WELLTOWER INC. - Quarter Report: 2015 September (Form 10-Q)

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


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

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

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

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

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

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.

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)
	Foreign currency translation			(1,345)			(810)
Cash disbursed for construction in progress				37,032			5,881
Capital improvements to existing properties				61,911			52,177
	Total cash invested in real property, net of cash acquired		$	1,189,535		$	337,558

(1) Includes acquisitions with an aggregate purchase price of $1,268,031,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2) Excludes $3,390,000 and $8,476,000 of cash acquired during the nine months ended September 30, 2015 and 2014, respectively.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Outpatient Medical Activity

		Nine Months Ended
(In thousands)		September 30, 2015⁽¹⁾			September 30, 2014
Land and land improvements			$	737	$	29,588
Buildings and improvements				426,288		471,410
Acquired lease intangibles				19,373		17,440
Receivables and other assets				-		1,245
	Total assets acquired⁽²⁾			446,398		519,683
Secured debt				(112,000)		(50,500)
Accrued expenses and other liabilities				(2,743)		(9,308)
	Total liabilities assumed			(114,743)		(59,808)
Noncontrolling interests				(68,535)		(39,987)
Non-cash acquisition activity⁽³⁾				-		(45,836)
	Cash disbursed for acquisitions			263,120		374,052
Construction in progress additions				38,919		71,245
Less:	Capitalized interest			(742)		(1,533)
	Accruals⁽⁴⁾			(1,921)		(11,290)
Cash disbursed for construction in progress				36,256		58,422
Capital improvements to existing properties				25,687		19,772
	Total cash invested in real property		$	325,063	$	452,246

(1) Includes acquisitions with an aggregate purchase price of $440,220,000 for which the allocation of the purchase price consideration is preliminary and subject to change.
(2) Excludes $4,372,000 and $0 of cash acquired during the nine months ended September 30, 2015 and 2014, respectively.
(3) Relates to an acquisition of assets previously financed as real estate loans. Please refer to Note 6 for additional information.
(4) Represents non-cash consideration accruals for amounts to be paid in future periods relating to properties that converted in the periods noted above.

Construction Activity

The following is a summary of the construction projects that were placed into service and began generating revenues during the periods presented (in thousands):


			Nine Months Ended
			September 30, 2015			September 30, 2014
	Development projects:
		Triple-net		$	85,902		$	71,569
		Seniors housing operating			19,869			-
		Outpatient medical			16,592			56,807
	Total development projects				122,363			128,376
	Expansion projects				38,808			17,586
Total construction in progress conversions				$	161,171		$	145,962

WELLTOWER INC.

NOTES TO UNAUDITED 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):


		September 30, 2015		December 31, 2014
Assets:
	In place lease intangibles	$	1,042,770	$	988,290
	Above market tenant leases		82,083		65,684
	Below market ground leases		61,159		62,426
	Lease commissions		22,498		19,536
	Gross historical cost		1,208,510		1,135,936
	Accumulated amortization		(836,684)		(776,501)
	Net book value	$	371,826	$	359,435

	Weighted-average amortization period in years		17.2		17.7

Liabilities:
	Below market tenant leases	$	89,891	$	91,168
	Above market ground leases		7,860		7,859
	Gross historical cost		97,751		99,027
	Accumulated amortization		(44,609)		(40,891)
	Net book value	$	53,142	$	58,136

	Weighted-average amortization period in years		15.6		14.4

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Rental income related to above/below market tenant leases, net	$	(1,684)	$	179	$	(1,901)	$	423
Property operating expenses related to above/below market ground leases, net		(308)		(317)		(962)		(926)
Depreciation and amortization related to in place lease intangibles and lease commissions		(26,137)		(46,366)		(82,434)		(185,363)

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


		Assets		Liabilities
2015	$	39,972	$	3,279
2016		71,453		6,512
2017		43,426		6,052
2018		30,094		5,583
2019		24,033		5,325
Thereafter		162,848		26,391
Total	$	371,826	$	53,142

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5. Dispositions, Assets Held for Sale and Discontinued Operations

We periodically sell properties for various reasons, including favorable market conditions or the exercise of tenant purchase options. The following is a summary of our real property disposition activity for the periods presented (in thousands):


		Nine Months Ended
		September 30, 2015			September 30, 2014
Real estate dispositions:
	Triple-net		$	246,116		$	56,713
	Outpatient medical⁽¹⁾			166,919			343,337
	Land parcels			5,724			-
	Total dispositions			418,759			400,050
Gain (loss) on real estate dispositions, net				249,002			42,683
Proceeds from real estate dispositions			$	667,761		$	442,733

(1) Dispositions occurring in the nine-month period ending September 30, 2015 primarily related to the disposition of an unconsolidated equity investment with Forest City Enterprises.

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):


			Three Months Ended				Nine Months Ended
			September 30,				September 30,
		2015		2014		2015		2014
Revenues:
	Rental income	$	7,164	$	26,123	$	24,237	$	89,593
Expenses:
	Interest expense		1,041		4,507		3,991		18,512
	Property operating expenses		1,577		1,595		4,586		6,017
	Provision for depreciation		123		7,878		4,760		27,106
	Total expenses		2,741		13,980		13,337		51,635
Income (loss) from real estate dispositions, net		$	4,423	$	12,143	$	10,900	$	37,958

Discontinued Operations

We have reclassified the income and expenses attributable to all properties sold prior to or held for sale at January 1, 2014 to discontinued operations in accordance with ASU 2014-08. The following illustrates the reclassification impact as reported in our Consolidated Statements of Comprehensive Income as a result of classifying these properties as discontinued operations for the periods presented (in thousands):


			Three Months Ended				Nine Months Ended
			September 30,				September 30,
		2015		2014		2015		2014
Revenues:
	Rental income	$	-	$	-	$	-	$	881
Expenses:
	Interest expense		-		-		-		157
	Total expenses		-		-		-		157
Income (loss) from discontinued operations, net		$	-	$	-	$	-	$	724

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Real Estate Loans Receivable

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

		Nine Months Ended
		September 30, 2015						September 30, 2014
				Outpatient						Outpatient
		Triple-net		Medical		Totals		Triple-net		Medical		Totals
Advances on real estate loans receivable:
	Investments in new loans	$	392,278	$	-	$	392,278	$	10,674	$	-	$	10,674
	Draws on existing loans		51,422		2,285		53,707		50,446		18,144		68,590
	Net cash advances on real estate loans		443,700		2,285		445,985		61,120		18,144		79,264
Receipts on real estate loans receivable:
	Loan payoffs		52,088		-		52,088		24,522		42,036		66,558
	Principal payments on loans		19,023		-		19,023		25,494		52		25,546
	Sub-total		71,111		-		71,111		50,016		42,088		92,104
	Less: Non-cash activity⁽¹⁾		-		-		-		-		(45,836)		(45,836)
	Net cash receipts on real estate loans		71,111		-		71,111		50,016		(3,748)		46,268
Net cash advances (receipts) on real estate loans			372,589		2,285		374,874		11,104		21,892		32,996
Change in balance due to foreign currency translation			(2,131)		-		(2,131)		(1,085)		-		(1,085)
Net change in real estate loans receivable		$	370,458	$	2,285	$	372,743	$	10,019	$	(23,944)	$	(13,925)

(1) Represents an acquisition of assets previously financed as a real estate loan. Please see Note 3 for additional information.

We recorded no provision for loan losses during the nine months ended September 30, 2015. At September 30, 2015, we had no real estate loans with outstanding balances on non-accrual status and no allowances for loan losses were recorded.

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⁾	September 30, 2015		December 31, 2014
Triple-net	10% to 49%	$	35,657	$	31,511
Seniors housing operating	10% to 50%		485,278		539,147
Outpatient medical	36% to 49%		37,419		173,493
Total		$	558,354	$	744,151

(1) Excludes ownership of in-substance real estate.

At September 30, 2015, the aggregate unamortized basis difference of our joint venture investments of $161,882,000 is primarily attributable to appreciation of the underlying properties and transaction costs. This difference will be amortized over the remaining useful life of the related properties and included in the reported amount of income from unconsolidated entities.

8. Credit Concentration

We use net operating income from continuing operations (“NOI”) as our credit concentration metric. See Note 17 for additional information and reconciliation. The following table summarizes certain information about our credit concentration for the nine month period ended September 30, 2015, excluding our share of NOI in unconsolidated entities (dollars in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


		Number of	Total		Percent of
Concentration by relationship:⁽¹⁾		Properties	NOI		NOI⁽²⁾
	Genesis Healthcare	180	$	273,922	17%
	Sunrise Senior Living⁽³⁾	147		225,580	14%
	Brookdale Senior Living	146		124,843	8%
	Revera⁽³⁾	71		75,973	5%
	Benchmark Senior Living	50		73,788	4%
	Remaining portfolio	759		872,717	52%
	Totals	1,353	$	1,646,823	100%

(1) Genesis Healthcare is in our triple-net segment. Sunrise Senior Living and Revera are in our seniors housing operating segment. Benchmark Senior Living and Brookdale Senior Living are both in our triple-net and seniors housing operating segments.
(2) NOI with our top five relationships comprised 49% of total NOI for the year ending December 31, 2014.
(3) Revera owns a controlling interest in Sunrise Senior Living.

9. Borrowings Under Credit Facilities and Related Items

At September 30, 2015, we had a primary unsecured credit facility with a consortium of 28 banks that includes a $2,500,000,000 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 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 $500,000,000 in alternate currencies (none outstanding at September 30, 2015). Borrowings under the unsecured revolving credit facility are subject to interest payable at the applicable margin over LIBOR interest rate (1.119% at September 30, 2015). The applicable margin is based on certain of our debt ratings and was 0.925% at September 30, 2015. 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 September 30, 2015. The primary unsecured credit facility is scheduled to expire October 31, 2018 and can be extended for an additional year at our option.

The following information relates to aggregate borrowings under the primary unsecured revolving credit facility for the periods presented (dollars in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2015		2014		2015		2014
Balance outstanding at quarter end⁽¹⁾		$	490,000	$	-	$	490,000	$	-
Maximum amount outstanding at any month end		$	490,000	$	235,000	$	535,000	$	637,000
Average amount outstanding (total of daily
	principal balances divided by days in period)	$	298,370	$	100,380	$	402,619	$	253,681
Weighted average interest rate (actual interest
	expense divided by average borrowings outstanding)		1.16%		1.67%		1.17%		1.40%

(1) As of September 30, 2015, letters of credit in the aggregate amount of $58,484,000 have been issued, which reduces the borrowing capacity on the primary unsecured revolving credit facility.

10. Senior Unsecured Notes and Secured Debt

We may repurchase, redeem or refinance convertible and non-convertible 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 non-convertible senior unsecured notes are redeemable at our option, at any time in whole or from time to time in part, at a redemption price equal to the sum of (1) the principal amount of the notes (or portion of such notes) being redeemed plus accrued and unpaid interest thereon up to the redemption date and (2) any “make-whole” amount due under the terms of the notes in connection with early redemptions. Redemptions and repurchases of debt, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. At September 30, 2015, the annual principal payments due on these debt obligations were as follows (in thousands):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Senior		Secured
	Unsecured Notes^(1,2)		Debt ^(1,3)		Totals
2015	$	-	$	106,190	$	106,190
2016		400,000		464,519		864,519
2017		450,000		399,670		849,670
2018		450,000		558,656		1,008,656
2019^(4,5)		1,286,625		374,769		1,661,394
Thereafter^(6,7,8)		5,387,915		1,041,893		6,429,808
Totals	$	7,974,540	$	2,945,697	$	10,920,237

(1) Amounts represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(2) Annual interest rates range from 1.169% to 6.5%.
(3) Annual interest rates range from 1.0% to 7.98%. Carrying value of the properties securing the debt totaled $5,205,803,000 at September 30, 2015.
(4) On July 25, 2014, we refinanced the funding on a $250,000,000 Canadian-denominated unsecured term credit facility (approximately $186,625,000 based on the Canadian/U.S. Dollar exchange rate on September 30, 2015). The loan matures on October 31, 2018 (with an option to extend for an additional year at our discretion) and bears interest at the Canadian Dealer Offered Rate plus 97.5 basis points (1.8% at September 30, 2015).
(5) On July 25, 2014, we refinanced the funding on a $500,000,000 unsecured term credit facility. The loan matures on October 31, 2018 (with an option to extend for an additional year at our discretion) and bears interest at LIBOR plus 97.5 basis points (1.17% at September 30, 2015).
(6) On November 20, 2013, we completed the sale of £550,000,000 (approximately $831,765,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2015) of 4.8% senior unsecured notes due 2028.
(7) On November 25, 2014, we completed the sale of £500,000,000 (approximately $756,150,000 based on the Sterling/U.S. Dollar exchange rate in effect on September 30, 2015) of 4.5% senior unsecured notes due 2034.
(8) 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.

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


	Nine Months Ended
	September 30, 2015			September 30, 2014
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	7,817,154	4.385%	$	7,421,707	4.400%
Debt issued		750,000	4.000%		-	0.000%
Debt extinguished		(300,000)	6.200%		-	0.000%
Debt redeemed		(215,965)	3.000%		(47,660)	3.000%
Foreign currency		(76,649)	8.065%		(31,719)	3.892%
Ending balance	$	7,974,540	4.210%	$	7,342,328	4.388%

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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


	Nine Months Ended
		September 30, 2015		September 30, 2014
			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	2,941,765	4.94%	$	3,010,711	5.10%
Debt issued		222,612	2.76%		98,100	3.23%
Debt assumed		339,929	3.34%		62,505	3.11%
Debt extinguished		(420,672)	4.27%		(240,355)	5.66%
Foreign currency		(89,154)	3.88%		(45,807)	4.97%
Principal payments		(48,783)	4.85%		(23,434)	3.78%
Ending balance	$	2,945,697	4.72%	$	2,861,720	4.94%

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 September 30, 2015, 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 may elect to manage this risk through the use of forward 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 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 $2,775,000 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 nine months ended September 30, 2015, we settled certain net investment hedges generating cash proceeds of $103,615,000. The balance of the cumulative translation adjustment will be reclassified to earnings when the hedged investment is sold or substantially liquidated.

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


		September 30, 2015		December 31, 2014
Derivatives designated as net investment hedges:
Denominated in Canadian Dollars	$	1,175,000	$	900,000
Denominated in Pounds Sterling	£	550,000	£	350,000

Financial instruments designated as net investment hedges:
Denominated in Canadian Dollars	$	250,000	$	250,000
Denominated in Pounds Sterling	£	1,050,000	£	1,050,000

Derivatives designated as cash flow hedges
Denominated in U.S. Dollars	$	57,000	$	57,000
Denominated in Canadian Dollars	$	72,000	$	58,000
Denominated in Pounds Sterling	£	57,000	£	40,000

Derivative instruments not designated:⁽¹⁾
Denominated in Canadian Dollars	$	700,000	$	12,000

(1) These non-designated instruments represent off-setting forward exchange contracts to manage against adverse movements in exchange rates with regards to the purchase price on pending foreign acquisitions.

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


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Location		2015		2014		2015		2014
Gain (loss) on interest rate swap recognized in OCI (effective portion)	OCI	$	-	$	(4)	$	(1)	$	(11)

Gain (loss) on interest rate swaps reclassified from AOCI into income (effective portion)	Interest expense		(462)		(459)		(1,390)		(1,338)

Gain (loss) on forward exchange contracts recognized in income	Interest expense		2,347		-		6,285		-

Gain (loss) on forward exchange contracts recognized in income	Gain (loss) on derivatives, net		-		(49)		-		(400)

Loss (gain) on option exercise⁽¹⁾	Loss (gain) on derivatives, net		-		-		(58,427)		-

Gain on release of cumulative translation adjustment related to net investment hedge of an equity investment	Income (loss) from unconsolidated entities		-		528		-		528

Gain (loss) on foreign exchange contracts and term loans designated as net investment hedge recognized in OCI	OCI		174,239		12,880		208,854		6,833

(1) In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis Healthcare Corporation. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis Healthcare. In February 2015, Genesis Healthcare closed on a transaction to merge with Skilled Healthcare Group to become a publicly traded company which required us to record the value of the derivative asset due to the net settlement feature.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12. Commitments and Contingencies

At September 30, 2015, we had eight outstanding letter of credit obligations totaling $73,655,000 and expiring between 2015 and 2018. At September 30, 2015, we had outstanding construction in progress of $197,639,000 and were committed to providing additional funds of approximately $408,372,000 to complete construction. Purchase obligations also include $236,068,000 representing the cash portion of an acquisition that occurred in October 2015 and contingent purchase obligations totaling $29,427,000. These contingent purchase obligations relate to unfunded capital improvement obligations and contingent obligations on acquisitions. Rents due from the tenant are increased to reflect the additional investment in the property.

We evaluate our leases for operating versus capital lease treatment in accordance with Accounting Standards Codification (“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 September 30, 2015, we had operating lease obligations of $988,564,000 relating to certain ground leases and company office space and capital lease obligations of $99,751,000 relating primarily to certain investment properties. Regarding 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 September 30, 2015, aggregate future minimum rentals to be received under these noncancelable subleases totaled $27,126,000.

13. Stockholders’ Equity

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


	September 30, 2015	December 31, 2014
Preferred Stock:
Authorized shares	50,000,000	50,000,000
Issued shares	25,875,000	25,875,000
Outstanding shares	25,875,000	25,875,000

Common Stock, $1.00 par value:
Authorized shares	700,000,000	700,000,000
Issued shares	353,814,909	329,487,615
Outstanding shares	352,998,274	328,790,066

Preferred Stock. The following is a summary of our preferred stock activity during the periods indicated:


	Nine Months Ended
	September 30, 2015		September 30, 2014
		Weighted Avg.		Weighted Avg.
	Shares	Dividend Rate	Shares	Dividend Rate
Beginning balance	25,875,000	6.500%	26,108,236	6.496%
Shares converted	-	0.000%	(233,236)	6.000%
Ending balance	25,875,000	6.500%	25,875,000	6.500%

Common Stock. The following is a summary of our common stock issuances during the nine months ended September 30, 2015 and 2014 (dollars in thousands, except per share amounts):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Shares Issued		Average Price		Gross Proceeds		Net Proceeds
June 2014 public issuance	16,100,000	$	62.35	$	1,003,835	$	968,517
September 2014 public issuance	17,825,000		63.75		1,136,344		1,095,883
2014 Dividend reinvestment plan issuances	3,114,052		60.05		186,996		186,996
2014 Option exercises	207,046		45.94		9,512		9,512
2014 Stock incentive plans, net of forfeitures	186,837				-		-
2014 Senior note conversions	199,943				-		-
2014 Preferred stock conversions	233,236				-		-
2014 Totals	37,866,114			$	2,336,687	$	2,260,908

February 2015 public issuance	19,550,000	$	75.50	$	1,476,025	$	1,423,935
2015 Dividend reinvestment plan issuances	2,935,950		70.28		206,334		206,334
2015 Option exercises	247,005		47.42		11,712		11,712
2015 Stock incentive plans, net of forfeitures	144,779				-		-
2015 Senior note conversions	1,330,474				-		-
2015 Totals	24,208,208			$	1,694,071	$	1,641,981

Dividends. The increase in dividends is primarily attributable to increases in our common shares outstanding as described above and an increase in common dividends per share. The following is a summary of our dividend payments (in thousands, except per share amounts):


	Nine Months Ended
	September 30, 2015				September 30, 2014
	Per Share		Amount		Per Share		Amount
Common Stock	$	2.4750	$	852,563	$	2.3850	$	708,923
Series H Preferred Stock		-		-		0.0079		1
Series I Preferred Stock		2.4375		35,039		2.4375		35,040
Series J Preferred Stock		1.2189		14,016		1.2189		14,016
Totals			$	901,618			$	757,980

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

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


		Unrecognized gains (losses) related to:
		Foreign Currency Translation		Available for Sale Securities		Actuarial Losses		Cash Flow Hedges		Total
Balance at December 31, 2014	$	(74,770)	$	-	$	(1,589)	$	(650)	$	(77,009)
Other comprehensive income before reclassification adjustments		2,071		(18,186)		-		(2,625)		(18,740)
Reclassification amount to net income		-		-		-		1,390 ⁽¹⁾		1,390
Net current-period other comprehensive income		2,071		(18,186)		-		(1,235)		(17,350)
Balance at September 30, 2015	$	(72,699)	$	(18,186)	$	(1,589)	$	(1,885)	$	(94,359)

Balance at December 31, 2013	$	(17,631)	$	(389)	$	(1,452)	$	(5,059)	$	(24,531)
Other comprehensive income before reclassification adjustments		(29,361)		389		-		(11)		(28,983)
Reclassification amount to net income		(528)		-		-		1,338 ⁽¹⁾		810
Net current-period other comprehensive income		(29,889)		389		-		1,327		(28,173)
Balance at September 30, 2014	$	(47,520)	$	-	$	(1,452)	$	(3,732)	$	(52,704)

(1) Please see note 11 for additional information.

14. Stock Incentive Plans

Our Amended and Restated 2005 Long-Term Incentive Plan (“2005 Plan”) authorizes up to 6,200,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Our non-employee directors, officers and key employees are eligible to participate in the 2005 Plan. The 2005 Plan allows for the issuance of, among other things, stock options, restricted stock, deferred stock units and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three to five years. Options expire ten years from the date of grant. Stock-based compensation expense totaled $5,477,000 and $25,655,000 for the three and nine months ended September 30, 2015, respectively, and $4,271,000 and $26,108,000 for the same periods in 2014.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15. Earnings Per Share

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


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2015		2014		2015		2014
Numerator for basic and diluted earnings
	per share - net income (loss) attributable
	to common stockholders	$	182,043	$	136,255	$	685,413	$	258,107

Denominator for basic earnings per
	share - weighted average shares		351,765		311,117		346,425		299,137
Effect of dilutive securities:
	Employee stock options		114		202		155		181
	Non-vested restricted shares		607		505		498		506
	Redeemable shares		621		-		207		-
	Convertible senior unsecured notes		-		988		262		821
Dilutive potential common shares			1,342		1,695		1,122		1,508
Denominator for diluted earnings per
	share - adjusted weighted average shares		353,107		312,812		347,547		300,645

Basic earnings per share		$	0.52	$	0.44	$	1.98	$	0.86
Diluted earnings per share		$	0.52	$	0.44	$	1.97	$	0.86

The Series I Cumulative Convertible Perpetual Preferred Stock was not included in the calculations as the effect of conversions into common stock was anti-dilutive.

16. Disclosure about Fair Value of Financial Instruments

U.S. GAAP provides authoritative guidance for measuring and disclosing fair value measurements of assets and liabilities. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Please see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 for additional information.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Mortgage Loans and Other Real Estate Loans Receivable — The fair value of mortgage loans and other real estate loans receivable is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Cash and Cash Equivalents — The carrying amount approximates fair value.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 fixed rate senior unsecured notes payable was estimated based on Level 1 publicly available trading prices. The carrying amount of variable rate senior unsecured notes payable approximates fair value because the borrowings 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 — The fair value of our redeemable unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.

The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):


		September 30, 2015				December 31, 2014
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
	Mortgage loans receivable	$	570,997	$	606,910	$	188,651	$	194,935
	Other real estate loans receivable		181,915		181,585		191,518		195,375
	Available-for-sale equity investments		40,241		40,241		-		-
	Cash and cash equivalents		292,042		292,042		473,726		473,726
	Foreign currency forward contracts		105,856		105,856		57,087		57,087

Financial liabilities:
	Borrowings under unsecured credit facilities	$	490,000	$	490,000	$	-	$	-
	Senior unsecured notes		7,926,757		8,489,584		7,766,251		8,613,702
	Secured debt		2,975,639		3,024,245		2,977,713		3,053,067
	Foreign currency forward contracts		21,909		21,909		1,495		1,495
Redeemable OP unitholder interests		$	111,380	$	111,380	$	46,722	$	46,722

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):

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Fair Value Measurements as of September 30, 2015
	Total		Level 1		Level 2		Level 3
Available-for-sale equity investments⁽¹⁾	$	40,241	$	40,241	$	-	$	-
Foreign currency forward contracts, net⁽²⁾		83,947		-		83,947		-
Redeemable OP unitholder interests		111,380		-		111,380		-
Totals	$	235,568	$	40,241	$	195,327	$	-

(1) Unrealized gains or losses on equity investments are recorded in accumulated other comprehensive income (loss) at each measurement date.
(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. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired/assumed in business combinations (see Note 3) and asset impairments (if applicable, see Note 5 for impairments of real property and Note 6 for impairments of loans receivable). We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available. As such, we have determined that each of these fair value measurements generally reside within Level 3 of the fair value hierarchy. We estimate the fair value of real estate and related intangibles using the income approach and unobservable data such as net operating income and estimated capitalization and discount rates. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of secured debt assumed in business combinations using current interest rates at which similar borrowings could be obtained on the transaction date.

17. Segment Reporting

We invest in seniors housing and health care real estate. We evaluate our business and make resource allocations on our four operating segments: triple-net, seniors housing operating, outpatient medical and life science. During the quarter ended March 31, 2015, we changed the names of our seniors housing triple-net segment to triple-net and our medical facilities segment to outpatient medical.

Our triple-net properties include long-term/post-acute care facilities, hospitals, assisted living facilities, independent living/continuing care retirement communities, care homes (United Kingdom), independent support living facilities (Canada), care homes with nursing (United Kingdom) and combinations thereof. Under the triple-net segment, we invest in seniors housing and health care real estate through acquisition and financing of primarily single tenant properties. Properties acquired are primarily leased under triple-net leases and we are not involved in the management of the property. Our seniors housing operating properties include the seniors housing communities referenced above that are owned and/or operated through RIDEA structures (see Notes 3 and 18).

Our outpatient medical properties include medical office buildings and life science buildings which are aggregated into our outpatient medical reportable segment. Our medical office buildings are typically leased to multiple tenants and generally require a certain level of property management. During the three months ended June 30, 2015, we disposed of our life science investments.

We evaluate performance based upon NOI by segment. We define NOI as total revenues, including tenant reimbursements, less property level 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 non-real estate investments and other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining NOI.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014). The results of operations for all acquisitions described in Note 3 are included in our consolidated results of operations from the acquisition dates and

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

are components of the appropriate segments. There are no intersegment sales or transfers.

Summary information for the reportable segments is as follows for the periods presented (in thousands):


Three Months Ended September 30, 2015:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	285,027	$	-	$	124,263	$	-	$	409,290
Resident fees and services		-		545,255		-		-		545,255
Interest income		19,454		1,054		1,872		-		22,380
Other income		969		772		309		22		2,072
Total revenues		305,450		547,081		126,444		22		978,997

Property operating expenses		-		368,050		40,653		-		408,703
Net operating income from continuing operations		305,450		179,031		85,791		22		570,294

Reconciling items:
Interest expense		12,359		30,990		7,120		70,661		121,130
Depreciation and amortization		74,486		87,306		44,007		-		205,799
General and administrative		-		-		-		36,950		36,950
Transaction costs		1,865		7,630		(162)		-		9,333
Loss (gain) on extinguishment of debt, net		(139)		-		-		723		584
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		216,879		53,105		34,826		(108,312)		196,498
Income tax expense		87		3,237		154		(134)		3,344
(Loss) income from unconsolidated entities		2,851		(5,629)		147		-		(2,631)
Income (loss) from continuing operations		219,817		50,713		35,127		(108,446)		197,211
Gain (loss) on real estate dispositions, net		2,155		-		(109)		-		2,046
Net income (loss)	$	221,972	$	50,713	$	35,018	$	(108,446)	$	199,257

Total assets	$	12,346,157	$	10,325,540	$	4,699,643	$	85,026	$	27,456,366

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Three Months Ended September 30, 2014:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	250,748	$	-	$	103,400	$	-	$	354,148
Resident fees and services		-		482,412		-		-		482,412
Interest income		7,520		1,054		770		-		9,344
Other income		981		325		207		106		1,619
Total revenues		259,249		483,791		104,377		106		847,523

Property operating expenses		41		320,895		34,221		-		355,157
Net operating income from continuing operations		259,208		162,896		70,156		106		492,366

Reconciling items:
Interest expense		10,294		26,612		7,692		73,837		118,435
Loss (gain) on derivatives, net		52		(3)		-		-		49
Depreciation and amortization		68,027		95,819		37,124		-		200,970
General and administrative		-		-		-		30,803		30,803
Transaction costs		1,619		10,572		1,363		-		13,554
Loss (gain) on extinguishment of debt, net		(36)		-		-		2,728		2,692
Other Expenses		8,825		1,437		-		-		10,262
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		170,427		28,459		23,977		(107,262)		115,601
Income tax expense		5,986		3,746		466		-		10,198
(Loss) income from unconsolidated entities		1,353		(5,550)		1,565		-		(2,632)
Income (loss) from continuing operations		177,766		26,655		26,008		(107,262)		123,167
Gain (loss) on real estate dispositions, net		29,604		-		-		-		29,604
Net income (loss)	$	207,370	$	26,655	$	26,008	$	(107,262)	$	152,771


Nine Months Ended September 30, 2015:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	829,422	$	-	$	356,080	$	-	$	1,185,502
Resident fees and services		-		1,573,318		-		-		1,573,318
Interest income		52,343		3,126		4,481		-		59,950
Other income		5,823		5,001		665		83		11,572
Total revenues		887,588		1,581,445		361,226		83		2,830,342

Property operating expenses		-		1,067,127		116,392		-		1,183,519
Net operating income from continuing operations		887,588		514,318		244,834		83		1,646,823

Reconciling items:
Interest expense		25,064		104,245		21,929		209,833		361,071
Loss (gain) on derivatives, net		(58,427)		-		-		-		(58,427)
Depreciation and amortization		216,921		252,785		133,725		-		603,431
General and administrative		-		-		-		110,562		110,562
Transaction costs		45,615		23,610		1,154		-		70,379
Loss (gain) on extinguishment of debt, net		10,096		-		-		24,776		34,872
Impairment of assets		2,220		-		-		-		2,220
Other expenses		-		-		-		10,583		10,583
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		646,099		133,678		88,026		(355,671)		512,132
Income tax expense		(2,617)		(745)		460		(867)		(3,769)
(Loss) income from unconsolidated entities		5,697		(26,785)		2,857		-		(18,231)
Income (loss) from continuing operations		649,179		106,148		91,343		(356,538)		490,132
Gain (loss) on real estate dispositions, net		56,251		-		192,751		-		249,002
Net income (loss)	$	705,430	$	106,148	$	284,094	$	(356,538)	$	739,134

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Nine Months Ended September 30, 2014:		Triple-net		Seniors Housing Operating		Outpatient Medical		Non-segment / Corporate		Total
Rental income	$	736,599	$	-	$	301,852	$	-	$	1,038,451
Resident fees and services		-		1,406,316		-		-		1,406,316
Interest income		23,220		1,065		2,586		-		26,871
Other income		1,448		1,643		850		198		4,139
Total revenues		761,267		1,409,024		305,288		198		2,475,777

Property operating expenses		732		939,108		100,502		-		1,040,342
Net operating income from continuing operations		760,535		469,916		204,786		198		1,435,435

Reconciling items:
Interest expense		28,063		82,924		25,423		223,924		360,334
Loss (gain) on derivatives, net		125		275		-		-		400
Depreciation and amortization		202,668		334,625		111,444		-		648,737
General and administrative		-		-		-		115,327		115,327
Transaction costs		5,900		12,863		2,783		-		21,546
Loss (gain) on extinguishment of debt, net		(36)		383		-		2,728		3,075
Other expenses		8,825		1,437		-		-		10,262
Income (loss) from continuing operations before income taxes and income from unconsolidated entities		514,990		37,409		65,136		(341,781)		275,754
Income tax expense		5,194		1,302		(127)		-		6,369
(Loss) income from unconsolidated entities		4,157		(29,007)		5,145		-		(19,705)
Income (loss) from continuing operations		524,341		9,704		70,154		(341,781)		262,418
Income (loss) from discontinued operations		7,135		-		-		-		7,135
Gain (loss) on real estate dispositions, net		35,366		-		906		-		36,272
Net income (loss)	$	566,842	$	9,704	$	71,060	$	(341,781)	$	305,825

Our portfolio of properties and other investments are located in the United States, the United Kingdom and Canada. Revenues and assets are attributed to the country in which the property is physically located. The following is a summary of geographic information for our operations for the periods presented (dollars in thousands):


		Three Months Ended						Nine Months Ended
		September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
Revenues:		Amount	%		Amount	%		Amount	%		Amount	%
United States	$	793,429	81.0%	$	707,842	83.5%	$	2,309,596	81.6%	$	2,078,863	84.0%
International		185,568	19.0%		139,681	16.5%		520,746	18.4%		396,914	16.0%
Total	$	978,997	100.0%	$	847,523	100.0%	$	2,830,342	100.0%	$	2,475,777	100.0%


		As of
		September 30, 2015			December 31, 2014
Assets:		Amount	%		Amount	%
United States	$	22,508,234	82.0%	$	20,728,477	82.9%
International		4,948,132	18.0%		4,285,819	17.1%
Total	$	27,456,366	100.0%	$	25,014,296	100.0%

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18. Income Taxes and Distributions

We elected to be taxed as a REIT commencing with our first taxable year. To qualify as a REIT for federal income tax purposes, at least 90% of taxable income (excluding 100% of net capital gains) must be distributed to stockholders. REITs that do not distribute a certain amount of current year taxable income in the current year are also subject to a 4% federal excise tax. The main differences between undistributed net income for federal income tax purposes and financial statement purposes are the recognition of straight-line rent for reporting purposes, basis differences in acquisitions, recording of impairments, differing useful lives and depreciation and amortization methods for real property and the provision for loan losses for reporting purposes versus bad debt expense for tax purposes.

Under the provisions of the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”), for taxable years beginning after July 30, 2008, a REIT may lease “qualified health care properties” on an arm’s-length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such TRS by a person who qualifies as an “eligible independent contractor.” Generally, the rent received from the TRS will meet the related party rent exception and will be treated as “rents from real property.” A “qualified health care property” includes real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients. We have entered into various joint ventures that were structured under RIDEA. Resident level rents and related operating expenses for these facilities are reported in the unaudited consolidated financial statements and are subject to federal and state income taxes as the operations of such facilities are included in TRS entities. Certain net operating loss carryforwards could be utilized to offset taxable income in future years.

Income tax expense reflected in the financial statements primarily represents U.S. federal and state and local income taxes as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The income tax benefit for the three months ended September 30, 2015 and 2014, was primarily due to operating income or losses, offset by certain discrete items at our TRS entities. In 2014, we established certain wholly-owned direct and indirect subsidiaries in Luxembourg and Jersey and transferred interests in certain foreign investments into this holding company structure. The structure includes a property holding company that is tax resident in the United Kingdom. No material adverse current tax consequences in Luxembourg, Jersey or the United Kingdom resulted from the creation of this holding company structure and all of the subsidiary entities in the structure are treated as disregarded entities of the company for U.S. federal income tax purposes. The company reflects current and deferred tax liabilities for any such withholding taxes incurred as a result of this holding company structure in its consolidated financial statements.

Generally, given current statutes of limitations, we are subject to audit by the Internal Revenue Service (“IRS”) for the year ended December 31, 2011 and subsequent years and by state taxing authorities for the year ended December 31, 2010 and subsequent years. The company and its subsidiaries are also subject to audit by the Canada Revenue Agency and provincial authorities generally for periods subsequent to our initial investments in Canada in May 2012, by HM Revenue & Customs for periods subsequent to our initial investments in the United Kingdom in August 2012 and by Luxembourg taxing authorities generally for periods subsequent to our establishment of certain Luxembourg-based subsidiaries during 2014.

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

	EXECUTIVE SUMMARY

	Company Overview Business Strategy Capital Market Outlook Key Transactions in 2015 Key Performance Indicators, Trends and Uncertainties Corporate Governance	29 29 30 30 31 33

	LIQUIDITY AND CAPITAL RESOURCES

	Sources and Uses of Cash Off-Balance Sheet Arrangements Contractual Obligations Capital Structure	34 34 35 35

	RESULTS OF OPERATIONS

	Summary Triple-net Seniors Housing Operating Outpatient Medical Non-Segment/Corporate	36 37 40 41 44

	OTHER

	Non-GAAP Financial Measures Other Disclosures Critical Accounting Policies	45 52 56
	Cautionary Statement Regarding Forward-Looking Statements	56

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

The following discussion and analysis is based primarily on the unaudited consolidated financial statements of Welltower Inc. (formerly Health Care REIT, Inc.) for the periods presented and should be read together with the notes thereto contained in this Quarterly Report on Form 10-Q. Other important factors are identified in our Annual Report on Form 10-K for the year ended December 31, 2014, including factors identified under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References herein to “we,” “us,” “our,” or the “company” refer to Welltower Inc. and its subsidiaries unless specifically noted otherwise.

Executive Summary

Company Overview

Welltower Inc. (NYSE:HCN), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. Welltower™, a real estate investment trust (“REIT”), owns 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. 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 three months ended September 30, 2015 (dollars in thousands):

			Percentage of	Number of
Type of Property	NOI⁽¹⁾		NOI	Properties
Triple-net	$	305,450	53.6%	749
Seniors housing operating		179,031	31.4%	352
Outpatient medical		85,791	15.0%	252
Totals	$	570,272	100.0%	1,353

(1) 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.

Business Strategy

Our primary objectives are to protect stockholder capital and enhance stockholder value. We seek to pay consistent cash dividends to stockholders and create opportunities to increase dividend payments to stockholders as a result of annual increases in net operating income and portfolio growth. To meet these objectives, we invest across the full spectrum of seniors housing and health care real estate and diversify our investment portfolio by property type, relationship and geographic location.

Substantially all of our revenues are derived from operating lease rentals, resident fees and services, and interest earned on outstanding loans receivable. These items represent our primary sources of liquidity to fund distributions and depend upon the continued ability of our obligors to make contractual rent and interest payments to us and the profitability of our operating properties. To the extent that our customers/partners experience operating difficulties and become unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by the type of property. Our proactive and comprehensive asset management process for seniors housing properties generally includes review of monthly financial statements and other operating data for each property, review of obligor/partner creditworthiness, property inspections, and review of covenant compliance relating to licensure, real estate taxes, letters of credit and other collateral. Our internal property management division actively manages and monitors the outpatient medical portfolio with a comprehensive process including tenant relations, lease expirations, the mix of health service providers, hospital/health system relationships, property performance, capital improvement needs, and market conditions among other things. In monitoring our portfolio, our personnel use a proprietary database to collect and analyze property-specific data. Additionally, we conduct extensive research to ascertain industry trends. We evaluate the operating environment in each property’s market to determine the likely trend in operating performance of the facility. When we identify unacceptable trends, we seek to mitigate, eliminate or transfer the risk. Through these efforts, we are generally able to intervene at an early stage to address any negative trends, and in so doing, support both the collectability of revenue and the value of our investment.

In addition to our asset management and research efforts, we also structure our investments to help mitigate payment risk. Operating leases and loans are normally credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other real estate loans, operating leases or agreements between us and the obligor and its affiliates.

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

For the nine months ended September 30, 2015, rental income and resident fees and services represented 42% and 56%, 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 and services, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses and general and administrative expenses. Depending upon the availability and cost of external capital, we believe our liquidity is sufficient to fund these uses of cash.

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility, internally generated cash and the proceeds from investment dispositions. Our investments generate cash from net operating income and principal payments on loans receivable. Permanent financing for future investments, which replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of public debt and equity securities and the incurrence or assumption of secured debt.

Depending upon market conditions, we believe that new investments will be available in the future with spreads over our cost of capital that will generate appropriate returns to our stockholders. It is also possible that investment dispositions may occur in the future. To the extent that investment dispositions exceed new investments, our revenues and cash flows from operations could be adversely affected. We expect to reinvest the proceeds from any investment dispositions in new investments. To the extent that new investment requirements exceed our available cash on-hand, we expect to borrow under our primary unsecured credit facility. At September 30, 2015, we had $292,042,000 of cash and cash equivalents, $74,758,000 of restricted cash and $1,951,516,000 of available borrowing capacity under our primary unsecured credit facility.

Capital Market Outlook

We believe the capital markets remain supportive of our investment strategy. In July 2014, we closed on a new primary unsecured credit facility that further enhances our access to efficient capital and financial flexibility. For the 21 months ended September 30, 2015, we raised $5,612,494,000 in aggregate gross proceeds through the issuance of common stock and unsecured debt. The capital raised, in combination with available cash and borrowing capacity under our primary unsecured credit facility, supported pro rata gross new investments of $3,579,831,000 during 2014 and $3,330,923,000 during the nine months ended September 30, 2015. We expect attractive investment opportunities to remain available in the future as we continue to leverage the benefits of our relationship investment strategy.

Key Transactions in 2015

Capital. In February 2015, we completed the public issuance of 19,550,000 shares of common stock at a price of $75.50 per share for approximate gross proceeds of $1,476,025,000. This was the largest overnight common stock offering and the highest offering price in our history. In May 2015, we issued $750,000,000 of 4.0% senior unsecured notes due 2025, generating approximately $743,407,000 of net proceeds. This was the largest single tranche U.S. debt offering in our history. In October 2015, we re-opened this tranche and issued an additional $500,000,000 of these notes, generating net proceeds of approximately $485,250,000. During the nine months ended September 30, 2015, we raised $206,334,000 through our dividend reinvestment program. Also during October 2015, we raised approximately $47,463,000 under our Equity Shelf Program (as defined below).

Investments. The following summarizes our acquisitions and joint venture investments completed during the nine months ended September 30, 2015 (dollars in thousands):

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

	Properties		Investment Amount⁽¹⁾	Capitalization Rates⁽²⁾		Book Amount⁽³⁾
Triple-net	45	$	1,150,199	6.8%	$	1,140,860
Seniors housing operating	43		1,247,004	6.1%		1,431,047
Outpatient medical	9		134,999	5.9%		446,398
Totals	97	$	2,532,202	6.4%	$	3,018,305

(1) Represents stated pro rata purchase price including cash and any assumed debt but excludes fair value adjustments pursuant to U.S. GAAP.
(2) Represents annualized contractual or projected income to be received in cash divided by investment amounts.
(3) Represents amounts recorded on our books including fair value adjustments pursuant to U.S. GAAP. See Notes 3 and 7 to our unaudited consolidated financial statements for additional information.

Dispositions. The following summarizes our property dispositions completed during the nine months ended September 30, 2015 (dollars in thousands):

	Properties		Proceeds⁽¹⁾	Capitalization Rates⁽²⁾		Book Amount⁽³⁾
Triple-net	23	$	307,961	7.1%	$	251,840
Outpatient medical	9		585,799	5.1%		166,919
Totals	32	$	893,760	5.8%	$	418,759

(1) Represents pro rata proceeds received upon disposition including any seller financing.
(2) Represents annualized contractual income that was being received in cash at date of disposition divided by disposition proceeds.
(3) Represents carrying value of assets at time of disposition. See Note 5 to our unaudited consolidated financial statements for additional information.

Dividends. Our Board of Directors increased the annual cash dividend to $3.30 per common share ($0.825 per share quarterly), as compared to $3.18 per common share for 2014, beginning in February 2015. The dividend declared for the quarter ended September 30, 2015 represents the 178^th 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, concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results, in making operating decisions and for budget planning purposes.

Operating Performance. We believe that net income attributable to common stockholders (“NICS”) is the most appropriate earnings measure. Other useful supplemental measures of our operating performance include funds from operations (“FFO”), net operating income from continuing operations (“NOI”) and same store cash NOI (“SSCNOI”); however, these supplemental measures are not defined by U.S. generally accepted accounting principles (“U.S. GAAP”). Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion and reconciliations of FFO, NOI and SSCNOI. These earnings measures and their relative per share amounts are widely used by investors and analysts in the valuation, comparison and investment recommendations of companies. The following table reflects the recent historical trends of our operating performance measures for the periods presented (in thousands, except per share amounts):

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

		Three Months Ended
		March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
		2014		2014		2014		2014			2015	2015		2015

Net income (loss) attributable to common stockholders		$	50,022	$	71,829	$	136,255	$	188,636	$	190,799	$	312,573	$	182,043
Funds from operations			288,803		284,245		316,512		284,516		344,250		340,588		392,295
Net operating income from continuing operations			460,376		482,692		492,366		504,754		517,716		558,815		570,294
Same store cash net operating income			409,723		422,227		426,260		423,847		416,400		428,791		427,948

Per share data (fully diluted):
	Net income (loss) attributable to common stockholders	$	0.17	$	0.24	$	0.44	$	0.57	$	0.56	$	0.89	$	0.52
	Funds from operations		0.99		0.95		1.01		0.86		1.02		0.97		1.11

Concentration Risk. We evaluate our concentration risk in terms of NOI by property mix, relationship mix and geographic mix. Concentration risk is a valuable measure in understanding what portion of our NOI could be at risk if certain sectors were to experience downturns. Property mix measures the portion of our NOI that relates to our various property types. Relationship mix measures the portion of our NOI that relates to our top five relationships. Geographic mix measures the portion of our NOI that relates to our top five states (or international equivalents). The following table reflects our recent historical trends of concentration risk by NOI for the periods indicated below:

		Three Months Ended
		March 31,	June 30,	September 30,	December 31,	March 31,	June 30,	September 30,
		2014	2014	2014	2014	2015	2015	2015

Property mix:⁽¹⁾
	Triple-net	53%	53%	53%	53%	55%	54%	54%
	Seniors housing operating	32%	33%	33%	32%	30%	32%	31%
	Outpatient medical	15%	14%	14%	15%	15%	14%	15%

Relationship mix:⁽¹⁾
	Genesis Healthcare	15%	16%	16%	16%	17%	17%	17%
	Sunrise Senior Living⁽²⁾	15%	15%	16%	15%	14%	14%	14%
	Brookdale Senior Living	9%	9%	8%	8%	8%	7%	7%
	Revera⁽²⁾	4%	4%	5%	4%	4%	5%	5%
	Benchmark Senior Living	4%	4%	4%	4%	4%	5%	5%
	Remaining relationships	53%	52%	51%	53%	53%	52%	52%

Geographic mix:⁽¹⁾
	California	10%	10%	10%	10%	10%	9%	10%
	United Kingdom	7%	6%	7%	7%	8%	10%	10%
	New Jersey	8%	8%	9%	8%	8%	8%	8%
	Pennsylvania	5%	5%	5%	5%	6%	6%	7%
	Texas	7%	7%	7%	7%	7%	7%	7%
	Remaining geographic areas	63%	64%	62%	63%	61%	60%	58%

(1) Excludes our share of investments in unconsolidated entities. Entities in which the company has 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.

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. 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 compliance with our debt covenants. The coverage ratios are based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) which is discussed in further detail, and reconciled to net income, below in

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

“Non-GAAP Financial Measures.” Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, investment recommendations and rating of companies. The following table reflects the recent historical trends for our credit strength measures for the periods presented:

		Three Months Ended
		March 31,	June 30,	September 30,	December 31,	March 31,	June 30,	September 30,
		2014	2014	2014	2014	2015	2015	2015

Debt to book capitalization ratio		48%	45%	43%	45%	42%	43%	43%
Debt to undepreciated book
	capitalization ratio	43%	40%	38%	40%	38%	39%	38%
Debt to market capitalization ratio		37%	33%	32%	29%	28%	32%	31%

Interest coverage ratio		3.45x	3.51x	3.86x	4.29x	4.21x	5.32x	4.39x
Fixed charge coverage ratio		2.74x	2.77x	3.07x	3.39x	3.34x	4.19x	3.45x

Lease Expirations. The following table sets forth information regarding lease expirations for certain portions of our portfolio as of September 30, 2015 (dollars in thousands):

			Expiration Year
			2015		2016		2017		2018		2019		2020		2021		2022		2023		2024		Thereafter

Triple-net:
	Properties		4		-		33		51		-		16		25		40		13		20		517
	Base rent⁽¹⁾	$	12,406	$	-	$	14,907	$	37,216	$	-	$	19,193	$	37,194	$	35,359	$	18,819	$	43,946	$	940,133
	% of base rent		1.1%		0.0%		1.3%		3.2%		0.0%		1.7%		3.2%		3.1%		1.6%		3.8%		81.1%
	Units/beds		432		-		1,467		3,151		-		1,391		3,725		4,964		1,390		2,164		55,711
	% of Units/beds		0.6%		0.0%		2.0%		4.2%		0.0%		1.9%		5.0%		6.7%		1.9%		2.9%		74.9%



Outpatient medical:
	Square feet		761,227		838,863		1,104,670		936,001		1,062,052		1,210,011		1,146,299		2,162,371		1,192,960		1,353,779		4,269,748
	Base rent⁽¹⁾	$	18,997	$	18,562	$	27,630	$	22,485	$	26,112	$	30,653	$	28,733	$	44,486	$	26,088	$	35,676	$	84,256
	% of base rent		5.2%		5.1%		7.6%		6.2%		7.2%		8.4%		7.9%		12.2%		7.2%		9.8%		23.3%
	Leases		198		251		284		269		250		227		173		181		150		99		225
	% of Leases		8.6%		10.9%		12.3%		11.7%		10.8%		9.8%		7.5%		7.8%		6.5%		4.3%		9.8%

(1) The most recent monthly base rent including straight line for leases with fixed escalators or annual cash rents for leases with contingent escalators. Base rent does not include tenant recoveries or amortization of above and below market lease intangibles.

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 “Cautionary Statement Regarding Forward-Looking Statements” and other sections of this Quarterly Report on Form 10-Q. 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 our Annual Report on Form 10-K for the year ended December 31, 2014, under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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 Quarterly Report on Form 10-Q, and our web address is included as an inactive textual reference only.

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

Liquidity and Capital Resources

Sources and Uses of Cash

Our primary sources of cash include rent and interest receipts, resident fees and services, borrowings under our primary unsecured credit facility, public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures, construction advances and transaction costs), loan advances, property operating expenses, and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows and are discussed in further detail below. The following is a summary of our sources and uses of cash flows (dollars in thousands):

		Nine Months Ended				Change
		September 30, 2015		September 30, 2014		$		%

Cash and cash equivalents at beginning of period		$	473,726	$	158,780	$	314,946	198%
Cash provided from (used in):
Operating activities			1,036,324		854,169		182,155	21%
Investing activities			(2,505,642)		(1,106,896)		(1,398,746)	126%
Financing activities			1,289,945		1,092,490		197,455	18%
Effect of foreign currency translation on cash and cash equivalents			(2,311)		135		(2,446)	n/a
	Cash and cash equivalents at end of period	$	292,042	$	998,678	$	(706,636)	-71%

Operating Activities. The change in net cash provided from operating activities is primarily attributable to increases in NOI, which is primarily due to acquisitions. Please see “Results of Operations” for further discussion. For the nine months ended September 30, 2015 and 2014, cash flow provided 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 2015” and Notes 3 and 6 of our unaudited consolidated financial statements. The following is a summary of cash used in non-acquisition capital improvement activities (dollars in thousands):

	Nine Months Ended				Change
	September 30,		September 30,
	2015		2014		$		%
New development	$	165,311	$	140,829	$	24,482	17%
Recurring capital expenditures, tenant improvements and lease commissions		13,650		43,956		(30,306)	-69%
Renovations, redevelopments and other capital improvements		108,990		42,368		66,622	157%
Total	$	287,951	$	227,153	$	60,798	27%

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/conversion of common and preferred stock and dividend payments. Please refer to Notes 9, 10 and 13 of our unaudited consolidated financial statements for additional information.

Off-Balance Sheet Arrangements

At September 30, 2015, we had investments in unconsolidated entities with our ownership generally ranging from 10% to 50%. Please see Note 7 to our unaudited 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 unaudited consolidated financial statements for additional information. At September 30, 2015, we had eight outstanding letter of credit obligations. Please see Note 12 to our unaudited consolidated financial statements for additional information.

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

Contractual Obligations

The following table summarizes our payment requirements under contractual obligations as of September 30, 2015 (in thousands):

	Payments Due by Period
Contractual Obligations	Total		2015		2016-2017		2018-2019		Thereafter
Unsecured revolving credit facility⁽¹⁾	$	490,000	$	-	$	-	$	490,000	$	-
Senior unsecured notes and credit facilities:⁽²⁾
U.S. Dollar senior unsecured notes		5,700,000		-		850,000		1,050,000		3,800,000
Pounds Sterling senior unsecured notes⁽³⁾		1,587,915		-		-		-		1,587,915
U.S. Dollar term credit facility		500,000		-		-		500,000		-
Canadian Dollar term credit facility⁽³⁾		186,625		-		-		186,625		-
Secured debt:^(2,3)
Consolidated		2,945,697		106,190		864,189		933,425		1,041,893
Unconsolidated		499,217		8,832		53,211		27,454		409,720
Contractual interest obligations:⁽⁴⁾
Unsecured revolving credit facility		18,966		2,842		11,368		4,756		-
Senior unsecured notes and term loans⁽³⁾		3,547,135		118,562		665,356		595,402		2,167,815
Consolidated secured debt⁽³⁾		608,001		35,231		225,990		129,012		217,768
Unconsolidated secured debt⁽³⁾		144,514		4,648		34,097		30,964		74,805
Capital lease obligations⁽⁵⁾		99,751		1,182		9,464		9,012		80,093
Operating lease obligations⁽⁵⁾		988,564		3,907		30,956		31,123		922,578
Purchase obligations⁽⁵⁾		673,867		249,736		371,693		52,438		-
Other long-term liabilities⁽⁶⁾		6,022		369		2,950		2,703		-
Total contractual obligations	$	17,996,274	$	531,499	$	3,119,274	$	4,042,914	$	10,302,587

(1) Relates to unsecured revolving credit facility with an aggregate commitment of $2,500,000,000. See Note 9 to our unaudited consolidated financial statements for additional information.
(2) Amounts represent principal amounts due and do not reflect unamortized premiums/discounts or other fair value adjustments as reflected on the balance sheet.
(3) Based on foreign currency exchange rates in effect as of balance sheet date.
(4) Based on variable interest rates in effect as of balance sheet date.
(5) See Note 12 to our unaudited consolidated financial statements for additional information.
(6) Primarily relates to payments to be made under our Supplemental Executive Retirement Plan.

Capital Structure

Please refer to “Credit Strength” above for a discussion of our leverage and coverage ratio trends. Our debt agreements contain various covenants, restrictions and events of default. Certain agreements require us to maintain 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 September 30, 2015, we were in compliance with all of the covenants under our debt agreements. Please refer to the section entitled “Non-GAAP Financial Measures” for further discussion. 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. A summary of certain covenants and our results as of September 30, 2015 is as follows:

	Per Agreement
	Primary Unsecured Credit Facility	Senior Unsecured Notes	Actual at September 30, 2015
Covenant	Primary Unsecured Credit Facility	Senior Unsecured Notes	Actual at September 30, 2015
Total Indebtedness to Book Capitalization Ratio maximum	60%	n/a	43%
Secured Indebtedness to Total Assets Ratio maximum	30%	40%	11%
Total Indebtedness to Total Assets maximum	n/a	60%	42%
Unsecured Debt to Unencumbered Assets maximum	60%	n/a	36%
Adjusted Interest Coverage Ratio minimum	n/a	1.50x	4.71x
Adjusted Fixed Charge Coverage minimum	1.50x	n/a	3.72x

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

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 (the “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 under which we may issue up to 15,000,000 shares of common stock. As of October 23, 2015, 12,800,329 shares of common stock remained available for issuance under this registration statement. We have entered into separate Equity Distribution Agreements with each of UBS Securities LLC, KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. relating to the offer and sale from time to time of up to $630,015,000 aggregate amount of our common stock (“Equity Shelf Program”). As of October 23, 2015, we had $408,926,000 of remaining capacity under the Equity Shelf Program. Depending upon market conditions, we anticipate issuing securities under our registration statements to invest in additional properties and to repay borrowings under our primary unsecured credit facility.

Results of Operations

Summary

Our primary sources of revenue include rent and resident fees and services. Our primary expenses include interest expense, depreciation and amortization, property operating expenses, transaction costs and general and administrative expenses. We evaluate our business and make resource allocations on our three business segments: triple-net, seniors housing operating and outpatient medical. The primary performance measures for our properties are NOI and SSCNOI, which are discussed below. Please see Note 17 to our unaudited consolidated financial statements for additional information. The following is a summary of our results of operations (dollars in thousands, except per share amounts):

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2015		2014		Amount		%	2015		2014		Amount		%
Net income (loss) attributable to common stockholders	$	182,043	$	136,255	$	45,788	34%	$	685,413	$	258,107	$	427,306	166%
Funds from operations		392,295		316,512		75,783	24%		1,077,132		889,562		187,570	21%
EBITDA		522,842		461,978		60,864	13%		1,707,405		1,308,684		398,721	30%
Net operating income from continuing operations (NOI)		570,294		492,366		77,928	16%		1,646,823		1,435,435		211,388	15%
Same store cash NOI		427,948		426,260		1,688	0%		1,273,140		1,258,210		14,930	1%

Per share data (fully diluted):
Net income (loss) attributable to common stockholders	$	0.52	$	0.44	$	0.08	18%	$	1.97	$	0.86	$	1.11	129%
Funds from operations	$	1.11	$	1.01	$	0.10	10%	$	3.10	$	2.96	$	0.14	5%

Interest coverage ratio		4.39x		3.86x		0.53x	14%		4.64x		3.60x		1.04x	29%
Fixed charge coverage ratio		3.45x		3.07x		0.38x	12%		3.67x		2.86x		0.81x	28%

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

Triple-net

The following is a summary of our NOI for the triple-net segment (dollars in thousands):

	Three Months Ended					Change			Nine Months Ended					Change
		September 30,		September 30,						September 30,		September 30,
		2015		2014		$		%		2015		2014		$		%
SSCNOI⁽¹⁾		$	211,586		204,626	$	6,960	3%		$	628,463		609,336	$	19,127	3%
Non-cash NOI attributable to same store properties⁽¹⁾			22,376		20,189		2,187	11%			67,456		52,565		14,891	28%
NOI attributable to non same store properties⁽²⁾			71,488		34,393		37,095	108%			191,669		98,634		93,035	94%
NOI		$	305,450	$	259,208	$	46,242	18%		$	887,588	$	760,535	$	127,053	17%

(1) Change is due to increases in cash and non-cash NOI (described below) related to 584 same store properties.
(2) Change is primarily due to the acquisition of 149 properties and the conversion of 9 construction projects into revenue-generating properties subsequent to January 1, 2014.

The following is a summary of our results of operations for the triple-net segment (dollars in thousands):

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

			Three Months Ended				Change			Nine Months Ended				Change
			September 30,		September 30,					September 30,		September 30,
			2015		2014		$		%	2015		2014		$		%
Revenues:
	Rental income		$	285,027	$	250,748	$	34,279	14%	$	829,422	$	736,599	$	92,823	13%
	Interest income			19,454		7,520		11,934	159%		52,343		23,220		29,123	125%
	Other income			969		981		(12)	-1%		5,823		1,448		4,375	302%
				305,450		259,249		46,201	18%		887,588		761,267		126,321	17%
Property operating expenses				-		41		(41)	-100%		-		732		(732)	-100%
		Net operating income from continuing operations (NOI)		305,450		259,208		46,242	18%		887,588		760,535		127,053	17%
Other expenses:
	Interest expense			12,359		10,294		2,065	20%		25,064		28,063		(2,999)	-11%
	Loss (gain) on derivatives, net			-		52		(52)	-100%		(58,427)		125		(58,552)	n/a
	Depreciation and amortization			74,486		68,027		6,459	9%		216,921		202,668		14,253	7%
	Transaction costs			1,865		1,619		246	15%		45,615		5,900		39,715	673%
	Loss (gain) on extinguishment of debt, net			(139)		(36)		(103)	286%		10,096		(36)		10,132	n/a
	Impairment of assets			-		-		-	n/a		2,220		-		2,220	n/a
	Other expenses			-		8,825		(8,825)	-100%		-		8,825		(8,825)	-100%
				88,571		88,781		(210)	0%		241,489		245,545		(4,056)	-2%
Income from continuing operations before income taxes and income (loss) from unconsolidated entities				216,879		170,427		46,452	27%		646,099		514,990		131,109	25%
Income tax benefit (expense)				87		5,986		(5,899)	-99%		(2,617)		5,194		(7,811)	n/a
Income (loss) from unconsolidated entities				2,851		1,353		1,498	111%		5,697		4,157		1,540	37%
Income from continuing operations				219,817		177,766		42,051	24%		649,179		524,341		124,838	24%
Discontinued operations, net⁽¹⁾				-		-		-	n/a		-		7,135		(7,135)	-100%
Gain (loss) on real estate dispositions, net⁽¹⁾				2,155		29,604		(27,449)	-93%		56,251		35,366		20,885	59%
Net income				221,972		207,370		14,602	7%		705,430		566,842		138,588	24%
Less: Net income (loss) attributable to noncontrolling interests				526		500		26	5%		1,528		1,491		37	2%
Net income attributable to common stockholders			$	221,446	$	206,870	$	14,576	7%	$	703,902	$	565,351	$	138,551	25%

(1) See Note 5 to our unaudited consolidated financial statements.

The increase in rental income is primarily attributable to the acquisitions of new properties, the conversion of newly constructed triple-net properties from which we receive rent and the modification of our lease with Genesis Healthcare to replace the CPI-based component of an annual increaser with a fixed annual increaser effective April 1, 2014 and extend the term. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the tenant’s properties. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If gross operating revenues at our facilities and/or the Consumer Price Index do not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the three months ended September 30, 2015, we had no lease renewals but we had 25 leases with rental rate increasers ranging from 0.12% to 0.43% in our triple-net portfolio.

The change in interest income is due to a higher loan volume in the current year, which includes a first mortgage loan to Genesis Healthcare to facilitate their merger with Skilled Healthcare Group. The increase in other income year-to-date over the prior year includes the receipt of an early prepayment fee related to a real estate loan receivable.

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

During the nine months ended September 30, 2015, we completed four triple-net construction projects representing $85,902,000 or $270,132 per bed/unit plus expansion projects totaling $38,808,000. The following is a summary of triple-net construction projects pending as of September 30, 2015 (dollars in thousands):

Location	Units/Beds		Commitment		Balance	Est. Completion
Frederick, MD	130		19,000		17,863	4Q15
Edmond, OK	142		24,500		7,984	3Q16
Carrollton, TX	104		18,900		5,940	3Q16
Tulsa, OK	145		25,800		3,709	4Q16
Bracknell, UK	64		16,709		6,633	4Q16
Piscataway, NJ	124		30,600		17,062	4Q16
Raleigh, NC	225		93,000		33,891	1Q17
Livingston, NJ	120		51,440		16,744	1Q17
	1,054	$	279,949	$	109,826

Interest expense for the nine months ended September 30, 2015 and 2014 represents secured debt interest expense. The change in secured debt interest expense is due to the net effect and timing of assumptions, segment transitions, extinguishments and principal amortizations. The following is a summary of our triple-net property secured debt principal activity (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.			Wtd. Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	545,207	5.556%	$	581,740	5.389%	$	670,769	5.337%	$	587,136	5.394%
Debt extinguished		(20,338)	6.306%		(9,019)	6.140%		(132,545)	4.695%		(9,019)	6.140%
Foreign Currency		(6,155)	5.316%		-	0.000%		(13,011)	5.316%		-	0.000%
Principal payments		(3,046)	5.566%		(2,657)	5.774%		(9,545)	5.669%		(8,053)	5.830%
Ending balance	$	515,668	5.526%	$	570,064	5.374%	$	515,668	5.526%	$	570,064	5.374%

Monthly averages	$	520,244	5.541%	$	573,927	5.379%	$	549,861	5.528%	$	580,636	5.387%

In April 2011, we completed the acquisition of substantially all of the real estate assets of privately-owned Genesis Healthcare Corporation. In conjunction with this transaction, we received the option to acquire an ownership interest in Genesis Healthcare. In February 2015, Genesis Healthcare closed on a transaction to merge with Skilled Healthcare Group to become a publicly traded company which required us to record the value of the derivative asset due to the net settlement feature. We elected to exercise our option during the three months ended March 31, 2015 which resulted in a $58,427,000 gain.

Depreciation and amortization increased primarily as a result of new property acquisitions and the conversions of newly constructed 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.

Transaction costs represent costs incurred with property acquisitions including due diligence costs, fees for legal and valuation services, the termination of pre-existing relationships, lease termination expenses and other similar costs. The increase in year-to-date transaction costs over the prior year includes a charge related to the termination of pre-existing relationships, the termination of a lease obligation and overall higher transaction volume. The fluctuation in losses/gains on debt extinguishment is primarily attributable to the volume of extinguishments and the terms of the related secured debt.

The decrease in other expenses in the third quarter is primarily related to the 2014 reversal of the indemnification asset recorded in connection with the Genesis acquisition. At that time, an income tax benefit was recorded in the same amount to reverse the unrecognized tax benefits related to the transaction.

Changes in the gain on sales of properties are related to property sales which totaled 23 and twelve for the nine months ended September 30, 2015 and 2014, respectively. During the nine months ended September 30, 2015, we recorded an impairment of $2,200,000 related to a triple-net property and land parcel, both of which are considered held for sale.

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

Seniors Housing Operating

The following is a summary of our NOI for the seniors housing operating segment (dollars in thousands):

	Three Months Ended					Change			Nine Months Ended				Change
		September 30,		September 30,					September 30,		September 30,
		2015		2014		$		%	2015		2014		$		%
SSCNOI⁽¹⁾		$	154,128	$	160,725	$	(6,597)	-4%	$	457,733	$	466,455	$	(8,722)	-2%
Non-cash NOI attributable to same store properties			(250)		(261)		11	-4%		(754)		(793)		39	-5%
NOI attributable to non same store properties⁽²⁾			25,153		2,432		22,721	934%		57,339		4,254		53,085	1248%
NOI		$	179,031	$	162,896	$	16,135	10%	$	514,318	$	469,916	$	44,402	9%

(1) Relates to 279 same store properties. Decrease is primarily due to unfavorable changes in USD/CAD and GBP/USD rates.
(2) Change is primarily due to the acquisition of 73 properties subsequent to January 1, 2014.

The following is a summary of our seniors housing operating results of operations (dollars in thousands):

		Three Months Ended				Change			Nine Months Ended				Change
		September 30,		September 30,					September 30,		September 30,
		2015		2014		$		%	2015		2014		$		%
Revenues:
	Resident fees and services	$	545,255	$	482,412	$	62,843	13%	$	1,573,318	$	1,406,316	$	167,002	12%
	Interest income		1,054		1,054		-	0%		3,126		1,065		2,061	194%
	Other income		772		325		447	138%		5,001		1,643		3,358	204%
			547,081		483,791		63,290	13%		1,581,445		1,409,024		172,421	12%
Property operating expenses			368,050		320,895		47,155	15%		1,067,127		939,108		128,019	14%
	Net operating income from continuing operations (NOI)		179,031		162,896		16,135	10%		514,318		469,916		44,402	9%
Other expenses:
	Interest expense		30,990		26,612		4,378	16%		104,245		82,924		21,321	26%
	Loss (gain) on derivatives, net		-		(3)		3	-100%		-		275		(275)	-100%
	Depreciation and amortization		87,306		95,819		(8,513)	-9%		252,785		334,625		(81,840)	-24%
	Transaction costs		7,630		10,572		(2,942)	-28%		23,610		12,863		10,747	84%
	Loss (gain) on extinguishment of debt, net		-		-		-	n/a		-		383		(383)	-100%
	Other expenses		-		1,437		(1,437)	-100%		-		1,437		(1,437)	-100%
			125,926		134,437		(8,511)	-6%		380,640		432,507		(51,867)	-12%
Income (loss) from continuing operations before income taxes and income (loss) from unconsolidated entities			53,105		28,459		24,646	87%		133,678		37,409		96,269	257%
Income tax benefit (expense)			3,237		3,746		(509)	-14%		(745)		1,302		(2,047)	-157%
Income (loss) from unconsolidated entities			(5,629)		(5,550)		(79)	1%		(26,785)		(29,007)		2,222	-8%
Net income (loss)			50,713		26,655		24,058	90%		106,148		9,704		96,444	994%
Less: Net income (loss) attributable to noncontrolling interests			(679)		(391)		(288)	74%		2,114		(3,104)		5,218	-168%
Net income (loss) attributable to common stockholders		$	51,392	$	27,046	$	24,346	90%	$	104,034	$	12,808	$	91,226	712%

Fluctuations in revenues and property operating expenses are primarily a result of acquisitions and the movement of U.S. and foreign currency exchange rates. The fluctuations in depreciation and amortization are due to acquisitions and variations in amortization of short-lived intangible assets. The decrease in depreciation and amortization for the three and nine month periods ended September 30, 2015 as compared to the prior year are due primarily to a number of short lived intangible assets which became fully amortized. To the extent that we acquire or dispose of additional properties in the future, these amounts will change accordingly.

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

During the nine month period ended September 30, 2015, we completed one seniors housing operating construction project representing $19,869,000 or $283,843 per unit. The following is a summary of our seniors housing operating construction projects, excluding expansions, pending as of September 30, 2015 (dollars in thousands):

Location	Units		Commitment		Balance	Est. Completion
Camberley, UK	102	$	20,982	$	18,279	3Q16
Chertsey, UK	93		46,778		12,390	3Q17
Bushey, UK	95		59,897		13,817	2Q18
Total	290	$	127,657	$	44,486

Interest expense represents secured debt interest expense as well as interest expense related to our $250,000,000 Canadian-denominated unsecured term credit facility and Sterling-denominated senior unsecured notes. The increase in interest expense from the prior year is attributed primarily to the £500,000,000 Sterling-denominated senior unsecured notes issued in November 2014. Please refer to Note 10 to our unaudited consolidated financial statements for additional information. The following is a summary of our seniors housing operating property secured debt principal activity (dollars in thousands):


	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
			Weighted Avg.			Weighted Avg.			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	1,827,123	4.353%	$	1,637,508	4.499%	$	1,654,531	4.422%	$	1,714,714	4.622%
Debt issued		85,811	2.623%		87,410	3.190%		222,612	2.759%		98,100	3.228%
Debt assumed		22,032	4.995%		-	0.000%		227,929	4.075%		12,005	4.147%
Debt extinguished		(79,981)	3.478%		(31,167)	5.079%		(199,946)	3.507%		(112,829)	5.665%
Foreign currency		(44,360)	3.588%		(22,234)	3.759%		(76,146)	3.639%		(23,434)	3.775%
Principal payments		(9,375)	4.217%		(8,296)	4.325%		(27,730)	4.209%		(25,335)	4.354%
Ending balance	$	1,801,250	4.335%	$	1,663,221	4.431%	$	1,801,250	4.335%	$	1,663,221	4.431%

Monthly averages	$	1,792,576	4.346%	$	1,649,352	4.481%	$	1,754,706	4.376%	$	1,654,526	4.538%

The increase in transaction costs in the current year is a result of increased acquisition and transaction volume in the current year. The majority of our seniors housing operating properties are formed through partnership interests. Net income attributable to noncontrolling interests represents our partners’ share of net income (loss) related to joint ventures. The fluctuations in income (loss) from unconsolidated entities is primarily due to depreciation and amortization of short-lived intangible assets and the timing of additional investments in unconsolidated entities.

Outpatient Medical

The following is a summary of our NOI for the outpatient medical segment (dollars in thousands):

	Three Months Ended					Change			Nine Months Ended				Change
		September 30,		September 30,					September 30,		September 30,
		2015		2014		$		%	2015		2014		$		%
SSCNOI⁽¹⁾		$	62,234	$	60,909	$	1,325	2%	$	186,944	$	182,419	$	4,525	2%
Non-cash NOI attributable to same store properties⁽¹⁾			1,299		1,744		(445)	-26%		4,137		6,160		(2,023)	-33%
NOI attributable to non same store properties⁽²⁾			22,258		7,503		14,755	197%		53,753		16,207		37,546	232%
NOI		$	85,791	$	70,156	$	15,635	22%	$	244,834	$	204,786	$	40,048	20%

(1) Change is due to increases in cash NOI and decreases in non-cash NOI related to 178 same store properties.
(2) Change is primarily due to acquisitions of 41 properties and conversions of construction projects into 12 revenue-generating properties subsequent to January 1, 2014.

The following is a summary of our results of operations for the outpatient medical segment (dollars in thousands):

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

		Three Months Ended				Change			Nine Months Ended				Change
		September 30,		September 30,					September 30,		September 30,
		2015		2014		$		%	2015		2014		$		%
Revenues:
	Rental income	$	124,263	$	103,400	$	20,863	20%	$	356,080	$	301,852	$	54,228	18%
	Interest income		1,872		770		1,102	143%		4,481		2,586		1,895	73%
	Other income		309		207		102	49%		665		850		(185)	-22%
			126,444		104,377		22,067	21%		361,226		305,288		55,938	18%
Property operating expenses			40,653		34,221		6,432	19%		116,392		100,502		15,890	16%
	Net operating income from continuing operations (NOI)		85,791		70,156		15,635	22%		244,834		204,786		40,048	20%
Other expenses:
	Interest expense		7,120		7,692		(572)	-7%		21,929		25,423		(3,494)	-14%
	Depreciation and amortization		44,007		37,124		6,883	19%		133,725		111,444		22,281	20%
	Transaction costs		(162)		1,363		(1,525)	n/a		1,154		2,783		(1,629)	-59%
			50,965		46,179		4,786	10%		156,808		139,650		17,158	12%
Income from continuing operations before income taxes and income from unconsolidated entities			34,826		23,977		10,849	45%		88,026		65,136		22,890	35%
Income tax (expense) benefit			154		466		(312)	-67%		460		(127)		587	n/a
Income from unconsolidated entities			147		1,565		(1,418)	-91%		2,857		5,145		(2,288)	-44%
Income from continuing operations			35,127		26,008		9,119	35%		91,343		70,154		21,189	30%
Gain (loss) on real estate dispositions, net⁽¹⁾			(109)		-		(109)	n/a		192,751		906		191,845	21175%
Net income (loss)			35,018		26,008		9,010	35%		284,094		71,060		213,034	300%
Less: Net income (loss) attributable to noncontrolling interests			1,015		55		960	1745%		1,024		274		750	274%
Net income (loss) attributable to common stockholders		$	34,003	$	25,953	$	8,050	31%	$	283,070	$	70,786	$	212,284	300%

(1) See Note 5 to our unaudited consolidated financial statements.

The increase in rental income is primarily attributable to the acquisitions of new properties and the conversion of newly constructed outpatient medical properties from which we receive rent. Certain of our leases contain annual rental escalators that are contingent upon changes in the Consumer Price Index. These escalators are not fixed, so no straight-line rent is recorded; however, rental income is recorded based on the contractual cash rental payments due for the period. If the Consumer Price Index does not increase, a portion of our revenues may not continue to increase. Sales of real property would offset revenue increases and, to the extent that they exceed new acquisitions, could result in decreased revenues. Our leases could renew above or below current rent rates, resulting in an increase or decrease in rental income. For the three months ended September 30, 2015, our consolidated outpatient medical portfolio signed 65,179 square feet of new leases and 228,038 square feet of renewals. The weighted-average term of these leases was six years, with a rate of $37.25 per square foot and tenant improvement and lease commission costs of $15.75 per square foot. Substantially all of these leases during the referenced quarter contain an annual fixed or contingent escalation rent structure ranging from the change in CPI to 5%.

During the nine months ended September 30, 2015, we completed one outpatient medical construction project representing $16,592,000 or $325 per square foot. The following is a summary of the outpatient medical construction projects, excluding expansions, pending as of September 30, 2015 (dollars in thousands):

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

Location	Square Feet		Commitment		Balance	Est. Completion
Bel Air, MD	99,184	$	26,386	$	12,289	1Q16
Richmond, TX	36,475		11,670		5,062	1Q16
Stamford, CT	92,345		41,735		3,359	3Q16
Missouri, TX	23,863		9,180		1,560	3Q16
Brooklyn, NY	140,955		103,624		15,248	1Q17
Total	392,822	$	192,595	$	37,518

Total interest expense represents secured debt interest expense. The change in secured debt interest expense is primarily due to the net effect and timing of assumptions, extinguishments and principal amortizations. The following is a summary of our outpatient medical secured debt principal activity (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30, 2015			September 30, 2014			September 30, 2015			September 30, 2014
			Weighted Avg.			Weighted Avg.			Weighted Avg.			Weighted Avg.
	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate	Amount		Interest Rate
Beginning balance	$	654,990	5.193%	$	585,161	6.067%	$	609,268	5.838%	$	700,427	5.999%
Debt assumed		-	0.000%		50,500	2.863%		112,000	1.837%		50,500	2.863%
Debt extinguished		(29,370)	5.381%		(11,447)	5.700%		(88,182)	5.355%		(118,507)	5.613%
Principal payments		(3,065)	6.023%		(3,282)	6.092%		(10,531)	5.724%		(11,488)	5.682%
Ending balance	$	622,555	5.181%	$	620,932	5.812%	$	622,555	5.181%	$	620,932	5.812%

Monthly averages	$	640,971	5.188%	$	590,392	6.001%	$	608,489	5.523%	$	634,851	5.956%

The increase in property operating expenses and depreciation and amortization is primarily attributable to acquisitions and construction conversions of new outpatient medical facilities for which we incur certain property operating expenses.

Transaction costs represent costs incurred with property acquisitions including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships, lease termination expenses and other similar costs. The fluctuations in transaction costs are primarily due to acquisition volumes in the relevant periods.

Income from unconsolidated entities represents our share of net income or losses from certain unconsolidated property investments related to our strategic joint venture with a national medical office building company and the period for which we held a joint venture investment with Forest City Enterprises.

Gain on real estate dispositions is due to the disposition of our interest in the joint venture with Forest City Enterprises in the second quarter of 2015.

Item 2. 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):

		Three Months Ended				Change			Nine Months Ended				Change
		September 30,		September 30,					September 30,		September 30,
		2015		2014		$		%	2015		2014		$		%
Revenues:
	Other income	$	22	$	106	$	(84)	-79%	$	83	$	198	$	(115)	-58%
Expenses:
	Interest expense		70,661		73,837		(3,176)	-4%		209,833		223,924		(14,091)	-6%
	General and administrative		36,950		30,803		6,147	20%		110,562		115,327		(4,765)	-4%
	Loss on extinguishment of debt, net		723		2,728		(2,005)	-73%		24,776		2,728		22,048	808%
	Other expenses		-		-		-	n/a		10,583		-		10,583	n/a
			108,334		107,368		966	1%		355,754		341,979		13,775	4%
Loss from continuing operations before income taxes			(108,312)		(107,262)		(1,050)	1%		(355,671)		(341,781)		(13,890)	4%
Income tax (expense) benefit			(134)		-		(134)	n/a		(867)		-		(867)	n/a
Loss from continuing operations			(108,446)		(107,262)		(1,184)	1%		(356,538)		(341,781)		(14,757)	4%
Less: Preferred stock dividends			16,352		16,352		-	0%		49,055		49,057		(2)	0%
Net loss attributable to common stockholders		$	(124,798)	$	(123,614)	$	(1,184)	1%	$	(405,593)	$	(390,838)	$	(14,755)	4%

The following is a summary of our non-segment/corporate interest expense (dollars in thousands):

	Three Months Ended				Change			Nine Months Ended				Change
	September 30,		September 30,					September 30,		September 30,
	2015		2014		$		%	2015		2014		$		%
Senior unsecured notes	$	66,679	$	69,485	$	(2,806)	-4%	$	196,752	$	210,765	$	(14,013)	-7%
Secured debt		94		112		(18)	-16%		281		334		(53)	-16%
Primary unsecured credit facility		2,042		1,760		282	16%		7,806		6,884		922	13%
Capitalized interest		(1,321)		(1,561)		240	-15%		(4,680)		(4,778)		98	-2%
Swap loss (savings)		(11)		(4)		(7)	175%		(23)		(11)		(12)	109%
Loan expense		3,178		4,045		(867)	-21%		9,697		10,730		(1,033)	-10%
Totals	$	70,661	$	73,837	$	(3,176)	-4%	$	209,833	$	223,924	$	(14,091)	-6%

The change in interest expense on senior unsecured notes is due to the net effect of issuances and extinguishments, excluding our Sterling-denominated senior unsecured notes and Canadian-denominated unsecured term credit facility, both of which are in our seniors housing operating segment. Please refer to Note 10 to our unaudited consolidated financial statements for additional information. We capitalize certain interest costs associated with funds used for the construction of properties owned directly by us. The amount capitalized is based upon the balances outstanding during the construction period using the rate of interest that approximates our cost of financing. Our interest expense is reduced by the amount capitalized. Loan expense represents the amortization of deferred loan costs incurred in connection with the issuance and amendments of debt. Loan expense changes are due to amortization of charges for costs incurred in connection with senior unsecured note issuances. The change in interest expense on the 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 unaudited consolidated financial statements for additional information regarding our primary unsecured credit facility.

General and administrative expenses for the nine months ended September 30, 2014 included $19,688,000 related to CEO transition costs. Excluding these costs, general and administrative expenses as a percentage of consolidated revenues for the three months ended September 30, 2015 and 2014 were 3.77% and 3.63%, respectively. The increase in general and administrative expenses excluding the CEO transition costs is primarily related to costs associated with our initiatives to attract and retain appropriate personnel to achieve our business objectives. The loss on extinguishment of debt is due primarily to the early extinguishment of the 2016 senior unsecured notes. The increase in other expenses in the current year is due to costs associated with the retirement of an executive officer and the termination of our investment in a strategic medical office partnership.

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

Other

Non-GAAP Financial Measures

We believe that net income, as defined by U.S. GAAP, is the most appropriate earnings measurement. However, we consider FFO, NOI and EBITDA to be useful supplemental measures of our operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income attributable to common stockholders, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate and impairment of depreciable assets, plus depreciation and amortization, and after adjustments for unconsolidated entities and noncontrolling interests.

Net operating income from continuing operations (“NOI”) is used to evaluate the operating performance of our properties. We define NOI as total revenues, including tenant reimbursements, less property operating expenses. Property operating expenses represent costs associated with managing, maintaining and servicing tenants for our seniors housing operating and medical facility properties. These expenses include, but are not limited to, property-related payroll and benefits, property management fees, marketing, housekeeping, food service, maintenance, utilities, property taxes and insurance. General and administrative expenses represent costs unrelated to property operations or transaction costs. These expenses include, but are not limited to, payroll and benefits, professional services, office expenses and depreciation of corporate fixed assets. Same store cash NOI (“SSCNOI”) is used to evaluate the cash-based 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, 2014. Any properties acquired, developed, transitioned, sold or classified as held for sale during that period are excluded from the same store amounts. We believe NOI and SSCNOI provide investors relevant and useful information because they measure the operating performance of our properties at the property level on an unleveraged basis. We use NOI and SSCNOI to make decisions about resource allocations and to assess the property level performance of our properties.

EBITDA stands for earnings before interest, taxes, depreciation and amortization. We believe that EBITDA, along with net income and cash flow provided from operating activities, is an important supplemental measure because it provides additional information to assess and evaluate the performance of our operations. We primarily utilize EBITDA to measure our interest coverage ratio, which represents EBITDA divided by total interest, and our fixed charge coverage ratio, which represents EBITDA divided by fixed charges. Fixed charges include total interest, secured debt principal amortization and preferred dividends.

A covenant in our primary unsecured credit facility contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy these covenants could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of these debt agreements and the financial covenants, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Our covenant requires an adjusted fixed charge coverage ratio of at least 1.50 times.

Other than Adjusted EBITDA, our supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. Management uses these financial measures to facilitate internal and external comparisons to our historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant in our primary unsecured credit facility and is not being presented for use by investors for any other purpose. None of our supplemental measures represent net income or cash flow provided from operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental measures, as defined by us, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies.

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

The table below reflects the reconciliation of FFO to net income attributable to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. Noncontrolling interest and unconsolidated entity amounts represent adjustments to reflect our share of depreciation and amortization. Amounts are in thousands except for per share data.

		Three Months Ended
		March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
FFO Reconciliations:		2014		2014		2014		2014		2015		2015		2015
Net income (loss) attributable to common stockholders		$	50,022	$	71,829	$	136,255	$	188,636	$	190,799	$	312,573	$	182,043
Depreciation and amortization			233,318		214,449		200,970		195,393		188,829		208,802		205,799
Impairment of assets			-		-		-		-		2,220		-		-
Loss (gain) on sales of properties, net			-		(13,079)		(29,604)		(110,839)		(56,845)		(190,111)		(2,046)
Noncontrolling interests			(10,520)		(9,741)		(9,359)		(8,234)		(7,249)		(10,467)		(11,647)
Unconsolidated entities			15,983		20,787		18,250		19,560		26,496		19,791		18,146
Funds from operations		$	288,803	$	284,245	$	316,512	$	284,516	$	344,250	$	340,588	$	392,295

Average common shares outstanding:
	Basic		289,606		296,256		311,117		327,492		336,754		350,399		351,765
	Diluted		290,917		297,995		312,812		329,130		337,812		351,366		353,107

Per share data:
Net income attributable to
	common stockholders
	Basic	$	0.17	$	0.24	$	0.44	$	0.58	$	0.57	$	0.89	$	0.52
	Diluted		0.17		0.24		0.44		0.57		0.56		0.89		0.52

Funds from operations
	Basic	$	1.00	$	0.96	$	1.02	$	0.87	$	1.02	$	0.97	$	1.12
	Diluted		0.99		0.95		1.01		0.86		1.02		0.97		1.11

		Nine Months Ended
		September 30,		September 30,
FFO Reconciliations:		2014		2015
Net income attributable to common stockholders		$	258,107	$	685,413
Depreciation and amortization			648,737		603,431
Impairment of assets			-		2,220
Loss (gain) on sales of properties, net			(42,683)		(249,002)
Noncontrolling interests			(29,618)		(29,363)
Unconsolidated entities			55,019		64,433
Funds from operations		$	889,562	$	1,077,132

Average common shares outstanding:
	Basic		299,137		346,425
	Diluted		300,645		347,547

Per share data:
Net income attributable to
	common stockholders
	Basic	$	0.86	$	1.98
	Diluted		0.86		1.97

Funds from operations
	Basic	$	2.97	$	3.11
	Diluted		2.96		3.10

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

The table below reflects the reconciliation of EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense includes discontinued operations. Dollars are in thousands.

		Three Months Ended
		March 31,		June 30,		September 30,		December 31,		March 31,			June 30,	September 30,
EBITDA Reconciliations:		2014		2014		2014		2014		2015			2015	2015
Net income		$	65,200	$	87,854	$	152,771	$	206,474	$	209,422	$	330,459	$	199,257
Interest expense			120,956		121,099		118,435		120,707		121,080		118,861		121,130
Income tax expense (benefit)			2,260		1,569		(10,198)		5,101		(304)		7,417		(3,344)
Depreciation and amortization			233,318		214,449		200,970		195,393		188,829		208,802		205,799
EBITDA		$	421,734	$	424,971	$	461,978	$	527,675	$	519,027	$	665,539	$	522,842

Interest Coverage Ratio:
Interest expense		$	120,956	$	121,099	$	118,435	$	120,707	$	121,080	$	118,861	$	121,130
Non-cash interest expense			(330)		(1,649)		(547)		100		(119)		4,202		(3,791)
Capitalized interest			1,605		1,700		1,779		2,066		2,387		2,060		1,865
	Total interest		122,231		121,150		119,667		122,873		123,348		125,123		119,204
EBITDA		$	421,734	$	424,971	$	461,978	$	527,675	$	519,027	$	665,539	$	522,842
	Interest coverage ratio		3.45x		3.51x		3.86x		4.29x		4.21x		5.32x		4.39x

Fixed Charge Coverage Ratio:
Total interest		$	122,231	$	121,150	$	119,667	$	122,873	$	123,348	$	125,123	$	119,204
Secured debt principal payments			15,455		15,803		14,549		16,473		15,630		17,336		15,817
Preferred dividends			16,353		16,352		16,352		16,352		16,352		16,352		16,352
	Total fixed charges		154,039		153,305		150,568		155,698		155,330		158,811		151,373
EBITDA		$	421,734	$	424,971	$	461,978	$	527,675	$	519,027	$	665,539	$	522,842
	Fixed charge coverage ratio		2.74x		2.77x		3.07x		3.39x		3.34x		4.19x		3.45x

		Nine Months Ended
		September 30,		September 30,
EBITDA Reconciliations:		2014			2015
Net income		$	305,825	$	739,134
Interest expense			360,491		361,071
Income tax expense (benefit)			(6,369)		3,769
Depreciation and amortization			648,737		603,431
EBITDA		$	1,308,684	$	1,707,405

Interest Coverage Ratio:
Interest expense		$	360,491	$	361,071
Non-cash interest expense			(2,527)		291
Capitalized interest			5,084		6,311
	Total interest		363,048		367,673
EBITDA		$	1,308,684	$	1,707,405
	Interest coverage ratio		3.60x		4.64x

Fixed Charge Coverage Ratio:
Total interest		$	363,048	$	367,673
Secured debt principal payments			45,807		48,783
Preferred dividends			49,057		49,055
	Total fixed charges		457,912		465,511
EBITDA		$	1,308,684	$	1,707,405
	Fixed charge coverage ratio		2.86x		3.67x

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

The table below reflects the reconciliation of Adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for the periods presented. Interest expense includes discontinued operations. Dollars are in thousands.


		Twelve Months Ended
Adjusted EBITDA		March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
Reconciliations:		2014		2014		2014		2014		2015		2015		2015
Net income		$	131,682	$	212,355	$	331,524	$	512,300	$	656,518	$	899,126	$	945,612
Interest expense			472,827		483,082		484,975		481,197		481,321		479,083		481,778
Income tax expense (benefit)			6,987		7,341		(5,934)		(1,267)		(3,832)		2,016		8,870
Depreciation and amortization			920,156		934,128		892,117		844,130		799,641		793,994		798,823
Stock-based compensation expense			17,336		29,320		29,635		32,075		33,462		30,416		31,622
Provision for loan losses			2,110		2,110		2,110		-		-		-		-
Loss (gain) on extinguishment of debt, net			(749)		(218)		6,542		9,558		25,108		43,464		41,356
Adjusted EBITDA		$	1,550,349	$	1,668,118	$	1,740,969	$	1,877,993	$	1,992,218	$	2,248,099	$	2,308,061

Adjusted Fixed Charge Coverage Ratio:
Interest expense		$	472,827	$	483,082	$	484,975	$	481,197	$	481,321	$	479,083	$	481,778
Capitalized interest			6,700		7,014		7,087		7,150		7,931		8,292		8,378
Non-cash interest expense			(880)		(1,292)		(2,790)		(2,427)		(2,215)		3,636		392
	Total interest		478,647		488,804		489,272		485,920		487,037		491,011		490,548
Adjusted EBITDA		$	1,550,349	$	1,668,118	$	1,740,969	$	1,877,993	$	1,992,218	$	2,248,099	$	2,308,061
	Adjusted interest coverage ratio		3.24x		3.41x		3.56x		3.86x		4.09x		4.58x		4.71x

Total interest		$	478,647	$	488,804	$	489,272	$	485,920	$	487,037	$	491,011	$	490,548
Secured debt principal payments			60,341		62,867		62,119		62,280		62,455		63,988		65,256
Preferred dividends			66,088		65,838		65,588		65,408		65,408		65,408		65,408
	Total fixed charges		605,076		617,509		616,979		613,608		614,900		620,407		621,212
Adjusted EBITDA		$	1,550,349	$	1,668,118	$	1,740,969	$	1,877,993	$	1,992,218	$	2,248,099	$	2,308,061
	Adjusted fixed charge coverage ratio		2.56x		2.70x		2.82x		3.06x		3.24x		3.62x		3.72x

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

The following tables reflect the reconciliation of NOI and SSCNOI to net income attributable to common stockholders, the most directly comparable U.S. GAAP measure, for the periods presented. Dollars are in thousands.

			Three Months Ended
			March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
NOI Reconciliations:			2014		2014		2014		2014		2015		2015		2015
Total revenues:
	Triple-net		$	245,580	$	256,439	$	259,249	$	266,600	$	282,988	$	299,149	$	305,450
	Seniors housing operating			456,319		468,914		483,791		488,546		494,561		539,805		547,081
	Outpatient medical			99,893		101,017		104,377		112,144		116,606		118,176		126,444
	Non-segment/corporate			15		76		106		479		22		39		22
		Total revenues		801,807		826,446		847,523		867,769		894,177		957,169		978,997
Property operating expenses:
	Triple-net			243		447		41		-		-		-		-
	Seniors housing operating			308,184		310,029		320,895		327,200		338,507		360,569		368,050
	Outpatient medical			33,004		33,278		34,221		35,815		37,954		37,785		40,653
		Total property operating expenses		341,431		343,754		355,157		363,015		376,461		398,354		408,703
Net operating income:
	Triple-net			245,337		255,992		259,208		266,600		282,988		299,149		305,450
	Seniors housing operating			148,135		158,885		162,896		161,346		156,054		179,236		179,031
	Outpatient medical			66,889		67,739		70,156		76,329		78,652		80,391		85,791
	Non-segment/corporate			15		76		106		479		22		39		22
		NOI		460,376		482,692		492,366		504,754		517,716		558,815		570,294
Reconciling items:
	Interest expense			(120,833)		(121,065)		(118,435)		(120,707)		(121,080)		(118,861)		(121,130)
	Gain (loss) on derivatives, net			-		(351)		(49)		1,895		58,427		-		-
	Depreciation and amortization			(233,318)		(214,449)		(200,970)		(195,393)		(188,829)		(208,802)		(205,799)
	General and administrative			(32,865)		(51,660)		(30,803)		(27,616)		(35,138)		(38,474)		(36,950)
	Transaction costs			(952)		(7,040)		(13,554)		(47,991)		(48,554)		(12,491)		(9,333)
	Gain (loss) on extinguishment of debt, net			148		(531)		(2,692)		(6,484)		(15,401)		(18,887)		(584)
	Impairment of assets			-		-		-		-		(2,220)		-		-
	Other expenses			-		-		(10,262)		-		-		(10,583)		-
	Income tax benefit (expense)			(2,260)		(1,569)		10,198		(5,101)		304		(7,417)		3,344
	Income (loss) from unconsolidated entities			(5,556)		(11,516)		(2,632)		(7,722)		(12,648)		(2,952)		(2,631)
	Income (loss) from discontinued operations, net			460		6,675		-		-		-		-		-
	Gain (loss) on real estate dispositions, net			-		6,668		29,604		110,839		56,845		190,111		2,046
	Preferred dividends			(16,353)		(16,352)		(16,352)		(16,352)		(16,352)		(16,352)		(16,352)
	Loss (income) attributable to noncontrolling interests			1,175		327		(164)		(1,486)		(2,271)		(1,534)		(862)
				(410,354)		(410,863)		(356,111)		(316,118)		(326,917)		(246,242)		(388,251)
Net income (loss) attributable to common stockholders			$	50,022	$	71,829	$	136,255	$	188,636	$	190,799	$	312,573	$	182,043

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

			Nine Months Ended
			September 30,		September 30,
NOI Reconciliations:			2014		2015
Total revenues:
	Triple-net		$	761,267	$	887,588
	Seniors housing operating			1,409,024		1,581,445
	Outpatient medical			305,288		361,226
	Non-segment/corporate			198		83
		Total revenues		2,475,777		2,830,342
Property operating expenses:
	Triple-net			732		-
	Seniors housing operating			939,108		1,067,127
	Outpatient medical			100,502		116,392
		Total property operating expenses		1,040,342		1,183,519
Net operating income:
	Triple-net			760,535		887,588
	Seniors housing operating			469,916		514,318
	Outpatient medical			204,786		244,834
	Non-segment/corporate			198		83
		NOI		1,435,435		1,646,823
Reconciling items:
	Interest expense			(360,334)		(361,071)
	Gain (loss) on derivatives, net			(400)		58,427
	Depreciation and amortization			(648,737)		(603,431)
	General and administrative			(115,327)		(110,562)
	Transaction costs			(21,546)		(70,379)
	Gain (loss) on extinguishment of debt, net			(3,075)		(34,872)
	Impairment of assets			-		(2,220)
	Other expenses			(10,262)		(10,583)
	Income tax benefit (expense)			6,369		(3,769)
	Income (loss) from unconsolidated entities			(19,705)		(18,231)
	Income (loss) from discontinued operations, net			7,135		-
	Gain (loss) on real estate dispositions, net			36,272		249,002
	Preferred dividends			(49,057)		(49,055)
	Loss (income) attributable to noncontrolling interests			1,339		(4,666)
				(1,177,328)		(961,410)
Net income (loss) attributable to common stockholders			$	258,107	$	685,413

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

					Three Months Ended
					March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,
Same Store Cash NOI Reconciliations:					2014		2014		2014		2014		2015		2015		2015
Net operating income from continuing operations:
	Triple-net				$	245,337	$	255,992	$	259,208	$	266,600	$	282,988	$	299,149	$	305,450
	Seniors housing operating					148,135		158,885		162,896		161,346		156,054		179,236		179,031
	Outpatient medical					66,889		67,739		70,156		76,329		78,652		80,390		85,791
			Total			460,361		482,616		492,260		504,275		517,694		558,775		570,272
Adjustments:
	Triple-net:
		Non-cash NOI on same store properties				(13,022)		(19,354)		(20,189)		(19,688)		(22,241)		(22,838)		(22,377)
		NOI attributable to non same store properties				(31,401)		(32,841)		(34,393)		(40,925)		(53,731)		(66,450)		(71,488)
			Subtotal			(44,423)		(52,195)		(54,582)		(60,613)		(75,972)		(89,288)		(93,865)
	Seniors housing operating:
		Non-cash NOI on same store properties				266		266		261		252		251		253		250
		NOI attributable to non same store properties				(117)		(1,705)		(2,432)		(5,386)		(9,034)		(23,155)		(25,153)
			Subtotal			149		(1,439)		(2,171)		(5,134)		(8,783)		(22,902)		(24,903)
	Outpatient medical:
		Non-cash NOI on same store properties				(2,226)		(2,190)		(1,744)		(1,560)		(1,262)		(1,577)		(1,299)
		NOI attributable to non same store properties				(4,138)		(4,565)		(7,503)		(13,121)		(15,277)		(16,217)		(22,258)
			Subtotal			(6,364)		(6,755)		(9,247)		(14,681)		(16,539)		(17,794)		(23,557)
Same store cash net operating income:				Properties
	Triple-net			584		200,914		203,797		204,626		205,987		207,016		209,861		211,586
	Seniors housing operating			279		148,284		157,446		160,725		156,212		147,271		156,334		154,128
	Outpatient medical			178		60,525		60,984		60,909		61,648		62,113		62,596		62,234
			Total	1,041	$	409,723	$	422,227	$	426,260	$	423,847	$	416,400	$	428,791	$	427,948

Same Store Cash NOI Property Reconciliation:
	Total Properties			1,353
	Acquisitions			(263)
	Developments			(21)
	Held-for-sale			(14)
	Other⁽¹⁾			(14)
		Same store properties		1,041

(1) Includes eleven land parcels and three loans.

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

					Nine Months Ended
						September 30,		September 30,
Same Store Cash NOI Reconciliations:						2014		2015
Net operating income from continuing operations:
	Triple-net					$	760,535	$	887,588
	Seniors housing operating						469,916		514,318
	Outpatient medical						204,786		244,834
			Total				1,435,237		1,646,740
Adjustments:
	Triple-net:
		Non-cash NOI on same store properties					(52,564)		(67,456)
		NOI attributable to non same store properties					(98,635)		(191,669)
			Subtotal				(151,199)		(259,125)
	Seniors housing operating:
		Non-cash NOI on same store properties					793		754
		NOI attributable to non same store properties					(4,254)		(57,339)
			Subtotal				(3,461)		(56,585)
	Outpatient medical
		Non-cash NOI on same store properties					(6,160)		(4,137)
		NOI attributable to non same store properties					(16,207)		(53,753)
			Subtotal				(22,367)		(57,890)
Same store cash net operating income:				Properties
	Triple-net			584			609,336		628,463
	Seniors housing operating			279			466,455		457,733
	Outpatient medical			178			182,419		186,944
			Total	1,041		$	1,258,210	$	1,273,140

Other Disclosures

United States of America

Health Care Reimbursements

Policy and legislative changes that increase or decrease government reimbursement impact our operators and tenants that participate in Medicare, Medicaid, or other government programs. The reimbursement methodologies applied to health care facilities continue to evolve. To the extent that policy or legislative changes, or new reimbursement methodologies decrease government reimbursement to our operators and tenants, our revenue and operations may be adversely affected.

Medicare Reimbursement and Physicians. Historically, the Centers for Medicare and Medicaid Services (“CMS”) annually adjusted the Medicare Physician Fee Schedule payment rates based on an update formula that included application of the Sustainable Growth Rate (“SGR”). On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act of 2014, which provided for a 0% update to the 2015 Medicare Physician Fee Schedule through March 31, 2015. On November 13, 2014, CMS published the calendar year 2015 Physician Fee Schedule final rule, which, consistent with the Protecting Access to Medicare Act of 2014, called for a 0% update from January 1, 2015 through March 31, 2015 and a negative 21.2% update under the statutory SGR formula for April 1, 2015 through December 31, 2015. However, on April 16, 2015, President Obama signed and enacted into law H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015, which, among other things:

· Repeals the SGR.

· Institutes a 0% update to the single conversion factor under the Medicare Physician Fee Schedule from January 1 through June 30, 2015, a 0.5% update for July 2015 through the end of 2019, and a 0% update for 2020 through 2025. For 2026 and subsequent years, the update will be either 0.75% or 0.25%, depending in which Alternate Payment Model (“APM”) the physician participates.

· Delays the Geographic Practice Cost Indices (“GPCI”) payment adjustment until January 1, 2018.

· Extends the therapy cap exceptions process through December 31, 2017.

· Imposes a market basket update of 1% for skilled nursing providers for FY 2018.

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

Additionally, on April 6, 2015, CMS announced final 2016 payment rates for Medicare Advantage, with an expected average payment impact of 3.25%. Changes in Medicare Advantage plan payments may indirectly affect our operators and tenants that contract with Medicare Advantage plans.

CMS also issued several additional rules (proposed and final) which could impact our tenants and operators.

· On August 4, 2015, CMS published a final rule regarding fiscal year 2016 (“FY16”) Medicare payment rates for skilled nursing facilities (“SNFs”). Under the rule, CMS projects that aggregate payments to SNFs will increase by $430 million, or 1.2%, from payments in fiscal year 2015.

· On August 17, 2015, CMS published a final rule regarding FY16 Medicare payment rates for Long-Term Care Hospitals (“LTCHs”). Under the rule, standard LTCH Prospective Payment System (“PPS”) rates will increase 1.7%. CMS projects overall payments to LTCHs under the rule would decrease by 4.6%, or $250 million, due to the statutory decrease in payment rates for site neutral LTCH PPS cases. Site neutral LTCH PPS cases do not meet the clinical criteria to qualify for the higher standard LTCH PPS payment rates.

· On July 8, 2015, CMS issued a proposed rule regarding 2016 Medicare payment rates for hospital outpatient departments (“HOPDs”) and ambulatory surgery centers (“ASCs”). Under the rule, CMS proposes to reduce payments to HOPDs by 0.1% and increase payments to ASCs by 1.1%. The proposed rule also included updates to the “Two-Midnight” rule regarding when inpatient admissions are appropriate for payment under Medicare Part A. If finalized, an inpatient admission lasting less than two midnights would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician, supported by documentation in the medical record.

· On July 14, 2015, CMS issued a proposal to bundle the costs for Lower Extremity Joint Replacement (“LEJR”) procedures in certain geographic areas. The bundle would begin with the hospital admission and continue for 90 days following hospital discharge. The following services, among others, would be included: physician services, inpatient hospital services (including readmission), LTCH, inpatient rehabilitation, SNF, and/or home health services, hospital outpatient services, outpatient therapy, clinical lab and hospice. Hospitals subject to the bundling requirements with spending below an established target price that meet the threshold on certain quality measures could earn a reconciliation payment from Medicare. Hospitals with spending that exceeds the target would need to pay the difference to Medicare.

· On July 15, 2015, CMS issued a proposed rule regarding 2016 Medicare payment rates under the Physician Fee Schedule (“PFS”). Among other proposals, CMS plans to initiate implementation of the new payment system for physicians and other practitioners, the Merit-Based Incentive Payment System (“MIPS”), required by the legislation that repealed the SGR.

· On July 16, 2015, CMS issued a proposed rule that, for the first time in nearly 25 years, would comprehensively update the SNF requirements for participation under Medicare and Medicaid. Among other things, the proposed rule addresses requirements relating to quality of care and quality of life, facility responsibilities and staffing considerations, resident assessments, and compliance and ethics programs. CMS estimates that this rule would result in an estimated first-year cost of approximately $46,491 per facility and a subsequent-year cost of $40,685 per facility on 15,691 LTC facilities.

Other Health Care Initiatives

Recent Quality Initiatives. Recent government proposals have resulted in an increased emphasis by the government on the quality of care provided by providers. For example, on February 27, 2015, CMS announced the establishment of a Health Care Payment Learning and Action Network as part of its plan to shift the Medicare program, and the healthcare system at large, toward paying providers based on quality, rather than the quantity of care they provide to patients. Through the Learning and Action Network, CMS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs. To the extent this and similar measures impose additional obligations on our operators or tenants, or decrease the reimbursements that they receive, our revenues and operations may be indirectly adversely affected.

The Department of Health and Human Services, Office of Inspector General (“OIG”) Recommendations Addressing SNF Billing. In the OIG’s March 2015 Compendium of Priority Recommendations, a report that highlights the OIG’s previous recommendations for which corrective action has not been completed, the OIG cited its prior November 2012 report addressing questionable billing practices by SNFs. The OIG recommended, among other things, changing the current method for determining how much therapy is needed to ensure appropriate payments, monitoring compliance with new therapy assessments, and improving accuracy of data submitted by SNFs. Similarly, in June 2015, the OIG issued a report analyzing CMS’ assessments related to changes in the amount of therapy that a beneficiary receives during stays. The OIG concluded that CMS’ new policies create challenges for oversight and that SNFs’ use of these assessments cost Medicare $143 million over 2 years. The OIG recommended, among other things, that CMS (1) reduce the financial incentive for SNFs to use assessments differently when decreasing and increasing therapy and (2) accelerate its efforts to implement a new method for paying for therapy. Most recently, OIG issued a report in September 2015 calling for reevaluation of the Medicare payment system for SNFs. In particular, OIG found that Medicare payments for therapy greatly

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

exceeded SNFs’ costs for therapy, and that, under the current payment system, SNFs increasingly billed for the highest level of therapy even though key beneficiary characteristics remained largely the same. OIG determined that its findings demonstrated the need for CMS to reevaluate the Medicare SNF payment system, concluding that payment reform could save Medicare billions of dollars and encourage SNFs to provide services that are better aligned with beneficiaries’ care needs. If followed, these reports and recommendations may impact our operators and tenants.

Challenges to the Health Reform Laws. Since the enactment of the Patient Protection and Affordable Care Act of 2010, as modified by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Laws”), there have been multiple attempts through legislative action and legal challenge to repeal or amend the Health Reform Laws, including the case that was before the U.S. Supreme Court, King v. Burwell. Although the Supreme Court in Burwell upheld the use of subsidies to individuals in federally-facilitated health care exchanges on June 25, 2015, which ultimately did not disrupt significantly the implementation of the Health Care Reform Laws, we cannot predict whether other current or future efforts to repeal or amend the Health Reform Laws will be successful, nor can we predict the impact that such a repeal or amendment would have on our operators or tenants and their ability to meet their obligations to us.

Canada

Licensing and Regulation

Ontario

Retirement homes in Ontario are regulated under the Retirement Homes Act, 2010 (the “Act”). A license is required to operate a retirement home. Licenses must be applied for and are non-transferable. Applications for licenses are directed to the Registrar of the Retirement Homes Regulatory Authority (“RHRA”).

The Act requires a report to the RHRA when any person has reasonable grounds to suspect abuse of a resident by anyone, or neglect of a resident by staff. Following a report to the RHRA, there is a mandatory inspection carried out by the RHRA, which results in a report that is posted on the RHRA’s public website. The most recent report must also be posted in the subject home, and be readily available for review if requested thereafter. The Registrar of the RHRA can receive complaints about a retirement home contravening a provision of the Act, and if such a complaint is received, it must be reviewed promptly. The Registrar may ask the retirement home that is the subject of the complaint to provide information relevant to the complaint, and has the power to conduct an inspection, issue a written warning or take other action as prescribed in the regulations.

British Columbia

The Community Care and Assisted Living Act, the Residential Care Regulation, and the Community Care and Assisted Living Regulation (together, the “B.C. Act”) regulate “community care facilities” (long-term care facilities) in substantially the same manner as retirement homes are regulated under the Ontario Act. The B.C. Act defines such a facility 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 of cash resources; monitoring of food intake; structured behavior management and intervention; and psychosocial or physical rehabilitative therapy).

Other Related Laws

Privacy

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 a custodian’s privacy law compliance. Mandatory breach notification, to the affected individuals, is a requirement under some laws and amendments have been passed or proposed, but are not yet in effect, requiring breach notification to the applicable privacy regulator under some laws. Some laws require notification where personal health information/personal information is processed or stored outside of Canada. One provincial law (in Quebec) provides for fines where an organization fails to perform required 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, penalties have generally not been monetary, although that may change depending on decisions in connection with class actions. Regulators have the authority to make public the identity of a health information custodian that has been found to have

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

committed a breach, so that there is a reputational risk associated with privacy law violations even where no monetary damages are incurred. The notification of patients (as mentioned above, mandatory under some privacy laws and a best practice in other jurisdictions) and other activities required to manage a privacy breach can give rise to significant costs.

United Kingdom

Registration

In England, care home services are principally regulated by the Health and Social Care Act 2008 (the “Act”) and associated Regulations. The Act requires all persons carrying out “Regulated Activities” in England, and the managers of such persons, to be registered. Regulated Activities are defined in the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014, as amended (the “2014 Regulations”), and include (among other activities):

· The provision of personal care for persons who, by reason of old age, illness or disability are unable to provide it for themselves, and which is provided in a place where those persons are living at the time the care is provided; and

· The provision of residential accommodation, together with nursing or personal care.

From April 1, 2015, the 2014 Regulations fully revoked the Health and Social Care Act 2008 (Regulated Activities) Regulations 2010 (the “2010 Regulations”) and while the 2014 Regulations introduce certain modifications with regard to service standards, the registration obligations under the Act remain.

Service Standards and Notification Obligations

The 2014 Regulations aim to streamline the legal obligations in the 2010 Regulations, and replace them with a set of more broadly-phrased, legally binding “Fundamental Standards”. The 2014 Regulations list the standards that must be met when providing care services. The service providers’ legal obligations include:

· Care and treatment must be appropriate and reflect service user needs and preferences;

· Service users must be treated with dignity and respect;

· Care and treatment must only be provided with consent;

· Care and treatment must be provided in a safe way for service users;

· Service users must be protected from abuse and improper treatment;

· Service users nutritional and hydration needs must be met;

· All premises and equipment must be clean, secure, suitable and used properly;

· Complaints must be investigated and appropriate action taken;

· Systems and processes must be established to ensure compliance with fundamental standards;

· Sufficient numbers of suitably qualified, competent, skilled and experienced staff must be deployed;

· Persons employed must be of good character, having the necessary qualifications, skills and experience, and be able to perform the work for which they are employed; and

· Health service bodies must be open and transparent with service users about their care and treatment.

Failure to comply with certain provisions of the above Regulations is an offense, with a person guilty of the offense liable on summary conviction to a fine. Monetary penalty notices may also be issued.

The Regulations also include:

· Requirements around fit and proper persons being employed for the purposes of carrying of a regulated activity. Such persons must be of good character, have the qualifications, competence, skills and experience necessary and be able by reason of their health to perform their tasks. Recruitment procedures must also be established and effectively operated with certain specified information being available in relation to each person employed and registered where required;

· A new “duty of candour” to notify and apologize to affected persons, in the event of certain incidents having actually or potentially led to the death of the service user, where the death relates directly to the incident rather than to the natural course of the service user's illness or underlying condition, or severe harm, moderate harm or prolonged psychological harm to the service user;

· A requirement for a service provider to display a performance assessment received as a rating of its performance by the Care Quality Commission (the “CQC”); and

· A requirement that registered persons have regard to guidance issued by the CQC and any code of practice from the Secretary of State in relation to prevention or control of health care associated infections.

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

Under the Care Quality Commission (Registration) Regulations 2009 certain matters must be notified to the CQC, the government regulatory body overseeing the provision of nursing and other care services in England. Failure to comply with notification obligations is an offense and a person guilty of an offense is liable on summary conviction to a fine of up to £2,500.

Regulatory Oversight and Inspections

The Act also sets out the powers and responsibilities of the CQC. Among other powers, the CQC administers the compulsory registration system and issues guidance to care service providers on how to comply with applicable standards set out in legislation.

The Care Act 2014 sets out certain provisions concerning (among others):

· The duty of a local authority to meet the needs of an adult for care and support and a carer’s needs where the registered care provider is unable to carry on a regulated activity because of business failure;

· The duty of the CQC to assess the financial sustainability of providers subject to its regulatory regime with a view to identifying any threats that such providers may face to their financial sustainability. Where the CQC identifies a significant risk to financial sustainability it can require the provider to develop a sustainability plan setting out the provider’s plan to mitigate or eliminate risk or require the provider to organize an independent review of the business with the costs being recovered from the provider;

· The CQC informing local authorities where a registered care provider is likely to become unable to carry on a regulated activity; and

· A new offense where certain registered care providers supply, publish or make available information that is false or misleading in a material respect which can also apply to a director, manager or person purporting to act as such of a company.

Critical Accounting Policies

Our unaudited consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions. Management considers an accounting estimate or assumption 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. Management believes the current assumptions and other considerations used to estimate amounts reflected in our unaudited 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 unaudited 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 the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 for further information regarding significant accounting policies that impact us. There have been no material changes to these policies in 2015.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. When the company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. In particular, these forward-looking statements include, but are not limited to, those relating to the company’s opportunities to acquire, develop or sell properties; the company’s ability to close its anticipated acquisitions, investments or dispositions on currently anticipated terms, or within currently anticipated timeframes; the expected performance of the company’s operators/tenants and properties; the company’s expected occupancy rates; the company’s ability to declare and to make distributions to shareholders; the company’s investment and financing opportunities and plans; the company’s continued qualification as a real estate investment trust (“REIT”); the company’s ability to access capital markets or other sources of funds; and the company’s ability to meet its earnings guidance. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the company’s actual results to differ materially from the company’s 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

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

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; the company’s 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 the company’s properties; the company’s ability to re-lease space at similar rates as vacancies occur; the company’s 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 regulations affecting Medicare and Medicaid reimbursement rates and operational requirements; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future investments or acquisitions; environmental laws affecting the company’s properties; changes in rules or practices governing the company’s financial reporting; the movement of U.S. and foreign currency exchange rates; the company’s ability to maintain its qualification as a REIT; and key management personnel recruitment and retention. Other important factors are identified in the company’s Annual Report on Form 10-K for the year ended December 31, 2014, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Finally, the company undertakes no obligation to update or revise publicly 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.

Item 3. 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 presented to provide a discussion of the risks associated with potential fluctuations in interest rates and foreign currency exchange rates.

We historically borrow on our primary unsecured credit facility to acquire, construct or make loans relating to health care and seniors housing properties. Then, as market conditions dictate, we will issue equity or long-term fixed rate debt to repay the borrowings under our primary unsecured credit facility. We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.

A change in interest rates will not affect the interest expense associated with our fixed rate debt. Interest rate changes, however, will affect the fair value of our fixed rate debt. Changes in the interest rate environment upon maturity of this fixed rate debt could have an effect on our future cash flows and earnings, depending on whether the debt is replaced with other fixed rate debt, variable rate debt or equity or repaid by the sale of assets. To illustrate the impact of changes in the interest rate markets, we performed a sensitivity analysis on our fixed rate debt instruments whereby we modeled the change in net present values arising from a hypothetical 1% increase in interest rates to determine the instruments’ change in fair value. The following table summarizes the analysis performed as of the dates indicated (in thousands):

	September 30, 2015				December 31, 2014
	Principal		Change in		Principal		Change in
	balance		fair value		balance		fair value
Senior unsecured notes	$	7,287,915	$	(500,331)	$	7,101,655	$	(547,358)
Secured debt		2,567,571		(81,472)		2,673,480		(93,580)
Totals	$	9,855,486	$	(581,803)	$	9,775,135	$	(640,938)

Our variable rate debt, including our primary unsecured credit facility, is reflected at fair value. At September 30, 2015, we had $1,554,751,000 outstanding under our variable rate debt. Assuming no changes in outstanding balances, a 1% increase in interest rates would result in increased annual interest expense of $15,548,000. At December 31, 2014, we had $983,783,000 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 $9,838,000.

We are subject to currency fluctuations that may, from time to time, affect our financial condition and results of operations. Increases or decreases in the value of the Canadian Dollar or Pounds Sterling relative to the U.S. Dollar impact the amount of net income we earn from our investments in Canada and the United Kingdom. Based solely on our results for the three months ended September 30, 2015, if these exchange rates were to increase or decrease by 100 basis points, our net income from these investments would decrease or increase, as applicable, by less than $1,000,000 annualized. We seek to mitigate these underlying foreign currency exposures with non-U.S. denominated borrowings and gains and losses on derivative contracts hedging these exposures. If we increase our international presence through investments in, or acquisitions or development of, seniors housing and health care properties outside the U.S., we may also decide to transact additional business or borrow funds in currencies other than U.S. Dollars, Canadian Dollars or Pounds Sterling. To illustrate the impact of changes in foreign currency markets, we performed a sensitivity analysis on our derivative portfolio whereby we modeled the change in net present values arising from a hypothetical 1% increase in foreign currency exchange rates to determine the instruments’ change in fair value. The following table summarizes the results of the analysis performed (dollars in thousands):

	September 30, 2015				December 31, 2014
	Carrying		Change in		Carrying		Change in
	Value		fair value		Value		fair value
Foreign currency forward contracts⁽¹⁾	$	76,326	$	2,091	$	54,247	$	4,242
Debt designated as hedges		1,774,540		13,000		1,851,189		13,000
Totals	$	1,850,866	$	15,091	$	1,905,436	$	17,242

(1) Amounts exclude cross currency hedge activity.

For additional information regarding fair values of financial instruments, see “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” and Notes 11 and 16 to our unaudited consolidated financial statements.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in the reports we file with or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. No changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, there are various legal proceedings pending to which we are a party or to which some of our properties are subject arising in the normal course of business. We do not believe that the ultimate resolution of these proceedings will have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors

There have been no material changes from the risk factors identified under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014.

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


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2015 through July 31, 2015	-	$	-
August 1, 2015 through August 31, 2015	246		65.08
September 1, 2015 through September 30, 2015	-		-
Totals	246	$	65.08

(1) During the three months ended September 30, 2015, the company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
(2) No shares were purchased as part of publicly announced plans or programs.

Item 5. Other Information

On October 29, 2015, the Board of Directors of the company amended the company’s by-laws to reflect the change of its name from Health Care REIT, Inc. to Welltower Inc.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the company’s Fifth Amended and Restated By-Laws, a copy of which is filed herewith as Exhibit 3.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 6. Exhibits

1.1 Form of Amendment No. 2, dated August 5, 2015, to the Equity Distribution Agreements entered into by and between the company and each of UBS Securities LLC, KeyBanc Capital Markets Inc. and Credit Agricole Securities (USA) Inc. (filed with the Securities and Exchange Commission as Exhibit 1.3 to the company’s Form 8-K filed August 5, 2015, and incorporated herein by reference thereto).

3.1 Certificate of Amendment of Second Restated Certificate of Incorporation of the company (filed with the Securities and Exchange Commission as Exhibit 3.1 to the company’s Form 8-K filed September 30, 2015, and incorporated herein by reference thereto).

3.2 Fifth Amended and Restated By-Laws of the company.

12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited).

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1 Certification pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer.

32.2 Certification pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer.

101.INS XBRL Instance Document*

101.SCH XBRL Taxonomy Extension Schema Document*

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB XBRL Taxonomy Extension Label Linkbase Document*

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document*


*			Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014, (iii) the Consolidated Statements of Equity for the nine months ended September 30, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 and (v) the Notes to Unaudited Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements 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.


	WELLTOWER INC.
Date: October 30, 2015	By:	/s/ THOMAS J. DEROSA
	Thomas J. DeRosa,
	Chief Executive Officer (Principal Executive Officer)


Date: October 30, 2015	By:	/s/ SCOTT A. ESTES
	Scott A. Estes,
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)


Date: October 30, 2015	By:	/s/ PAUL D. NUNGESTER, JR.
	Paul D. Nungester, Jr.,
	Senior Vice President and Controller (Principal Accounting Officer)