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EX-3.2 - EX-3.2 - WELLTOWER INC.Ex-3.2.htm
EX-32.1 - EX-32.1 - WELLTOWER INC.Ex-32.1.htm
EX-32.2 - EX-32.2 - WELLTOWER INC.Ex-32.2.htm
EX-31.2 - EX-31.2 - WELLTOWER INC.Ex-31.2.htm
EX-12 - EX-12 - WELLTOWER INC.Ex-12.htm
EX-31.1 - EX-31.1 - WELLTOWER INC.Ex-31.1.htm

 

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

or

 

 

 

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                      

Commission file number: 1-8923

WELLTOWER INC.

 

(Exact name of registrant as specified in its charter

 

 

 

Delaware

 

34-1096634

 

 

 

(State or other jurisdiction of

 incorporation or organization)

 

(I.R.S. Employer

 Identification No.)

 

 

 

4500 Dorr Street, Toledo, Ohio

 

43615

 

 

 

(Address of principal executive offices)

 

(Zip Code)

(419) 247-2800

(Registrant’s telephone number, including area code)  

Health Care REIT, Inc.

(Former name, former address and former fiscal year, if changed since last report)

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  ☑  No  o

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  No  o

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  

 

Accelerated filer o  

 

Non-accelerated filer   o

 (Do not check if a smaller reporting company)

 

Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  ☑

As of October 23, 2015, the registrant had 353,879,510 shares of common stock outstanding.  

 

 

 

 


TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements (Unaudited)

 

 

 

Consolidated Balance Sheets — September 30, 2015 and December 31, 2014

3

 

 

Consolidated Statements of Comprehensive Income — Three and nine months ended September 30, 2015 and 2014

4

 

 

Consolidated Statements of Equity — Nine months ended September 30, 2015 and 2014

6

 

 

Consolidated Statements of Cash Flows — Nine months ended September 30, 2015 and 2014

7

 

 

Notes to Unaudited Consolidated Financial Statements

8

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

57

 

 

Item 4. Controls and Procedures

58

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

 

Item 1A. Risk Factors

58

 

58

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

59

 

 

Item 5. Other Information

59

 

 

Item 6. Exhibits

59

 

 

Signatures

60

 

  

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

 

 

 

 

  

(Unaudited)

 

(Note)

Assets:  

 

 

 

 

 

Real estate investments:  

 

 

 

 

 

 

Real property owned:  

 

 

 

 

 

 

 

Land and land improvements  

$

2,241,210

 

$

2,046,541

 

 

Buildings and improvements  

 

24,273,654

 

 

21,799,313

 

 

Acquired lease intangibles  

 

1,208,510

 

 

1,135,936

 

 

Real property held for sale, net of accumulated depreciation  

 

229,038

 

 

323,818

 

 

Construction in progress  

 

197,639

 

 

186,327

 

 

 

Gross real property owned  

 

28,150,051

 

 

25,491,935

 

 

Less accumulated depreciation and amortization  

 

(3,553,171)

 

 

(3,020,908)

 

 

 

Net real property owned  

 

24,596,880

 

 

22,471,027

 

Real estate loans receivable  

 

752,912

 

 

380,169

 

Net real estate investments  

 

25,349,792

 

 

22,851,196

Other assets:  

 

 

 

 

 

 

 

Investments in unconsolidated entities  

 

558,354

 

 

744,151

 

 

Goodwill  

 

68,321

 

 

68,321

 

 

Deferred loan expenses  

 

64,190

 

 

69,282

 

 

Cash and cash equivalents  

 

292,042

 

 

473,726

 

 

Restricted cash  

 

74,758

 

 

79,697

 

 

Straight-line rent receivable

 

366,545

 

 

279,806

 

 

Receivables and other assets  

 

682,364

 

 

448,117

 

 

 

Total other assets  

 

2,106,574

 

 

2,163,100

Total assets  

$

27,456,366

 

$

25,014,296

 

 

 

 

  

 

 

 

 

 

Liabilities and equity  

 

 

 

 

 

Liabilities:  

 

 

 

 

 

 

 

Borrowings under primary unsecured credit facility  

$

490,000

 

$

-

 

 

Senior unsecured notes  

 

7,926,757

 

 

7,766,251

 

 

Secured debt  

 

2,975,639

 

 

2,977,713

 

 

Capital lease obligations  

 

75,379

 

 

84,049

 

 

Accrued expenses and other liabilities  

 

686,651

 

 

626,825

Total liabilities  

 

12,154,426

 

 

11,454,838

Redeemable noncontrolling interests  

 

164,765

  

  

86,409

Equity:  

 

 

 

 

 

 

 

Preferred stock  

 

1,006,250

 

 

1,006,250

 

 

Common stock  

 

353,023

 

 

328,835

 

 

Capital in excess of par value  

 

16,381,569

 

 

14,740,712

 

 

Treasury stock  

 

(44,336)

 

 

(35,241)

 

 

Cumulative net income  

 

3,576,490

 

 

2,842,022

 

 

Cumulative dividends  

 

(6,537,541)

 

 

(5,635,923)

 

 

Accumulated other comprehensive income (loss)  

 

(94,359)

 

 

(77,009)

 

 

Other equity  

 

3,997

 

 

5,507

 

 

 

Total Welltower Inc. stockholders’ equity  

 

14,645,093

 

 

13,175,153

 

 

Noncontrolling interests  

 

492,082

 

 

297,896

Total equity  

 

15,137,175

 

 

13,473,049

Total liabilities and equity  

$

27,456,366

 

$

25,014,296

 

NOTE: The consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

 

See notes to unaudited consolidated financial statements

 

3


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2015

 

2014

 

2015

 

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental income  

$

409,290

 

$

354,148

 

$

1,185,502

 

$

1,038,451

 

Resident fees and services

 

545,255

 

 

482,412

 

 

1,573,318

 

 

1,406,316

 

Interest income

 

22,380

 

 

9,344

 

 

59,950

 

 

26,871

 

Other income

 

2,072

 

 

1,619

 

 

11,572

 

 

4,139

 

 

Total revenues

 

978,997

 

 

847,523

 

 

2,830,342

 

 

2,475,777

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

121,130

 

 

118,435

 

 

361,071

 

 

360,334

 

Property operating expenses

 

408,703

 

 

355,157

 

 

1,183,519

 

 

1,040,342

 

Depreciation and amortization

 

205,799

 

 

200,970

 

 

603,431

 

 

648,737

 

General and administrative

 

36,950

 

 

30,803

 

 

110,562

 

 

115,327

 

Transaction costs

 

9,333

 

 

13,554

 

 

70,379

 

 

21,546

 

Loss (gain) on derivatives, net

 

-

 

 

49

 

 

(58,427)

 

 

400

 

Loss (gain) on extinguishment of debt, net

 

584

 

 

2,692

 

 

34,872

 

 

3,075

 

Impairment of assets

 

-

 

 

-

 

 

2,220

 

 

-

 

Other expenses

 

-

 

 

10,262

 

 

10,583

 

 

10,262

 

 

Total expenses

 

782,499

 

 

731,922

 

 

2,318,210

 

 

2,200,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and income from unconsolidated entities

 

196,498

 

 

115,601

 

 

512,132

 

 

275,754

Income tax (expense) benefit

 

3,344

 

 

10,198

 

 

(3,769)

 

 

6,369

Income (loss) from unconsolidated entities

 

(2,631)

 

 

(2,632)

 

 

(18,231)

 

 

(19,705)

Income (loss) from continuing operations

 

197,211

 

 

123,167

 

 

490,132

 

 

262,418

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on sales of discontinued properties, net

 

-

 

 

-

 

 

-

 

 

6,411

 

Income (loss) from discontinued operations, net

 

-

 

 

-

 

 

-

 

 

724

 

 

Discontinued operations, net

 

-

 

 

-

 

 

-

 

 

7,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on real estate dispositions, net

 

2,046

 

 

29,604

 

 

249,002

 

 

36,272

Net income

 

199,257

 

 

152,771

 

 

739,134

 

 

305,825

Less:

Preferred stock dividends

 

16,352

 

 

16,352

 

 

49,055

 

 

49,057

Less:

Net income (loss) attributable to noncontrolling interests(1)

 

862

 

 

164

 

 

4,666

 

 

(1,339)

Net income (loss) attributable to common stockholders

$

182,043

 

$

136,255

 

$

685,413

 

$

258,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

351,765

 

 

311,117

 

 

346,425

 

 

299,137

 

Diluted

 

353,107

 

 

312,812

 

 

347,547

 

 

300,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

0.52

 

$

0.44

 

$

1.98

 

$

0.84

 

Discontinued operations, net

 

-

 

 

-

 

 

-

 

 

0.02

 

Net income (loss) attributable to common stockholders*

$

0.52

 

$

0.44

 

$

1.98

 

$

0.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations attributable to common stockholders, including real estate dispositions

$

0.52

 

$

0.44

 

$

1.97

 

$

0.83

 

Discontinued operations, net

 

-

 

 

-

 

 

-

 

 

0.02

 

Net income (loss) attributable to common stockholders*

$

0.52

 

$

0.44

 

$

1.97

 

$

0.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

$

0.825

 

$

0.795

 

$

2.475

 

$

2.385

* Amounts may not sum due to rounding

(1) Includes amounts attributable to redeemable noncontrolling interests.

See notes to unaudited consolidated financial statements

 

4


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

Net income

$

199,257

 

$

152,771

 

$

739,134

 

$

305,825

 

 

 

 

 

 

 

 

  

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrecognized gain (loss) on equity investments

 

(3,086)

 

 

-

 

 

(18,186)

 

 

389

 

Change in net unrealized gains (losses) on cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on cash flow hedges

 

462

 

 

455

 

 

(1,235)

 

 

1,327

 

Foreign currency translation gain (loss)

 

(25,198)

 

 

(42,664)

 

 

(22,011)

 

 

(39,444)

Total other comprehensive income (loss)

 

(27,822)

 

 

(42,209)

 

 

(41,432)

 

 

(37,728)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

171,435

 

 

110,562

 

 

697,702

 

 

268,097

Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)

 

(14,271)

 

 

(7,984)

 

 

(19,416)

 

 

(10,894)

Total comprehensive income (loss) attributable to common stockholders

$

185,706

 

$

118,546

 

$

717,118

 

$

278,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements

 

5


CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

 

 

Nine Months Ended September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

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 (loss)

 

 

 

 

 

 

 

 

 

734,468

 

 

 

 

 

 

 

4,476

 

738,944

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,350)

 

 

 

(24,082)

 

(41,432)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

697,512

Net change in noncontrolling interests

 

 

 

  

 

(4,778)

 

 

 

 

 

 

 

 

 

 

 

213,792

 

209,014

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

3,308

 

236,718

 

(9,095)

 

 

 

 

 

 

 

(2,097)

 

 

 

228,834

Proceeds from issuance of common stock

 

 

 

19,550

 

1,403,486

 

 

 

 

 

 

 

 

 

 

 

 

 

1,423,036

Equity component of convertible debt

 

 

 

1,330

 

5,431

 

 

 

 

 

 

 

 

 

 

 

 

 

6,761

Option compensation expense

  

  

 

 

 

 

 

 

 

 

 

 

 

 

 

587

 

 

 

587

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(852,563)

 

 

 

 

 

 

 

(852,563)

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(49,055)

 

 

 

 

 

 

 

(49,055)

Balances at end of period

$

1,006,250

$

353,023

$

16,381,569

$

(44,336)

$

3,576,490

$

(6,537,541)

$

(94,359)

$

3,997

$

492,082

$

15,137,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Preferred

Common

Excess of

Treasury

Cumulative

Cumulative

Comprehensive

Other

Noncontrolling

 

 

 

 

 

Stock

Stock

Par Value

Stock

Net Income

Dividends

Income (Loss)

Equity

Interests

Total

Balances at beginning of period

$

1,017,361

$

289,461

$

12,418,520

$

(21,263)

$

2,329,869

$

(4,600,854)

$

(24,531)

$

6,020

$

341,748

$

11,756,331

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

307,164

 

 

 

 

 

 

 

(1,318)

 

305,846

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,173)

 

 

 

(9,555)

 

(37,728)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

268,118

Net change in noncontrolling interests

 

 

 

 

 

(7,818)

 

 

 

 

 

 

 

 

 

 

 

(21,062)

 

(28,880)

Amounts related to issuance of common stock from dividend reinvestment and stock incentive plans, net of forfeitures

 

 

 

3,614

 

212,718

 

(13,978)

 

 

 

 

 

 

 

(486)

 

 

 

201,868

Proceeds from issuance of common stock

 

 

 

33,925

 

2,030,476

 

 

 

 

 

 

 

 

 

 

 

 

 

2,064,401

Equity component of convertible debt

 

 

 

200

 

675

 

 

 

 

 

 

 

 

 

 

 

 

 

875

Conversion of preferred stock

 

(11,111)

 

233

 

10,878

 

 

 

 

 

 

 

 

 

 

 

 

 

-

Option compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

689

 

 

 

689

Cash dividends paid:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(708,923)

 

 

 

 

 

 

 

(708,923)

 

Preferred stock cash dividends

 

 

 

 

 

 

 

 

 

 

 

(49,057)

 

 

 

 

 

 

 

(49,057)

Balances at end of period

$

1,006,250

$

327,433

$

14,665,449

$

(35,241)

$

2,637,033

$

(5,358,834)

$

(52,704)

$

6,223

$

309,813

$

13,505,422

 

See notes to unaudited consolidated financial statements

 

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)

 

 

 

 

 

Nine Months Ended

 

 

 

  

September 30,

 

 

 

  

2015

 

2014

Operating activities:  

 

 

 

 

 

Net income  

$

739,134

 

$

305,825

Adjustments to reconcile net income to  

 

 

 

 

 

 

net cash provided from (used in) operating activities:  

 

 

 

 

 

 

 

Depreciation and amortization  

 

603,431

 

 

648,737

 

 

Other amortization expenses  

 

3,867

 

 

5,626

 

 

Impairment of assets  

 

2,220

 

 

-

 

 

Stock-based compensation expense  

 

25,655

 

 

26,108

 

 

Loss (gain) on derivatives, net  

 

(58,427)

 

 

400

 

 

Loss (gain) on extinguishment of debt, net  

 

34,872

 

 

3,075

 

 

Loss (income) from unconsolidated entities

 

18,231

 

 

19,705

 

 

Rental income in excess of cash received  

 

(86,739)

 

 

(51,017)

 

 

Amortization related to above (below) market leases, net  

 

2,863

 

 

503

 

 

Loss (gain) on sales of properties, net  

 

(249,002)

 

 

(42,683)

 

 

Distributions by unconsolidated entities

 

435

 

 

8,883

 

 

Increase (decrease) in accrued expenses and other liabilities  

 

42,759

 

 

(19,259)

 

 

Decrease (increase) in receivables and other assets  

 

(42,975)

 

 

(51,734)

Net cash provided from (used in) operating activities  

 

1,036,324

 

 

854,169

 

 

 

  

 

 

 

 

 

Investing activities:  

 

 

 

 

 

 

Cash disbursed for acquisitions  

 

(2,489,345)

 

 

(991,315)

 

Cash disbursed for capital improvements to existing properties

 

(122,640)

 

 

(86,324)

 

Cash disbursed for construction in progress

 

(165,311)

 

 

(140,829)

 

Capitalized interest  

 

(6,311)

 

 

(5,084)

 

Investment in real estate loans receivable  

 

(445,985)

 

 

(79,264)

 

Other investments, net of payments  

 

(129,311)

 

 

(39,202)

 

Principal collected on real estate loans receivable  

 

71,111

 

 

46,268

 

Contributions to unconsolidated entities  

 

(139,295)

 

 

(246,794)

 

Distributions by unconsolidated entities  

 

139,557

 

 

38,261

 

Proceeds from (payments on) derivatives  

 

103,615

 

 

-

 

Decrease (increase) in restricted cash  

 

10,512

 

 

(45,346)

 

Proceeds from sales of real property  

 

667,761

 

 

442,733

Net cash provided from (used in) investing activities  

 

(2,505,642)

 

 

(1,106,896)

 

 

 

  

 

 

 

 

 

Financing activities:  

 

 

 

 

 

 

Net increase (decrease) under unsecured credit facilities  

 

490,000

 

 

(130,000)

 

Proceeds from issuance of senior unsecured notes  

 

743,407

 

 

-

 

Payments to extinguish senior unsecured notes  

 

(534,546)

 

 

(47,591)

 

Net proceeds from the issuance of secured debt  

 

222,612

 

 

98,100

 

Payments on secured debt  

 

(469,455)

 

 

(286,162)

 

Net proceeds from the issuance of common stock  

 

1,641,981

 

 

2,260,908

 

Decrease (increase) in deferred loan expenses  

 

(7,834)

 

 

(17,429)

 

Contributions by noncontrolling interests(1)

 

163,105

 

 

5,572

 

Distributions to noncontrolling interests(1)

 

(27,439)

 

 

(30,909)

 

Acquisitions of noncontrolling interests

 

(3,154)

 

 

(1,175)

 

Cash distributions to stockholders  

 

(901,618)

 

 

(757,980)

 

Other financing activities

 

(27,114)

 

 

(844)

Net cash provided from (used in) financing activities  

 

1,289,945

 

 

1,092,490

Effect of foreign currency translation on cash and cash equivalents

 

(2,311)

 

 

135

Increase (decrease) in cash and cash equivalents  

 

(181,684)

 

 

839,898

Cash and cash equivalents at beginning of period  

 

473,726

 

 

158,780

Cash and cash equivalents at end of period  

$

292,042

 

$

998,678

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid

$

334,511

 

$

365,738

 

Income taxes paid

 

11,489

 

 

16,672

 

 

 

 

 

 

 

 

 

(1) Includes amounts attributable to redeemable noncontrolling interests.

 

See notes to unaudited consolidated financial statements

 

7


WELLTOWER INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. Business

 

     Welltower Inc. (formerly Health Care REIT, 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.  Welltower™, a real estate investment trust (REIT), owns 1,414 properties in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties.  Founded in 1970, we were the first real estate investment trust to invest exclusively in health care facilities.

  

2. Accounting Policies and Related Matters

     Basis of Presentation

     The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2015 are not necessarily an indication of the results that may be expected for the year ending December 31, 2015. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

     New Accounting Standards     

     In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted beginning after December 15, 2016.  We are currently evaluating the impact that the standard will have on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.

     In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis” (“ASU 2015-02”), which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination.  ASU 2015-02 is effective beginning January 1, 2016.  We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.

     In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.  The recognition and measurement guidance for debt issuance costs are not affected.  Upon adoption, we will apply the new guidance on a retrospective basis and adjust the balance sheet of each individual period presented to reflect the period-specific effects of applying the new guidance.  The guidance is effective beginning January 1, 2016.  We are continuing to evaluate this guidance; however, we do not expect its adoption to have a significant impact on our consolidated financial statements.

  

3. Real Property Acquisitions and Development

 

     The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets, liabilities and noncontrolling interests based upon their respective fair values in accordance with our accounting policies. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments.  Transaction costs primarily represent costs incurred with property acquisitions, including due diligence costs, fees for legal and valuation services and termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs.  Certain of our subsidiaries’ functional currencies are the local currencies of their respective countries. See Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 for information regarding our foreign currency policies.  

 

 

8


WELLTOWER INC.

  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

    Triple-net Activity

 

 

Nine Months Ended

 

(In thousands)

September 30, 2015(1)

September 30, 2014

 

Land and land improvements

 

$

111,674

 

$

36,427

 

Buildings and improvements

 

 

1,025,232

 

 

303,273

 

Acquired lease intangibles

 

 

3,888

 

 

-

 

Restricted cash

 

 

6

 

 

-

 

Receivables and other assets

 

 

60

 

 

-

 

 

Total assets acquired

 

 

1,140,860

 

 

339,700

 

Accrued expenses and other liabilities  

 

 

(2,447)

 

 

-

 

 

Total liabilities assumed

 

 

(2,447)

 

 

-

 

Non-cash acquisition related activity

 

 

(2,780)

 

 

(1,937)

 

 

Cash disbursed for acquisitions

 

 

1,135,633

 

 

337,763

 

Construction in progress additions

 

 

96,403

 

 

79,668

 

Less:

Capitalized interest

 

 

(4,453)

 

 

(3,258)

 

 

Foreign currency translation

 

 

73

 

 

116

 

Cash disbursed for construction in progress

 

 

92,023

 

  

76,526

 

Capital improvements to existing properties

 

 

35,042

 

 

14,375

 

 

Total cash invested in real property, net of cash acquired

 

$

1,262,698

 

$

428,664

 

 

 

 

 

 

 

 

 

 

(1) Includes acquisitions with an aggregate purchase price of $844,298,000 for which the allocation of the purchase price consideration is preliminary and subject to change.

 

 

 

 

 

 

 

 

 

      Seniors Housing Operating Activity

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

(In thousands)

September 30, 2015(1)

September 30, 2014

 

Land and land improvements

 

$

98,444

 

$

40,764

 

Building and improvements

 

 

1,229,017

 

 

224,936

 

Acquired lease intangibles

 

 

74,091

 

 

10,021

 

Construction in progress

 

 

-

 

 

27,957

 

Restricted cash

 

 

5,567

 

 

-

 

Receivables and other assets

 

 

23,928

 

 

5,679

 

  

Total assets acquired(2)

 

 

1,431,047

 

 

309,357

 

Secured debt

 

 

(234,597)

 

 

(12,846)

 

Accrued expenses and other liabilities  

 

 

(19,016)

 

 

(17,011)

 

 

Total liabilities assumed

 

 

(253,613)

 

 

(29,857)

 

Noncontrolling interests

 

 

(86,842)

 

 

-

 

 

Cash disbursed for acquisitions

 

 

1,090,592

 

 

279,500

 

Construction in progress additions

 

 

39,493

 

 

6,984

 

Less:

Capitalized interest

 

 

(1,116)

 

 

(293)