Real Property Acquisitions and Development

6 Months Ended

Jun. 30, 2023

Real Estate [Abstract]

Real Property Acquisitions and Development

Real Property Acquisitions and Development The total purchase price for all properties acquired has been allocated to the tangible and identifiable intangible assets and liabilities at cost on a relative fair value basis. Liabilities assumed and any associated noncontrolling interests are reflected at fair value. The results of operations for these acquisitions have been included in our consolidated results of operations since the date of acquisition and are a component of the appropriate segments. Transaction costs primarily represent costs incurred with acquisitions, including due diligence costs, fees for legal and valuation services, termination of pre-existing relationships computed based on the fair value of the assets acquired, lease termination fees and other acquisition-related costs. Transaction costs related to asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in other expenses on our Consolidated Statements of Comprehensive Income.

The following is a summary of our real property investment activity by segment for the periods presented (in thousands):

	Six Months Ended
	June 30, 2023								June 30, 2022
	Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$	4,426	$	7,370	$	60,527	$	72,323	$	130,282	$	—	$	26,714	$	156,996
Buildings and improvements	50,172		74,289		256,190		380,651		1,249,982		171		205,161		1,455,314
Acquired lease intangibles	970		—		39,090		40,060		77,705		—		26,836		104,541
Construction in progress	—		—		—		—		108,141		—		—		108,141
Right of use assets, net	—		—		927		927		169		—		3,852		4,021
Total net real estate assets	55,568		81,659		356,734		493,961		1,566,279		171		262,563		1,829,013
Receivables and other assets	2,089		—		358		2,447		6,091		—		260		6,351
Total assets acquired(1)	57,657		81,659		357,092		496,408		1,572,370		171		262,823		1,835,364
Secured debt	(21,767)		—		(40,953)		(62,720)		(219,067)		—		—		(219,067)
Lease liabilities	—		—		(953)		(953)		—		—		(3,852)		(3,852)
Accrued expenses and other liabilities	(570)		—		(8,071)		(8,641)		(11,937)		—		(393)		(12,330)
Total liabilities acquired	(22,337)		—		(49,977)		(72,314)		(231,004)		—		(4,245)		(235,249)
Noncontrolling interests (2)	—		—		—		—		(101,885)		(4)		(664)		(102,553)
Non-cash acquisition related activity(3)	—		—		—		—		(25,795)		—		—		(25,795)
Cash disbursed for acquisitions	35,320		81,659		307,115		424,094		1,213,686		167		257,914		1,471,767
Construction in progress additions	295,120		25,646		190,164		510,930		229,044		45,939		24,336		299,319
Less: Capitalized interest	(16,761)		(2,416)		(3,028)		(22,205)		(9,305)		(2,031)		(530)		(11,866)
Accruals (4)	746		(9,384)		(5,972)		(14,610)		(3,479)		—		2,453		(1,026)
Cash disbursed for construction in progress	279,105		13,846		181,164		474,115		216,260		43,908		26,259		286,427
Capital improvements to existing properties	165,187		11,784		28,007		204,978		146,052		25,016		29,001		200,069
Total cash invested in real property, net of cash acquired	$	479,612	$	107,289	$	516,286	$	1,103,187	$	1,575,998	$	69,091	$	313,174	$	1,958,263

(1) Excludes $5,491,000 of unrestricted and restricted cash acquired during the six months ended June 30, 2022.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests. For the six months ended June 30, 2022, 1,145,000 Welltower OP units were issued as a component of funding for certain transactions.

(3) Relates to the acquisition of assets recognized as investments in unconsolidated entities.

(4) Represents non-cash accruals for amounts to be paid in future periods for properties that converted, offset by amounts paid in the current period.

Effective on April 1, 2022, our leasehold interest relating to the master lease with National Health Investors, Inc. ("NHI") for 17 properties assumed in conjunction with the Holiday Retirement acquisition was terminated as a result of the transition or sale of the properties by NHI. The lease termination was part of an agreement to resolve outstanding litigation with NHI. In conjunction with the agreement, a wholly owned subsidiary and the lessee on the master lease agreed to release $6,883,000 of cash to the landlord, which represents the net cash flow generated from the properties since we assumed the leasehold interest. Additionally, in connection with the lease termination, during the three months ended June 30, 2022, we recognized $58,621,000 in other income on our Consolidated Statements of Comprehensive Income from the derecognition of the right of use asset and related lease liability.

Construction Activity 

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

	Six Months Ended
	June 30, 2023		June 30, 2022
Development projects:
Seniors Housing Operating	$	140,865	$	134,562
Triple-net	141,142		—
Outpatient Medical	21,173		—
Total development projects	303,180		134,562
Expansion projects	26,125		—
Total construction in progress conversions	$	329,305	$	134,562