 19,989 168,690 32,603 137,274 45,293 Total cash invested in real property, net of cash acquired . . . . . . . . . . . . . $333,926 $646,219 $1,241,969 (1) Excludes $318,000, $682,000 and $16,578,000 of cash and restricted cash acquired during the years ended December 31, 2017, 2016 and 2015, respectively. (2) For the year ended December 31, 2017, $54,901,000 is related to the acquisition of assets previously financed as real estate loans receivable. 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. 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 77 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2017 2016 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Land and land improvements Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,525 428,777 63,912 3,959 $ 164,653 1,518,472 115,643 2,462 $ 218,581 2,367,486 187,512 29,501 Total assets acquired(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,173 — — (46,301) 1,801,230 (63,732) — (23,681) 2,803,080 (871,471) (24,621) (81,778) Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash acquisition related activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,301) (4,701) (67,633)(2) (87,413) (6,007) (47,065)(3) (977,870) (183,854) — Cash disbursed for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,538 84,874 (9,106) (6,830) 1,660,745 157,845 (5,793) (8,500) 1,641,356 44,173 (1,740) (2,499) Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . . . 68,938 185,473 143,552 138,673 39,934 104,308 Total cash invested in real property, net of cash acquired . . . . . . . . . $674,949 $1,942,970 $1,785,598 (1) Excludes $6,273,000, $351,000 and $42,728,000 of cash and restricted cash acquired during the years ended December 31, 2017, 2016 and 2015, respectively. (2) Includes $59,665,000 related to the acquisition of assets previously financed as investments in unconsolidated entities, and $6,349,000 related to the acquisition of assets previously financed as real estate loans receivable. (3) Includes $43,372,000 related to the acquisition of assets previously financed as investments in unconsolidated entities. 78 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Outpatient Medical Activity The following is a summary of our outpatient medical real property investment activity for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables and other assets $ 40,565 159,643 24,014 10 $ 5,738 46,056 4,592 — $ 223,708 614,770 45,226 939 Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash acquisition related activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,232 (25,708) (3,181) (28,889) (9,080) 56,386 884,643 — (120,977) (7,777) (1,670) (1,670) — (128,754) (76,535) (27,025)(3) — (15,013)(2) Cash disbursed for acquisitions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Capitalized interest Accruals(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,263 37,094 (2,406) 13,615 39,703 113,933 (3,723) (19,321) 652,329 70,560 (1,286) (1,921) Cash disbursed for construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital improvements to existing properties . . . . . . . . . . . . . . . . . . . . . . . . . . 48,303 44,814 90,889 47,870 67,353 38,151 Total cash invested in real property, net of cash acquired . . . . . . . . . . . . $279,380 $178,462 $ 757,833 (1) Excludes $5,522,000 of cash acquired during the year ended December 31, 2015. (2) The non-cash activity relates to the acquisition of assets previously financed as real estate loans. Please refer to Note 6 for additional information. (3) 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. (4) Represents non-cash consideration accruals for amounts to be paid in future periods for properties that converted, off-set by amounts paid in the current period. 79 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Construction Activity The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands): Year Ended December 31, 2017 December 31, 2016 December 31, 2015 Development projects: Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical $283,472 3,634 63,036 Total development projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expansion projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,142 10,336 $ 46,094 18,979 108,001 173,074 11,363 $104,844 19,869 16,592 141,305 38,808 Total construction in progress conversions . . . . . . . . . . . . . . . . . . . . . . . $360,478 $184,437 $180,113 At December 31, 2017, 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): 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter $ 1,098,987 1,056,731 1,034,583 980,716 944,028 7,771,145 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,886,190 80 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2017 December 31, 2016 Assets: In place lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Above market tenant leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Below market ground leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,352,139 58,443 58,784 33,105 $1,252,143 61,700 61,628 27,413 Gross historical cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,502,471 (1,125,437) 1,402,884 (966,714) Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 377,034 $ 436,170 Weighted-average amortization period in years . . . . . . . . . . . . . . . . . . 15.1 13.7 Liabilities: Below market tenant leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Above market ground leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Gross historical cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,430 8,540 68,970 (39,629) $ 89,468 8,107 97,575 (52,134) Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,341 $ 45,441 Weighted-average amortization period in years . . . . . . . . . . . . . . . . . . 20.1 15.2 The following is a summary of real estate intangible amortization for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Rental income related to above/below market tenant leases, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 875 $ 919 $ (2,746) Property operating expenses related to above/below market ground leases, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,231) (1,241) (1,272) Depreciation and amortization related to in place lease intangibles and lease commissions . . . . . . . . . . . . . . . . . . . . (145,132) (132,141) (115,855) The future estimated aggregate amortization of intangible assets and liabilities is as follows for the periods presented (in thousands): 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $111,339 55,336 34,402 20,419 17,213 138,325 $ 3,765 3,306 2,809 2,321 1,856 15,284 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $377,034 $29,341 Assets Liabilities 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, relationship, or geography). At 81 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017, 50 triple-net, three seniors housing operating and 20 outpatient medical properties with an aggregate net real estate balance of $734,147,000 were classified as held for sale. Secured debt related to the held for sale properties totaled $66,872,000. 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): December 31, 2017 Year Ended December 31, 2016 December 31, 2015 Real property dispositions: Triple-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Land parcels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on sales of real property, net . . . . . . . . . . . . . . Net other assets (liabilities) disposed . . . . . . . . . . . . . . . . $ 916,689 74,832 19,697 — 1,011,218 344,250 22,546 $1,773,614 — 78,786 — 1,852,400 364,046 133,622 $356,300 — 181,553 5,724 543,577 280,387 — Proceeds from real property sales . . . . . . . . . . . . . . . . . . . $1,378,014 $2,350,068 $823,964 (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 (“Genesis”) for which we received loans in the amount of $74,445,000 for termination fees relating to the properties sold under the master lease. The related termination fee income has been deferred and will be recognized as the principal balance of the loans are repaid. At December 31, 2017, $61,994,000 of principal is outstanding on the loans. 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, 2017 2016 2015 Revenues: Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,681 $401,742 $435,404 Expenses: Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,570 12,402 31,736 50,708 47,083 20,847 98,949 68,978 22,313 114,869 166,879 206,160 Income (loss) from real estate dispositions, net . . . . . . . . . . . . . . $ 69,973 $234,863 $229,244 82 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, 2017 2016 Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $374,492 121,379 $485,735 136,893 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $495,871 $622,628 The following is a summary of our real estate loan activity for the periods presented (in thousands): December 31, 2017 December 31, 2016 December 31, 2015 Triple-net Outpatient Medical Totals Triple-net Outpatient Medical Totals Triple-net Outpatient Medical Totals Year Ended Advances on real estate loans receivable: Investments in new loans . . . . . $ 12,091 71,647 Draws on existing loans . . . . . . Net cash advances on real $ — $ 12,091 $ — 71,647 8,445 118,788 $ — $ 2,651 8,445 $530,497 65,614 121,439 $ — $530,497 68,225 2,611 estate loans . . . . . . . . . . . . . . 83,738 — 83,738 127,233 2,651 129,884 596,111 2,611 598,722 Receipts on real estate loans receivable: Loan payoffs . . . . . . . . . . . . . . Principal payments on loans . . Sub-total Less: Non-cash activity(1) . . . . . . . . . . . . . . . . . . . 157,912 1,219 60,500 — 218,412 1,219 275,439 6,867 27,303 — 302,742 6,867 121,778 33,340 159,131 (63,108) 60,500 (60,500) 219,631 (123,608) 282,306 (45,044) 27,303 (15,013) 309,609 (60,057) 155,118 (23,288) — 121,778 33,340 — — 155,118 (23,288) — Net cash receipts on real estate loans . . . . . . . . . . . . . . . . . . . 96,023 Net cash advances (receipts) on real estate loans . . . . . . . . . . . . (12,285) Change in balance due to foreign currency translation . . . . . . . . . Loan impairments(2) . . . . . . . . . . . 9,136 — Net change in real estate loans — — — — 96,023 237,262 12,290 249,552 131,830 — 131,830 (12,285) (110,029) (9,639) (119,668) 464,281 2,611 466,892 9,136 — (14,086) — — (3,053) (14,086) (3,053) (4,281) — — — (4,281) — receivable . . . . . . . . . . . . . . . . . $ (66,257) $(60,500) $(126,757) $(169,159) $(27,705) $(196,864) $436,712 $2,611 $439,323 (1) Primarily represents aquisitions of assets previously financed as a real estate loans. Please see Note 3 for additional information. (2) Represents a direct write down of an impaired loan receivable. In 2016, we restructured two existing real estate loans in the triple-net segment to Genesis. 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 had 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. During 2017, we recorded a provision for loan loss of $62,966,000 relating to three real estate loans receivable to Genesis. The allowance for losses on loans receivable for these three loans totals $68,372,000 and is deemed to be sufficient to absorb expected losses relating to the loans. Such allowance was based on an estimation of expected future cash flows discounted at the effective interest rate for each loan. Please see Note 21 for additional information. 83 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of the allowance for losses on loans receivable for the periods presented (in thousands): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at beginning of year Provision for loan losses(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in present value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,563 62,966 (1,157) $ — $— 6,935 — (372) — Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $68,372 $6,563 $— Year Ended December 31, 2017 2016 2015 (1) Excludes direct write down of an impaired loan receivable in 2016. The following is a summary of our loan impairments (in thousands): Year Ended December 31, 2017 2016 2015 Balance of impaired loans at end of year . . . . . . . . . . . . . . . . . . . . Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $282,882 68,372 $377,549 6,563 $ — — Balance of impaired loans not reserved . . . . . . . . . . . . . . . . . . . . . $214,510 $370,986 $ — Average impaired loans for the year . . . . . . . . . . . . . . . . . . . . . . . Interest recognized on impaired loans(1) . . . . . . . . . . . . . . . . . . . . . $330,216 27,793 $188,775 8,707 $10,500 — (1) Represents cash interest recognized in the 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, 2017 December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Triple-net Seniors housing operating . . . . . . . . . . . . . . . . . . . . . . . . Outpatient medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10% to 49% 10% to 50% 43% $ 22,856 352,430 70,299 $ 27,005 407,172 22,961 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $445,585 $457,138 (1) Excludes ownership of in substance real estate. During the year ended December 31, 2017, we increased our ownership in Sunrise Senior Living Management, Inc. (“Sunrise”) from 24% to 34%. Sunrise provides comprehensive property management and accounting services with respect to certain of our seniors housing operating properties that Sunrise operates, for which we pay annual management fees pursuant to long-term management agreements. Our management agreements with Sunrise have initial terms expiring through December 2032 plus, if applicable, optional renewal periods ranging from an additional 5 to 15 years depending on the property. The management fees payable to Sunrise under the management agreements include a fee based on a percentage of revenues generated by the applicable properties plus, if applicable, positive or negative adjustments based on specified performance targets. 84 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2017, 2016 and 2015, we recognized fees to Sunrise of $37,573,000, $37,751,000, and $36,403,000, respectively, the majority of which are reflected within property operating expenses in our consolidated statements of comprehensive income. At December 31, 2017, the aggregate unamortized basis difference of our joint venture investments of $110,063,000 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 is being amortized over the remaining useful life of the related assets and included in the reported amount of income from unconsolidated entities. Summary combined financial information for our investments in unconsolidated entities held for the periods presented is as follows (in thousands): December 31, 2017 December 31, 2016 Net real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,955,527 2,582,943 $2,595,107 2,298,503 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,538,470 4,037,145 4,893,610 3,588,007 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,501,325 $1,305,603 Year Ended December 31, 2017 2016 2015 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) $2,074,139 (264,473) $1,867,464 (86,167) $2,947,993 (40,116) 8. Credit Concentration We use consolidated net operating income (“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, 2017, excluding our share of NOI in unconsolidated entities (dollars in thousands): Number of Properties Total NOI Percent of NOI(2) Concentration by relationship:(1) Sunrise Senior Living(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Genesis HealthCare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revera(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brookdale Senior Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benchmark Senior Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remaining portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 86 98 137 48 759 $ 315,409 190,506 156,698 151,026 97,779 1,321,298 14% 9% 7% 7% 4% 59% Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,286 $2,232,716 100% (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) NOI with our top five relationships comprised 45% of total NOI for the year ending December 31, 2016. (3) Revera owns a controlling interest in Sunrise Senior Living. For the year ended December 31, 2017, we recognized $1,032,562,000 of revenue from properties managed by Sunrise Senior Living. 85 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Borrowings Under Credit Facilities and Related Items At December 31, 2017, 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, 2017). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate (2.46% at December 31, 2017). The applicable margin is based on certain of our debt ratings and was 0.90% at December 31, 2017. 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, 2017. 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): Balance outstanding at year end(1) . . . . . . . . . . . . . . . . . . . . . Maximum amount outstanding at any month end . . . . . . . . . Average amount outstanding (total of daily principal Year Ended December 31, 2017 2016 2015 $ 719,000 $1,010,000 $ 645,000 $1,560,000 $835,000 $835,000 balances divided by days in period) . . . . . . . . . . . . . . . . . . $ 597,422 $ 762,896 $452,644 Weighted-average interest rate (actual interest expense divided by average borrowings outstanding) . . . . . . . . . . . 2.02% 1.39% 1.17% (1) As of December 31, 2017, letters of credit in the aggregate amount of $22,365,000 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 86 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS requirements, contractual restrictions, and other factors. At December 31, 2017, the annual principal payments due on these debt obligations were as follows (in thousands): 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022(5,6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter(7,8,9,10) Senior Unsecured Notes(1,2) $ 450,000 600,000 697,174 1,149,728 600,000 4,920,545 Secured Debt(1,3) $ 396,588 522,458 184,726 221,784 234,850 1,058,002 $ Totals 846,588 1,122,458 881,900 1,371,512 834,850 5,978,547 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,417,447 $2,618,408 $11,035,855 (1) Amounts represent principal amounts due and do not include unamortized premiums/discounts, debt issuance costs, or other fair value adjustments as reflected on the consolidated balance sheet. (2) Annual interest rates range from 2.1% to 6.5%. (3) Annual interest rates range from 1.69% to 7.98%. Carrying value of the properties securing the debt totaled $5,475,672,000 at December 31, 2017. (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 $239,674,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2017). (5) On May 13, 2016, we refinanced the funding on a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $199,728,000 based on the Canadian/U.S. Dollar exchange rate on December 31, 2017). The loan matures on May 13, 2021 and bears interest at the Canadian Dealer Offered Rate plus 95 basis points (2.28% at December 31, 2017). (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 (2.41% at December 31, 2017). (7) On November 20, 2013, we completed the sale of £550,000,000 (approximately $744,095,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on December 31, 2017) of 4.8% senior unsecured notes due 2028. (8) On November 25, 2014, we completed the sale of £500,000,000 (approximately $676,450,000 based on the Pounds Sterling/U.S. Dollar exchange rate in effect on December 31, 2017) 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): December 31, 2017 December 31, 2016 December 31, 2015 Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Year Ended Beginning balance . . . . . . Debt issued . . . . . . . . . . . . Debt assumed . . . . . . . . . . Debt extinguished . . . . . . . Debt redeemed . . . . . . . . . Foreign currency . . . . . . . . $8,260,038 7,500 — (5,000) — 154,909 4.245% $8,645,758 705,000 1.973% — 0.000% (850,000) 1.830% — 0.000% (240,720) 4.288% 4.237% $7,817,154 1,475,540 4.228% 24,621 0.000% (300,000) 4.194% (240,249) 0.000% (131,308) 4.565% 4.385% 3.901% 6.000% 6.200% 3.303% 3.966% Ending balance . . . . . . . . . $8,417,447 4.306% $8,260,038 4.245% $8,645,758 4.237% 87 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of our secured debt principal activity for the periods presented (dollars in thousands): December 31, 2017 December 31, 2016 December 31, 2015 Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Amount Weighted Avg. Interest Rate Year Ended Beginning balance . . . . . . Debt issued . . . . . . . . . . . Debt assumed . . . . . . . . . Debt extinguished . . . . . . Principal payments . . . . . Debt deconsolidated . . . . Foreign currency . . . . . . . $ 3,465,066 241,772 23,094 (1,080,268) (64,078) (60,000) 92,822 4.094% $3,478,207 460,015 2.822% 60,898 6.670% (489,293) 5.247% (74,466) 4.340% — 3.799% 29,705 3.164% 4.440% $2,941,765 228,685 2.646% 1,007,482 4.301% (506,326) 5.105% (67,064) 4.663% 0.000% — (126,335) 3.670% 4.940% 2.776% 3.334% 4.506% 4.801% 0.000% 3.834% Ending balance . . . . . . . . $ 2,618,408 3.761% $3,465,066 4.094% $3,478,207 4.440% 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, 2017, we believe 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 foreign currencies. Interest Rate Swap Contracts and Foreign Currency Forward Contracts Designated as Cash Flow Hedges For instruments that are designated as 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 $914,000 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, 2017 and 2016, we settled certain net investment hedges generating cash proceeds of $52,719,000 and $108,347,000, respectively. The balance of the cumulative translation adjustment will be reclassified to earnings when the hedged investment is sold or substantially liquidated. 88 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following presents the notional amount of derivatives and other financial instruments as of the dates indicated (in thousands): December 31, 2017 December 31, 2016 Derivatives designated as net investment hedges: Denominated in Canadian Dollars . . . . . . . . . . . . . . . . . . . . . . . . Denominated in Pounds Sterling . . . . . . . . . . . . . . . . . . . . . . . . . Financial instruments designated as net investment hedges: Denominated in Canadian Dollars . . . . . . . . . . . . . . . . . . . . . . . . Denominated in Pounds Sterling . . . . . . . . . . . . . . . . . . . . . . . . . Derivatives designated as cash flow hedges: Denominated in U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denominated in Canadian Dollars . . . . . . . . . . . . . . . . . . . . . . . . Denominated in Pounds Sterling . . . . . . . . . . . . . . . . . . . . . . . . . Derivative instruments not designated: Denominated in U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denominated in Canadian Dollars . . . . . . . . . . . . . . . . . . . . . . . . $ 575,000 £ 550,000 $ £ 900,000 550,000 $ 250,000 £1,050,000 $ 250,000 £ 1,050,000 $ $ £ — 36,000 — $ 408,007 80,000 $ $ $ £ $ $ 57,000 54,000 48,000 — 37,000 The following presents the impact of derivative instruments on the consolidated statements of comprehensive income for the periods presented (in thousands): Location December 31, 2017 December 31, 2016 December 31, 2015 Year Ended Gain (loss) on forward exchange contracts recognized in income . . . . . . . . . . . . . . . . . . . Interest expense $ (2,476) $ 8,544 $ 14,474 Loss (gain) on option exercise(1) . . . . . . . . . . . . . Loss (gain) on derivatives, net Gain on release of cumulative translation adjustment related to ineffectiveness on net investment hedge . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net $ $ — $ — $ (58,427) — $ (2,516) $ — Gain (loss) on forward exchange contracts and term loans designated as net investment hedge recognized in OCI . . . . . . . . . . . . . . . . OCI $(252,168) $357,021 $298,116 (1) In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis. In February 2015, Genesis 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, 2017, we had fourteen outstanding letter of credit obligations totaling $159,151,000 and expiring between 2018 and 2024. At December 31, 2017, we had outstanding construction in process of $237,746,000 for leased properties and were committed to providing additional funds of approximately $429,815,000 to complete construction. At December 31, 2017, we had contingent purchase obligations totaling $11,832,000. These contingent purchase obligations relate to unfunded capital improvement obligations and the additional contingent obligations on acquisitions. Rents due from the tenant are increased to reflect 89 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS investment in the property. In December 2017, we finalized an agreement with the University of Toledo Foundation to transfer our corporate headquarters as a gift and recognized an expense of $40,730,000. 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 and have been classified as capital leases. At December 31, 2017, we had operating lease obligations of $1,125,098,000 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, 2017, aggregate future minimum rentals to be received under these noncancelable subleases totaled $77,385,000. At December 31, 2017, future minimum lease payments due under operating and capital leases are as follows (in thousands): Operating Leases Capital Leases(1) 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,871 18,070 17,605 17,419 16,765 1,037,368 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,125,098 $ 4,678 4,334 4,173 4,173 4,173 67,573 $89,104 (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 $29,303,000 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, 2017 December 31, 2016 Preferred Stock, $1.00 par value: Authorized shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000,000 14,375,000 14,370,060 Common Stock, $1.00 par value: Authorized shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000,000 372,852,311 371,731,551 50,000,000 25,875,000 25,875,000 700,000,000 363,576,924 362,602,173 90 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Preferred Stock. The following is a summary of our preferred stock activity during the periods presented: December 31, 2017 December 31, 2016 December 31, 2015 Shares Weighted Avg. Dividend Rate Shares Weighted Avg. Dividend Rate Shares Weighted Avg. Dividend Rate Year Ended Beginning balance . . . . . . Shares redeemed . . . . . . . Shares converted . . . . . . . 25,875,000 (11,500,000) (4,940) 6.500% 25,875,000 — 6.500% — 6.500% 6.500% 25,875,000 — 0.000% — 0.000% 6.500% 0.000% 0.000% Ending balance . . . . . . . . 14,370,060 6.500% 25,875,000 6.500% 25,875,000 6.500% 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 year ended December 31, 2017, 4,940 shares of Series I preferred stock were converted into common stock. During the three months ended March 31, 2012, we issued 11,500,000 of 6.50% Series J Cumulative Redeemable Preferred Stock. During the year ended December 31, 2017, we recognized a charge of $9,769,000 in connection with the redemption of the Series J preferred stock. Common Stock. The following is a summary of our common stock activity during the periods indicated (dollars in thousands, except average price amounts): Shares Issued Average Price Gross Proceeds Net Proceeds February 2015 public issuance . . . . . . . . . . . . . . . . . . . . 2015 Dividend reinvestment plan issuances . . . . . . . . . 2015 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 Equity Shelf Program issuances . . . . . . . . . . . . . . 2015 Stock incentive plans, net of forfeitures . . . . . . . . 2015 Senior note conversions . . . . . . . . . . . . . . . . . . . . 19,550,000 4,024,169 249,054 696,070 137,837 1,330,474 $75.50 67.72 47.35 69.23 $1,476,025 272,531 11,793 48,186 — — $1,423,935 272,531 11,793 47,463 — — 2015 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987,604 $1,808,535 $1,755,722 2016 Dividend reinvestment plan issuances . . . . . . . . . 2016 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 Equity Shelf Program issuances . . . . . . . . . . . . . . 2016 Stock incentive plans, net of forfeitures . . . . . . . . 4,145,457 141,405 3,134,901 402,740 $70.34 47.13 75.27 $ 291,852 6,664 238,286 — $ 291,571 6,664 235,959 — 2016 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,824,503 $ 536,802 $ 534,194 2017 Dividend reinvestment plan issuances . . . . . . . . . 2017 Option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 Equity Shelf Program issuances . . . . . . . . . . . . . . 2017 Preferred stock conversions . . . . . . . . . . . . . . . . . 2017 Redemption of equity membership units . . . . . . . 2017 Stock incentive plans, net of forfeitures . . . . . . . . 5,640,008 252,979 2,986,574 4,300 91,180 154,337 $69.97 51.16 71.79 $ 395,526 12,942 215,917 — — — $ 394,639 12,942 214,406 — — — 2017 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,129,378 $ 624,385 $ 621,987 91 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Dividends. The increase in dividends is primarily attributable to increases in our common shares outstanding, offset by the redemption of the Series J preferred stock, as described above. Please refer to Note 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): December 31, 2017 December 31, 2016 December 31, 2015 Per Share Amount Per Share Amount Per Share Amount Year Ended Common Stock . . . . . . . . . . . . . . . . . . . Series I Preferred Stock . . . . . . . . . . . . Series J Preferred Stock . . . . . . . . . . . . $3.4800 3.2500 0.2347 $1,277,321 46,711 2,699 $3.4400 3.2500 1.6251 $1,233,519 46,719 18,687 $3.3000 3.2500 1.6251 $1,144,727 46,719 18,687 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . $1,326,731 $1,298,925 $1,210,133 Accumulated Other Comprehensive Income. The following is a summary of accumulated other comprehensive income/(loss) for the periods presented (in thousands): Unrecognized gains (losses) related to: Foreign Currency Translation Equity Investments Actuarial losses Cash Flow Hedges Total $(173,496) $ 5,120 $(1,153) $ (2) $(169,531) Balance at December 31, 2016 . . . . . Other comprehensive income (loss) before reclassification adjustments . . . . . . . . . . . . . . . . . . Reclassification adjustment for write down of equity investment . . . . . . Net current-period other comprehensive income (loss) . . . . 62,915 (5,120) 62,915 — — (5,120) 269 — 269 2 — 2 63,186 (5,120) 58,066 Balance at December 31, 2017 . . . . . $(110,581) $ — $ (884) $ — $(111,465) Balance at December 31, 2015 . . . . . Other comprehensive income (loss) before reclassification adjustments . . . . . . . . . . . . . . . . . . Reclassification amount to net $ (85,484) $ — $(1,343) $(1,416) $ (88,243) (90,528) 5,120 190 1,414 (83,804) income . . . . . . . . . . . . . . . . . . . . . 2,516 — — — 2,516 Net current-period other comprehensive income (loss) . . . . (88,012) 5,120 190 1,414 (81,288) Balance at December 31, 2016 . . . . . $(173,496) $ 5,120 $(1,153) $ (2) $(169,531) 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 92 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Committee of the Board of Directors. Awards granted after May 5, 2016 are 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. Under our long-term incentive plan, certain restricted stock awards are market and 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 two to three years. Awards vest over two to three years after the end of the performance period with a portion vesting immediately at the end of the performance periods. The expected term represents the period from the grant date to the end of 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 compensation cost is based on the grant date closing price and management’s estimate of corporate achievement of 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 fair value and compensation cost. The following table summarizes compensation expense (a component of general and administrative expenses) recognized for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10 19,092 $ 266 28,603 $ 698 30,146 $19,102 $28,869 $30,844 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, 2017 have an aggregate intrinsic value of $1,346,000. 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, 2017, there was $31,709,000 of total unrecognized compensation expense related to unvested restricted stock that is expected to be recognized over a 93 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 2017: Restricted Stock Number of Shares (000’s) Weighted-Average Grant Date Fair Value Non-vested at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Terminated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-vested at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987 (477) 247 (59) 698 $58.98 63.15 69.78 63.20 $61.00 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, 2017 2016 2015 Numerator for basic and diluted earnings per share — net income attributable to common stockholders . . . . . . . . . . . . $463,595 $1,012,397 $818,344 Denominator for basic earnings per share: weighted-average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,237 358,275 348,240 Effect of dilutive securities: Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-vested restricted shares . . . . . . . . . . . . . . . . . . . . . . . . . Redeemable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Convertible senior unsecured notes . . . . . . . . . . . . . . . . . . . Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . Denominator for diluted earnings per share: adjusted- 47 482 1,235 — 1,764 110 449 1,393 — 1,952 143 535 310 196 1,184 weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,001 360,227 349,424 Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 1.26 1.26 $ $ 2.83 2.81 $ $ 2.35 2.34 Stock options outstanding were anti-dilutive for the years ended December 31, 2017, 2016 and 2015. 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 94 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 carrying value of mortgage loans and other real estate loans receivable is net of related reserves. The fair value is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Cash and Cash Equivalents and Restricted Cash — The carrying amount approximates fair value. 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. 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 OP 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. 95 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The carrying amounts and estimated fair values of our financial instruments are as follows as of the dates presented (in thousands): Financial Assets: December 31, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value Mortgage loans receivable . . . . . . . . . . . Other real estate loans receivable . . . . . . Available-for-sale equity investments . . . Cash and cash equivalents . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . Foreign currency forward contracts . . . . $ 306,120 121,379 7,269 243,777 65,526 15,604 $ 332,508 125,480 7,269 243,777 65,526 15,604 $ 485,735 136,893 27,899 419,378 187,842 135,561 $ 521,773 138,050 27,899 419,378 187,842 135,561 Financial Liabilities: Borrowings under unsecured lines of credit arrangements . . . . . . . . . . . . . . . Senior unsecured notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secured debt Foreign currency forward contracts . . . . Redeemable OP unitholder interests . . . . . . $ 719,000 8,331,722 2,608,976 38,654 97,476 $ $ 719,000 9,168,432 2,641,997 38,654 97,476 $ $ 645,000 8,161,619 3,477,699 4,342 $ 110,502 $ 645,000 8,879,176 3,558,378 4,342 $ 110,502 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, 2017 Total Level 1 Level 2 Level 3 Available-for-sale equity investments(1) . . . . . . . . . . . . . . Foreign currency forward contracts, net(2) . . . . . . . . . . . . . Redeemable OP unitholder interests . . . . . . . . . . . . . . . . . $ 7,269 (23,050) 97,476 $7,269 — — $ — $— — — (23,050) 97,476 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81,695 $7,269 $ 74,426 $— (1) Unrealized gains or losses on available-for-sale equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date. During the years ended December 31, 2017 and 2015, we recognized other than temporary impairment charges of $18,294,000 and $35,648,000, respectively, 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 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. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed in asset 96 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS acquisitions and 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 loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of the underlying collateral. 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. We estimate the fair value of secured debt assumed in business combinations and asset acquisitions 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. Our triple-net properties include long-term/post-acute care facilities, assisted living facilities, independent living/ continuing care retirement communities, independent support living facilities (Canada), care homes with and without nursing (U.K.), 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 Note 18). Our outpatient medical properties include outpatient medical buildings which are typically leased to multiple tenants and generally require a certain level of property management by us. We evaluate performance based upon consolidated net operating income (“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. 97 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summary information for the reportable segments (which excludes unconsolidated entities) during the years ended December 31, 2017, 2016 and 2015 is as follows (in thousands): Year Ended December 31, 2017: Rental income . . . . . . . . . . . . . . . . . . . . . . Resident fees and services . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . . Consolidated net operating income . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net . . . . . . . . . Depreciation and amortization . . . . . . . . . General and administrative . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) (Loss) income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing Triple-net Seniors Housing Operating Outpatient Medical Non-segment / Corporate Total $ 885,811 — 73,742 7,531 $ — $ 560,060 — — 3,340 2,779,423 69 5,127 $ — $ 1,445,871 2,779,423 — 73,811 — 17,536 1,538 967,084 — 967,084 15,194 2,284 243,830 — 29,083 62,966 96,909 116,689(1) 2,784,619 1,904,593 880,026 63,265 — 484,796 — 3,785 — 21,949 8,347 563,400 179,332 384,068 10,015 — 193,094 — 4,373 — 5,625 1,911 1,538 — 1,538 396,148 — — 122,008 — — — 50,829(2) 4,316,641 2,083,925 2,232,716 484,622 2,284 921,720 122,008 37,241 62,966 124,483 177,776 400,129 (4,291) 297,884 (16,430) 169,050 (1,477) (567,447) 2,070 299,616 (20,128) 19,428 (105,236) 2,683 — (83,125) operations . . . . . . . . . . . . . . . . . . . . . . . 415,266 176,218 170,256 (565,377) 196,363 Gain (loss) on real estate dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,325 56,295 1,630 — 344,250 Net income (loss) . . . . . . . . . . . . . . . . . . . $ 701,591 $ 232,513 $ 171,886 $(565,377) $ 540,613 Total assets . . . . . . . . . . . . . . . . . . . . . . . . $9,325,344 $13,432,001 $5,082,145 $ 104,955 $27,944,445 (1) Primarily represents non-capitalizable transaction costs, including $88,316,000 due to a joint venture transaction with an existing seniors housing operator which converted a portfolio of properties from triple-net to seniors housing operating, an exchange of PropCo/OpCo interests, and termination/restructuring of pre-existing relationships. In addition, includes $18,294,000 other than temporary impairment charge on the Genesis available-for-sale equity investment (see also Notes 11 and 16). (2) Primarily related to $40,730,000 recognized for the donation of the corporate headquarters. See also Note 12. 98 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2016: Rental income . . . . . . . . . . . . . . . . . . . . . Resident fees and services . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . Consolidated net operating income . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net Depreciation and amortization . . . . . . . . General and administrative . . . . . . . . . . . Transaction costs . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) (Loss) income from unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing Triple-net Seniors Housing Operating Outpatient Medical Non-segment / Corporate Total $ 1,112,325 — 90,476 6,059 $ — $ 536,490 — 3,307 5,568 2,504,731 4,180 17,085 $ — $ 1,648,815 2,504,731 — 97,963 — 29,651 939 1,208,860 — 1,208,860 21,370 68 297,197 — 10,016 863 6,935 20,169 — 2,525,996 1,711,882 814,114 81,853 — 415,429 — 29,207 (88) — 12,403 — 545,365 165,101 380,264 19,087 — 188,616 — 3,687 — 3,280 4,635 — 939 — 939 399,035 (2,516) — 155,241 — 16,439 — — 11,998 4,281,160 1,876,983 2,404,177 521,345 (2,448) 901,242 155,241 42,910 17,214 10,215 37,207 11,998 852,242 (1,087) 275,310 (3,762) 160,959 (511) (579,258) 24,488 709,253 19,128 9,767 (20,442) 318 — (10,357) 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 99 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Triple-net Seniors Housing Operating Outpatient Medical Non-segment / Corporate Total Year Ended December 31, 2015: Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . Resident fees and services . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . $1,094,827 $ — 2,158,031 4,180 6,060 74,108 6,871 — $504,121 — 5,853 4,684 Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . Property operating expenses . . . . . . . . . . . . . . . 1,175,806 2,168,271 — 1,467,009 $ — $1,598,948 — 2,158,031 84,141 — 18,706 1,091 1,091 3,859,826 — 1,622,257 1,091 365,855 — — 147,416 — 24,777 — 10,583 2,237,569 492,169 (58,427) 826,240 147,416 110,926 34,677 2,220 46,231 514,658 155,248 359,410 27,542 — 186,265 — 2,765 — — — 1,175,806 28,384 (58,427) 288,242 — 53,195 10,095 2,220 35,648 701,262 70,388 — 351,733 — 54,966 (195) — — 816,449 (4,244) 8,260 820,465 86,261 224,370 986 (32,672) 142,838 245 2,908 192,684 145,991 — 194,126 (547,540) (3,438) — (550,978) — 636,117 (6,451) (21,504) 608,162 280,387 Consolidated net operating income . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on derivatives, net . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . Transaction costs . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on extinguishment of debt, net . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . (Loss) income from unconsolidated entities . . Income from continuing operations . . . . . . . . . Gain (loss) on real estate dispositions, net . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 906,726 $ 192,684 $340,117 $(550,978) $ 888,549 Our portfolio of properties and other investments are located in the U.S., the U.K. 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, 2017 December 31, 2016 December 31, 2015 Amount % Amount % Amount % Revenues: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,464,527 407,351 444,763 80.3% $3,453,485 9.4% 388,383 10.3% 439,292 80.6% $3,133,327 9.1% 407,745 10.3% 318,754 81.1% 10.6% 8.3% Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,316,641 100.0% $4,281,160 100.0% $3,859,826 100.0% 100 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2017 December 31, 2016 Amount % Amount % Assets: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,274,443 3,239,039 2,430,963 79.7% $23,572,459 11.6% 2,782,489 8.7% 2,510,236 81.7% 9.6% 8.7% Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,944,445 100.0% $28,865,184 100.0% 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 tax purposes and consolidated 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. income for federal Cash distributions paid to common stockholders, for federal income tax purposes, are as follows for the periods presented: Per Share: Year Ended December 31, 2017 2016 2015 Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qualified dividend* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrecaptured section 1250 gains* . . . . . . . . . . . . . . . . . . . . . . . . . $1.8117 0.0038 0.0929 1.5750 0.3557 $2.5067 0.0047 0.0573 0.4593 0.4120 $1.9134 0.0529 0.0503 0.9352 0.3482 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.4800 $3.4400 $3.3000 * Informational purposes only Our consolidated provision for income tax expense (benefit) is as follows for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,633 12,495 $ 14,944 (34,072) $10,177 (3,726) Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,128 $(19,128) $ 6,451 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, 2017, as a result of acquisitions located in Canada and the U.K., we were subject to foreign income taxes under the respective tax laws of these jurisdictions. 101 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The provision for income taxes for the year ended December 31, 2017 primarily relates to state taxes, foreign taxes, and taxes based on income generated by entities that are structured as TRSs. For the tax years ended December 31, 2017, 2016 and 2015, included in the consolidated provision for income taxes was $4,806,000, ($3,315,000) and $7,385,000, respectively. the foreign tax provision/(benefit) amount A reconciliation of income taxes, which is computed by applying the federal corporate tax rate for the years ended December 31, 2017, 2016 and 2015, to the income tax expense/(benefit) is as follows for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Tax at statutory rate on earnings from continuing operations before unconsolidated entities, noncontrolling interests and income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in valuation allowance(1) . . . . . . . . . . . . . . Tax at statutory rate on earnings not subject to federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign permanent depreciation . . . . . . . . . . . . . . . . . . . . . . . . Other differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 199,588 30,445 $ 372,030 (2,128) $ 313,250 13,759 (234,468) 10,065 14,498 (399,571) 9,205 1,336 (319,832) 7,500 (8,226) Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,128 $ (19,128) $ 6,451 (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 asset/(liability) attributes, are summarized as follows for the periods presented (in thousands): Year Ended December 31, 2017 2016 2015 Investments and property, primarily differences in investment basis, depreciation and amortization, the basis of land assets and the treatment of interests and certain costs . . . . . . . . . . . . Operating loss and interest deduction carryforwards . . . . . . . . . . Expense accruals and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,812) 94,654 25,146 (127,283) $ (7,089) 82,469 15,978 (96,838) $(30,564) 75,455 6,259 (98,966) Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . $ (19,295) $ (5,480) $(47,816) 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. 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, 2017. 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 $127,283,000 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 102 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 (in thousands): Year Ended December 31, 2017 2016 2015 Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,838 30,445 $98,966 (2,128) $85,207 13,759 Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $127,283 $96,838 $98,966 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 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, state and foreign 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, 2014 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, 2011. 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 the U.K.’s HM Revenue & Customs for periods subsequent to August 2012 related to entities acquired or formed in connection with acquisitions. At December 31, 2017, we had a net operating loss (“NOL”) carryforward related to the REIT of $448,475,000. 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 generated through December 31, 2017 will expire through 2036. Beginning with tax years after December 31, 2017, the Tax Cuts and Jobs Act (“Tax Act”) limits the NOLs to 80% of taxable income and replaces the 20-year eliminates the carryback period, carryforward period with an indefinite carryforward period. 103 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At December 31, 2017 and 2016, we had an NOL carryforward related to Canadian entities of $134,552,000, and $104,988,000, respectively. These Canadian losses have a 20-year carryforward period. At December 31, 2017 and 2016, we had an NOL carryforward related to U.K. entities of $183,712,000 and $158,156,000, respectively. These U.K. losses do not have a finite carryforward period. We did not identify items for which the income tax effects of the Tax Act have not been completed and a reasonable estimate could not be determined as of December 31, 2017. Our analysis of the Tax Act may be impacted by any corrective legislation and any guidance provided by the U.S. Treasury, the IRS or by the General Explanation of the Tax Act, which is under preparation by the Staff of the Congressional Joint Committee on Taxation. Based on the Tax Act as enacted, we do not believe there will be further material impacts to the consolidated financial statements related to the other Tax Act provisions but cannot assure you as to the outcome of this matter. 19. Quarterly Results of Operations (Unaudited) The following is a summary of our unaudited quarterly results of operations for the years ended December 31, 2017 and 2016 (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 comprehensive income due to rounding. Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . Net income (loss) attributable to common stockholders per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . Net income attributable to common stockholders per share: . . . . . . . . . . . . . Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2017 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter(1) $1,062,298 $1,058,602 $1,091,483 $1,104,257 312,639 188,429 74,043 (111,523) $ $ 0.86 0.86 $ $ 0.51 0.51 $ $ 0.20 0.20 $ $ (0.31) (0.31) Year Ended December 31, 2016 1st Quarter 2nd Quarter 3rd Quarter(2) 4th Quarter $1,047,050 $1,076,657 $1,079,133 $1,078,321 148,969 195,474 334,910 333,044 $ $ 0.42 0.42 $ $ 0.55 0.54 $ $ 0.93 0.93 $ $ 0.92 0.91 (1) The decrease in net income (loss) and amounts per share are primarily attributable to $99,821,100 impairment of assets and $62,966,000 provision for loan losses recognized in the fourth quarter as compared to none in the third quarter. (2) 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. 20. Variable Interest Entities We have entered into joint ventures to own certain seniors housing and outpatient medical assets which are deemed to be variable interest entities (“VIEs”). We have concluded that we are the primary beneficiary of these VIEs based on a combination of operational control of the joint venture and the rights to receive residual returns 104 WELLTOWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS or the obligation to absorb losses arising from the joint ventures. Except for capital contributions associated with the initial joint venture formations, the joint ventures have been and are expected to be funded from the ongoing operations of the underlying properties. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs in the aggregate (in thousands): December 31, 2017 December 31, 2016 Assets Net real property owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,002,137 12,308 16,330 $ 989,596 10,501 12,102 Total assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,030,775 $1,012,199 Liabilities and equity Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 471,103 14,832 171,898 372,942 $ 450,255 13,803 185,556 362,585 Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,030,775 $1,012,199 (1) Note that assets of the consolidated VIEs can only be used to settle obligations relating to such VIEs. Liabilities of the consolidated VIEs represent claims against the specific assets of the VIEs. 21. Subsequent Events Genesis Restructuring. Subsequent to December 31, 2017, we entered into agreements with Genesis, our largest triple-net relationship, which included the following terms: • Master Lease: Effective January 1, 2018, the Genesis annual cash rent obligation under the Welltower master lease was reduced by $35 million and the term was extended by 5 years. Additionally, lease escalators will be set to 2.5% in year one and 2% thereafter, and rent will be reset on January 31, 2023 in such fashion to permit the rent payable to Welltower to increase up to $35 million subject to increases in Genesis’s EBITDAR relative to the trailing twelve months ended December 31, 2017, generated by the properties comprising the Welltower master lease portfolio. • Term Loan: Welltower and Omega Healthcare Investors, Inc. (“Omega”) have entered into an agreement with Genesis to amend and expand the existing Genesis $120 million term loan agreement. Welltower will fund a $24 million tranche and will receive priority of repayment among lenders. • Real Estate Loans: As of December 31, 2017, Welltower had approximately $267 million (excluding allowances and non-accrual interest) of real estate loans. Welltower and Genesis have entered into a definitive agreement to amend the annual interest rate beginning February 15, 2018 to 12%, of which 7% will be paid in cash and 5% will be paid-in-kind. • Interest: Genesis continues to seek refinancing and asset sale transactions to secure commitments to repay no less than $105 million of obligations. If Genesis is unsuccessful in securing such commitments or otherwise reducing the outstanding obligation on or before April 1, 2018, the cash pay component of loan interest will increase by approximately $2 million annually. 105 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, 2017 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. 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, 2017. 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. 106 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Welltower Inc. Opinion on Internal Control over Financial reporting We have audited Welltower reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO Criteria”). In our opinion, Welltower Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO Criteria. internal control over financial Inc. and subsidiaries’ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Welltower Inc. and subsidiaries as of December 31, 2017 and 2016, the related consolidated statements of comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedules listed in the index at Item 15(a) of the Company and our report dated February 28, 2018 expressed an unqualified opinion thereon. Basis for Opinion The Company’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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Definition and Limitations of Internal Control over Financial Reporting 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. 107 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. /s/ ERNST & YOUNG LLP Toledo, Ohio February 28, 2018 108 Item 9B. Other Information None. Item 10. Directors, Executive Officers and Corporate Governance PART III 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, 2018. 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. Please refer to “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Corporate Governance” in the Annual Report on Form 10-K for further discussion of corporate 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, 2018. 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, 2018. 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, 2018. 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, 2018. 109 Item 15. Exhibits and Financial Statement Schedules (a) 1. Our Consolidated Financial Statements are included in Part II, Item 8: PART IV Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets — December 31, 2017 and 2016 . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income — Years ended December 31, 2017, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity — Years ended December 31, 2017, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows — Years ended December 31, 2017, 2016 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements 63 64 65 67 68 69 2. The following Financial Statement Schedules are included beginning on page 117: 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. (b) Exhibits: The exhibits listed below 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. 3.1(a) 3.1(b) 3.1(c) 3.1(d) 3.1(e) 3.1(f) 3.1(g) 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). 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). 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). 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). 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). 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). 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). 110 3.1(h) 3.1(i) 3.2 4.1(a) 4.1(b) 4.1(c) 4.1(d) 4.1(e) 4.1(f) 4.1(g) 4.1(h) 4.1(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). 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). 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). 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). 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). 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). 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). 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). 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). 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). 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). 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). 111 4.1(j) 4.1(k) 4.1(l) 4.1(m) 4.1(n) 4.1(o) 4.1(p) 4.2 4.3 4.4(a) 4.4(b) 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). 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). 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). 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). 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). 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). 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). 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). 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). 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). 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 112 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). 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). 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).* 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).* 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).* 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).* 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).* Amended and Restated Employment Agreement, dated January 3, 2017, between the Company and Thomas J. DeRosa (filed with the Commission as Exhibit 10.4(a) to the Company’s Form 10-K filed February 22, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 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).* Employment Contract, dated May 6, 2014, between HCN UK Management Services Limited and John Goodey.* Deed of Assignment and Amendment of Employment Contract, dated effective October 3, 2017, between HCN UK Management Services Limited, John Goodey, and the Company.* Third Amended and Restated Employment Agreement, dated June 16, 2017, between the Company and Scott A. Estes (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed July 28, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* Resignation Agreement, dated October 3, 2017, between the Company and Scott A. Estes (filed with the Commission as Exhibit 10.1 to the Company’s Form 10-Q filed November 7, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 113 10.2 10.3(a) 10.3(b) 10.3(c) 10.3(d) 10.3(e) 10.4(a) 10.4(b) 10.5(a) 10.5(b) 10.6 10.7 10.8 10.9 10.10 10.11 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).* Executive Retirement Agreement, dated as of February 16, 2017, by and between Jeffery H. Miller and the Company (filed with the Commission as Exhibit 10.8 to the Company’s Form 10-K filed February 22, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* Amended and Restated Employment Agreement, dated June 16, 2017, by and between the Company and Mercedes T. Kerr (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed July 28, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 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).* 10.12 Summary of Director Compensation.* 10.13(a) 10.13(b) 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).* 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).* 10.14(a) 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).* 10.14(b) 10.14(c) 10.14(d) Form of Restricted Stock Grant Notice for Executive Officers under the 2016 Long-Term Incentive Plan.* Form of Restricted Stock Grant Notice for Senior Vice Presidents under the 2016 Long-Term Incentive Plan.* Form of Deferred Stock Unit Grant Agreement for Non-Employee Directors under the 2016 Long- Term Incentive Plan.* 10.15(a) 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).* 10.15(b) Form of Performance Restricted Stock Unit Award Agreement under the 2016-2018 Long-Term Incentive Program.* 10.16(a) Welltower Inc. 2017-2019 Long-Term Incentive Program (filed with the Commission as Exhibit 10.4 to the Company’s Form 10-Q filed May 5, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 10.16(b) Form of Award Notice under the 2017-2019 Long-Term Incentive Program.* 10.16(c) Welltower Inc. 2017-2019 Long-Term Incentive Program – Bridge 1 (filed with the Commission as Exhibit 10.2 to the Company’s Form 10-Q filed November 7, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 10.16(d) Form of Award Notice under the 2017-2019 Long Term Incentive Program — Bridge 1.* 114 10.16(e) Welltower Inc. 2017-2019 Long-Term Incentive Program — Bridge 2 (filed with the Commission as Exhibit 10.3 to the Company’s Form 10-Q filed November 7, 2017 (File No. 001-08923), and incorporated herein by reference thereto).* 10.16(f) Form of Award Notice under the 2017-2019 Long Term Incentive Program — Bridge 2.* 10.17(a) Welltower Inc. 2018-2020 Long-Term Incentive Program.* 10.17(b) Form of Restricted Stock Unit Award Agreement under the 2018-2020 Long-Term Incentive Program.* 12 21 23 24 31.1 31.2 32.1 32.2 Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited). Subsidiaries of the Company. Consent of Ernst & Young LLP, independent registered public accounting firm. Powers of Attorney. Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer. 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, 2017 and 2016, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015, (iii) the Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015, (v) the Notes to Consolidated Financial Statements, (vi) Schedule III — Real Estate and Accumulated Depreciation and (vii) Schedule IV — Mortgage Loans on Real Estate. Item 16. Form 10-K Summary Not applicable. 115 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 28, 2018 WELLTOWER INC. By: /s/ THOMAS 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 28, 2018 by the following persons on behalf of the Registrant and in the capacities indicated. /s/ JEFFREY H. DONAHUE** Jeffrey H. Donahue, Chairman of the Board /s/ SERGIO D. RIVERA** Sergio D. Rivera, Director /s/ KENNETH J. BACON** Kenneth J. Bacon, Director /s/ FRED S. KLIPSCH** Fred S. Klipsch, Director /s/ GEOFFREY G. MEYERS** Geoffrey G. Meyers, Director /s/ TIMOTHY J. NAUGHTON** Timothy J. Naughton, Director /s/ SHARON M. OSTER** Sharon M. Oster, Director /s/ R. SCOTT TRUMBULL** R. Scott Trumbull, Director /s/ GARY WHITELAW** Gary Whitelaw, Director /s/ THOMAS J. DEROSA** Thomas J. DeRosa, Chief Executive Officer and Director (Principal Executive Officer) /s/ JOHN A. GOODEY** John A. Goodey, Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ PAUL D. NUNGESTER, JR.** Paul D. Nungester, Jr., Senior Vice President and Controller (Principal Accounting Officer) /s/ JUDITH C. PELHAM** Judith C. Pelham, Director **By: /s/ THOMAS J. DEROSA Thomas J. DeRosa, Attorney-in-Fact 116 Welltower Inc. Schedule III Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Triple-net: Abilene, TX . . . . . . . . . . $ — $ Abilene, TX . . . . . . . . . . Aboite Twp, IN . . . . . . . . Agawam, MA . . . . . . . . . Albertville, AL . . . . . . . . Ames, IA . . . . . . . . . . . . . Anderson, SC . . . . . . . . . Ankeny, IA . . . . . . . . . . . Apple Valley, CA . . . . . . Asheboro, NC . . . . . . . . . Asheville, NC . . . . . . . . . Asheville, NC . . . . . . . . . Atchison, KS . . . . . . . . . . Atlanta, GA . . . . . . . . . . . Aurora, OH . . . . . . . . . . . Aurora, CO . . . . . . . . . . . Austin, TX . . . . . . . . . . . Avon, IN . . . . . . . . . . . . . Avon, IN . . . . . . . . . . . . . Avon Lake, OH . . . . . . . . Baldwin City, KS . . . . . . Bartlesville, OK . . . . . . . Bellingham, WA . . . . . . . Benbrook, TX . . . . . . . . . Bethel Park, PA . . . . . . . Beverly Hills, CA . . . . . . Bexleyheath, UKI . . . . . . Birmingham, UKG . . . . . Birmingham, UKG . . . . . Birmingham, UKG . . . . . Birmingham, UKG . . . . . Bloomington, IN . . . . . . . Boardman, OH . . . . . . . . Bowling Green, KY . . . . Bracknell, UKJ . . . . . . . . Bradenton, FL . . . . . . . . . Bradenton, FL . . . . . . . . . Braintree, MA . . . . . . . . . Braintree, UKH . . . . . . . . Brandon, MS . . . . . . . . . . Brecksville, OH . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Brentwood, UKH . . . . . . 38,810 Brick, NJ . . . . . . . . . . . . . Brick, NJ . . . . . . . . . . . . . Brick, NJ . . . . . . . . . . . . . Bridgewater, NJ . . . . . . . Bridgewater, NJ . . . . . . . Bridgewater, NJ . . . . . . . — — — — — — 950 990 1,770 880 170 330 710 1,129 480 290 204 280 140 2,058 1,760 2,440 880 1,830 900 790 190 100 1,500 1,550 1,700 6,000 3,750 1,647 1,591 1,462 1,184 670 1,200 3,800 4,329 252 480 170 — 1,220 990 8,537 1,290 1,170 690 1,850 1,730 1,800 $ 20,987 $ 361 $ 8,187 19,930 16,112 6,203 8,870 6,290 10,270 16,639 5,032 3,489 1,955 5,610 14,914 14,148 28,172 9,520 14,470 19,444 10,421 4,810 1,380 19,861 13,553 16,007 13,385 10,807 14,853 19,092 9,056 10,085 17,423 12,800 26,700 12,167 3,298 9,953 7,157 13,296 10,241 19,353 45,869 25,247 17,372 17,125 3,050 48,201 31,810 1,089 1,601 2,134 280 — 419 — 168 165 — 351 19 1,143 106 — 1,216 — — 5,822 48 — 321 2,206 — — 1,407 1,594 1,998 1,016 1,089 — — 149 — — — 1,290 1,285 — — 5,304 916 1,405 5,548 48 1,406 1,347 $ 21,348 $ 1,990 9,276 21,531 18,246 6,477 8,870 6,709 10,270 16,801 5,197 3,489 2,306 5,629 16,035 14,254 28,172 10,731 14,470 19,444 16,243 4,858 1,380 20,175 15,759 16,007 13,385 11,851 16,288 20,937 9,931 11,059 17,423 12,800 26,849 12,167 3,298 9,953 8,447 14,581 10,241 19,353 50,348 26,163 18,758 22,671 3,098 49,571 33,157 739 4,048 7,621 1,613 1,835 3,278 534 4,199 2,019 1,777 983 316 11,518 2,943 10,233 5,451 3,127 1,762 2,666 279 795 4,945 2,484 3,837 1,079 970 1,160 1,469 718 782 1,156 3,877 6,423 108 1,915 1,450 8,414 1,281 2,011 1,746 1,335 4,357 3,605 3,534 1,546 8,989 5,419 950 990 1,770 880 176 330 710 1,129 486 290 204 280 140 2,080 1,760 2,440 885 1,830 900 790 190 100 1,507 1,550 1,700 6,000 4,113 1,806 1,745 1,603 1,299 670 1,200 3,800 4,329 252 480 170 — 1,220 990 9,362 1,290 1,188 692 1,850 1,766 1,800 117 2014 2014 2010 2002 2010 2010 2003 2016 2010 2003 1999 2003 2015 1997 2011 2006 1999 2010 2014 2011 2015 1996 2010 2011 2007 2014 2014 2015 2015 2015 2015 2015 2008 2008 2014 1996 2012 1997 2014 2010 2014 2016 2011 2010 2010 2004 2010 2011 1998 6565 Central Park Boulevard 1985 1250 East N 10th Street 2008 611 W County Line Rd South 1993 1200 Suffield St. 1999 151 Woodham Dr. 1999 1325 Coconino Rd. 1986 311 Simpson Rd. 2012 1275 SW State Street 1999 11825 Apple Valley Rd. 1998 514 Vision Dr. 1999 4 Walden Ridge Dr. 1992 308 Overlook Rd. 2001 1301 N 4th St. 1999 1460 S Johnson Ferry Rd. 2002 505 S. Chillicothe Rd 2007 14211 E. Evans Ave. 1998 12429 Scofield Farms Dr. 2004 182 S Country RD. 550E 2013 10307 E. CR 100 N 2001 345 Lear Rd. 2000 321 Crimson Ave 1995 5420 S.E. Adams Blvd. 1996 4415 Columbine Dr. 1984 4242 Bryant Irvin Road 2009 5785 Baptist Road 2000 220 N Clark Drive 1996 35 West Street 2010 Clinton Street, Winson Green 2010 Braymoor Road, Tile Cross 2010 Clinton Street, Winson Green 1997 122 Tile Cross Road, Garretts Green 2015 363 S. Fieldstone Boulevard 2008 8049 South Ave. 1992 1300 Campbell Lane 2017 Bagshot Road 1995 6101 Pointe W. Blvd. 2000 2800 60th Avenue West 1968 1102 Washington St. 2009 Meadow Park Tortoiseshell Way 1999 140 Castlewoods Blvd 2011 8757 Brecksville Road 2013 London Road 2000 458 Jack Martin Blvd. 1998 515 Jack Martin Blvd 1999 1594 Route 88 1970 875 Route 202/206 North 1999 2005 Route 22 West 2001 680 US-202/206 North Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Broadview Heights, OH . . . . . . . . . . . . . . . Brookfield, WI . . . . . . . . — — Brooks, AB . . . . . . . . . . . 2,016 Burleson, TX . . . . . . . . . Burlington, NC . . . . . . . . Burlington, NC . . . . . . . . Burlington, NJ . . . . . . . . Burlington, NJ . . . . . . . . Burnaby, BC . . . . . . . . . . Calgary, AB . . . . . . . . . . Calgary, AB . . . . . . . . . . Camberley, UKJ . . . . . . . Canton, MA . . . . . . . . . . Canton, OH . . . . . . . . . . . Cape Coral, FL . . . . . . . . — — — — — 8,341 17,109 28,391 — — — — Cape Coral, FL . . . . . . . . 8,530 Cape May Court House, NJ . . . . . . . . . . . . . . . . Carmel, IN . . . . . . . . . . . Carrollton, TX . . . . . . . . Cary, NC . . . . . . . . . . . . . Castleton, IN . . . . . . . . . . Cedar Grove, NJ . . . . . . . Centreville, MD . . . . . . . Chapel Hill, NC . . . . . . . Charles Town, WV . . . . . Charleston, WV . . . . . . . Chatham, VA . . . . . . . . . Chelmsford, MA . . . . . . . Chester, VA . . . . . . . . . . Chickasha, OK . . . . . . . . Cinnaminson, NJ . . . . . . Citrus Heights, CA . . . . . Claremore, OK . . . . . . . . Clarksville, TN . . . . . . . . Clayton, NC . . . . . . . . . . Cleburne, TX . . . . . . . . . Clevedon, UKK . . . . . . . Cobham, UKJ . . . . . . . . . Colchester, CT . . . . . . . . Colorado Springs, CO . . . Colorado Springs, CO . . . Colts Neck, NJ . . . . . . . . Columbia, TN . . . . . . . . . Columbia Heights, MN . . . . . . . . . . . . . . . Columbus, IN . . . . . . . . . Concord, NC . . . . . . . . . . Concord, NH . . . . . . . . . . Congleton, UKD . . . . . . . Conroe, TX . . . . . . . . . . . Coppell, TX . . . . . . . . . . Corby, UKF . . . . . . . . . . Coventry, UKG . . . . . . . . Crawfordsville, IN . . . . . Danville, VA . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 920 1,300 376 670 280 460 1,700 1,170 7,623 2,341 4,569 10,580 820 300 530 760 1,440 1,700 2,010 1,500 920 2,850 600 354 230 440 320 1,040 1,320 85 860 2,300 155 330 520 520 2,838 9,808 980 4,280 1,730 780 341 825 610 550 1,760 2,036 980 1,550 1,228 1,962 720 410 12,400 12,830 4,951 13,985 4,297 5,467 12,554 19,205 13,844 42,768 70,199 41,548 8,201 2,098 3,281 18,868 17,002 19,491 19,549 4,350 15,137 27,737 14,602 2,646 22,834 17,575 14,039 10,951 18,127 1,395 6,663 31,876 1,427 2,292 15,733 5,369 16,927 24,991 4,860 62,168 25,493 14,733 2,295 14,175 3,190 3,921 43,179 5,120 7,771 8,386 5,144 13,830 17,239 3,954 14,793 12,830 5,474 15,631 5,004 5,467 13,055 19,377 15,306 47,307 77,613 41,548 8,464 2,098 3,281 18,868 18,777 19,491 19,549 5,336 15,137 27,757 14,843 3,429 22,974 17,881 14,039 12,450 18,127 1,395 6,835 32,465 7,557 2,292 15,733 5,369 18,563 27,406 5,404 62,168 26,186 15,802 2,295 14,338 3,190 3,976 43,813 5,615 7,771 8,486 5,144 15,166 18,665 4,676 2,393 — 563 1,646 707 — 501 172 2,267 4,787 7,897 — 263 — — — 1,775 — — 986 — 20 241 783 140 306 — 1,499 — — 172 589 6,130 — — — 1,910 3,362 544 — 693 1,371 — 163 — 55 634 691 — 100 — 1,526 1,426 722 920 1,300 415 670 280 460 1,700 1,170 8,429 2,588 5,051 10,580 820 300 530 760 1,440 1,700 2,010 1,500 920 2,850 600 354 230 440 320 1,040 1,320 85 860 2,300 155 330 520 520 3,112 10,756 980 4,280 1,730 1,082 341 825 610 550 1,760 2,232 980 1,550 1,228 2,151 720 410 118 5,769 1,435 483 2,588 1,917 2,142 2,809 3,560 1,372 4,026 6,544 559 6,353 1,066 1,396 2,778 1,746 1,421 663 2,570 1,427 5,210 2,822 1,428 4,081 3,203 1,372 4,320 1,733 798 1,461 8,132 1,410 1,159 1,339 1,524 1,631 3,164 1,252 3,730 1,184 3,108 1,165 2,359 676 1,693 7,855 460 1,736 1,084 108 1,113 1,695 1,853 2001 2012 2014 2011 2003 2003 2011 2011 2014 2014 2014 2016 2002 1998 2002 2012 2014 2015 2014 1998 2014 2011 2011 2002 2011 2011 2014 2003 2014 1996 2011 2010 1996 1998 2014 2006 2014 2013 2011 2015 2016 2010 1999 2011 2010 2003 2011 2014 2009 2012 2017 2015 2014 2003 1984 2801 E. Royalton Rd. 2013 1185 Davidson Road 2000 951 Cassils Road West 1988 300 Huguley Boulevard 2000 3619 S. Mebane St. 1997 3615 S. Mebane St. 1965 115 Sunset Road 1994 2305 Rancocas Road 2006 7195 Canada Way 1971 1729-90th Avenue SW 2001 500 Midpark Way SE 2017 Pembroke Broadway 1993 One Meadowbrook Way 1998 1119 Perry Dr., N.W. 2000 911 Santa Barbara Blvd. 2009 831 Santa Barbara Boulevard 1990 144 Magnolia Drive 2015 12315 Pennsylvania Street 2016 2645 East Trinity Mills Road 1996 111 MacArthur 2013 8405 Clearvista Lake 1970 536 Ridge Road 1978 205 Armstrong Avenue 1997 100 Lanark Rd. 1997 219 Prospect Ave 1998 1000 Association Drive, North Gate Business Park 2009 100 Rorer Street 1997 4 Technology Dr. 2009 12001 Iron Bridge Road 1996 801 Country Club Rd. 1965 1700 Wynwood Drive 1997 7418 Stock Ranch Rd. 1996 1605 N. Hwy. 88 1998 2183 Memorial Dr. 2013 84 Johnson Estate Road 2007 402 S Colonial Drive 1994 18/19 Elton Road 2013 Redhill Road 1986 59 Harrington Court 2008 1605 Elm Creek View 2016 2818 Grand Vista Circle 2002 3 Meridian Circle 1999 5011 Trotwood Ave. 2009 3807 Hart Boulevard 1998 2564 Foxpointe Dr. 1997 2452 Rock Hill Church Rd. 1994 239 Pleasant Street 1994 Rood Hill 2010 903 Longmire Road 2013 1530 East Sandy Lake Road 1997 25 Rockingham Road 2014 Banner Lane, Tile Hill 2013 517 Concord Road 1998 149 Executive Ct. Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Danville, VA . . . . . . . . . . Daphne, AL . . . . . . . . . . Dedham, MA . . . . . . . . . Denton, TX . . . . . . . . . . . Derby, UKF . . . . . . . . . . Dover, DE . . . . . . . . . . . . Dresher, PA . . . . . . . . . . Dundalk, MD . . . . . . . . . Durham, NC . . . . . . . . . . — — — — — — — — — Eagan, MN . . . . . . . . . . . 16,741 East Brunswick, NJ . . . . . East Norriton, PA . . . . . . Eastbourne, UKJ . . . . . . . Eden, NC . . . . . . . . . . . . Edmond, OK . . . . . . . . . . Edmond, OK . . . . . . . . . . Edmond, OK . . . . . . . . . . Elizabeth City, NC . . . . . Emeryville, CA . . . . . . . . Englewood, NJ . . . . . . . . Englishtown, NJ . . . . . . . — — — — — — — — — — — 240 2,880 1,360 1,760 2,503 600 2,060 1,770 1,476 2,260 1,380 1,200 4,071 390 410 1,810 1,650 200 2,560 930 690 Epsom, UKJ . . . . . . . . . . 39,175 20,159 Eureka, KS . . . . . . . . . . . Everett, WA . . . . . . . . . . Fairfield, CA . . . . . . . . . . Fairhope, AL . . . . . . . . . . Fall River, MA . . . . . . . . Fanwood, NJ . . . . . . . . . . Faribault, MN . . . . . . . . . Farnborough, UKJ . . . . . Fayetteville, PA . . . . . . . Fayetteville, NY . . . . . . . Findlay, OH . . . . . . . . . . Fishers, IN . . . . . . . . . . . Florence, NJ . . . . . . . . . . Florence, AL . . . . . . . . . . Flourtown, PA . . . . . . . . Flower Mound, TX . . . . . Folsom, CA . . . . . . . . . . . Forest City, NC . . . . . . . . Fort Ashby, WV . . . . . . . Fort Collins, CO . . . . . . . Fort Wayne, IN . . . . . . . . Fort Worth, TX . . . . . . . . Franconia, NH . . . . . . . . Fredericksburg, VA . . . . Fredericksburg, VA . . . . Fremont, CA . . . . . . . . . . Fresno, CA . . . . . . . . . . . Gardner, KS . . . . . . . . . . Gardnerville, NV . . . . . . Gastonia, NC . . . . . . . . . Gastonia, NC . . . . . . . . . Gastonia, NC . . . . . . . . . Georgetown, TX . . . . . . . Gettysburg, PA . . . . . . . . Gig Harbor, WA . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 50 1,400 1,460 570 620 2,850 780 2,036 2,150 410 200 1,500 300 353 1,800 1,800 — 320 330 3,680 170 450 360 1,000 1,130 3,400 2,500 200 1,143 470 310 400 200 590 8,436 8,670 9,830 8,305 9,058 22,266 40,236 32,047 10,659 31,643 34,229 28,129 24,438 4,877 8,388 14,849 25,167 2,760 57,491 4,514 12,520 34,803 3,950 5,476 14,040 9,119 5,829 55,175 11,539 5,737 32,951 3,962 1,800 14,500 2,978 13,049 14,830 8,414 33,600 4,497 19,566 58,608 8,232 13,615 11,320 20,000 23,202 25,300 35,800 2,800 10,831 6,129 3,096 5,029 2,100 8,913 1,560 15,947 — 384 — 100 — 141 1,148 784 2,196 4 835 1,604 2,755 — — 1,921 — 2,011 641 26 1,489 5,346 70 — 1,541 112 4,856 1,071 50 751 1,802 500 — — — 200 266 100 — — 356 — — 5,086 70 1,200 — 3,203 118 91 1,075 — 22 120 — 118 253 240 2,880 1,360 1,760 2,503 600 2,120 1,770 1,476 2,260 1,380 1,264 4,465 390 410 1,810 1,650 200 2,560 930 769 22,106 50 1,400 1,460 570 620 2,850 780 2,232 2,150 410 200 1,500 300 385 1,800 1,800 1,582 320 330 3,680 170 450 360 1,000 1,130 3,456 2,500 200 1,164 470 310 400 200 590 8,436 9,054 9,830 8,405 9,058 22,407 41,324 32,831 12,855 31,647 35,064 29,670 26,799 4,877 8,388 16,770 25,167 4,771 58,132 4,540 13,930 38,201 4,020 5,476 15,581 9,231 10,685 56,246 11,590 6,291 34,753 4,462 1,800 14,500 2,978 13,217 15,096 8,514 32,018 4,497 19,922 58,608 8,232 18,701 11,390 21,200 23,202 28,447 35,918 2,891 11,885 6,129 3,118 5,149 2,100 9,031 1,583 16,177 119 822 1,366 4,418 1,538 529 4,104 7,471 5,984 11,283 1,772 5,769 5,414 2,323 1,931 1,321 1,530 621 2,152 5,204 936 2,718 1,014 225 2,689 6,266 1,402 5,212 9,157 658 501 2,191 1,866 976 3,132 1,262 3,234 2,866 1,276 4,045 1,797 3,512 3,505 2,408 3,614 2,119 6,879 2,045 9,360 8,599 172 8,717 2,390 1,283 2,022 1,127 1,844 3,863 2014 2012 2002 2010 2014 2011 2010 2011 1997 2015 2011 2010 2014 2003 2012 2014 2014 1998 2014 2011 2010 2016 2015 1999 2002 2012 1996 2011 2015 2014 2015 2001 1997 2010 2002 2010 2011 2011 2013 2003 2011 2015 2006 2010 2011 2005 2014 2005 2008 2015 1998 2003 2003 2003 1997 2011 2010 1996 508 Rison Street 2001 27440 County Road 13 1996 10 CareMatrix Dr. 2011 2125 Brinker Rd 2015 Rykneld Road 1984 1080 Silver Lake Blvd. 2001 1405 N. Limekiln Pike 1978 7232 German Hill Road 1999 4434 Ben Franklin Blvd. 2004 3810 Alder Avenue 1998 606 Cranbury Rd. 1988 2101 New Hope St 1999 Carew Road 1998 314 W. Kings Hwy. 2001 15401 North Pennsylvania Avenue 1985 1225 Lakeshore Drive 2017 2709 East Danforth Road 1999 400 Hastings Lane 2010 1440 40th Street 1966 333 Grand Avenue 1997 49 Lasatta Ave 2014 450-458 Reigate Road 1994 1820 E River St 1999 2015 Lake Heights Dr. 1998 3350 Cherry Hills St. 1987 50 Spring Run Road 1973 1748 Highland Ave. 1982 295 South Ave. 2003 828 1st Street NE 1980 Bruntile Close, Reading Road 1991 6375 Chambersburg Road 1997 5125 Highbridge St. 1997 725 Fox Run Rd. 2000 9745 Olympia Dr. 1999 901 Broad St. 1999 3275 County Road 47 1908 350 Haws Lane 2012 4141 Long Prairie Road 2009 330 Montrose Drive 1999 493 Piney Ridge Rd. 1980 Diane Drive, Box 686 2007 4750 Pleasant Oak Drive 2006 2626 Fairfield Ave. 2011 425 Alabama Ave. 1971 93 Main Street 1999 3500 Meekins Dr. 2010 140 Brimley Drive 1987 2860 Country Dr. 1991 7173 North Sharon Avenue 2000 869 Juniper Terrace 1999 1565-A Virginia Ranch Rd. 1998 1680 S. New Hope Rd. 1994 1717 Union Rd. 1996 1750 Robinwood Rd. 1997 2600 University Dr., E. 1987 867 York Road 1994 3213 45th St. Court NW Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Granbury, TX . . . . . . . . . Grand Ledge, MI . . . . . . Granger, IN . . . . . . . . . . . Grapevine, TX . . . . . . . . Greeley, CO . . . . . . . . . . Greenfield, WI . . . . . . . . Greensboro, NC . . . . . . . Greensboro, NC . . . . . . . Greenville, SC . . . . . . . . Greenville, NC . . . . . . . . Greenwood, IN . . . . . . . . Groton, CT . . . . . . . . . . . Haddonfield, NJ . . . . . . . Hamburg, PA . . . . . . . . . Hamilton, NJ . . . . . . . . . . Hanford, UKG . . . . . . . . Harrow, UKI . . . . . . . . . . Hatboro, PA . . . . . . . . . . Hatfield, UKH . . . . . . . . Hattiesburg, MS . . . . . . . Haverford, PA . . . . . . . . . Hermitage, TN . . . . . . . . Herne Bay, UKJ . . . . . . . Hiawatha, KS . . . . . . . . . Hickory, NC . . . . . . . . . . High Point, NC . . . . . . . . High Point, NC . . . . . . . . High Point, NC . . . . . . . . High Point, NC . . . . . . . . Highland Park, IL . . . . . . Highlands Ranch, CO . . . Hinckley, UKF . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Hindhead, UKJ . . . . . . . . 47,374 Hockessin, DE . . . . . . . . Holton, KS . . . . . . . . . . . Howard, WI . . . . . . . . . . — — — 2,550 1,150 1,670 2,220 1,077 — 330 560 310 290 1,550 2,430 520 840 440 1,382 7,402 — 2,924 450 1,880 1,500 1,900 40 290 560 370 330 430 2,820 940 2,159 17,852 1,120 40 579 Howell, NJ . . . . . . . . . . . 8,835 1,066 Hutchinson, KS . . . . . . . . Indianapolis, IN . . . . . . . Indianapolis, IN . . . . . . . Jackson, NJ . . . . . . . . . . . Jacksonville, FL . . . . . . . Jacksonville, FL . . . . . . . Kansas City, KS . . . . . . . Katy, TX . . . . . . . . . . . . . Kenner, LA . . . . . . . . . . . Kennett Square, PA . . . . Kingston upon Thames, UKI . . . . . . . . . . . . . . . Kirkland, WA . . . . . . . . . Kirkstall, UKE . . . . . . . . Kokomo, IN . . . . . . . . . . Lafayette, LA . . . . . . . . . Lafayette, CO . . . . . . . . . Lafayette, IN . . . . . . . . . . Lakeway, TX . . . . . . . . . Lakewood, CO . . . . . . . . — — — — — — — — — — 600 870 890 6,500 750 — 700 1,778 1,100 1,050 56,849 33,063 — — — — — — — — 1,880 2,437 710 1,928 1,420 670 5,142 2,160 2,940 16,286 21,280 17,648 18,051 15,204 2,970 5,507 4,750 4,393 22,770 19,941 16,363 10,543 4,469 9,829 8,266 28,112 7,527 13,469 33,993 9,943 24,353 4,210 987 4,443 2,185 3,395 4,143 15,832 3,721 4,194 48,645 6,308 7,460 32,122 21,577 10,590 14,688 18,781 26,405 25,231 26,381 20,116 22,622 10,036 22,946 46,696 4,315 9,414 16,044 10,483 20,192 16,833 23,203 28,091 3,717 21,405 23,681 17,648 18,051 14,314 3,524 6,520 4,750 4,561 22,851 20,909 16,363 10,765 4,469 10,779 9,064 29,883 8,254 13,469 35,069 9,943 26,706 4,239 1,219 5,236 2,595 3,423 4,143 16,021 8,704 4,599 53,383 7,555 7,473 32,122 22,341 10,784 14,688 18,781 29,512 25,231 26,381 20,116 22,622 10,364 23,229 51,252 4,998 10,324 16,044 10,509 20,192 16,833 23,203 28,153 777 5,119 2,401 — — — 554 1,013 — 168 81 968 — 222 — 1,083 1,514 1,771 1,010 — 1,080 — 2,537 29 232 793 410 28 — 189 4,983 614 6,463 1,247 13 — 769 194 — — 2,550 1,150 1,670 2,220 1,077 890 330 560 310 290 1,550 2,430 520 840 440 1,515 8,117 — 3,206 450 1,884 1,500 2,083 40 290 560 370 330 430 2,820 940 2,368 19,576 1,120 40 579 1,071 600 870 890 3,107 6,500 — — — — 328 316 7,751 683 1,145 — 25 — — — 62 750 — 700 1,778 1,100 1,083 36,258 1,880 2,672 710 1,928 1,420 670 5,142 2,160 120 597 3,731 4,392 1,105 270 1,685 1,425 2,618 1,814 1,774 4,334 4,156 1,293 2,271 1,882 1,257 772 5,298 970 2,364 6,307 1,695 3,389 247 627 2,083 1,090 1,370 1,646 2,136 2,091 592 1,392 718 407 157 4,129 3,716 1,390 1,639 3,820 987 1,031 1,113 387 9,033 4,219 1,351 1,792 1,207 1,515 4,358 1,430 1,372 2,550 2,823 2012 2010 2010 2013 2017 2013 2003 2003 2004 2003 2010 2011 2011 2011 2001 2013 2014 2011 2013 2010 2010 2011 2013 2015 2003 2003 2003 2003 2003 2011 2002 2013 2016 2014 2015 2017 2010 2004 2014 2014 2012 2013 2013 2015 2017 1998 2010 2016 2003 2013 2014 2006 2015 2015 2007 2014 1996 916 East Highway 377 1999 4775 Village Dr 2009 6330 North Fir Rd 2014 4545 Merlot Drive 2009 5300 West 29th Street 1983 5017 South 110th Street 1996 5809 Old Oak Ridge Rd. 1997 4400 Lawndale Dr. 1997 23 Southpointe Dr. 1998 2715 Dickinson Ave. 2007 2339 South SR 135 1975 1145 Poquonnock Road 2015 132 Warwick Road 1966 125 Holly Road 1998 1645 Whitehorse-Mercerville Rd. 2012 Bankhouse Road 2001 177 Preston Hill 1996 3485 Davisville Road 2012 St Albans Road East 2009 217 Methodist Hospital Blvd 2000 731 Old Buck Lane 2006 4131 Andrew Jackson Parkway 2011 165 Reculver Road 1996 400 Kansas Ave 1994 2530 16th St. N.E. 2000 1568 Skeet Club Rd. 1999 1564 Skeet Club Rd. 1994 201 W. Hartley Dr. 1998 1560 Skeet Club Rd. 2012 1651 Richfield Avenue 1999 9160 S. University Blvd. 2013 Tudor Road 2012 Portsmouth Road 1992 100 Saint Claire Drive 1996 410 Juniper Dr 2016 2790 Elm Tree Hill 2007 100 Meridian Place 1997 2416 Brentwood 2014 1635 N Arlington Avenue 2014 5404 Georgetown Road 2001 2 Kathleen Drive 2014 5939 Roosevelt Boulevard 2014 4000 San Pablo Parkway 2015 8900 Parallel Parkway 2015 24802 Kingsland Boulevard 2000 1600 Joe Yenni Blvd 2008 301 Victoria Gardens Dr. 2014 Coombe Lane West 1996 6505 Lakeview Dr. 2009 29 Broad Lane 2014 2200 S. Dixon Rd 1993 204 Energy Parkway 2015 329 Exempla Circle 2014 2402 South Street 2011 2000 Medical Dr 2010 7395 West Eastman Place Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Lakewood Ranch, FL . . . Lakewood Ranch, FL . . . Lancaster, CA . . . . . . . . . Lancaster, PA . . . . . . . . . Langhorne, PA . . . . . . . . LaPlata, MD . . . . . . . . . . Las Vegas, NV . . . . . . . . Lawrence, KS . . . . . . . . . Lecanto, FL . . . . . . . . . . . Lee, MA . . . . . . . . . . . . . Leeds, UKE . . . . . . . . . . Leicester, UKF . . . . . . . . Lenoir, NC . . . . . . . . . . . — — — — — — — — — — — — — Lethbridge, AB . . . . . . . . 1,505 Lexana, KS . . . . . . . . . . . Lexington, NC . . . . . . . . Libertyville, IL . . . . . . . . Lichfield, UKG . . . . . . . . Lillington, NC . . . . . . . . . Lillington, NC . . . . . . . . . Lincoln, NE . . . . . . . . . . Linwood, NJ . . . . . . . . . . Litchfield, CT . . . . . . . . . Lititz, PA . . . . . . . . . . . . Little Neck, NY . . . . . . . Livermore, CA . . . . . . . . Livingston, NJ . . . . . . . . London, UKI . . . . . . . . . . Longview, TX . . . . . . . . . Longwood, FL . . . . . . . . Louisburg, KS . . . . . . . . . Louisville, KY . . . . . . . . Lowell, MA . . . . . . . . . . Loxley, UKE . . . . . . . . . . Lutherville, MD . . . . . . . Lynchburg, VA . . . . . . . . Macungie, PA . . . . . . . . . Mahwah, NJ . . . . . . . . . . Manalapan, NJ . . . . . . . . Manassas, VA . . . . . . . . . Mankato, MN . . . . . . . . . Mansfield, TX . . . . . . . . . Manteca, CA . . . . . . . . . . Marietta, PA . . . . . . . . . . Marion, IN . . . . . . . . . . . Marion, IN . . . . . . . . . . . Marlborough, UKK . . . . Marlow, UKJ . . . . . . . . . Martinsville, VA . . . . . . . Marysville, WA . . . . . . . Matawan, NJ . . . . . . . . . . Matthews, NC . . . . . . . . . McHenry, IL . . . . . . . . . . McKinney, TX . . . . . . . . McMurray, PA . . . . . . . . Mechanicsburg, PA . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 650 1,000 700 1,680 1,350 700 580 250 200 290 1,974 3,060 190 1,214 480 200 6,500 1,382 470 500 390 800 1,240 1,200 3,350 4,100 8,000 8,158 610 1,260 280 490 680 1,369 1,100 340 960 1,605 900 750 1,460 660 1,300 1,050 720 990 2,677 9,619 349 620 1,830 560 1,576 1,570 1,440 1,350 6,714 22,388 15,295 14,039 24,881 19,068 23,420 8,716 6,900 18,135 13,239 24,410 3,748 2,750 1,770 3,900 40,024 30,324 17,579 16,451 13,807 21,984 17,908 13,836 38,461 24,996 44,424 17,545 5,520 6,445 4,320 10,010 3,378 15,668 19,786 16,114 29,033 27,249 22,624 7,446 32,104 5,251 12,125 13,633 12,750 9,190 6,822 42,134 — 4,780 20,618 4,738 — 7,389 15,805 16,650 8,702 22,388 15,907 14,039 25,052 19,534 23,420 8,716 6,900 19,061 14,518 26,769 4,389 3,040 1,918 4,915 40,024 33,254 17,579 16,451 13,902 22,980 28,882 13,836 39,720 24,996 44,424 17,545 5,520 6,445 4,355 12,778 3,422 17,182 21,530 16,114 29,117 27,249 23,213 7,976 32,117 5,251 13,679 13,633 13,886 10,014 7,482 42,134 — 5,683 20,784 4,738 — 7,389 19,699 16,650 1,988 — 625 — 171 466 — — — 926 1,470 2,654 641 419 148 1,015 — 3,063 — — 95 1,056 10,991 — 1,265 — — — — — 35 2,768 44 1,646 1,744 — 84 — 589 530 13 — 1,566 — 1,136 824 918 — — 903 166 — — — 3,894 — 650 1,000 712 1,680 1,350 700 580 250 200 290 2,165 3,355 190 1,342 480 200 6,500 1,515 470 500 390 859 1,258 1,200 3,357 4,100 8,000 8,158 610 1,260 280 490 680 1,502 1,100 340 960 1,605 900 750 1,460 660 1,312 1,050 720 990 2,936 9,619 349 620 1,830 560 1,576 1,570 1,440 1,350 121 1,240 3,234 4,279 364 4,717 3,653 3,967 1,245 2,541 7,947 1,007 3,516 1,739 348 120 2,011 7,376 2,350 1,598 1,402 2,789 4,341 4,068 359 7,308 2,008 667 579 1,576 1,172 240 4,594 824 2,161 3,877 1,484 5,262 1,826 3,813 2,899 1,792 1,516 5,000 868 1,264 1,083 622 1,970 — 2,072 3,552 1,920 — 1,666 3,093 2,888 2011 2012 2010 2015 2011 2011 2011 2012 2004 2002 2015 2012 2003 2014 2015 2002 2011 2015 2014 2014 2010 2010 2010 2015 2010 2014 2015 2015 2006 2011 2015 2005 2011 2013 2011 2014 2011 2012 2011 2003 2015 2006 2005 2015 2014 2014 2014 2013 2003 2003 2011 2003 2006 2009 2010 2011 2012 8230 Nature’s Way 2005 8220 Natures Way 1999 43051 15th St. West 2017 31 Millersville Road 1979 262 Toll Gate Road 1984 One Magnolia Drive 2002 2500 North Tenaya Way 1996 3220 Peterson Road 1986 2341 W. Norvell Bryant Hwy. 1998 600 & 620 Laurel St. 2013 100 Grove Lane 2010 307 London Road 1998 1145 Powell Rd., N.E. 2003 785 Columbia Boulevard West 1994 8710 Caenen Lake Rd 1997 161 Young Dr. 2001 901 Florsheim Dr 2012 Wissage Road 2013 54 Red Mulberry Way 1999 2041 NC-210 N 2000 7208 Van Dorn St. 1997 432 Central Ave 1998 19 Constitution Way 2016 80 West Millport Road 2000 55-15 Little Neck Pkwy. 1974 35 Fenton Street 2017 369 E Mt Pleasant Avenue 2016 6 Victoria Drive 2007 311 E Hawkins Pkwy 2011 425 South Ronald Reagan Boulevard 1996 202 Rogers St 1978 4604 Lowe Rd 1969 30 Princeton Blvd 2008 Loxley Road 1988 515 Brightfield Road 2013 189 Monica Blvd 1994 1718 Spring Creek Road 2015 15 Edison Road 2001 445 Route 9 South 1996 8341 Barrett Dr. 2006 100 Dublin Road 2007 2281 Country Club Dr 1986 430 N. Union Rd. 1999 2760 Maytown Road 2012 614 W. 14th Street 1976 505 N. Bradner Avenue 1999 The Common 2014 210 Little Marlow Road 1900 Rolling Hills Rd. & US Hwy. 58 1998 9802 48th Dr. N.E. 1965 625 State Highway 34 1998 2404 Plantation Center Dr. 1900 5200 Block of Bull Valley Road 2010 2701 Alma Rd. 2011 240 Cedar Hill Dr 1971 4950 Wilson Lane Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Medicine Hat, AB . . . . . . 2,471 Melville, NY . . . . . . . . . . Mendham, NJ . . . . . . . . . Menomonee Falls, WI . . Mercerville, NJ . . . . . . . . Meriden, CT . . . . . . . . . . Merrillville, IN . . . . . . . . Mesa, AZ . . . . . . . . . . . . Middleburg Heights, OH . . . . . . . . . . . . . . . Middleton, WI . . . . . . . . Midland, MI . . . . . . . . . . Mill Creek, WA . . . . . . . Millville, NJ . . . . . . . . . . Milton Keynes, UKJ . . . . Mishawaka, IN . . . . . . . . Missoula, MT . . . . . . . . . Monmouth Junction, NJ . . . . . . . . . . . . . . . . Monroe, NC . . . . . . . . . . Monroe, NC . . . . . . . . . . Monroe, NC . . . . . . . . . . Monroe Township, NJ . . Monroe Twp, NJ . . . . . . . Montville, NJ . . . . . . . . . Moorestown, NJ . . . . . . . Moorestown, NJ . . . . . . . Morehead City, NC . . . . . Morton Grove, IL . . . . . . Moulton, UKF . . . . . . . . Mount Pleasant, SC . . . . Nacogdoches, TX . . . . . . Naperville, IL . . . . . . . . . Nashville, TN . . . . . . . . . Naugatuck, CT . . . . . . . . Needham, MA . . . . . . . . New Moston, UKD . . . . . Newark, DE . . . . . . . . . . Newcastle Under Lyme, UKG . . . . . . . . . . . . . . Newcastle-under-Lyme, UKG . . . . . . . . . . . . . . Norman, OK . . . . . . . . . . Norman, OK . . . . . . . . . . North Augusta, SC . . . . . North Cape May, NJ . . . . Northampton, UKF . . . . . Northampton, UKF . . . . . Nuneaton, UKG . . . . . . . Nuthall, UKF . . . . . . . . . Nuthall, UKF . . . . . . . . . Oakland, CA . . . . . . . . . . Ocala, FL . . . . . . . . . . . . Ogden, UT . . . . . . . . . . . Oklahoma City, OK . . . . Oklahoma City, OK . . . . Olathe, KS . . . . . . . . . . . Omaha, NE . . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 932 4,280 1,240 1,020 860 1,300 700 950 960 420 200 10,150 840 1,826 740 550 720 470 310 450 3,250 1,160 3,500 2,060 6,400 200 1,900 1,695 — 390 3,470 4,910 1,200 1,610 1,480 560 5,566 73,283 27,169 6,984 9,929 1,472 11,699 9,087 7,780 4,006 11,025 60,274 29,944 18,654 16,114 7,490 6,209 3,681 4,799 4,021 27,771 13,193 31,002 51,628 23,875 3,104 19,374 12,510 17,200 5,754 29,547 29,590 15,826 13,715 4,378 21,220 1,110 5,655 1,125 55 1,480 332 600 5,182 2,013 3,325 1,628 2,498 4,760 1,340 360 590 760 1,930 370 5,537 1,484 33,330 2,558 22,266 17,348 6,257 8,983 6,263 10,436 16,143 10,564 6,700 7,513 7,017 19,765 10,230 6,154 77,874 27,807 8,636 10,102 1,705 11,853 10,654 7,780 4,606 16,547 61,179 30,073 20,456 16,114 7,867 6,295 4,329 5,656 4,135 27,991 13,307 32,075 53,270 23,902 4,752 19,533 12,510 13,149 5,754 29,547 29,590 16,025 14,081 4,801 22,708 6,202 6,072 1,484 33,330 2,558 22,384 19,024 6,862 9,850 6,868 11,444 16,252 10,564 7,399 7,513 7,017 20,318 10,230 686 4,616 638 1,652 173 233 154 1,567 — 600 5,522 935 129 1,979 — 377 86 648 857 114 219 114 1,073 1,653 27 1,648 159 — — — — — 199 366 566 1,488 654 644 — — — 118 2,177 799 1,189 762 1,250 109 — 699 — — 553 — 1,031 4,306 1,240 1,020 860 1,300 700 950 960 420 200 10,179 840 2,002 740 550 720 470 310 450 3,250 1,160 3,500 2,071 6,400 200 1,900 1,695 4,052 390 3,470 4,910 1,200 1,610 1,623 560 1,218 1,234 55 1,480 332 600 5,682 2,208 3,646 1,786 2,740 4,760 1,340 360 590 760 1,930 370 122 559 13,828 5,006 2,057 2,012 623 3,105 4,657 2,758 1,802 2,555 17,227 5,532 1,488 1,569 2,576 1,323 1,750 2,181 1,669 1,454 2,666 5,350 9,619 2,531 2,149 3,201 247 2,586 1,636 5,550 7,529 3,028 6,424 585 7,504 2014 2010 2011 2006 2011 2011 2007 1999 2004 2001 2010 2010 2011 2015 2014 2005 2011 2003 2003 2003 2015 2011 2011 2010 2012 1999 2010 2017 2013 2006 2011 2008 2011 2002 2013 2004 1999 65 Valleyview Drive SW 2001 70 Pinelawn Rd 1968 84 Cold Hill Road 2007 W128 N6900 Northfield Drive 1967 2240 White Horse- Merceville Road 1968 845 Paddock Ave 2008 9509 Georgia St. 2000 7231 E. Broadway 1998 15435 Bagley Rd. 1991 6701 Stonefield Rd. 1994 2325 Rockwell Dr 1998 14905 Bothell-Everett Hwy 1986 54 Sharp Street 2007 Tunbridge Grove, Kents Hill 2013 60257 Bodnar Blvd 1998 3620 American Way 1996 2 Deer Park Drive 2001 918 Fitzgerald St. 2000 919 Fitzgerald St. 1997 1316 Patterson Ave. 1996 319 Forsgate Drive 1996 292 Applegarth Road 1988 165 Changebridge Rd. 2000 1205 N. Church St 2014 250 Marter Avenue 1999 107 Bryan St. 2011 5520 N. Lincoln Ave. 1995 Northampton Lane North 1985 1200 Hospital Drive 2007 5902 North St 2001 504 North River Road 2007 15 Burton Hills Boulevard 1980 4 Hazel Avenue 1994 100 West St. 2010 90a Broadway 1998 200 E. Village Rd. 721 2013 2010 Hempstalls Lane 505 906 4,715 1,288 4,099 2,300 543 1,147 530 1,346 1,500 2,468 2,509 1,968 1,788 1,138 2,096 2014 1995 2012 1999 2011 2013 2014 2013 2014 2013 2014 2008 2004 2007 2007 2016 2010 1999 Silverdale Road 1995 1701 Alameda Dr. 1985 800 Canadian Trails Drive 1998 105 North Hills Dr. 1995 700 Townbank Road 2011 Cliftonville Road 2014 Cliftonville Road 2011 132 Coventry Road 2014 172A Nottingham Road 2011 172 Nottingham Road 2002 468 Perkins Street 2009 2650 SE 18TH Avenue 1998 1340 N. Washington Blv. 2008 13200 S. May Ave 2009 11320 N. Council Road 2015 21250 W 151 Street 1998 11909 Miracle Hills Dr. Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Omaha, NE . . . . . . . . . . . Ona, WV . . . . . . . . . . . . . Oneonta, NY . . . . . . . . . . Orem, UT . . . . . . . . . . . . Osage City, KS . . . . . . . . Osawatomie, KS . . . . . . . Ottawa, KS . . . . . . . . . . . Overland Park, KS . . . . . Overland Park, KS . . . . . Overland Park, KS . . . . . Overland Park, KS . . . . . Owasso, OK . . . . . . . . . . Owensboro, KY . . . . . . . Owenton, KY . . . . . . . . . Oxford, MI . . . . . . . . . . . Palestine, TX . . . . . . . . . Palm Coast, FL . . . . . . . . Panama City Beach, FL . . . . . . . . . . . . . . . . Paola, KS . . . . . . . . . . . . Paris, TX . . . . . . . . . . . . . Paso Robles, CA . . . . . . . Pella, IA . . . . . . . . . . . . . Pennington, NJ . . . . . . . . Pennsauken, NJ . . . . . . . . Petoskey, MI . . . . . . . . . . Philadelphia, PA . . . . . . . Phillipsburg, NJ . . . . . . . Phillipsburg, NJ . . . . . . . Pinehurst, NC . . . . . . . . . Piqua, OH . . . . . . . . . . . . Piscataway, NJ . . . . . . . . Pittsburgh, PA . . . . . . . . . Plainview, NY . . . . . . . . Plano, TX . . . . . . . . . . . . Plattsmouth, NE . . . . . . . Plymouth, MI . . . . . . . . . Princeton, NJ . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Prior Lake, MN . . . . . . . . 14,033 Puyallup, WA . . . . . . . . . Raleigh, NC . . . . . . . . . . Raleigh, NC . . . . . . . . . . Raleigh, NC . . . . . . . . . . Reading, PA . . . . . . . . . . Red Bank, NJ . . . . . . . . . Rehoboth Beach, DE . . . Reidsville, NC . . . . . . . . Reno, NV . . . . . . . . . . . . Richmond, IN . . . . . . . . . Richmond, VA . . . . . . . . Ridgeland, MS . . . . . . . . Rochdale, MA . . . . . . . . . Rockville, CT . . . . . . . . . Rockville Centre, NY . . . Rockwall, TX . . . . . . . . . Rocky Hill, CT . . . . . . . . Rohnert Park, CA . . . . . . — — — — — — — — — — — — — — — — — — 380 950 80 2,150 50 130 160 3,730 4,500 410 1,300 215 225 100 1,430 180 870 900 190 490 1,770 870 1,380 900 860 2,930 800 300 290 204 3,100 1,750 3,990 1,840 250 1,490 1,730 1,870 1,150 7,598 3,530 2,580 980 1,050 960 170 1,060 700 — 520 — 1,500 4,290 2,220 1,090 6,500 8,769 15,998 5,020 24,107 1,700 2,970 6,590 27,076 29,105 2,840 25,311 1,380 13,275 2,400 15,791 4,320 10,957 6,402 5,610 5,452 8,630 6,716 27,620 10,780 14,452 10,433 21,175 8,114 2,690 1,885 33,501 8,572 11,969 20,152 5,650 19,990 30,888 29,849 20,776 88,870 59,589 16,837 19,906 21,275 24,248 3,830 11,440 14,222 12,000 7,675 7,100 4,835 20,310 17,650 6,710 18,700 8,769 15,998 5,020 24,107 1,836 3,096 6,630 27,416 36,400 2,910 25,988 1,380 13,275 2,400 15,791 5,620 10,957 6,402 5,667 5,452 9,323 6,805 28,462 10,959 14,452 13,969 21,413 8,215 3,174 1,885 33,501 8,687 13,054 20,712 5,650 20,320 32,521 29,862 21,216 88,870 59,589 16,837 20,046 21,840 32,938 4,687 12,045 14,615 11,750 8,102 6,410 5,016 21,178 17,650 8,210 20,769 — — — — 136 126 40 340 7,295 70 677 — — — — 1,300 — — 57 — 693 89 937 179 — 3,536 238 101 484 — — 115 1,085 560 — 330 1,713 13 445 — — — 140 565 8,708 857 605 393 — 427 — 181 868 — 1,500 2,116 380 950 80 2,150 50 130 160 3,730 4,500 410 1,300 215 225 100 1,430 180 870 900 190 490 1,770 870 1,476 900 860 2,930 800 300 290 204 3,100 1,750 3,990 1,840 250 1,490 1,810 1,870 1,156 7,598 3,530 2,580 980 1,050 977 170 1,060 700 250 520 690 1,500 4,290 2,220 1,090 6,546 123 1,896 980 1,315 1,400 119 186 370 6,190 7,345 184 1,464 769 4,813 1,059 3,172 1,668 2,421 981 320 4,057 3,811 955 4,740 2,340 2,750 2,765 4,046 1,546 1,320 979 477 3,096 2,355 968 1,218 3,862 5,525 1,666 5,246 1,959 8,253 2,497 3,736 3,593 5,180 1,935 4,148 813 1,624 2,966 841 1,248 3,656 1,131 2,889 7,032 2010 2015 2007 2015 2015 2015 2015 2008 2010 2015 2016 1996 2005 2005 2010 2006 2008 2011 2015 2005 2002 2012 2011 2011 2011 2011 2011 2011 2003 1997 2013 2005 2011 2016 2010 2010 2011 2015 2010 2008 2012 2012 2011 2011 2010 2002 2004 2016 2013 2003 2013 2011 2011 2012 2003 2005 1999 5728 South 108th St. 2007 100 Weatherholt Drive 1996 1846 County Highway 48 2014 250 East Center Street 1996 1403 Laing St 2003 1520 Parker Ave 2007 2250 S Elm St 2009 12000 Lamar Avenue 1988 6101 W 119th St 2004 14430 Metcalf Ave 2015 7600 Antioch Road 1996 12807 E. 86th Place N. 1964 1205 Leitchfield Rd. 1979 905 Hwy. 127 N. 2001 701 Market St 2005 1625 W. Spring St. 2010 50 Town Ct. 2005 6012 Magnolia Beach Road 2000 601 N. East Street 2006 750 N Collegiate Dr 1998 1919 Creston Rd. 2002 2602 Fifield Road 2000 143 West Franklin Avenue 1985 5101 North Park Drive 1997 965 Hager Dr 1952 1526 Lombard Street 1992 290 Red School Lane 1905 843 Wilbur Avenue 1998 17 Regional Dr. 1997 1744 W. High St. 2017 10 Sterling Drive 1998 100 Knoedler Rd. 1963 150 Sunnyside Blvd 2016 3325 W Plano Parkway 1999 1913 E. Highway 34 1972 14707 Northville Rd 2001 155 Raymond Road 2003 4685 Park Nicollet Avenue 1985 123 Fourth Ave. NW 2017 4030 Cardinal at North Hills St 2002 5301 Creedmoor Road 1988 7900 Creedmoor Road 1994 5501 Perkiomen Ave 1997 One Hartford Dr. 1999 36101 Seaside Blvd 1998 2931 Vance St. 1998 5165 Summit Ridge Road 2015 400 Industries Road 1989 2220 Edward Holland Drive 1997 410 Orchard Park 1994 111 Huntoon Memorial Highway 1960 1253 Hartford Turnpike 2002 260 Maple Ave 2014 720 E Ralph Hall Parkway 1996 60 Cold Spring Rd. 1986 4855 Snyder Lane Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Romeoville, IL . . . . . . . . Roseville, MN . . . . . . . . . Roswell, GA . . . . . . . . . . Rugeley, UKG . . . . . . . . Ruston, LA . . . . . . . . . . . Sacramento, CA . . . . . . . Salem, OR . . . . . . . . . . . . Salisbury, NC . . . . . . . . . San Angelo, TX . . . . . . . San Angelo, TX . . . . . . . San Antonio, TX . . . . . . . San Bernardino, CA . . . . San Diego, CA . . . . . . . . Sanatoga, PA . . . . . . . . . Sand Springs, OK . . . . . . Sarasota, FL . . . . . . . . . . Sarasota, FL . . . . . . . . . . Scranton, PA . . . . . . . . . . Scranton, PA . . . . . . . . . . Seattle, WA . . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — Seattle, WA . . . . . . . . . . . 27,180 Selbyville, DE . . . . . . . . . Seven Fields, PA . . . . . . . Severna Park, MD . . . . . . Shawnee, OK . . . . . . . . . Shelbyville, KY . . . . . . . Sherman, TX . . . . . . . . . . Shrewsbury, NJ . . . . . . . . Silvis, IL . . . . . . . . . . . . . Sittingbourne, UKJ . . . . . Smithfield, NC . . . . . . . . Smithfield, NC . . . . . . . . Sonoma, CA . . . . . . . . . . South Bend, IN . . . . . . . . South Boston, MA . . . . . Southampton, UKJ . . . . . Southbury, CT . . . . . . . . Springfield, IL . . . . . . . . Springfield, IL . . . . . . . . St. Louis, MO . . . . . . . . . St. Paul, MN . . . . . . . . . . Stafford, UKG . . . . . . . . Stamford, UKF . . . . . . . . Statesville, NC . . . . . . . . Statesville, NC . . . . . . . . Statesville, NC . . . . . . . . Stillwater, OK . . . . . . . . . Stockton, CA . . . . . . . . . Stratford-upon-Avon, UKG . . . . . . . . . . . . . . Stroudsburg, PA . . . . . . . Summit, NJ . . . . . . . . . . . Sunninghill, UKJ . . . . . . Superior, WI . . . . . . . . . . Swanton, OH . . . . . . . . . Terre Haute, IN . . . . . . . . Texarkana, TX . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,895 2,140 1,107 1,900 710 940 449 370 260 1,050 — 3,700 — 980 910 475 3,360 440 320 5,190 10,670 750 484 2,120 80 630 700 2,120 880 1,357 290 360 1,100 670 385 1,612 1,860 — 990 1,890 2,100 2,131 1,820 150 310 140 80 2,280 790 340 3,080 12,338 1,020 330 1,370 192 — 24,679 9,627 10,262 9,790 14,781 5,171 5,697 8,800 24,689 17,303 14,300 22,003 30,695 19,654 3,175 19,140 17,609 12,144 9,350 37,291 25,912 4,663 31,273 1,400 3,870 5,221 38,116 16,420 6,539 5,680 8,216 18,400 17,770 2,002 16,803 23,613 10,100 13,378 12,390 33,019 8,739 3,238 1,447 6,183 3,627 1,400 5,983 14,508 16,313 14,152 44,799 13,735 6,370 18,016 1,403 — 24,746 10,706 11,253 9,790 15,020 5,172 5,865 9,225 25,741 17,303 14,987 23,848 30,787 19,654 3,175 19,140 17,609 12,144 9,905 38,155 26,308 4,722 32,081 1,400 4,500 5,221 39,188 16,559 7,170 5,680 8,216 20,090 17,770 7,220 16,803 24,571 9,332 14,462 12,390 33,097 8,739 3,551 1,713 6,191 3,627 1,400 6,288 15,910 16,313 14,152 44,799 19,894 6,370 18,016 1,403 — 67 1,086 1,175 — 251 — 168 425 1,052 — 687 1,845 92 — — — — — 564 894 415 60 808 — 630 — 1,080 139 763 — — 1,700 — 5,218 — 958 — 1,084 — 78 — 489 266 8 — — 397 1,478 — — — 6,159 — — — 1,895 2,140 1,114 2,083 710 952 449 370 260 1,050 — 3,700 — 980 910 475 3,360 440 320 5,199 10,700 769 484 2,120 80 630 700 2,128 880 1,488 290 360 1,109 670 385 1,612 1,860 768 990 1,890 2,100 2,131 1,996 150 310 140 80 2,372 866 340 3,080 12,338 1,020 330 1,370 192 124 — 1,391 7,942 1,387 1,842 3,718 2,585 2,284 3,122 2,358 7,106 3,490 5,472 5,551 2,832 1,843 3,179 1,533 1,059 3,373 11,465 4,848 2,364 5,756 804 1,474 1,555 7,156 3,247 573 2,228 715 6,758 1,604 3,652 114 4,300 1,682 1,292 2,354 1,843 294 303 710 2,365 1,416 806 1,821 1,123 1,573 2,633 600 2,361 2,392 1,408 781 2006 2015 1997 2013 2011 2010 1999 2003 2004 2014 2007 2008 2008 2011 2012 1996 2011 2014 2014 2010 2010 2010 1999 2011 1996 2005 2005 2010 2010 2014 2003 2014 2005 2014 1995 2017 2011 2013 2014 2010 2015 2014 2014 2003 2003 2003 1995 2010 2015 2014 2011 2014 2009 2004 2015 1996 1900 Grand Haven Circle 1989 2750 North Victoria Street 1999 655 Mansell Rd. 2010 Horse Fair 1988 1401 Ezelle St 1978 6350 Riverside Blvd 1998 1355 Boone Rd. S.E. 1997 2201 Statesville Blvd. 1997 2695 Valleyview Blvd. 1999 6101 Grand Court Road 2007 8902 Floyd Curl Dr. 1993 1760 W. 16th St. 1992 555 Washington St. 1993 225 Evergreen Road 2002 4402 South 129th Avenue West 1995 8450 McIntosh Rd. 2006 6150 Edgelake Drive 2005 2741 Blvd. Ave 2013 2751 Boulevard Ave 1962 11501 15th Ave NE 2005 805 4th Ave N 2008 21111 Arrington Dr 1999 500 Seven Fields Blvd. 1981 24 Truckhouse Road 1995 3947 Kickapoo 1965 1871 Midland Trail 2006 1011 E. Pecan Grove Rd. 2000 5 Meridian Way 2005 1900 10th St. 1997 200 London Road 1998 830 Berkshire Rd. 1999 250 Highway 210 West 1988 800 Oregon St. 2014 52565 State Road 933 1961 804 E. Seventh St. 2013 Botley Road, Park Gate 2001 655 Main St 2010 701 North Walnut Street 2013 3089 Old Jacksonville Road 1963 6543 Chippewa St 1996 750 Mississippi River 2016 Stone Road 1998 Priory Road 1990 2441 E. Broad St. 1996 2806 Peachtree Place 1999 2814 Peachtree Rd. 1995 1616 McElroy Rd. 1988 6725 Inglewood 2012 Scholars Lane 2011 370 Whitestone Corner Road 2001 41 Springfield Avenue 2017 Bagshot Road 2010 1915 North 34th Street 1950 401 W. Airport Hwy. 2015 395 8th Avenue 1996 4204 Moores Lane Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address The Villages, FL . . . . . . . Thomasville, GA . . . . . . Tomball, TX . . . . . . . . . . Toms River, NJ . . . . . . . . Tonganoxie, KS . . . . . . . Topeka, KS . . . . . . . . . . . Towson, MD . . . . . . . . . . Troy, OH . . . . . . . . . . . . . Troy, OH . . . . . . . . . . . . . Trumbull, CT . . . . . . . . . Tulsa, OK . . . . . . . . . . . . Tulsa, OK . . . . . . . . . . . . Tulsa, OK . . . . . . . . . . . . Tulsa, OK . . . . . . . . . . . . — — — — — — — — — — — — — — Tulsa, OK . . . . . . . . . . . . 13,000 Tulsa, OK . . . . . . . . . . . . Tyler, TX . . . . . . . . . . . . Upper Providence, PA . . Vacaville, CA . . . . . . . . . Vallejo, CA . . . . . . . . . . . Vallejo, CA . . . . . . . . . . . Valparaiso, IN . . . . . . . . . Valparaiso, IN . . . . . . . . . Vancouver, WA . . . . . . . Venice, FL . . . . . . . . . . . Vero Beach, FL . . . . . . . . Vero Beach, FL . . . . . . . . Virginia Beach, VA . . . . Voorhees, NJ . . . . . . . . . Voorhees, NJ . . . . . . . . . Voorhees, NJ . . . . . . . . . Voorhees, NJ . . . . . . . . . Wabash, IN . . . . . . . . . . . Waconia, MN . . . . . . . . . Wake Forest, NC . . . . . . Wall, NJ . . . . . . . . . . . . . Walsall, UKG . . . . . . . . . Wamego, KS . . . . . . . . . . Wareham, MA . . . . . . . . Warren, NJ . . . . . . . . . . . Watchung, NJ . . . . . . . . . Waukee, IA . . . . . . . . . . . Waxahachie, TX . . . . . . . Weatherford, TX . . . . . . . Wellingborough, UKF . . West Bend, WI . . . . . . . . West Chester, PA . . . . . . West Orange, NJ . . . . . . . Westerville, OH . . . . . . . Westfield, IN . . . . . . . . . Westfield, NJ . . . . . . . . . Weston Super Mare, UKK . . . . . . . . . . . . . . White Lake, MI . . . . . . . . Wichita, KS . . . . . . . . . . Wichita, KS . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Wichita, KS . . . . . . . . . . 13,001 1,035 530 1,050 1,610 310 260 1,180 200 470 4,440 3,003 1,390 1,320 1,100 1,752 890 650 1,900 900 4,000 2,330 112 108 1,820 1,150 263 297 1,540 1,800 1,900 3,100 3,700 670 890 200 1,650 1,184 40 875 2,000 1,920 1,870 650 660 1,480 620 1,350 2,280 740 890 2,270 2,517 2,920 1,400 860 627 7,446 12,520 13,300 34,627 3,690 12,712 13,280 2,000 16,730 43,384 6,025 7,110 10,087 27,007 28,421 9,410 5,268 28,195 17,100 18,000 15,407 2,558 2,962 19,042 10,674 3,187 3,263 22,593 37,299 26,040 25,950 24,312 14,588 14,726 3,003 25,350 8,562 2,510 10,313 30,810 24,880 31,878 5,763 5,261 5,724 17,790 29,237 10,687 8,287 15,964 16,589 7,054 20,179 11,000 8,873 19,748 7,446 12,520 14,140 35,423 3,762 12,712 13,475 6,254 16,730 43,384 6,045 8,212 10,087 27,007 28,421 9,410 5,268 28,195 18,751 20,315 15,717 2,558 2,962 19,311 10,674 3,187 3,263 22,593 37,970 26,934 25,976 25,796 14,588 19,221 4,745 27,807 9,389 2,565 12,014 31,824 25,947 32,953 5,763 5,261 6,277 17,828 29,497 10,874 11,392 15,964 17,086 7,736 20,271 11,000 8,873 19,752 — — 840 865 72 — 195 4,254 — — 20 1,102 — — — — — — 1,651 2,344 310 — — 270 — — — — 671 894 26 1,631 — 4,495 1,742 2,499 942 55 1,701 1,014 1,138 1,075 — — 696 38 260 187 3,105 — 497 925 92 — — — 1,035 530 1,050 1,679 310 260 1,180 200 470 4,440 3,003 1,390 1,320 1,100 1,752 890 650 1,900 900 4,030 2,330 112 108 1,821 1,150 263 297 1,540 1,800 1,900 3,100 3,847 670 890 200 1,692 1,299 40 875 2,000 1,991 1,870 650 660 1,623 620 1,350 2,280 740 890 2,270 2,760 2,920 1,400 860 629 125 878 1,757 2,438 6,545 234 1,892 2,589 2,009 6,074 7,703 3,432 1,708 1,529 597 407 44 1,509 1,968 6,462 6,950 4,110 1,146 1,309 4,822 2,415 1,398 1,441 1,996 7,042 5,017 3,724 3,228 1,381 3,073 2,197 4,554 702 149 5,255 5,165 4,363 4,544 1,521 1,519 538 2,837 5,462 2,249 9,171 1,499 3,481 905 3,951 4,399 1,527 2,810 2013 2011 2011 2010 2015 2012 2011 1997 2004 2011 2006 2010 2011 2015 2017 2017 2006 2013 2005 2005 2010 2001 2001 2010 2008 2001 2001 2014 2011 2011 2011 2012 2014 2011 1998 2011 2015 2015 2002 2011 2011 2012 2007 2006 2015 2010 2011 2011 1998 2014 2011 2013 2010 2006 2011 2012 2014 2450 Parr Drive 2006 423 Covington Avenue 2001 1221 Graham Dr 2005 1587 Old Freehold Rd 2009 120 W 8th St 2011 1931 Southwest Arvonia Place 1973 7700 York Road 1997 81 S. Stanfield Rd. 1971 512 Crescent Drive 2001 6949 Main Street 1992 3219 S. 79th E. Ave. 1998 7220 S. Yale Ave. 2012 7902 South Mingo Road East 2017 18001 East 51st Street 2014 701 W 71st Street South 2009 7210 South Yale Avenue 2007 5550 Old Jacksonville Hwy. 2015 1133 Black Rock Road 1987 799 Yellowstone Dr. 1989 350 Locust Dr. 1990 2261 Tuolumne 1998 2601 Valparaiso St. 1999 2501 Valparaiso St. 2006 10011 NE 118th Ave 2009 1600 Center Rd. 1999 420 4th Ct. 1996 410 4th Ct. 1993 5520 Indian River Rd 1965 2601 Evesham Road 1985 3001 Evesham Road 2013 113 South Route 73 2013 311 Route 73 2013 20 John Kissinger Drive 2005 500 Cherry Street 1999 611 S. Brooks St. 2003 2021 Highway 35 2015 Little Aston Road 1996 1607 4th St 1989 50 Indian Neck Rd. 1999 274 King George Rd 2000 680 Mountain Boulevard 2007 1650 SE Holiday Crest Circle 2008 1329 Brown St. 2007 1818 Martin Drive 2015 159 Northampton 2011 2130 Continental Dr 1974 800 West Miner Street 1963 20 Summit Street 2001 690 Cooper Rd. 2013 937 E. 186th Street 1970 1515 Lamberts Mill Road 2011 141b Milton Road 2000 935 Union Lake Rd 1997 505 North Maize Road 2012 10604 E 13th Street North 2009 2050 North Webb Road Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Wichita, KS . . . . . . . . . . Wichita, KS . . . . . . . . . . Williamstown, KY . . . . . Wilmington, DE . . . . . . . Wilmington, NC . . . . . . . Wilmington, NC . . . . . . . Windsor, CT . . . . . . . . . . Windsor, CT . . . . . . . . . . Winston-Salem, NC . . . . Winter Garden, FL . . . . . Witherwack, UKC . . . . . Wolverhampton, UKG . . Woodbury, MN . . . . . . . . Worcester, MA . . . . . . . . Worcester, MA . . . . . . . . Wyncote, PA . . . . . . . . . . York, UKE . . . . . . . . . . . Youngsville, NC . . . . . . . — — — — — — — — — — — — — — — — — — 260 900 70 800 210 400 2,250 1,800 360 1,110 944 1,573 1,317 3,500 2,300 2,700 2,961 380 2,240 10,134 6,430 9,494 2,991 15,356 8,539 600 2,514 7,937 6,915 6,678 20,935 54,099 9,060 22,244 8,266 10,689 114 — — 114 — — 1,855 970 459 — 759 797 — — 6,000 274 1,085 — 260 900 70 800 210 400 2,250 1,800 360 1,110 1,035 1,725 1,317 3,500 2,300 2,700 3,247 380 2,354 10,134 6,430 9,608 2,991 15,356 10,394 1,570 2,973 7,937 7,583 7,323 20,935 54,099 15,060 22,518 9,064 10,689 137 1,646 2,352 1,906 1,489 1,401 2,104 470 1,199 1,145 888 865 454 11,586 3,152 4,282 758 950 Zionsville, IN . . . . . . . . . $ — $ 1,610 $ 22,400 $ 1,691 $ 1,610 $ 24,091 $ 4,523 Triple-net total . . . . . . . $343,361 $818,863 $7,759,508 $382,344 $847,780 $8,112,937 $1,380,023 2015 2011 2005 2011 1999 2014 2011 2011 2003 2012 2013 2013 2017 2007 2008 2011 2014 2014 2010 1992 900 N Bayshore Dr 2012 10600 E 13th Street North 1987 201 Kimberly Lane 1970 810 S Broom Street 1999 3501 Converse Dr. 2012 3828 Independence Blvd 1969 One Emerson Drive 1974 One Emerson Drive 1996 2980 Reynolda Rd. 2013 720 Roper Road 2009 Whitchurch Road 2011 378 Prestonwood Road 2015 2195 Century Avenue South 2009 101 Barry Road 1993 378 Plantation St. 1960 1245 Church Road 2006 Rosetta Way, Boroughbridge Road 2013 100 Sunset Drive 2009 11755 N Michigan Rd 126 Welltower Inc. Schedule III Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Seniors housing operating: Acton, MA . . . . . . . . . . . $ — $ — $ Adderbury, UKJ . . . . . . . Agawam, MA . . . . . . . . . Albuquerque, NM . . . . . . Alhambra, CA . . . . . . . . . Altrincham, UKD . . . . . . Amherstview, ON . . . . . . Arlington, VA . . . . . . . . . Arlington, TX . . . . . . . . . Arnprior, ON . . . . . . . . . . Atlanta, GA . . . . . . . . . . . Austin, TX . . . . . . . . . . . Austin, TX . . . . . . . . . . . Avon, CT . . . . . . . . . . . . Azusa, CA . . . . . . . . . . . . Bagshot, UKJ . . . . . . . . . Banstead, UKJ . . . . . . . . . Basingstoke, UKJ . . . . . . Basking Ridge, NJ . . . . . Bassett, UKJ . . . . . . . . . . Bath, UKK . . . . . . . . . . . — — — — — 583 — 20,668 303 — — — — — — — — — — — Baton Rouge, LA . . . . . . 9,017 Beaconsfield, UKJ . . . . . Beaconsfield, QC . . . . . . Bedford, NH . . . . . . . . . . Bee Cave, TX . . . . . . . . . Bellevue, WA . . . . . . . . . Belmont, CA . . . . . . . . . . Belmont, CA . . . . . . . . . . — — — — — — — Berkeley, CA . . . . . . . . . 12,433 Bethesda, MD . . . . . . . . . Bethesda, MD . . . . . . . . . Bethesda, MD . . . . . . . . . Billerica, MA . . . . . . . . . Birmingham, UKG . . . . . Birmingham, UKG . . . . . Birmingham, UKG . . . . . Blainville, QC . . . . . . . . . Bloomfield Hills, MI . . . . Borehamwood, UKH . . . Bothell, WA . . . . . . . . . . Boulder, CO . . . . . . . . . . Bournemouth, UKK . . . . Braintree, MA . . . . . . . . . Brampton, ON . . . . . . . . . Brighton, MA . . . . . . . . . Brockport, NY . . . . . . . . — — — — — — — — — — — — — — 2,274 880 1,270 600 4,244 473 8,385 1,660 788 2,100 1,560 4,200 1,550 570 4,960 6,695 3,420 2,356 4,874 2,855 790 5,566 1,149 2,527 1,820 2,800 3,000 — 3,050 — — — 1,619 4 1,480 2,807 2,077 2,000 5,367 1,350 2,994 5,527 — 45,677 9,911 — 10,256 2,100 1,500 31,346 13,222 10,044 20,837 6,305 25,187 4,446 31,198 37,395 6,283 20,603 21,413 74,850 30,571 3,141 29,881 55,113 18,853 37,710 32,304 12,485 29,436 50,952 17,484 28,748 21,084 19,004 23,526 35,300 32,677 45,309 45 212 21,381 21,321 13,014 11,313 8,902 35,662 41,937 13,439 27,458 42,547 41,290 60,021 14,616 23,496 $ 1,484 $ 14 $ — 671 1,824 9,025 3,246 770 15,714 3,110 961 1,167 185 510 3,806 7,769 3,750 7,232 2,220 1,359 5,617 — 612 5,591 2,304 2,105 708 2,072 2,254 1,837 3,757 593 489 871 753 2,252 1,500 1,449 1,398 767 5,041 4,808 2,065 5,311 862 5,524 1,391 503 2,274 959 1,276 600 4,654 537 8,385 1,709 880 2,154 1,560 4,200 1,588 570 5,445 7,342 3,750 2,395 5,358 2,855 842 6,115 1,335 2,548 1,820 2,816 3,000 37 3,050 3 — — 1,624 30 1,623 3,078 2,306 2,008 5,900 1,361 3,022 6,061 56 11,107 2,109 1,705 127 32,816 13,222 10,636 22,655 15,330 28,023 5,152 46,912 40,456 7,152 21,717 21,598 75,361 34,339 10,910 33,146 61,698 20,742 39,031 37,436 12,485 29,996 55,993 19,602 30,832 21,792 21,060 25,780 37,100 36,434 45,900 534 1,083 22,130 23,547 14,371 12,491 10,071 36,421 46,445 18,237 29,495 47,324 42,097 64,694 15,998 23,794 $ 5,154 280 2,802 5,732 1,776 5,255 717 — 9,983 1,435 3,478 2,408 6,004 9,420 3,003 6,692 10,975 2,112 6,952 7,099 237 5,264 9,757 4,833 4,927 1,755 4,586 6,244 6,940 3,323 8,359 67 128 2,501 4,629 423 335 2,907 6,477 8,293 1,626 6,557 6,943 7,828 8,646 4,149 3,164 2013 2015 2011 2010 2011 2012 2015 2017 2012 2013 2014 2014 2015 2011 1998 2012 2012 2014 2013 2013 2015 2013 2013 2013 2011 2016 2013 2011 2013 2016 2013 2013 2013 2015 2013 2015 2015 2013 2013 2012 2015 2013 2013 2013 2015 2011 2015 2000 10 Devon Drive 2017 Banbury Road 1996 153 Cardinal Drive 1984 500 Paisano St NE 1923 1118 N. Stoneman Ave. 2009 295 Hale Road 1974 4567 Bath Road 1992 900 N Taylor Street 2000 1250 West Pioneer Parkway 1991 15 Arthur Street 2000 1000 Lenox Park Blvd NE 2013 11330 Farrah Lane 2014 4310 Bee Caves Road 1998 101 Bickford Extension 1953 125 W. Sierra Madre Ave. 2009 14 - 16 London Road 2005 Croydon Lane 2012 Grove Road 2002 404 King George Road 2006 111 Burgess Road 2017 Clarks Way, Rush Hill 2009 9351 Siegen Lane 2009 30-34 Station Road 2008 505 Elm Avenue 2012 5 Corporate Drive 2014 14058 A Bee Cave Parkway 1998 15928 NE 8th Street 1971 1301 Ralston Avenue 2002 1010 Alameda de Las Pulgas 1966 2235 Sacramento Street 2009 8300 Burdett Road 2009 8300 Burdett Road 2009 8300 Burdett Road 2000 20 Charnstaffe Lane 2006 5 Church Road, Edgbaston 2016 47 Bristol Road South 2016 134 Jockey Road 2008 50 des Chateaux Boulevard 2009 6790 Telegraph Road 2003 Edgwarebury Lane 1988 10605 NE 185th Street 2003 3955 28th Street 2008 42 Belle Vue Road 2007 618 Granite Street 2009 100 Ken Whillans Drive 1995 50 Sutherland Road 1999 90 West Avenue Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Brockville, ON . . . . . . . . 4,808 Brookfield, CT . . . . . . . . Broomfield, CO . . . . . . . — — Brossard, QC . . . . . . . . . . 11,807 Buckingham, UKJ . . . . . . Buffalo Grove, IL . . . . . . Burbank, CA . . . . . . . . . . — — — Burbank, CA . . . . . . . . . . 19,593 Burleson, TX . . . . . . . . . . Burlingame, CA . . . . . . . — — Burlington, ON . . . . . . . . 13,151 Burlington, MA . . . . . . . . Burlington, MA . . . . . . . . Calabasas, CA . . . . . . . . . Calgary, AB . . . . . . . . . . Calgary, AB . . . . . . . . . . Calgary, AB . . . . . . . . . . Calgary, AB . . . . . . . . . . Calgary, AB . . . . . . . . . . Camberley, UKJ . . . . . . . Camberley, UKJ . . . . . . . Cardiff, UKL . . . . . . . . . . — — — 12,898 14,751 11,678 23,927 26,364 — — — Cardiff by the Sea, CA . . 37,915 Carol Stream, IL . . . . . . . Carrollton, TX . . . . . . . . . Cary, NC . . . . . . . . . . . . . Cedar Park, TX . . . . . . . . Centerville, MA . . . . . . . Cerritos, CA . . . . . . . . . . — — — — — — Chatham, ON . . . . . . . . . 1,253 Chelmsford, MA . . . . . . . Chertsey, UKJ . . . . . . . . . Chesterfield, MO . . . . . . Chorleywood, UKH . . . . Chula Vista, CA . . . . . . . Church Crookham, UKJ . . . . . . . . . . . . . . . Cincinnati, OH . . . . . . . . Claremont, CA . . . . . . . . Cohasset, MA . . . . . . . . . Colleyville, TX . . . . . . . . Colorado Springs, CO . . . Concord, NH . . . . . . . . . . — — — — — — — — — — — — Coquitlam, BC . . . . . . . . 10,477 Costa Mesa, CA . . . . . . . Crystal Lake, IL . . . . . . . Dallas, TX . . . . . . . . . . . . Danvers, MA . . . . . . . . . . Danvers, MA . . . . . . . . . . Davenport, IA . . . . . . . . . Decatur, GA . . . . . . . . . . — — — — — — — Denver, CO . . . . . . . . . . . 12,033 Denver, CO . . . . . . . . . . . Dix Hills, NY . . . . . . . . . Dollard-Des-Ormeaux, QC . . . . . . . . . . . . . . . . — — — 484 2,250 4,140 5,499 2,979 2,850 4,940 3,610 3,150 — 1,309 2,443 2,750 — 2,252 2,793 3,122 3,431 2,385 2,654 731 3,191 5,880 1,730 4,280 740 1,750 1,300 — 1,098 1,589 — 1,857 5,636 7,445 30,180 44,547 31,854 13,880 49,129 43,466 50,817 10,437 62,786 19,311 34,354 57,488 6,438 37,415 41,179 38,971 28,983 36,776 5,736 3,164 12,566 64,711 55,048 31,444 45,240 15,664 27,357 27,494 12,462 26,432 105 48,366 43,191 1,040 2,422 11,669 3,168 1,764 1,272 1,324 3,284 626 — 2,496 1,350 3,167 977 4,862 4,956 4,817 4,572 4,457 19,242 — 1,786 1,925 1,723 941 635 759 1,113 5,633 2,960 1,214 — 1,299 6,324 543 2,262 10,135 5,912 3,267 2,850 4,940 3,610 3,150 — 1,453 2,522 2,750 — 2,492 3,098 3,464 3,810 2,642 7,914 731 3,499 5,880 1,730 4,280 740 1,750 1,324 — 1,290 1,651 — 1,917 6,184 8,426 32,590 50,221 34,609 15,356 50,401 44,790 54,101 11,063 62,786 21,663 35,626 60,655 7,415 42,036 45,831 43,446 33,176 40,978 19,717 3,164 14,043 66,636 56,771 32,385 45,875 16,422 28,446 33,127 15,230 27,585 105 49,605 48,967 1,034 8,207 14,474 4,674 2,047 9,134 9,465 4,187 1,049 980 4,163 6,963 3,673 5,256 8,321 8,857 8,314 5,378 5,167 624 24 3,315 14,057 11,184 3,353 7,154 649 6,327 3,641 2,947 2,988 — 8,273 8,985 2015 2011 2013 2015 2014 2012 2012 2016 2012 2016 2013 2013 2016 2013 2013 2013 2013 2013 2015 2014 2014 2013 2011 2012 2013 2013 2016 2011 2016 2015 2015 2015 2013 2013 1996 1026 Bridlewood Drive 1999 246A Federal Road 2009 400 Summit Blvd 1989 2455 Boulevard Rome 1883 Church Street 2003 500 McHenry Road 2002 455 E. Angeleno Avenue 1985 2721 Willow Street 2014 621 Old Highway 1187 2015 1818 Trousdale Avenue 1990 500 Appleby Line 2005 24 Mall Road 2011 50 Greenleaf Way 1972 25100 Calabasas Road 2003 20 Promenade Way SE 1998 80 Edenwold Drive NW 1998 150 Scotia Landing NW 1989 9229 16th Street SW 2006 2220-162nd Avenue SW 2016 Fernhill Road 2017 Fernhill Road 2007 127 Cyncoed Road 2009 3535 Manchester Avenue 2001 545 Belmont Lane 2010 2105 North Josey Lane 2009 1206 West Chatham Street 2015 800 C-Bar Ranch Trail 1998 22 Richardson Road 2002 11000 New Falcon Way 1965 25 Keil Drive North 1997 199 Chelmsford Street 1900 Bittams Lane 2001 1880 Clarkson Road 2007 High View, Rickmansworth Road 2,072 22,163 863 2,128 22,970 4,259 2013 2003 3302 Bonita Road 2,591 2,060 2,430 2,485 1,050 800 720 3,047 2,050 875 6,330 1,120 2,203 1,403 1,946 1,450 2,910 3,808 14,215 109,388 9,928 26,147 17,082 14,756 21,164 24,567 19,969 12,461 114,794 14,557 28,761 35,893 26,575 19,389 35,838 39,014 1,957 14,431 2,855 2,078 2,483 2,487 1,050 1,017 779 3,375 2,050 893 6,330 1,145 2,257 1,480 1,946 1,470 2,962 3,824 15,783 122,485 11,249 27,903 17,122 16,341 21,893 27,507 21,289 13,701 2,283 22,924 2,373 5,172 459 3,010 4,812 6,467 5,139 3,023 115,993 10,306 15,576 28,983 39,448 28,656 22,489 37,246 40,428 3,873 3,667 9,192 5,798 4,114 8,399 7,473 2014 2007 2013 2013 2016 2013 2011 2013 2011 2013 2015 2011 2015 2006 2013 2012 2012 2013 2014 Bourley Road 2010 5445 Kenwood Road 2001 2053 North Towne Avenue 1998 125 King Street (Rt 3A) 2013 8100 Precinct Line Road 2001 2105 University Park Boulevard 2001 300 Pleasant Street 1990 1142 Dufferin Street 1965 350 West Bay St 2001 751 E Terra Cotta Avenue 2013 3535 N Hall Street 2000 1 Veronica Drive 1997 9 Summer Street 2009 4500 Elmore Ave. 1998 920 Clairemont Avenue 1997 4901 South Monaco Street 2007 8101 E Mississippi Avenue 2003 337 Deer Park Road 2,222 16,149 4,757 2013 2008 4377 St. Jean Blvd 1,832 13,115 1,375 1,758 40 1,801 789 3,268 1,320 1,259 1,199 1,045 276 3,632 2,080 3,119 1,459 1,430 1,982 128 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Dresher, PA . . . . . . . . . . . 6,966 Dublin, OH . . . . . . . . . . . Dublin, OH . . . . . . . . . . . East Haven, CT . . . . . . . . East Meadow, NY . . . . . . East Setauket, NY . . . . . . Eastbourne, UKJ . . . . . . . Edgbaston, UKG . . . . . . . Edgewater, NJ . . . . . . . . . Edison, NJ . . . . . . . . . . . . Edmonds, WA . . . . . . . . . Edmonton, AB . . . . . . . . Edmonton, AB . . . . . . . . Encinitas, CA . . . . . . . . . Encino, CA . . . . . . . . . . . Escondido, CA . . . . . . . . Esher, UKJ . . . . . . . . . . . Fairfax, VA . . . . . . . . . . . Fairfield, NJ . . . . . . . . . . Fareham, UKJ . . . . . . . . . Flossmoor, IL . . . . . . . . . Folsom, CA . . . . . . . . . . . Fort Worth, TX . . . . . . . . Fort Worth, TX . . . . . . . . Franklin, MA . . . . . . . . . Frome, UKK . . . . . . . . . . Fullerton, CA . . . . . . . . . Gahanna, OH . . . . . . . . . — — — — — — — — — — 9,439 12,242 — — — — — — — — — — — — — — — Gilbert, AZ . . . . . . . . . . . 15,747 Gilroy, CA . . . . . . . . . . . Glen Cove, NY . . . . . . . . Glenview, IL . . . . . . . . . . — — — Golden Valley, MN . . . . . 19,022 Granbury, TX . . . . . . . . . Grimsby, ON . . . . . . . . . . Grosse Pointe Woods, MI . . . . . . . . . . . . . . . . Grosse Pointe Woods, MI . . . . . . . . . . . . . . . . — — — — Guelph, ON . . . . . . . . . . . 4,486 Guildford, UKJ . . . . . . . . Gurnee, IL . . . . . . . . . . . . Hamden, CT . . . . . . . . . . Hampshire, UKJ . . . . . . . Haverhill, MA . . . . . . . . . Henderson, NV . . . . . . . . Henderson, NV . . . . . . . . High Wycombe, UKJ . . . Highland Park, IL . . . . . . Hingham, MA . . . . . . . . . Holbrook, NY . . . . . . . . . Horley, UKJ . . . . . . . . . . Houston, TX . . . . . . . . . . — — — — — — — — — — — — — 1,900 1,680 1,169 2,660 69 4,920 4,145 2,720 4,561 1,892 1,650 1,589 2,063 1,460 5,040 1,520 5,783 19 3,120 3,408 1,292 1,490 2,080 1,740 2,430 2,720 1,964 772 2,160 760 4,594 2,090 1,520 2,040 636 10,664 43,423 25,345 35,533 45,991 37,354 33,744 13,969 25,047 32,314 24,449 29,819 37,293 7,721 46,255 24,024 48,361 2,678 43,868 17,970 9,496 32,754 27,888 19,799 30,597 14,813 19,989 11,214 28,246 13,880 35,236 69,288 33,513 30,670 5,617 950 13,662 1,430 1,190 5,361 890 1,460 4,172 1,720 880 1,190 3,784 2,250 1,440 31,777 7,597 56,494 27,931 24,093 26,035 50,046 29,809 11,600 14,191 25,313 32,292 3,957 35,337 2,332 3,830 12,144 55,674 1,914 1,847 1,169 2,681 124 4,975 4,557 2,983 4,564 1,905 1,651 1,778 2,281 1,460 5,040 1,520 6,346 53 3,175 3,743 1,339 1,490 2,093 1,740 2,458 2,983 1,998 787 2,176 1,578 4,634 2,090 1,545 2,040 708 11,547 49,685 25,345 38,621 47,296 38,648 37,224 15,386 26,393 33,764 27,113 33,520 42,023 10,667 48,185 25,382 53,118 2,883 44,937 19,960 11,082 32,791 31,513 20,811 33,053 16,411 20,792 12,537 29,179 37,875 36,857 72,045 34,614 31,172 6,348 3,259 12,524 452 11,385 8,545 7,038 7,009 1,130 5,108 8,522 2,679 6,718 10,604 4,504 9,720 6,200 9,005 822 8,407 2,442 2,631 3,354 7,915 1,610 5,582 1,747 4,094 2,302 7,465 10,084 8,125 13,683 6,045 5,475 885 2013 2010 2016 2011 2013 2013 2013 2014 2013 2013 2015 2013 2013 2000 2012 2011 2013 2013 2013 2014 2013 2015 2012 2016 2013 2014 2013 2013 2013 2006 2013 2012 2013 2011 2015 2006 1650 Susquehanna Road 1990 6470 Post Rd 2015 4175 Stoneridge Lane 2000 111 South Shore Drive 2002 1555 Glen Curtiss Boulevard 2002 1 Sunrise Drive 2008 6 Upper Kings Drive 2015 Pershore Road 2000 351 River Road 1996 1801 Oak Tree Road 1976 21500 72nd Avenue West 1999 103 Rabbit Hill Court NW 1968 10015 103rd Avenue NW 1988 335 Saxony Rd. 2003 15451 Ventura Boulevard 1987 1500 Borden Rd 2006 42 Copsem Lane 1991 9207 Arlington Boulevard 1998 47 Greenbrook Road 2012 Redlands Lane 2000 19715 Governors Highway 2014 1574 Creekside Drive 2001 2151 Green Oaks Road 2014 7001 Bryant Irvin Road 1999 4 Forge Hill Road 2012 Welshmill Lane 2008 2226 North Euclid Street 1998 775 East Johnstown Road 2008 580 S. Gilbert Road 2007 7610 Isabella Way 1998 39 Forest Avenue 2001 2200 Golf Road 2005 4950 Olson Memorial Highway 2009 100 Watermark Boulevard 1991 84 Main Street East 950 14,156 2,422 2013 2006 1850 Vernier Road 1,435 1,333 5,879 935 1,487 4,584 1,723 897 1,252 3,784 2,265 1,440 32,734 8,638 62,254 29,786 25,764 28,633 51,010 30,437 12,312 14,191 26,521 32,467 5,626 1,432 10,783 4,857 6,780 5,267 6,411 5,605 3,374 241 5,662 3,666 2013 2015 2013 2013 2011 2013 2015 2011 2013 2015 2013 2015 2005 21260 Mack Avenue 1978 165 Cole Road 2006 Astolat Way, Peasmarsh 2002 500 North Hunt Club Road 1999 35 Hamden Hills Drive 2006 22-26 Church Road 1997 254 Amesbury Road 2009 1935 Paseo Verde Parkway 2008 1555 West Horizon Ridge Parkway 2017 The Row Lane End 2005 1601 Green Bay Road 2012 1 Sgt. William B Terry Drive 4,021 36,382 6,615 2013 2001 320 Patchogue Holbrook Road 2,565 3,830 13,432 62,163 1,981 13,392 2014 2012 2014 Court Lodge Road 1998 2929 West Holcombe Boulevard 896 6,429 — 3,109 1,360 1,349 3,892 1,680 1,349 1,463 2,665 3,890 4,948 2,946 1,930 1,358 5,320 239 1,125 2,324 1,633 37 3,638 1,012 2,484 1,861 837 1,337 949 24,812 1,661 2,757 1,126 502 803 494 962 1,183 6,278 1,900 1,698 3,010 968 645 774 — 1,223 176 1,109 1,521 6,489 129 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Houston, TX . . . . . . . . . . 16,922 Houston, TX . . . . . . . . . . Huntington Beach, CA . . Irving, TX . . . . . . . . . . . . Johns Creek, GA . . . . . . . Kanata, ON . . . . . . . . . . . Kansas City, MO . . . . . . . Kansas City, MO . . . . . . . Kansas City, MO . . . . . . . Kelowna, BC . . . . . . . . . . Kennebunk, ME . . . . . . . Kingston, ON . . . . . . . . . Kingwood, TX . . . . . . . . Kingwood, TX . . . . . . . . — — — — — — 5,620 — 5,942 — 4,767 — — Kirkland, WA . . . . . . . . . 24,600 Kitchener, ON . . . . . . . . . Kitchener, ON . . . . . . . . . Kitchener, ON . . . . . . . . . 1,514 4,833 3,682 Kitchener, ON . . . . . . . . . 13,681 La Palma, CA . . . . . . . . . Lafayette Hill, PA . . . . . . Laguna Hills, CA . . . . . . Laguna Woods, CA . . . . . Laguna Woods, CA . . . . . Lake Zurich, IL . . . . . . . . Lawrenceville, GA . . . . . Leatherhead, UKJ . . . . . . Leawood, KS . . . . . . . . . Lenexa, KS . . . . . . . . . . . Leominster, MA . . . . . . . Lincroft, NJ . . . . . . . . . . . — — — — — — — — 15,021 9,396 — — Lombard, IL . . . . . . . . . . 16,297 London, UKI . . . . . . . . . . London, ON . . . . . . . . . . — 476 London, ON . . . . . . . . . . 12,381 London, ON . . . . . . . . . . — Longueuil, QC . . . . . . . . 10,257 Los Angeles, CA . . . . . . . — Los Angeles, CA . . . . . . . 61,460 Los Angeles, CA . . . . . . . Los Angeles, CA . . . . . . . Louisville, KY . . . . . . . . — — — Louisville, KY . . . . . . . . 10,775 Lynnfield, MA . . . . . . . . Malvern, PA . . . . . . . . . . Mansfield, MA . . . . . . . . Maple Ridge, BC . . . . . . Marieville, QC . . . . . . . . Markham, ON . . . . . . . . . Marlboro, NJ . . . . . . . . . . — — — 9,158 7,008 41,037 — Medicine Hat, AB . . . . . . 11,543 Melbourne, FL . . . . . . . . Memphis, TN . . . . . . . . . — — 1,040 1,750 3,808 1,030 1,580 1,689 1,820 1,930 541 2,688 2,700 1,030 480 1,683 3,450 708 1,130 1,093 1,341 2,950 1,750 12,820 11,280 9,150 1,470 1,500 4,967 2,490 826 944 9 2,130 3,121 987 1,969 1,445 3,992 — — 3,540 — 2,420 1,600 3,165 1,651 3,320 2,875 1,278 3,727 2,222 1,432 7,070 1,800 31,965 15,603 31,172 6,823 23,285 28,670 34,898 39,997 23,962 13,647 30,204 11,416 9,777 24,207 38,709 2,744 9,939 7,327 13,939 16,591 11,848 75,926 76,485 57,842 9,830 29,003 18,859 32,493 26,251 23,164 19,958 59,943 10,027 8,228 16,985 13,631 23,711 11,430 114,438 19,007 28,050 20,816 20,326 45,200 17,194 57,011 11,922 12,113 48,939 14,888 14,141 48,257 17,744 1,049 1,750 3,886 1,030 1,588 1,812 1,845 1,963 545 2,984 3,200 1,154 480 1,683 3,515 708 1,267 1,212 1,443 2,966 1,867 12,820 11,280 9,150 1,470 1,508 4,967 5,690 850 992 29 2,147 3,428 1,122 2,177 1,689 4,469 — — 3,540 — 2,420 1,600 3,165 1,739 3,447 3,095 1,419 4,161 2,250 1,591 7,070 1,800 37,517 16,867 33,523 8,331 23,863 31,189 39,443 44,333 24,131 15,453 34,442 12,928 10,857 26,655 39,491 3,138 11,169 8,239 17,901 17,398 13,945 87,838 86,414 64,206 12,770 29,672 18,859 33,091 27,173 23,763 21,391 61,316 11,179 9,517 19,650 15,331 27,428 13,554 7,104 738 7,290 2,428 4,448 5,491 10,363 11,808 2,418 3,689 11,037 1,574 2,524 496 7,883 727 2,307 2,164 1,974 3,346 3,430 6,020 6,754 5,550 4,074 5,615 226 7,993 5,665 2,958 3,979 10,789 1,391 1,321 2,795 1,917 3,623 3,397 116,346 25,572 21,257 30,010 22,321 20,973 47,226 18,910 65,149 12,860 13,110 54,564 15,918 15,372 77,110 19,221 4,179 2,169 4,614 4,334 8,848 4,875 15,871 1,306 1,453 13,923 3,273 2,746 14,328 4,957 2012 2016 2013 2007 2013 2012 2010 2010 2015 2013 2013 2015 2011 2017 2011 2013 2013 2013 2016 2013 2013 2016 2016 2016 2011 2013 2015 2012 2013 2015 2013 2013 2014 2015 2015 2015 2015 2008 2011 2012 2016 2012 2013 2013 2013 2011 2015 2015 2013 2013 2015 2007 2012 1999 505 Bering Drive 2014 10120 Louetta Road 2004 7401 Yorktown Avenue 1999 8855 West Valley Ranch Parkway 2009 11405 Medlock Bridge Road 2005 70 Stonehaven Drive 1980 12100 Wornall Road 1986 6500 North Cosby Ave 2014 6460 North Cosby Avenue 1999 863 Leon Avenue 2006 One Huntington Common Drive 1983 181 Ontario Street 1999 22955 Eastex Freeway 2012 24025 Kingwood Place 2009 14 Main Street South 1979 164 - 168 Ferfus Avenue 1988 20 Fieldgate Street 1964 290 Queen Street South 2003 1250 Weber Street E 2003 5321 La Palma Avenue 1998 429 Ridge Pike 1988 24903 Moulton Parkway 1987 24441 Calle Sonora 1986 24962 Calle Aragon 2007 550 America Court 2008 1375 Webb Gin House Road 2017 Rectory Lane 1999 4400 West 115th Street 2006 15055 West 87th Street Parkway 1999 1160 Main Street 2002 734 Newman Springs Road 2009 2210 Fountain Square Dr 2012 71 Hatch Lane 1989 760 Horizon Drive 1953 1486 Richmond Street North 1950 81 Grand Avenue 1989 70 Rue Levis 1971 330 North Hayworth Avenue 2009 10475 Wilshire Boulevard 2001 2051 N. Highland Avenue 2006 4061 Grand View Boulevard 1999 4600 Bowling Boulevard 2010 6700 Overlook Drive 2006 55 Salem Street 1998 324 Lancaster Avenue 1998 25 Cobb Street 2009 12241 224th Street 2002 425 rue Claude de Ramezay 1981 7700 Bayview Avenue 2002 3A South Main Street 1999 223 Park Meadows Drive SE 2009 7300 Watersong Lane 1999 6605 Quail Hollow Road 5,561 1,264 2,429 1,508 586 2,642 4,570 4,369 173 2,103 4,739 1,637 1,080 2,448 848 393 1,367 1,030 4,064 822 2,214 11,912 9,929 6,364 2,940 677 — 3,799 947 647 1,453 1,390 1,459 1,425 2,873 1,944 4,195 2,124 1,908 2,250 1,960 1,505 647 2,027 1,803 8,265 1,158 1,138 6,060 1,058 1,390 28,853 1,477 130 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Meriden, CT . . . . . . . . . . — Metairie, LA . . . . . . . . . . 12,773 Middletown, CT . . . . . . . Middletown, RI . . . . . . . . Milford, CT . . . . . . . . . . . Milton, ON . . . . . . . . . . . Minnetonka, MN . . . . . . . Minnetonka, MN . . . . . . . Mission Viejo, CA . . . . . Mississauga, ON . . . . . . . Mississauga, ON . . . . . . . Mississauga, ON . . . . . . . Mississauga, ON . . . . . . . Mobberley, UKD . . . . . . Monterey, CA . . . . . . . . . Montgomery Village, MD . . . . . . . . . . . . . . . — — — 15,391 13,654 15,651 14,118 9,409 3,169 30,008 6,471 — — — Moose Jaw, SK . . . . . . . . 2,476 Murphy, TX . . . . . . . . . . Mystic, CT . . . . . . . . . . . Naperville, IL . . . . . . . . . Naperville, IL . . . . . . . . . — — — — Naples, FL . . . . . . . . . . . . 57,022 Nashua, NH . . . . . . . . . . . Nashville, TN . . . . . . . . . Needham, MA . . . . . . . . . — — — Nepean, ON . . . . . . . . . . 6,045 New Braunfels, TX . . . . . Newbury, UKJ . . . . . . . . Newburyport, MA . . . . . . Newmarket, UKH . . . . . . Newton, MA . . . . . . . . . . — — — — — Newton, MA . . . . . . . . . . 15,227 Newton, MA . . . . . . . . . . Newtown Square, PA . . . — — Niagara Falls, ON . . . . . . 7,109 Niantic, CT . . . . . . . . . . . North Andover, MA . . . . North Chelmsford, MA . . . . . . . . . . . . . . . North Dartmouth, MA . . North Tustin, CA . . . . . . Oak Park, IL . . . . . . . . . . Oakland, CA . . . . . . . . . . Oakton, VA . . . . . . . . . . . Oakville, ON . . . . . . . . . . Oakville, ON . . . . . . . . . . Oakville, ON . . . . . . . . . . Oceanside, CA . . . . . . . . Okotoks, AB . . . . . . . . . . Oshawa, ON . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . — — — — — — — — 6,158 10,439 5,462 — 19,493 3,144 10,658 19,984 22,945 7,940 15,092 1,500 725 1,430 2,480 3,210 4,542 2,080 920 6,600 1,602 873 3,649 2,548 5,146 6,440 3,530 582 1,950 1,400 1,550 1,540 8,989 1,264 3,900 1,240 1,575 1,200 2,850 1,750 4,071 2,250 2,500 3,360 1,930 1,225 1,320 1,960 880 1,700 2,880 1,250 3,877 2,250 1,252 2,134 1,271 2,160 714 841 1,341 3,454 4,305 2,103 2,963 14,874 27,708 24,242 24,628 17,364 25,321 24,360 29,344 52,118 17,996 4,655 35,137 15,158 26,665 29,101 18,246 12,973 19,182 18,274 12,237 28,204 119,398 43,026 35,788 32,992 5,770 19,800 12,796 29,187 11,902 43,614 30,681 25,099 14,420 7,963 25,986 34,976 18,478 35,337 18,059 40,383 47,508 37,576 7,382 29,963 13,754 18,352 20,943 7,570 15,425 23,309 39,106 18,421 26,424 1,538 725 1,441 2,511 3,233 5,039 2,376 954 6,600 1,771 966 4,053 2,817 5,654 6,440 4,187 643 1,950 1,427 1,550 1,546 9,074 1,264 3,900 1,240 1,757 2,729 3,125 1,750 4,471 2,263 2,521 3,385 1,941 1,355 1,334 2,092 951 1,700 2,975 1,250 3,901 2,300 1,392 2,363 1,405 2,210 789 963 1,520 3,872 4,632 2,345 3,294 15,940 28,372 25,717 26,373 19,176 29,335 26,353 30,112 57,683 20,161 5,290 39,449 18,085 29,573 30,043 24,037 14,837 19,960 19,201 14,520 29,377 5,185 4,812 6,965 7,065 5,738 3,036 5,430 5,056 4,621 4,016 1,091 7,892 2,977 6,980 5,624 7,944 2,931 1,214 5,096 3,380 5,687 123,401 15,758 43,637 37,986 34,178 6,626 28,567 14,111 30,350 13,308 44,717 33,027 26,692 15,450 9,105 30,404 36,624 19,342 36,965 18,788 41,879 50,449 39,509 8,239 33,832 15,543 22,078 23,342 8,700 17,998 26,530 42,274 22,739 30,571 4,311 9,120 1,952 1,377 4,142 467 1,855 1,702 10,785 8,396 7,199 4,093 1,340 6,405 8,965 4,544 2,298 3,056 8,350 9,458 7,200 1,733 7,199 2,791 5,314 3,412 1,774 1,930 6,517 5,449 2,719 3,225 2011 2013 2011 2011 2011 2015 2012 2013 2016 2013 2013 2015 2015 2013 2013 2013 2013 2015 2011 2012 2013 2015 2015 2012 2016 2015 2011 2015 2016 2014 2011 2011 2011 2013 2015 2011 2011 2011 2016 2013 2012 2013 2013 2013 2013 2013 2011 2015 2013 2015 2015 2015 2015 2015 2001 511 Kensington Avenue 2009 3732 West Esplanade Ave. S 1999 645 Saybrook Road 1998 303 Valley Road 1999 77 Plains Road 2012 611 Farmstead Drive 1999 500 Carlson Parkway 2006 18605 Old Excelsior Blvd. 1998 27783 Center Drive 1984 1130 Bough Beeches Boulevard 1978 3051 Constitution Boulevard 1988 1490 Rathburn Road East 1989 85 King Street East 2007 Barclay Park, Hall Lane 2009 1110 Cass St. 1993 19310 Club House Road 2001 425 4th Avenue NW 2012 304 West FM 544 2001 20 Academy Lane Mystic 2013 1936 Brookdale Road 2002 535 West Ogden Avenue 2000 4800 Aston Gardens Way 1999 674 West Hollis Street 1999 4206 Stammer Place 2011 880 Greendale Avenue 1988 1 Mill Hill Road 2009 2294 East Common Street 2016 370 London Road 2015 4 Wallace Bashaw Junior Way 2011 Jeddah Way 1996 2300 Washington Street 1996 280 Newtonville Avenue 1994 430 Centre Street 2004 333 S. Newtown Street Rd. 1991 7860 Lundy’s Lane 2001 417 Main Street 1995 700 Chickering Road 1998 2 Technology Drive 1997 239 Cross Road 2000 12291 Newport Avenue 2004 1035 Madison Street 1999 11889 Skyline Boulevard 1997 2863 Hunter Mill Road 1982 289 and 299 Randall Street 1994 25 Lakeshore Road West 1988 345 Church Street 2005 3500 Lake Boulevard 2010 51 Riverside Gate 1991 649 King Street East 2001 110 Berrigan Drive 1966 2370 Carling Avenue 2005 751 Peter Morand Crescent 1989 1 Eaton Street 2008 691 Valin Street 1,103 663 1,487 1,777 1,835 4,512 2,289 803 5,565 2,334 728 4,715 3,195 3,417 942 6,448 1,925 778 954 2,283 1,178 4,088 611 2,198 1,186 1,038 10,296 1,591 1,162 1,806 1,116 2,367 1,618 1,041 1,272 4,432 1,780 935 1,628 825 1,496 2,965 1,983 996 4,098 1,924 3,776 2,475 1,252 2,752 3,639 3,494 4,560 4,480 131 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Ottawa, ON . . . . . . . . . . . Overland Park, KS . . . . . 11,412 14,405 19,417 3,112 2,266 10,914 4,994 6,500 9,796 3,336 Palo Alto, CA . . . . . . . . . 16,217 Paramus, NJ . . . . . . . . . . Parkland, FL . . . . . . . . . . Peabody, MA . . . . . . . . . Pembroke, ON . . . . . . . . Pittsburgh, PA . . . . . . . . . Placentia, CA . . . . . . . . . Plainview, NY . . . . . . . . . — 56,604 6,117 — — — — Plano, TX . . . . . . . . . . . . 27,671 Plano, TX . . . . . . . . . . . . Playa Vista, CA . . . . . . . . Plymouth, MA . . . . . . . . Plymouth, MA . . . . . . . . Port Perry, ON . . . . . . . . Port St. Lucie, FL . . . . . . Providence, RI . . . . . . . . Purley, UKI . . . . . . . . . . . Queensbury, NY . . . . . . . Quincy, MA . . . . . . . . . . Rancho Cucamonga, CA . . . . . . . . . . . . . . . . Rancho Palos Verdes, CA . . . . . . . . . . . . . . . . Randolph, NJ . . . . . . . . . Red Deer, AB . . . . . . . . . Red Deer, AB . . . . . . . . . Redondo Beach, CA . . . . Regina, SK . . . . . . . . . . . Regina, SK . . . . . . . . . . . Regina, SK . . . . . . . . . . . Renton, WA . . . . . . . . . . Ridgefield, CT . . . . . . . . Riviere-du-Loup, QC . . . Riviere-du-Loup, QC . . . Rocky Hill, CT . . . . . . . . Romeoville, IL . . . . . . . . Roseville, MN . . . . . . . . . Roseville, CA . . . . . . . . . Roswell, GA . . . . . . . . . . Sacramento, CA . . . . . . . — — — 13,462 9,905 — — — — — — — — 13,102 15,419 — 7,115 6,980 16,884 20,790 — 3,326 9,515 — — — — — — Saint-Lambert, QC . . . . . 37,529 10,259 Salem, NH . . . . . . . . . . . . Salinas, CA . . . . . . . . . . . Salisbury, UKK . . . . . . . . Salt Lake City, UT . . . . . San Antonio, TX . . . . . . . — — — — — 980 5,110 2,720 1,360 6,120 1,561 3,403 3,411 724 818 2,809 1,156 746 1,176 1,540 — 2,840 4,880 2,250 1,931 1,580 8,480 3,066 3,120 1,750 1,580 1,444 2,550 3,685 8,700 2,655 7,365 1,260 1,350 18,170 31,090 28,335 4,710 2,165 27,299 9,758 7,800 12,764 16,269 39,639 35,728 111,481 16,071 9,427 18,017 17,076 19,901 59,950 15,390 40,531 34,951 35,055 26,788 47,230 21,910 35,161 21,744 12,584 1,480 10,055 5,450 1,540 1,247 1,199 — 1,485 1,244 1,539 3,080 3,100 592 1,454 810 854 1,540 3,300 2,080 1,300 60,034 46,934 19,283 22,339 9,557 21,148 21,036 24,053 51,824 80,614 7,601 16,848 16,351 12,646 35,877 41,652 6,486 23,394 61,903 32,721 41,424 15,269 19,691 28,169 1,762 3,775 3,799 801 753 3,109 1,336 831 1,320 1,728 24 2,903 4,885 2,324 2,071 1,587 8,480 3,182 3,173 1,750 1,605 1,444 2,550 4,079 8,700 2,655 8,077 1,260 1,428 20,738 35,702 35,075 5,339 3,732 30,890 10,987 8,926 14,560 17,413 42,311 37,231 2,116 3,631 4,910 1,122 853 7,089 2,038 1,739 1,649 3,549 7,559 6,566 114,751 15,436 16,992 10,362 18,817 19,525 20,549 62,102 17,051 41,536 35,648 37,178 31,453 67,602 22,230 39,033 22,708 13,337 2,353 1,804 3,881 2,402 3,521 14,899 1,053 7,854 4,039 2,440 2,988 11,380 8,980 8,201 2,401 3,635 2015 2015 2015 2013 2013 2013 2013 2013 2015 2012 2013 2013 2015 2013 2012 2013 2016 2013 2013 2016 2013 2015 2016 2015 2008 2011 2012 2015 2011 2006 22 Barnstone Drive 2009 990 Hunt Club Road 2009 2 Valley Stream Drive 1995 1345 Ogilvie Road 1993 370 Kennedy Lane 1998 43 Aylmer Avenue 1998 1351 Hunt Club Road 1999 140 Darlington Private 1987 10 Vaughan Street 1998 9201 Foster 2007 2701 El Camino Real 1998 567 Paramus Road 2000 5999 University Drive 1994 73 Margin Street 1999 1111 Pembroke Street West 2009 900 Lincoln Club Dr. 1987 1180 N Bradford Avenue 2001 1231 Old Country Road 2006 4800 West Parker Road 2014 3690 Mapleshade Lane 2006 5555 Playa Vista Drive 1998 157 South Street 1970 60 Stafford Hill 2009 15987 Simcoe Street 2010 10685 SW Stony Creek Way 1998 700 Smith Street 2005 21 Russell Hill Road 1999 27 Woodvale Road 1998 2003 Falls Boulevard 1,567 11,109 2,568 2013 2001 9519 Baseline Road 5,450 1,570 1,379 1,328 — 1,662 1,380 1,704 3,119 3,150 642 1,700 909 6,174 1,607 3,300 2,385 1,334 11,414 1,054 5,110 2,983 1,360 6,120 62,057 47,703 21,476 24,966 10,435 23,590 23,620 28,722 52,908 85,302 8,489 21,503 16,995 67,897 36,741 44,886 7,739 24,587 66,709 36,828 46,916 16,826 21,640 30,651 12,432 8,586 2,820 3,330 5,609 5,180 4,380 3,385 10,446 11,313 895 2,890 4,150 14,427 6,269 3,868 1,891 4,343 10,015 7,726 4,462 1,636 6,685 5,207 2012 2013 2015 2015 2011 2013 2013 2015 2011 2015 2015 2015 2011 2006 2013 2016 2012 2013 2015 2011 2016 2014 2011 2010 2004 5701 Crestridge Road 2006 648 Route 10 West 2004 3100 - 22 Street 2004 10 Inglewood Drive 1957 514 North Prospect Ave 1999 3651 Albert Street 2004 3105 Hillsdale Street 1992 1801 McIntyre Street 2007 104 Burnett Avenue South 1998 640 Danbury Road 1956 35 des Cedres 1993 230-235 rue Des Chenes 2000 1160 Elm Street 2010 605 S Edward Dr. 2002 2555 Snelling Avenue, North 2000 5161 Foothills Boulevard 1997 75 Magnolia Street 2004 345 Munroe Street 1989 1705 Avenue Victoria 2000 242 Main Street 1990 1320 Padre Drive 2013 Shapland Close 1986 1430 E. 4500 S. 2011 2702 Cembalo Blvd 2,770 4,983 7,128 705 1,502 3,891 1,408 1,211 1,941 1,331 2,696 1,566 3,276 995 1,075 807 2,448 764 2,205 1,660 1,029 697 2,123 5,059 20,372 320 4,583 964 831 1,141 2,023 799 2,324 2,756 878 2,618 2,720 4,834 1,123 4,737 938 4,901 744 60,571 932 3,235 1,558 1,226 5,961 4,181 5,493 1,820 1,949 2,482 132 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address San Antonio, TX . . . . . . . San Diego, CA . . . . . . . . San Diego, CA . . . . . . . . San Diego, CA . . . . . . . . San Francisco, CA . . . . . San Francisco, CA . . . . . San Gabriel, CA . . . . . . . San Jose, CA . . . . . . . . . . San Jose, CA . . . . . . . . . . San Jose, CA . . . . . . . . . . San Juan Capistrano, CA . . . . . . . . . . . . . . . . San Rafael, CA . . . . . . . . San Ramon, CA . . . . . . . Sandy Springs, GA . . . . . Santa Maria, CA . . . . . . . — — — — — — — — — — — — — — — Santa Monica, CA . . . . . . 19,149 Santa Rosa, CA . . . . . . . . Saskatoon, SK . . . . . . . . . Saskatoon, SK . . . . . . . . . Schaumburg, IL . . . . . . . Scottsdale, AZ . . . . . . . . . Seal Beach, CA . . . . . . . . — 4,390 14,740 — — — Seattle, WA . . . . . . . . . . . 48,540 Seattle, WA . . . . . . . . . . . Sevenoaks, UKJ . . . . . . . Severna Park, MD . . . . . . Shelburne, VT . . . . . . . . . — — — — Shelby Township, MI . . . 15,894 Shelton, CT . . . . . . . . . . . Shrewsbury, MA . . . . . . . Sidcup, UKI . . . . . . . . . . Simi Valley, CA . . . . . . . Simi Valley, CA . . . . . . . Solihull, UKG . . . . . . . . . Solihull, UKG . . . . . . . . . Solihull, UKG . . . . . . . . . Sonning, UKJ . . . . . . . . . Sonoma, CA . . . . . . . . . . South Windsor, CT . . . . . Spokane, WA . . . . . . . . . Spokane, WA . . . . . . . . . St. Albert, AB . . . . . . . . . St. John’s, NL . . . . . . . . . Stittsville, ON . . . . . . . . . Stockport, UKD . . . . . . . Studio City, CA . . . . . . . . Sugar Land, TX . . . . . . . . Sugar Land, TX . . . . . . . . Sun City, FL . . . . . . . . . . Sun City, FL . . . . . . . . . . Sun City West, AZ . . . . . Sunnyvale, CA . . . . . . . . Surrey, BC . . . . . . . . . . . Surrey, BC . . . . . . . . . . . — — — — — — — — — — — — — 8,701 6,222 4,848 — — — — 21,294 23,992 11,780 — 7,228 17,047 5,045 4,200 5,810 3,000 5,920 11,800 3,120 2,850 3,280 11,900 1,390 1,620 8,700 2,214 6,050 5,250 2,250 981 1,382 2,460 2,500 6,204 6,790 1,150 6,181 — 720 1,040 2,246 950 7,446 3,200 5,510 5,070 3,571 1,851 5,644 2,820 3,000 3,200 2,580 1,145 706 1,175 4,369 4,006 960 4,272 6,521 5,040 1,250 5,420 3,605 4,552 58,048 30,707 63,078 27,164 91,639 77,214 15,566 35,098 46,823 27,647 6,942 27,392 72,223 8,360 50,658 28,340 26,273 13,905 17,609 22,863 3,890 72,954 85,369 19,887 40,240 67,623 31,041 26,344 33,967 26,824 56,570 16,664 51,406 43,297 26,053 10,585 42,155 21,890 29,295 25,064 25,342 17,863 11,765 17,397 25,018 25,307 31,423 60,493 48,476 50,923 21,778 41,682 18,818 22,338 5,045 4,243 5,810 3,000 5,920 11,800 3,138 2,858 3,280 11,900 1,390 1,635 8,700 2,220 6,089 5,263 2,250 1,084 1,528 2,486 2,500 6,271 6,825 1,150 6,778 6 777 1,100 2,246 950 8,183 3,238 5,510 5,560 3,917 2,029 6,189 2,820 3,104 3,271 2,639 1,266 757 1,299 4,791 4,071 960 4,272 6,622 5,338 1,274 5,420 3,985 5,045 61,177 31,177 65,407 27,927 103,168 86,346 16,407 35,690 49,178 30,918 8,433 29,337 78,968 9,030 53,585 29,196 28,367 15,580 19,735 23,896 5,594 74,644 87,854 20,919 45,599 72,882 32,904 27,453 33,967 28,139 62,636 17,524 57,875 48,264 28,899 11,670 46,807 23,769 32,061 25,612 25,682 20,745 12,795 19,559 27,637 26,230 33,146 66,989 52,030 53,990 22,877 43,677 21,338 25,625 3,129 513 2,329 763 11,529 9,132 860 600 2,355 3,271 1,491 1,960 6,745 676 2,966 869 2,094 1,778 2,272 1,060 1,704 1,757 2,520 1,032 5,956 5,264 1,921 1,170 — 1,315 6,802 898 6,469 5,457 3,191 1,263 5,197 1,879 2,870 619 399 3,003 1,081 2,286 3,041 988 1,723 6,497 3,655 3,365 1,123 1,995 2,900 3,780 133 656 4,952 15,249 4,709 7,666 6,679 3,283 7,052 9,756 3,497 3,634 2,597 6,181 2,404 13,408 5,352 2,623 2,760 3,435 5,198 1,583 17,334 17,947 2,119 9,281 7,069 7,180 4,716 1,839 3,286 14,212 4,377 4,891 9,412 5,786 494 8,529 2,202 8,587 6,718 5,571 5,136 1,308 3,456 6,015 5,707 8,437 970 8,661 8,143 4,311 8,985 5,675 7,201 2017 2011 2012 2013 2016 2016 2013 2011 2012 2016 2000 2016 2016 2012 2011 2013 2016 2013 2013 2013 2008 2013 2011 2015 2012 2016 2011 2013 2013 2015 2012 2013 2016 2012 2013 2015 2013 2016 2011 2013 2013 2014 2015 2013 2013 2013 2011 2017 2015 2015 2012 2012 2013 2013 2015 11300 Wild Pine 2011 2567 Second Avenue 2001 13075 Evening Creek Drive S 2003 810 Turquoise Street 1998 1550 Sutter Street 1923 1601 19th Avenue 2005 8332 Huntington Drive 2009 1420 Curvi Drive 2002 500 S Winchester Boulevard 2002 4855 San Felipe Road 2001 30311 Camino Capistrano 2001 111 Merrydale Road 1992 9199 Fircrest Lane 1997 5455 Glenridge Drive NE 2001 1220 Suey Road 2004 1312 15th Street 2001 4225 Wayvern Drive 1999 220 24th Street East 2004 1622 Acadia Drive 2001 790 North Plum Grove Road 1998 9410 East Thunderbird Road 2004 3850 Lampson Avenue 2009 5300 24th Avenue NE 1995 11039 17th Avenue 2009 64 - 70 Westerham Road 1997 43 W McKinsey Road 1988 687 Harbor Road 2006 46471 Hayes Road 2014 708A Bridgeport Avenue 1997 3111 Main Street 2000 Frognal Avenue 2009 190 Tierra Rejada Road 2003 5300 E Los Angeles Avenue 2009 1270 Warwick Road 2007 1 Worcester Way 2016 Warwick Road 2009 Old Bath Rd. 2005 91 Napa Road 1999 432 Buckland Road 2001 3117 E. Chaser Lane 1999 1110 E. Westview Ct. 2005 78C McKenney Avenue 2005 64 Portugal Cove Road 1996 1340 - 1354 Main Street 2008 1 Dairyground Road 2004 4610 Coldwater Canyon Avenue 1996 1221 Seventh St 2015 744 Brooks Street 1995 231 Courtyards 1999 1311 Aston Gardens Court 1998 13810 West Sandridge Drive 2002 1039 East El Camino Real 2000 16028 83rd Avenue 1987 15501 16th Avenue Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Sutton, UKI . . . . . . . . . . . Suwanee, GA . . . . . . . . . Sway, UKJ . . . . . . . . . . . Swift Current, SK . . . . . . Tacoma, WA . . . . . . . . . . Tacoma, WA . . . . . . . . . . Tacoma, WA . . . . . . . . . . — — — 2,228 17,760 — — Tampa, FL . . . . . . . . . . . . 69,330 Tewksbury, MA . . . . . . . The Woodlands, TX . . . . Toledo, OH . . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . — — — 18,615 9,662 13,959 40,768 4,650 1,439 8,587 Toronto, ON . . . . . . . . . . 19,525 Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Toronto, ON . . . . . . . . . . Torrance, CA . . . . . . . . . Trumbull, CT . . . . . . . . . 962 6,355 34,411 — — Tucson, AZ . . . . . . . . . . . 4,436 Tulsa, OK . . . . . . . . . . . . Tulsa, OK . . . . . . . . . . . . Tustin, CA . . . . . . . . . . . . Upland, CA . . . . . . . . . . . Upper St Claire, PA . . . . Vancouver, BC . . . . . . . . Vankleek Hill, ON . . . . . Vaudreuil, QC . . . . . . . . . Venice, FL . . . . . . . . . . . Vero Beach, FL . . . . . . . . Victoria, BC . . . . . . . . . . Victoria, BC . . . . . . . . . . Victoria, BC . . . . . . . . . . Virginia Water, UKJ . . . . Walnut Creek, CA . . . . . . Walnut Creek, CA . . . . . . Waltham, MA . . . . . . . . . Warwick, RI . . . . . . . . . . — — — — — — 943 8,744 64,425 — 7,752 7,147 8,015 — — — — — Washington, DC . . . . . . . 30,841 Waterbury, CT . . . . . . . . Wayland, MA . . . . . . . . . Webster Groves, MO . . . — — — Welland, ON . . . . . . . . . . 6,858 Wellesley, MA . . . . . . . . West Babylon, NY . . . . . West Bloomfield, MI . . . West Hills, CA . . . . . . . . — — — — West Vancouver, BC . . . 19,905 Westbourne, UKK . . . . . Westford, MA . . . . . . . . . — — 4,096 1,560 4,145 492 2,400 1,535 4,170 4,910 2,350 480 2,040 2,927 5,082 2,040 5,132 2,480 1,079 2,513 3,400 1,361 1,447 5,304 3,497 2,850 830 1,330 1,500 840 3,160 1,102 7,934 389 1,852 6,820 2,930 2,856 3,681 2,476 7,106 3,700 14,532 11,538 15,508 10,119 35,053 6,068 73,377 114,148 24,118 12,379 47,129 20,713 25,493 19,822 41,657 7,571 5,364 19,695 32,757 2,915 3,918 53,488 73,138 37,685 6,179 21,285 20,861 15,299 42,596 13,455 6,875 2,960 14,214 100,501 40,070 18,038 15,774 15,379 29,937 12,467 10,320 100,890 2,462 2,400 4,000 2,460 1,207 1,790 983 4,690 3,960 1,040 2,600 7,059 5,441 1,440 40,062 24,635 69,154 39,547 27,462 15,425 7,530 77,462 47,085 12,300 7,521 28,155 41,420 32,607 1,872 842 2,094 1,315 584 59 8,824 3,636 1,985 824 3,358 3,327 3,817 1,608 7,208 1,343 844 2,814 4,524 667 725 7,151 — 2,058 3,732 3,767 3,455 716 14 875 — 553 1,844 3,093 25,412 2,502 2,273 2,591 6,182 1,695 10,385 1,355 2,407 2,023 3,283 1,389 2,152 691 162 1,759 726 857 4,847 5,289 148 4,492 1,560 4,596 550 2,459 1,537 4,170 4,962 2,350 480 2,144 3,266 5,624 2,188 5,674 2,742 1,193 2,815 3,764 1,528 1,600 5,869 3,497 2,935 913 1,350 1,581 840 3,160 1,102 7,934 436 1,993 6,872 2,930 3,157 4,070 2,741 5,943 3,794 16,009 12,380 17,151 11,376 35,579 6,125 82,201 117,732 26,104 13,203 50,383 23,701 28,767 21,282 48,322 8,652 6,094 22,208 36,917 3,415 4,490 60,074 73,138 39,657 9,827 25,032 24,235 16,015 42,610 14,330 6,875 3,466 15,917 103,542 65,482 20,238 17,658 17,705 37,281 14,067 10,320 111,275 2,536 2,407 4,002 2,495 1,334 1,790 1,055 4,690 3,960 1,089 2,636 7,805 5,969 1,468 41,344 27,036 71,175 42,795 28,724 17,577 8,149 77,624 48,844 12,977 8,342 32,256 46,181 32,727 134 464 2,876 2,722 2,236 7,107 935 6,113 15,060 1,826 3,065 13,525 2,802 5,008 2,737 9,699 1,638 1,170 3,535 7,504 1,139 1,107 15,630 972 10,412 1,801 6,186 6,334 3,409 4,098 3,267 5,704 784 1,932 14,087 14,513 4,544 4,125 1,829 7,286 3,603 8,442 5,437 7,952 12,670 13,963 5,630 3,197 954 9,840 8,199 2,563 2,363 6,834 8,676 3,329 2015 2012 2014 2013 2011 2015 2016 2015 2016 2011 2010 2015 2015 2015 2015 2015 2013 2013 2013 2013 2013 2013 2016 2011 2012 2010 2010 2011 2015 2013 2015 2013 2015 2015 2007 2013 2013 2015 2012 2013 2016 2015 2011 2013 2011 2013 2011 2015 2015 2013 2013 2013 2013 2013 2015 2016 123 Westmead Road 2000 4315 Johns Creek Parkway 2008 Sway Place 2001 301 Macoun Drive 2008 7290 Rosemount Circle 2012 7290 Rosemount Circle 1987 8201 6th Avenue 2001 12951 W Linebaugh Avenue 2006 2000 Emerald Court 1999 7950 Bay Branch Dr 1985 3501 Executive Parkway 1900 54 Foxbar Road 1988 645 Castlefield Avenue 1999 4251 Dundas Street West 1964 10 William Morgan Drive 1971 123 Spadina Road 1982 25 Centennial Park Road 2002 305 Balliol Street 1973 1055 and 1057 Don Mills Road 1985 3705 Bathurst Street 1987 1340 York Mills Road 1988 8 The Donway East 2016 25525 Hawthorne Boulevard 1998 2750 Reservoir Avenue 1997 5660 N. Kolb Road 1986 8887 South Lewis Ave 1984 9524 East 71st St 1965 240 East 3rd St 2014 2419 North Euclid Avenue 2005 500 Village Drive 1974 2803 West 41st Avenue 1987 48 Wall Street 1975 333 rue Querbes 2002 1000 Aston Gardens Drive 2003 7955 16th Manor 1974 3000 Shelbourne Street 1988 3051 Shelbourne Street 1990 3965 Shelbourne Street 2002 Christ Church Road 1998 2175 Ygnacio Valley Road 1988 1580 Geary Road 2000 126 Smith Street 1998 75 Minnesota Avenue 2004 5111 Connecticut Avenue NW 1998 180 Scott Road 1997 285 Commonwealth Road 2012 45 E Lockwood Avenue 2006 110 First Street 2012 23 & 27 Washington Street 2003 580 Montauk Highway 2000 7005 Pontiac Trail 2002 9012 Topanga Canyon Road 1987 2095 Marine Drive 2006 16-18 Poole Road 2013 108 Littleton Road Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Weston, MA . . . . . . . . . . Westworth Village, TX . . . . . . . . . . . . . . . . Weybridge, UKJ . . . . . . . Weymouth, UKK . . . . . . White Oak, MD . . . . . . . . Wilbraham, MA . . . . . . . Wilmington, DE . . . . . . . Winchester, UKJ . . . . . . . Winnipeg, MB . . . . . . . . Winnipeg, MB . . . . . . . . Winnipeg, MB . . . . . . . . Woking, UKJ . . . . . . . . . Wolverhampton, UKG . . Woodbridge, CT . . . . . . . Woodland Hills, CA . . . . Worcester, MA . . . . . . . . Yarmouth, ME . . . . . . . . Yonkers, NY . . . . . . . . . . — — — — — — — — 13,446 16,833 13,641 — — — — — — — 1,160 2,060 7,899 2,591 2,304 660 1,040 6,009 1,960 1,276 1,317 3,172 2,941 1,370 3,400 1,140 450 3,962 Yorkton, SK . . . . . . . . . . $ 3,493 $ 466 $ Seniors housing 6,200 31,296 48,240 16,551 24,768 17,639 23,338 29,405 38,612 21,732 15,609 13,233 8,922 14,219 20,478 21,664 27,711 50,107 8,756 1,240 56 5,667 1,912 1,747 931 867 3,647 5,818 3,031 3,176 — 1,363 1,423 947 1,057 1,257 1,419 1,128 $ 1,160 2,060 8,662 2,879 2,316 685 1,129 6,598 2,225 1,466 1,456 3,172 3,232 1,426 3,447 1,166 470 3,967 $ 511 $ 7,440 1,285 2013 1998 135 North Avenue 31,352 53,144 18,174 26,503 18,544 24,116 32,463 44,164 24,572 18,645 13,233 9,994 15,586 21,378 22,695 28,948 51,521 9,839 2,523 11,619 1,712 4,644 4,515 4,588 6,719 12,378 4,643 2,899 — 2,856 5,225 4,637 5,493 6,586 9,381 1,916 $ 2014 2013 2014 2013 2011 2013 2012 2013 2013 2015 2016 2013 2011 2013 2011 2011 2013 2013 2014 25 Leonard Trail 2008 Ellesmere Road 2013 Cross Road 2002 11621 New Hampshire Avenue 2000 2387 Boston Road 2004 2215 Shipley Street 2010 Stockbridge Road 1999 857 Wilkes Avenue 1988 3161 Grant Avenue 1999 125 Portsmouth Boulevard 2017 12 Streets Heath, West End 2008 73 Wergs Road 1998 21 Bradley Road 2005 20461 Ventura Boulevard 1999 340 May Street 1999 27 Forest Falls Drive 2005 65 Crisfield Street 2001 94 Russell Drive operating total . . . . . . $1,988,700 $1,174,980 $12,626,419 $1,234,180 $1,246,991 $13,788,584 $2,362,335 135 Welltower Inc. Schedule III Real Estate and Accumulated Depreciation December 31, 2017 (Dollars in thousands) Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Outpatient medical: Akron, OH . . . . . . . . . . . $ — $ Allen, TX . . . . . . . . . . . . Alpharetta, GA . . . . . . . . Alpharetta, GA . . . . . . . . Alpharetta, GA . . . . . . . . Alpharetta, GA . . . . . . . . Alpharetta, GA . . . . . . . . Anderson, IN . . . . . . . . . Arcadia, CA . . . . . . . . . . Arlington, TX . . . . . . . . . Atlanta, GA . . . . . . . . . . Atlanta, GA . . . . . . . . . . Atlanta, GA . . . . . . . . . . Austin, TX . . . . . . . . . . . Bardstown, KY . . . . . . . . Bartlett, TN . . . . . . . . . . . Bel Air, MD . . . . . . . . . . Bellevue, NE . . . . . . . . . Bettendorf, IA . . . . . . . . . Beverly Hills, CA . . . . . . Beverly Hills, CA . . . . . . Beverly Hills, CA . . . . . . Beverly Hills, CA . . . . . . Beverly Hills, CA . . . . . . Birmingham, AL . . . . . . Birmingham, AL . . . . . . Birmingham, AL . . . . . . Boardman, OH . . . . . . . . Boca Raton, FL . . . . . . . . Boca Raton, FL . . . . . . . . Boerne, TX . . . . . . . . . . . Boynton Beach, FL . . . . . Boynton Beach, FL . . . . . Boynton Beach, FL . . . . . Boynton Beach, FL . . . . . Bradenton, FL . . . . . . . . . Bradenton, FL . . . . . . . . . Bridgeton, MO . . . . . . . . Bridgeton, MO . . . . . . . . Buckhurst Hill, UKH . . . Burleson, TX . . . . . . . . . Burnsville, MN . . . . . . . . Carmel, IN . . . . . . . . . . . Carmel, IN . . . . . . . . . . . Castle Rock, CO . . . . . . . Castle Rock, CO . . . . . . . — — — — — — — — — — — — — — — — — — — — — 33,729 78,271 — — — — — — — — — — — — — — — — — — — — — — 821 726 476 1,862 548 773 1,769 1,193 5,408 82 4,931 1,947 — 1,066 273 187 — — — 20,766 18,863 19,863 32,603 52,772 52 124 476 80 31 109 50 2,048 2,048 214 $ 12,105 $ 14,196 14,757 — 17,103 18,902 36,152 20,644 23,219 18,243 18,720 24,248 43,425 10,112 7,966 15,015 24,769 16,680 7,110 40,730 1,192 31,690 28,639 87,366 10,201 11,733 18,726 12,161 12,312 34,002 12,951 7,692 7,403 5,611 13,324 40,369 1,184 1,035 1,701 450 12,717 10 — 2,280 2,026 80 — 9,799 4,298 6,228 21,221 54,001 12,611 31,596 19,238 21,559 13,004 11,795 — 798 323 — 440 1,259 784 — 4,058 374 6,731 1,681 1,098 — 42 2,042 — 2 73 1,871 187 315 493 — 626 1,949 2,006 10 430 3,261 — 984 1,576 8,340 2,681 417 — — 188 — 698 568 649 26 571 — $ 821 726 476 1,862 548 773 1,769 1,193 5,618 82 5,387 2,030 — 1,066 274 187 — — — 20,766 18,863 19,863 32,603 52,772 52 124 476 80 59 214 50 2,185 2,185 270 14,030 1,184 1,035 1,701 450 12,717 10 — 2,280 2,026 79 — 136 $ 12,105 $ 14,994 15,081 — 17,543 20,161 36,936 20,644 27,067 18,617 24,996 25,845 44,523 10,112 8,007 17,057 24,769 16,682 7,183 42,601 1,379 32,005 29,132 87,366 10,827 13,682 20,731 12,170 12,714 37,158 12,951 8,539 8,841 13,895 42,344 10,216 4,298 6,228 21,409 54,001 13,309 32,164 19,886 21,586 13,576 11,795 2,528 4,117 4,456 — 5,809 5,652 11,834 562 9,859 2,796 10,420 6,803 11,603 71 984 6,305 1,069 4,658 569 4,352 513 3,514 4,117 8,731 3,863 4,512 7,398 4,225 3,103 13,169 3,100 3,507 3,640 5,191 9,445 1,454 694 296 6,149 3,832 3,599 6,446 6,935 7,913 2,347 217 2012 2012 2011 2011 2011 2011 2011 2017 2006 2012 2006 2012 2012 2017 2010 2007 2014 2010 2013 2015 2015 2015 2015 2015 2006 2006 2006 2010 2012 2006 2011 2006 2006 2007 2013 2014 2014 2017 2010 2015 2011 2013 2011 2011 2014 2016 2010 701 White Pond Drive 2006 1105 N Central Expressway 2003 11975 Morris Road 1900 940 North Point Parkway 2007 3300 Old Milton Parkway 1993 3400-A Old Milton Parkway 1999 3400-C Old Milton Parkway 2016 3125 S. Scatterfield Rd. 1984 301 W. Huntington Drive 2012 902 W. Randol Mill Road 1991 755 Mt. Vernon Hwy. 1984 975 Johnson Ferry Road 2006 5670 Peachtree-Dunwoody Road 2017 5301-B Davis Lane 2006 4359 New Shepherdsville Rd 2004 2996 Kate Bond Rd. 2016 12 Medstar Boulevard 2010 2510 Bellevue Medical Center Drive 2014 2140 53rd Avenue 1946 9675 Brighton Way 1955 415 North Bedford 1946 416 North Bedford 1950 435 North Bedford 1989 436 North Bedford 1971 801 Princeton Avenue SW 1985 817 Princeton Avenue SW 1989 833 Princeton Avenue SW 2007 8423 Market St 1993 9960 S. Central Park Boulevard 1995 9970 S. Central Park Blvd. 2007 134 Menger Springs Road 1995 8188 Jog Rd. 1997 8200 Jog Road 1996 10075 Jog Rd. 1995 10301 Hagen Ranch Road 1975 315 75th Street West 2006 7005 Cortez Road West 2008 3440 De Paul Ln. 2006 12266 DePaul Dr 2013 High Road 2007 12001 South Freeway 2014 14101 Fairview Dr 2005 12188-A North Meridian Street 2007 12188-B North Meridian Street 2013 2352 Meadows Boulevard 2017 Meadows Boulevard Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition 132 20,701 Costa Mesa, CA . . . . . . . 22,748 22,033 2,773 — 132 — — 2,333 23 — 1,287 2,985 1,211 122 137 462 730 2,408 1,882 1,212 310 677 4,842 958 369 8,578 737 4,164 4,620 1,105 462 401 2,338 — — 5,477 20 80 37 981 — 3,365 970 8,316 2,098 1,262 2,659 — 10,403 25,928 17,880 11,173 35,592 13,882 19,232 33,885 26,679 24,332 — — 5,511 15,419 28,690 52,488 6,919 7,809 34,767 22,858 15,132 17,075 26,010 27,485 13,911 61,779 9,277 27,027 — 22,836 26,020 6,099 12,138 18,635 15,309 53,890 21,801 30,810 18,398 6,086 5,943 15,669 10,104 26,384 21,538 7,045 29,069 8,834 — Cedar Park, TX . . . . . . . . Charleston, SC . . . . . . . . Cincinnati, OH . . . . . . . . Claremore, OK . . . . . . . . Clarkson Valley, MO . . . Clear Lake, TX . . . . . . . . Columbia, MD . . . . . . . . Columbia, MD . . . . . . . . Coon Rapids, MN . . . . . . — — — — — — — — — Cypress, TX . . . . . . . . . . Cypress, TX . . . . . . . . . . Dade City, FL . . . . . . . . . Dallas, TX . . . . . . . . . . . Dallas, TX . . . . . . . . . . . Dallas, TX . . . . . . . . . . . Dayton, OH . . . . . . . . . . Deerfield Beach, FL . . . . Delray Beach, FL . . . . . . Durham, NC . . . . . . . . . . Edina, MN . . . . . . . . . . . El Paso, TX . . . . . . . . . . . Everett, WA . . . . . . . . . . — — — — — — — — — — — — — Fenton, MO . . . . . . . . . . 10,919 Fenton, MO . . . . . . . . . . Florham Park, NJ . . . . . . Flower Mound, TX . . . . . Flower Mound, TX . . . . . Flower Mound, TX . . . . . Fort Wayne, IN . . . . . . . . Fort Worth, TX . . . . . . . . Fort Worth, TX . . . . . . . . Franklin, TN . . . . . . . . . . Frisco, TX . . . . . . . . . . . . Frisco, TX . . . . . . . . . . . . Fullerton, CA . . . . . . . . . Gallatin, TN . . . . . . . . . . Gig Harbor, WA . . . . . . . Glendale, CA . . . . . . . . . Grand Prairie, TX . . . . . . Grapevine, TX . . . . . . . . Grapevine, TX . . . . . . . . Greeneville, TN . . . . . . . Greenwood, IN . . . . . . . . Greenwood, IN . . . . . . . . Greenwood, IN . . . . . . . . High Point, NC . . . . . . . . Highland, IL . . . . . . . . . . Houston, TX . . . . . . . . . . Houston, TX . . . . . . . . . . Houston, TX . . . . . . . . . . Houston, TX . . . . . . . . . . Houston, TX . . . . . . . . . . Howell, MI . . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address 132 20,701 910 2017 2014 1401 Medical Parkway, 2,815 2 132 — — 2,333 9,353 — 22,033 1,287 2,985 1,211 122 137 462 730 2,540 2,449 1,212 310 677 4,842 958 369 8,578 737 4,164 4,620 1,105 462 401 2,338 — — 5,477 44 80 37 981 2,081 3,365 970 8,316 2,098 1,262 2,659 — 10,403 25,980 18,080 11,173 35,592 13,882 20,098 25,972 27,798 24,332 — — 5,511 15,419 32,315 52,714 7,281 8,094 41,094 22,859 16,077 19,324 26,010 28,199 14,016 61,779 9,277 27,027 — 22,836 26,378 6,099 14,699 20,111 17,846 53,890 23,506 30,810 19,853 6,086 8,640 15,699 10,178 26,384 22,176 7,053 29,191 8,834 — 3,950 2,853 3,009 11,095 1,157 4,106 4,616 4,240 1,376 — — 1,277 1,051 12,204 9,869 2,591 3,104 17,406 3,166 4,346 8,236 6,630 6,192 2,226 — 1,075 3,751 — 4,515 4,027 933 5,518 7,141 6,838 1,929 6,998 2,712 6,341 1,793 1,203 3,256 3,387 5,821 2,579 1,226 5,515 1,298 5 2014 2012 2007 2009 2013 2012 2015 2013 2017 2016 2016 2011 2013 2006 2012 2011 2011 2006 2013 2010 2006 2010 2013 2013 2017 2015 2014 2014 2012 2012 2014 2007 2007 2007 2014 2010 2010 2007 2012 2014 2014 2010 2012 2014 2014 2012 2012 2011 Building 2 2009 325 Folly Road 2013 3301 Mercy Health Boulevard 2005 1501 N. Florence Ave. 2010 15945 Clayton Rd 2014 1010 South Ponds Drive 2002 10700 Charter Drive 1982 5450 & 5500 Knoll N Dr. 2014 11850 Blackfoot Street NW 2007 1640 Newport Boulevard 1900 14940 Mueschke Road 1900 13105 Wortham Center Drive 1998 13413 US Hwy 301 2014 8196 Walnut Hill Lane 1995 9330 Poppy Dr. 2004 7115 Greenville Avenue 1988 1530 Needmore Road 2001 1192 East Newport Center Drive 1985 5130-5150 Linton Blvd. 2012 1823 Hillandale Road 2003 8100 W 78th St 1997 2400 Trawood Dr. 2011 13020 Meridian Ave. S. 2009 1011 Bowles Avenue 2009 1055 Bowles Avenue 2017 150 Park Avenue 2014 2560 Central Park Avenue 2012 4370 Medical Arts Drive 1900 Medical Arts Drive 2004 7916 Jefferson Boulevard 2012 10840 Texas Health Trail 2007 7200 Oakmont Boulevard 1988 100 Covey Drive 2004 4401 Coit Road 2004 4461 Coit Road 2007 1950 Sunny Crest Drive 1997 300 Steam Plant Rd 2009 11511 Canterwood Blvd. NW 2002 222 W. Eulalia St. 2009 2740 N State Hwy 360 2002 2040 W State Hwy 114 2002 2020 W State Hwy 114 2005 438 East Vann Rd 2010 1260 Innovation Parkway 2013 3000 S State Road 135 2010 333 E County Line Road 2010 4515 Premier Drive 2013 12860 Troxler Avenue 1900 F.M. 1960 & Northgate Forest Dr. 5,837 33,278 9,728 2012 2005 15655 Cypress Woods Medical Dr. — 94 203 — — — 867 1,417 1,119 — — — — — 3,624 225 362 417 6,895 1 945 2,249 — 714 104 — — — — — 358 — 2,560 1,476 2,537 — 1,729 — 1,455 — 4,778 30 73 — 638 8 122 — — 150 5,837 33,128 3,102 3,688 1,099 2,000 32,323 13,313 1,604 13,928 2,497 116 78,408 — 3,242 3,688 12,815 2,000 137 34,680 13,430 68,296 13,928 5,775 2,910 11,702 158 2014 2012 2012 2016 2014 1900 N Loop W Freeway 2007 10701 Vintage Preserve Parkway 1998 2727 W Holcombe Boulevard 2017 1225 South Latson Road Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Hudson, OH . . . . . . . . . . Humble, TX . . . . . . . . . . Jackson, MI . . . . . . . . . . Jupiter, FL . . . . . . . . . . . Jupiter, FL . . . . . . . . . . . Killeen, TX . . . . . . . . . . . Killeen, TX . . . . . . . . . . . Kyle, TX . . . . . . . . . . . . . La Jolla, CA . . . . . . . . . . La Jolla, CA . . . . . . . . . . La Quinta, CA . . . . . . . . Lake St Louis, MO . . . . . Lakeway, TX . . . . . . . . . Lakewood, CA . . . . . . . . Lakewood, WA . . . . . . . Land O Lakes, FL . . . . . . Land O Lakes, FL . . . . . . Las Vegas, NV . . . . . . . . Las Vegas, NV . . . . . . . . Las Vegas, NV . . . . . . . . Las Vegas, NV . . . . . . . . Lenexa, KS . . . . . . . . . . . Lenexa, KS . . . . . . . . . . . Lincoln, NE . . . . . . . . . . London, UKI . . . . . . . . . London, UKI . . . . . . . . . London, UKI . . . . . . . . . Los Alamitos, CA . . . . . . Los Gatos, CA . . . . . . . . Loxahatchee, FL . . . . . . . Loxahatchee, FL . . . . . . . Loxahatchee, FL . . . . . . . Marietta, GA . . . . . . . . . . Melbourne, FL . . . . . . . . Menasha, WI . . . . . . . . . Merced, CA . . . . . . . . . . Merriam, KS . . . . . . . . . . Merriam, KS . . . . . . . . . . Merriam, KS . . . . . . . . . . Merriam, KS . . . . . . . . . . Merriam, KS . . . . . . . . . . Merrillville, IN . . . . . . . . Mesa, AZ . . . . . . . . . . . . Mesquite, TX . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — Mission Hills, CA . . . . . . 24,325 Missouri City, TX . . . . . . Moline, IL . . . . . . . . . . . . — — Monticello, MN . . . . . . . 7,526 Moorestown, NJ . . . . . . . Morrow, GA . . . . . . . . . . Mount Juliet, TN . . . . . . Mount Vernon, IL . . . . . . Murrieta, CA . . . . . . . . . — — — — — 2,587 — 607 2,252 2,825 760 1,907 2,569 12,855 9,425 3,266 240 2,801 146 72 3,025 1,376 6,127 2,319 74 433 540 100 1,420 5,547 19,076 4,329 39 488 1,637 1,340 1,553 2,682 3,439 1,374 — 176 — — — 1,257 — 1,558 496 — 1,360 — 61 6 818 1,566 — 3,800 13,720 9,941 17,367 11,415 5,858 22,878 3,575 14,384 32,658 26,525 22,066 14,249 — 14,885 16,017 26,249 6,750 — 4,612 15,287 6,921 17,926 13,767 29,723 12,253 167,391 29,815 18,635 22,386 5,048 6,509 4,694 20,053 50,461 13,861 13,772 8,005 1,996 10,222 5,862 24,911 22,134 9,561 3,834 42,276 7,146 8,783 18,489 50,896 8,064 11,697 24,892 — 14,111 9,941 17,429 14,456 6,540 22,970 3,575 14,850 32,826 26,525 22,247 14,441 — 17,176 16,693 26,249 6,750 — 5,651 16,638 7,135 18,216 13,767 30,145 12,253 167,391 29,815 19,720 24,739 6,029 7,662 5,966 21,446 50,783 16,964 14,586 8,309 4,099 14,287 8,842 24,911 23,024 10,300 3,834 43,262 7,146 8,812 18,537 50,902 8,270 13,131 24,892 — 672 — 123 3,397 863 127 — 466 168 — 194 192 — 2,291 675 — — — 1,039 1,351 214 290 — 422 — — — 1,085 2,354 1,063 1,252 1,369 1,392 420 3,074 814 304 2,184 4,510 3,163 — 890 739 — 5,777 — 29 48 147 234 1,434 — — 2,868 — 668 2,608 3,005 795 1,907 2,569 12,855 9,425 3,279 240 2,801 146 72 3,025 1,376 6,127 2,319 74 433 540 100 1,420 5,547 19,076 4,329 39 488 1,719 1,440 1,650 2,682 3,538 1,345 — 176 81 444 182 1,257 — 1,558 496 4,791 1,360 — 61 147 845 1,566 — 3,800 138 4,157 787 3,709 4,941 2,807 7,008 477 2,321 4,500 2,814 3,785 4,499 — 5,902 3,256 157 45 — 2,478 5,930 3,022 4,676 1,353 9,862 869 11,878 2,116 6,792 10,115 2,484 2,853 2,358 1,010 7,147 1,364 4,436 2,898 1,508 4,793 2,960 4,881 6,471 4,396 867 6,715 238 947 3,317 10,435 4,063 5,153 5,282 — 2012 2013 2013 2006 2007 2010 2011 2014 2015 2015 2014 2010 2007 2006 2012 2017 2017 2007 2006 2006 2007 2010 2013 2010 2015 2015 2015 2007 2006 2006 2006 2006 2016 2014 2016 2009 2011 2011 2011 2011 2013 2008 2008 2012 2014 2015 2012 2012 2011 2007 2007 2011 2014 2006 5655 Hudson Drive 2014 8233 N. Sam Houston Parkway E. 2009 1201 E Michigan Avenue 2001 550 Heritage Dr. 2004 600 Heritage Dr. 2010 2405 Clear Creek Rd 2012 5702 E Central Texas Expressway 2011 135 Bunton Creek Road 1989 4150 Regents Park Row 1988 4120 & 4130 La Jolla Village Drive 2006 47647 Caleo Bay Drive 2008 400 Medical Dr 1900 Lohmans Crossing Road 1993 5750 Downey Ave. 2005 11307 Bridgeport Way SW 2009 2100 Via Bella 2011 2150 Via Bella 1900 SW corner of Deer Springs Way and Riley Street 1991 2870 S. Maryland Pkwy. 2000 1815 E. Lake Mead Blvd. 1997 1776 E. Warm Springs Rd. 2008 23401 Prairie Star Pkwy 2013 23351 Prairie Star Parkway 2003 575 South 70th St 2007 17-19 View Road 2010 53 Parkside 2003 49 Parkside 2003 3771 Katella Ave. 1993 555 Knowles Dr. 1997 12977 Southern Blvd. 1993 12989 Southern Blvd. 1994 12983 Southern Blvd. 2016 4800 Olde Towne Parkway 2009 2222 South Harbor City Boulevard 1994 1550 Midway Place 2010 315 Mercy Ave. 1972 8800 West 75th Street 1980 7301 Frontage Street 1977 8901 West 74th Street 1985 9119 West 74th Street 2009 9301 West 74th Street 2006 101 E. 87th Ave. 1989 6424 East Broadway Road 2012 1575 I-30 1986 11550 Indian Hills Road 2016 7010 Highway 6 2013 3900 28th Avenue Drive 2008 1001 Hart Boulevard 2012 401 Young Avenue 1990 6635 Lake Drive 2005 5002 Crossings Circle 2012 2 Good Samaritan Way 1900 28078 Baxter Rd. Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Murrieta, CA . . . . . . . . Nashville, TN . . . . . . . Nassau Bay, TX . . . . . . Nassau Bay, TX . . . . . . New Albany, IN . . . . . Niagara Falls, NY . . . . Niagara Falls, NY . . . . Oklahoma City, OK . . . Oro Valley, AZ . . . . . . Palmer, AK . . . . . . . . . Pasadena, TX . . . . . . . . Pearland, TX . . . . . . . . Pearland, TX . . . . . . . . Pendleton, OR . . . . . . . Phoenix, AZ . . . . . . . . Pineville, NC . . . . . . . . Plano, TX . . . . . . . . . . Plano, TX . . . . . . . . . . Plantation, FL . . . . . . . Plantation, FL . . . . . . . Portland, ME . . . . . . . . Redmond, WA . . . . . . . Reno, NV . . . . . . . . . . . Richmond, TX . . . . . . . Richmond, VA . . . . . . Rockwall, TX . . . . . . . Rogers, AR . . . . . . . . . Rolla, MO . . . . . . . . . . Roswell, NM . . . . . . . . Roswell, NM . . . . . . . . Roswell, NM . . . . . . . . Sacramento, CA . . . . . Salem, NH . . . . . . . . . . San Antonio, TX . . . . . San Antonio, TX . . . . . San Antonio, TX . . . . . San Antonio, TX . . . . . Santa Clarita, CA . . . . . Santa Clarita, CA . . . . . Santa Clarita, CA . . . . . Santa Clarita, CA . . . . . Santa Clarita, CA . . . . . Sarasota, FL . . . . . . . . . Seattle, WA . . . . . . . . . Sewell, NJ . . . . . . . . . . Shakopee, MN . . . . . . . Shakopee, MN . . . . . . . Shenandoah, TX . . . . . Sherman Oaks, CA . . . Somerville, NJ . . . . . . . Southlake, TX . . . . . . . Southlake, TX . . . . . . . Southlake, TX . . . . . . . Springfield, IL . . . . . . . Springfield, IL . . . . . . . St Paul, MN . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 25,000 — — — — 5,900 9,964 — — — — — — — — — — 1,806 378 91 2,411 1,433 454 216 89 217 1,700 1,500 9,594 — 1,149 961 5,423 793 8,563 8,848 655 5,015 1,117 2,000 2,969 132 1,062 1,931 183 883 762 866 1,655 1,048 1,038 4,518 900 — — 278 295 — 62 4,410 60 508 707 — — 3,400 3,000 592 47,190 7,165 31,206 10,613 16,494 10,891 8,362 19,135 18,339 29,705 8,009 11,253 32,753 10,312 48,018 6,974 20,698 83,209 10,666 9,262 25,930 26,697 21,972 9,118 26,697 17,197 28,680 47,639 5,851 15,984 17,171 12,756 14,050 10,252 9,173 31,041 17,288 2,338 28,384 185 40,257 20,618 47,325 38,428 57,929 11,412 18,089 21,135 32,186 22,244 — 18,243 698 30,549 1,569 177 49 10,350 3,519 37,695 46 3,234 168 1,282 30 435 307 378 969 1,333 — — 191 43 11,667 2,504 138 1,356 4,269 893 13 876 2,056 — 630 527 2,004 — — 18 1 1,737 20 — 1,853 3,353 620 20,063 1,499 11,595 — 718 3,134 392 683 391 78 51 2,729 2 — 1,101 3,915 — 31 402 — 1,942 378 91 2,411 1,721 454 216 89 217 1,700 1,500 9,807 — 1,149 1,077 5,423 793 8,575 8,908 655 5,015 1,117 2,000 3,004 132 1,062 1,931 183 883 762 869 1,655 1,048 1,074 4,548 900 5,218 5,250 11,872 295 4,407 62 4,410 164 509 773 24 3,121 3,400 3,000 592 47,236 10,263 31,374 11,894 16,524 11,037 8,669 19,513 19,308 31,038 8,009 11,253 32,731 10,355 59,685 9,362 20,836 84,566 14,923 10,095 25,943 27,573 24,028 9,118 27,291 17,723 30,684 47,639 5,851 16,002 17,171 14,490 14,070 10,252 10,990 34,364 17,907 17,183 24,633 185 40,257 16,929 50,459 38,820 58,508 11,802 18,102 21,162 31,795 22,246 — 19,344 15,692 3,951 7,866 3,369 2,318 5,311 2,967 4,392 6,489 10,170 902 1,175 3,801 1,076 23,017 4,180 11,412 18,638 7,044 6,498 7,307 7,241 8,627 399 7,440 4,142 9,017 11,144 1,619 3,974 3,499 5,359 2,381 4,636 5,151 9,138 3,636 2,505 3,534 123 3,964 2,615 11,273 13,671 21,485 3,714 4,421 1,586 4,762 5,237 — 4,305 2010 2006 2012 2012 2014 2007 2007 2013 2007 2007 2012 2012 2014 2012 2006 2006 2008 2012 2006 2006 2011 2010 2006 2015 2012 2012 2011 2011 2011 2011 2011 2006 2014 2006 2006 2012 2014 2014 2014 2014 2014 2014 2012 2010 2007 2010 2010 2013 2014 2008 2014 2012 2011 28078 Baxter Rd. 1986 310 25th Ave. N. 1981 18100 St John Drive 1986 2060 Space Park Drive 2001 2210 Green Valley Road 1995 6932 - 6934 Williams Rd 2004 6930 Williams Rd 2008 535 NW 9th Street 2004 1521 East Tangerine Rd. 2006 2490 South Woodworth Loop 2013 5001 E Sam Houston Parkway S 2013 2515 Business Center Drive 2013 11511 Shadow Creek Parkway 2013 3001 St. Anthony Way 1998 2222 E. Highland Ave. 1988 10512 Park Rd. 2007 6957 Plano Parkway 2005 6020 West Parker Road 1997 851-865 SW 78th Ave. 1996 600 Pine Island Rd. 2008 195 Fore River Parkway 2011 18000 NE Union Hill Rd. 1991 343 Elm St. 2016 22121 FM 1093 Road 2008 7001 Forest Avenue 2008 3142 Horizon Road 2008 2708 Rife Medical Lane 2009 1605 Martin Spring Drive 2004 601 West Country Club Road 2006 350 West Country Club Road 2009 300 West Country Club Road 1990 8120 Timberlake Way 2013 31 Stiles Road 1999 19016 Stone Oak Pkwy. 1999 540 Stone Oak Centre Drive 1986 5282 Medical Drive 2007 3903 Wiseman Boulevard 1976 23861 McBean Parkway 1998 23929 McBean Parkway 1996 23871 McBean Parkway 2013 23803 McBean Parkway 1989 24355 Lyons Avenue 1990 1921 Waldemere Street 2010 5350 Tallman Ave 2009 239 Hurffville-Cross Keys Road 1996 1515 St Francis Ave 2007 1601 St Francis Ave 2014 106 Vision Park Boulevard 1969 4955 Van Nuys Boulevard 2007 30 Rehill Avenue 1900 Central Avenue 2004 1545 East Southlake Boulevard 698 34,464 6,472 2012 2004 1545 East Southlake Boulevard 1,568 177 49 10,351 3,551 38,096 852 300 4,007 2010 2010 2014 2011 1100 East Lincolnshire Blvd 2011 2801 Mathers Rd. 2006 225 Smith Avenue N. 139 Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address St. Louis, MO . . . . . . . St. Paul, MN . . . . . . . . Stamford, CT . . . . . . . . Suffern, NY . . . . . . . . . Suffolk, VA . . . . . . . . . Sugar Land, TX . . . . . . Tacoma, WA . . . . . . . . Tallahassee, FL . . . . . . Tampa, FL . . . . . . . . . . Tampa, FL . . . . . . . . . . Temple, TX . . . . . . . . . Timonium, MD . . . . . . Tucson, AZ . . . . . . . . . Tustin, CA . . . . . . . . . . Tustin, CA . . . . . . . . . . Van Nuys, CA . . . . . . . Voorhees, NJ . . . . . . . . Voorhees, NJ . . . . . . . . Wausau, WI . . . . . . . . . Waxahachie, TX . . . . . Wellington, FL . . . . . . Wellington, FL . . . . . . West Seneca, NY . . . . . Zephyrhills, FL . . . . . . Outpatient medical — — — — — — — — — — — — — — — — — — — — — — — — $ $ 336 2,706 — 653 1,566 3,543 — — 4,319 1,462 2,900 8,829 1,302 3,345 3,361 — 6,404 6 2,050 — 107 388 917 3,874 $ 17,247 39,507 41,153 37,255 11,511 15,532 64,307 17,449 12,234 7,270 9,954 12,568 4,925 541 12,039 36,187 24,251 96,075 12,176 18,784 16,933 13,697 22,435 27,266 2,004 325 1,709 183 219 — — — — — 26 — 897 61 1,421 — 1,499 400 — 95 2,685 1,637 3,841 $ — $ 336 2,701 — 696 1,620 3,543 — — 4,319 1,462 2,900 8,829 1,325 3,345 3,361 — 6,477 99 2,050 303 326 580 1,665 3,875 $ 19,250 39,838 42,862 37,394 11,676 15,532 64,307 17,449 12,234 7,270 9,980 12,568 5,799 602 13,460 36,187 25,677 96,381 12,176 18,576 19,398 15,142 25,528 27,274 6,769 10,622 1,176 10,155 4,328 4,408 14,457 5,095 2,425 47 1,375 263 2,662 230 2,124 8,749 9,126 21,530 352 909 6,388 4,720 9,442 5,923 $ total: . . . . . . . . . . . . $ 218,382 $ 574,346 $ 4,724,190 $ 315,225 $ 639,696 $ 4,974,067 $1,096,012 $ Assets held for sale: Agawam, MA . . . . . . . Agawam, MA . . . . . . . Agawam, MA . . . . . . . Agawam, MA . . . . . . . Aspen Hill, MD . . . . . . Aurora, CO . . . . . . . . . Ayer, MA . . . . . . . . . . Beachwood, OH . . . . . Bend, OR . . . . . . . . . . . Bremerton, WA . . . . . . Bremerton, WA . . . . . . Bremerton, WA . . . . . . Burlington, WA . . . . . . Carson City, NV . . . . . Cedar Grove, WI . . . . . Cloquet, MN . . . . . . . . Columbia, SC . . . . . . . Concord, NH . . . . . . . . Crown Point, IN . . . . . Dallas, OR . . . . . . . . . . Dallas, TX . . . . . . . . . . Dyer, IN . . . . . . . . . . . . Eugene, OR . . . . . . . . . Franklin, WI . . . . . . . . Glastonbury, CT . . . . . Grass Valley, CA . . . . . Green Bay, WI . . . . . . . Green Bay, WI . . . . . . . Green Bay, WI . . . . . . . Hemet, CA . . . . . . . . . . Houston, TX . . . . . . . . — $ — — — — — — — — — — — — — — — — — — — — — — 4,161 — 4,113 5,178 — — — — $ 1,230 930 920 920 — 2,600 — 1,260 1,210 390 830 590 3,860 520 113 340 2,120 720 920 410 1,080 1,800 800 6,872 1,950 260 — — — 870 5,090 13,618 15,304 10,661 10,562 9,008 5,906 22,074 23,478 9,181 2,210 10,420 2,899 31,722 8,238 618 4,660 4,860 3,041 20,044 9,427 9,655 25,061 5,822 7,550 9,532 7,667 14,891 20,098 11,696 3,405 9,471 $ $ — $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 8,189 8,807 6,185 6,111 7,730 10,634 11,708 13,114 9,762 2,073 9,872 3,200 33,317 8,037 554 4,285 8,050 3,344 15,895 10,129 6,615 20,365 6,252 10,294 7,520 7,324 10,945 14,874 7,474 3,342 8,442 — $ — — — — 2,128 — — — — — — — — — — 1,070 — — 292 — — — — — — — — — — — 140 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 2007 2011 2015 2011 2010 2012 2011 2010 2011 2017 2011 2015 2008 2015 2015 2009 2006 2010 2015 2016 2006 2007 2007 2011 2011 2011 2011 2011 2011 2006 2011 2001 2015 2006 2010 2014 2015 2013 2010 2011 2003 2011 2015 2015 2011 2015 2015 2010 2011 2013 2010 2010 2010 2007 2007 2001 2325 Dougherty Rd. 2007 435 Phalen Boulevard 2016 29 Hospital Plaza 2007 257 Lafayette Avenue 2007 5838 Harbour View Blvd. 2005 11555 University Boulevard 2013 1608 South J Street 2011 One Healing Place 2003 14547 Bruce B Downs Blvd 1996 12500 N Dale Mabry 2012 2601 Thornton Lane 2017 2118 Greenspring Drive 1995 2055 W. Hospital Dr. 1976 14591 Newport Ave 1985 14642 Newport Ave 1991 6815 Noble Ave. 1997 900 Centennial Blvd. 2012 200 Bowman Drive 2017 1901 Westwood Center Boulevard 2014 2460 N I-35 East 2000 10115 Forest Hill Blvd. 2003 1395 State Rd. 7 1990 550 Orchard Park Rd 1974 38135 Market Square Dr 1975 61 Cooper Street 1970 55 Cooper Street 1985 464 Main Street 1967 65 Cooper Street 1988 3227 Bel Pre Road 1988 14101 E. Evans Ave. 1988 400 Groton Road 1990 3800 Park East Drive 1981 1801 NE Lotus Drive 1999 3231 Pine Road 1984 3201 Pine Road NE 1997 3210 Rickey Road 2001 400 Gilkey Road 1997 1111 W. College Parkway 1986 313 S. Main St. 2006 705 Horizon Circle 2000 731 Polo Rd. 1926 227 Pleasant Street 2015 1555 South Main Street 1972 664 SE Jefferson 1997 3611 Dickason Avenue 2015 1532 Calumet Avenue 1990 4550 West Amazon Drive 1984 9200 W. Loomis Rd. 1966 72 Salmon Brook Drive 2001 415 Sierra College Drive 2002 2253 W. Mason St. 2002 2845 Greenbrier Road 2002 2845 Greenbrier Road 1996 25818 Columbia St. 2009 15015 Cypress Woods Medical Drive Description Encumbrances Land Building & Improvements Initial Cost to Company Cost Capitalized Subsequent to Acquisition Gross Amount at Which Carried at Close of Period Land Building & Improvements Accumulated Depreciation(1) Year Acquired Year Built Address Houston, TX . . . . . . . . Hove, UKJ . . . . . . . . . . Indianapolis, IN . . . . . . Indianapolis, IN . . . . . . Kenosha, WI . . . . . . . . Kent, WA . . . . . . . . . . Lancaster, NH . . . . . . . Lowell, MA . . . . . . . . . Marinette, WI . . . . . . . McMinnville, OR . . . . Meridian, ID . . . . . . . . Milwaukee, WI . . . . . . Milwaukee, WI . . . . . . Milwaukee, WI . . . . . . Milwaukee, WI . . . . . . Milwaukie, OR . . . . . . Mount Vernon, WA . . . Mt. Vernon, WA . . . . . Muskego, WI . . . . . . . . New Berlin, WI . . . . . . New Haven, IN . . . . . . North Bend, OR . . . . . . North Cape May, NJ . . Oshkosh, WI . . . . . . . . Oshkosh, WI . . . . . . . . Palm Springs, FL . . . . . Palm Springs, FL . . . . . Plymouth, WI . . . . . . . Post Falls, ID . . . . . . . . Richardson, TX . . . . . . Rockville, MD . . . . . . . Roseburg, OR . . . . . . . Salem, OR . . . . . . . . . . Sheboygan, WI . . . . . . Shelton, WA . . . . . . . . Sparks, NV . . . . . . . . . Springfield, OR . . . . . . Summit, WI . . . . . . . . . Tucson, AZ . . . . . . . . . Wallingford, CT . . . . . West Allis, WI . . . . . . . Westlake, OH . . . . . . . Wilkes-Barre, PA . . . . Assets held for sale total . . . . . . . . . . . . . — — — — 5,676 — — — 4,832 — — 3,424 7,547 1,888 13,270 — — — 908 3,500 — — — — 5,978 — — 1,059 — — — — — 1,463 — — — — — — 2,685 — — $ 960 1,360 495 255 — 940 160 1,070 — 720 3,600 540 1,425 922 — 400 3,440 400 964 3,739 176 1,290 77 — — 739 1,182 1,250 2,700 1,800 — 1,200 440 1,012 530 3,700 1,790 2,899 1,190 490 1,106 1,330 570 65,682 $ 85,466 $ $ 27,598 6,979 6,287 2,473 18,058 20,318 434 13,481 13,538 7,984 20,802 8,457 11,520 2,185 44,535 6,782 21,842 2,200 2,159 8,290 3,524 7,361 151 18,339 15,881 4,066 7,765 1,870 14,217 16,562 16,398 4,891 4,726 2,216 17,049 46,526 8,865 87,666 18,318 1,210 3,308 17,926 2,301 909,837 $ $ $ $ — — 11,018 6,335 — 2,768 — — — — — — — — — — 128 — — — — 164 137 — — — — — — — — — — — — — — — 316 — — — — $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 9,332 2,361 17,800 9,063 12,519 24,026 493 1,960 8,664 8,296 6,860 5,846 8,731 2,108 30,222 6,828 25,410 2,066 2,156 8,129 1,961 8,815 365 12,160 11,337 2,061 3,072 2,149 14,941 17,440 8,715 5,792 4,903 2,318 15,409 39,559 10,131 60,029 19,824 941 3,159 10,208 1,545 $ 24,356 $ — $ 734,147 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 2011 2014 2006 2006 2010 2007 2011 2011 2010 2015 2006 2010 2010 2010 2010 2015 2014 2006 2010 2010 2004 2015 2015 2010 2010 2006 2006 2010 2007 2015 2012 2015 2015 2010 2012 2007 2015 2008 2015 2011 2010 2001 2011 1995 10225 Cypresswood Dr 1987 Furze Hill 1981 8616 W. Tenth St. 1981 8616 W.Tenth St. 1993 10400 75th St. 2000 24121 116th Avenue SE 1905 63 Country Village Road 1975 841 Merrimack Street 2002 4061 Old Peshtigo Rd. 1996 3121 NE Cumulus Avenue 2008 2825 E. Blue Horizon Dr. 1930 1218 W. Kilbourn Ave. 1962 3301-3355 W. Forest Home Ave. 1958 840 N. 12th St. 1983 2801 W. Kinnickinnic Pkwy. 1991 5770 SE Kellogg Creek Drive 1987 1810 E. Division Street 2001 3807 East College Way 1993 S74 W16775 Janesville Rd. 1993 14555 W. National Ave. 1981 1201 Daly Dr. 1995 2290 Inland Drive 1988 610 Town Bank Road 2000 855 North Wethaven Dr. 2000 855 North Wethaven Dr. 1993 1640 S. Congress Ave. 1997 1630 S. Congress Ave. 1991 2636 Eastern Ave. 2008 460 N. Garden Plaza Ct. 2009 1350 East Lookout Drive 1986 9701 Medical Center Drive 1990 1901 NW Hughwood Drive 1992 3988 12th Street SE 1958 1813 Ashland Ave. 1989 900 W Alpine Way 2009 275 Neighborhood Way 1994 770 Harlow Road 2009 36500 Aurora Dr. 1997 8151 E Speedway Boulevard 1962 35 Marc Drive 1961 11333 W. National Ave. 1985 27601 Westchester Pkwy. 1992 300 Courtright Street Summary: Triple-net . . . . . . . . . . . Seniors housing operating . . . . . . . . . . . . Outpatient medical Construction in progress . . . . . . . . . . $ 343,361 1,988,700 $ 818,863 1,174,980 $ 7,759,508 12,626,419 $ 382,344 1,234,180 $ 847,780 1,246,991 $ 8,112,937 13,788,584 $1,380,023 2,362,335 218,382 — 574,346 — 4,724,190 237,746 315,225 — 639,696 — 4,974,067 237,746 1,096,012 — Total continuing operating properties Assets held for sale . . . Total investments in real property owned 2,550,443 65,682 2,568,189 85,466 25,347,863 909,837 1,931,749 24,356 2,734,467 — 27,113,334 734,147 4,838,370 — $2,616,125 $2,653,655 $26,257,700 $1,956,105 $2,734,467 $27,847,481 $4,838,370 (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. 141 Investment in real estate: Beginning balance Acquisitions and development . . . . . . . . . . . . . . . . . . . . . . . . . . Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deconsolidation of previously consolidated venture . . . . . . . . . Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2017 2016 2015 (in thousands) $30,041,058 1,276,636 250,276 (144,897) (101,527) (1,203,247) 415,879 47,770 $29,865,490 2,834,279 219,146 — (37,207) (2,411,219) (429,431) — $25,491,935 5,076,830 187,752 — (2,220) (491,396) (397,411) — Ending balance(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,581,948 $30,041,058 $29,865,490 Accumulated depreciation: Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization expenses . . . . . . . . . . . . . . . . . . . Amortization of above market leases . . . . . . . . . . . . . . . . . . . . . Disposition and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,093,494 921,720 7,303 (192,029) 7,882 $ 3,796,297 901,242 7,909 (514,651) (97,303) $ 3,020,908 826,240 11,912 (111,199) 48,436 Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,838,370 $ 4,093,494 $ 3,796,297 (1) Primarily relates to the acquisition of an asset through foreclosure. (2) The unaudited aggregate cost for tax purposes for real property equals $25,618,090,000 at December 31, 2017. 142 Welltower Inc. Schedule IV — Mortgage Loans on Real Estate December 31, 2017 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 (in thousands) First mortgages relating to 1 property located in: Triple-Net California Triple-Net United Kingdom Triple-Net United Kingdom Triple-Net United Kingdom Triple-Net United Kingdom Triple-Net United Kingdom Triple-Net United Kingdom Triple-Net Oklahoma Triple-Net Oregon Triple-Net Pennsylvania Triple-Net Florida First mortgages relating to multiple properties: Triple-Net 7 properties in four states Triple-Net 13 properties in Texas Triple-Net 13 properties in six states Second mortgages relating to 1 property located in: 8.11% 7.25% 8.29% 8.00% 8.55% 7.00% 8.00% 9.02% 7.10% 8.11% 8.79% 12/15/20 11/21/19 01/16/18 08/24/22 07/01/19 03/14/22 07/06/19 11/01/19 12/31/17 03/01/22 06/23/21 $ 2,011,590 115,794,386 9,521,615 10,858,294 83,119,990 96,303,670 137,884,551 88,826,160 1,356,780 36,683,720 94,519,150 $ — — — — — — — — — — — $ 28,000 18,805 2,841 11,712 15,487 28,374 20,294 11,610 225 15,530 17,100 10.00% 10.00% 10.00% 01/01/22 01/01/22 01/01/22 $ 297,169,200 851,672,100 1,139,453,100 — — — 65,796 103,620 138,633 $ 292 18,805 1,352 1,645 15,486 16,139 20,294 11,595 225 5,706 12,444 25,832 82,041 91,164 Texas Totals Triple-Net 12.17% 05/01/19 32,033 11,367 3,100 3,100 $11,367 $481,127 $306,120 $— — — — — — — — — — — — — — — $— Reconciliation of mortgage loans: Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions: New mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Draws on existing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deductions: Collections of principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conversions to real property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in allowance for loan losses and charge-offs . . . . . . . . . . . . . . . . . . . . . . Total deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in balance due to foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2017 2016 2015 $ 485,735 (in thousands) $ 635,492 $ 188,651 6,706 58,224 64,930 (180,135) — (71,535) (251,670) 7,125 8,223 92,815 101,038 (191,134) (45,044) (3,053) (239,231) (11,564) 524,088 30,550 554,638 (80,552) (23,288) — (103,840) (3,957) Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 306,120 $ 485,735 $ 635,492 143 EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Thomas J. DeRosa, certify that: 1. I have reviewed this annual report on Form 10-K of Welltower Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 28, 2018 /s/ THOMAS J. DEROSA Thomas J. DeRosa, Chief Executive Officer EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, John A. Goodey, certify that: 1. I have reviewed this annual report on Form 10-K of Welltower Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 28, 2018 JOHN A. GOODEY /s/ John A. Goodey, Chief Financial Officer EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 I, Thomas J. DeRosa, the Chief Executive Officer of Welltower Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that (i) the Annual Report on Form 10-K for the Company for the year ended December 31, 2017 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ THOMAS J. DEROSA Thomas J. DeRosa, Chief Executive Officer Date: February 28, 2018 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 I, John A. Goodey, the Chief Financial Officer of Welltower Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that (i) the Annual Report on Form 10-K for the Company for the year ended December 31, 2017 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. JOHN A. GOODEY /s/ John A. Goodey, Chief Financial Officer Date: February 28, 2018 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] COMMITTEES OF THE BOARD Audit Committee Klipsch, Meyers, Rivera, Trumbull (Chair) Compensation Committee Bacon, Naughton, Oster (Chair), Pelham Investment Committee Bacon, Klipsch, Naughton (Chair), Rivera, Whitelaw Nominating/Corporate Governance Committee Donahue (Chair), Klipsch, Meyers, Oster, Pelham, Whitelaw Executive Committee DeRosa, Donahue (Chair), Naughton, Oster, Trumbull EXECUTIVE OFFICERS Thomas J. DeRosa Chief Executive Officer John Goodey Executive Vice President - Chief Financial Officer Mercedes T. Kerr Executive Vice President - Business & Relationship Management Matthew G. McQueen Senior Vice President – General Counsel & Corporate Secretary Shankh Mitra Senior Vice President - Investments CORPORATE OFFICES Welltower Inc. 4500 Dorr Street Toledo, Ohio 43615-4040 (877) 670-0070 (419) 247-2800 (419) 247-2826 Fax www.welltower.com 392 employees as of 1/31/18 4,761 registered shareholders as of 1/31/18 BOARD OF DIRECTORS Kenneth J. Bacon Age 63 Co-Founder and Managing Partner RailField Realty Partners Bethesda, Maryland Thomas J. DeRosa Age 60 Chief Executive Officer Welltower Inc. Toledo, Ohio Jeffrey H. Donahue Age 71 Chairman Former President & Chief Executive Officer Enterprise Community Investment, Inc. Columbia, Maryland Fred S. Klipsch Age 75 Founder and Chairman Hoosiers for Quality Education Indianapolis, Indiana Geoffrey G. Meyers Age 73 Retired Chief Financial Officer, Executive Vice President and Treasurer HCR ManorCare, Inc. Toledo, Ohio Timothy J. Naughton Age 56 Chairman and Chief Executive Officer AvalonBay Communities, Inc. Arlington, Virginia Sharon M. Oster Age 69 Frederic D. Wolfe Professor of Management & Entrepreneurship, Professor of Economics Yale University School of Management New Haven, Connecticut Judith C. Pelham Age 72 President Emeritus Trinity Health Livonia, Michigan Sergio D. Rivera Age 55 CEO and President of the Vacation Ownership Segment ILG, Inc. Miami, Florida R. Scott Trumbull Age 69 Retired CEO and Chairman of the Board Franklin Electric Co., Inc. Fort Wayne, Indiana Gary Whitelaw Age 62 Chief Executive Officer Bentall Kennedy Toronto, Canada TRANSFER AGENT, REGISTRAR, DIVIDEND DISBURSING AGENT AND PLAN ADMINISTRATOR Computershare P.O. Box 505000 Louisville, KY 40233 (888) 216-7206 www.computershare.com/investor SHAREHOLDER SERVICES Computershare provides shareholder services to registered shareholders via telephone and online. Computershare representatives can assist you in change of name or address, consolidation of accounts, duplicate mailings, dividend reinvestment enrollment, lost share certiﬁcates, transfer of shares to another person and additional administrative services. For more information, go to www.computershare.com/ investor or call toll-free (888) 216-7206. INVESTOR INFORMATION Current and prospective investors can access the Annual Report, Proxy Statement, SEC ﬁlings, earnings announcements and other press releases on our website at www.welltower.com, or by email request to info@welltower.com. EXCHANGE LISTING New York Stock Exchange Trading Symbol: WELL MEMBER National Association of Real Estate Investment Trusts INDUSTRY PARTNER World Economic Forum FORWARD-LOOKING STATEMENTS This Annual Report and the Letter to Shareholders contain “forward-looking statements” as that term is deﬁned in the Private Securities Litigation Reform Act of 1995. For example, when we use words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” or similar expressions that do not relate solely to historical matters, we are making forward- looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the company’s actual results to differ from the company’s expectations discussed in the forward-looking statements. Important factors that could cause our actual results to be materially different from the forward-looking statements are discussed in our Form 10-K under the heading “Risk Factors.” We assume no obligation to update or revise any forward- looking statements, whether because of new information, future events or otherwise, or to update the reasons why actual results could differ from those projected in any forward- looking statements. INDEPENDENT AUDITORS Ernst & Young LLP Toledo, Ohio WELLTOWER ONLINE Our website: www.welltower.com www.twitter.com/welltower www.linkedin.com/company/welltower To view the Welltower 2017 Annual Report, visit www.welltower.com. www.welltower.com 4500 Dorr Street Toledo, Ohio 43615-4040 877.670.0070 419.247.2800 WELL LISTED NYSE © COPYRIGHT 2018 WELLTOWER INC.

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