Welltower(WELL) - 2022 Q4 - Annual Report

Revenue Segmentation - The Seniors Housing Operating segment accounted for 72%, 68%, and 67% of total revenues for the years ended December 31, 2022, 2021, and 2020, respectively[27]. - The Triple-net segment accounted for 16%, 19%, and 17% of total revenues for the years ended December 31, 2022, 2021, and 2020, respectively[30]. - The Outpatient Medical segment accounted for 12%, 13%, and 16% of total revenues for the years ended December 31, 2022, 2021, and 2020, respectively[33]. - The relationship with Sunrise Senior Living accounted for approximately 20% of the Seniors Housing Operating segment revenues and 14% of total revenues for the year ended December 31, 2022[27]. - ProMedica Health System accounted for approximately 26% of the Triple-net segment revenues and 4% of total revenues for the year ended December 31, 2022[30]. - Approximately 87% of the outpatient medical building portfolio is affiliated with health systems[33]. - As of December 31, 2022, 96% of the triple-net properties were subject to master leases[38]. Financial Investments and Loans - As of December 31, 2022, the company had outstanding construction investments of $1,021,080,000 and was committed to provide additional funds of approximately$1,883,449,000 to complete construction for consolidated investment properties[40]. - At December 31, 2022, the company had outstanding loans, net of allowances, of $1,180,012,000 with an interest yield of approximately 9.9$1,499,790,000 as of December 31, 2022[42]. - The company has made loans related to 21 properties with a carrying value of $649,267,000, classified as in substance real estate investments[43]. Green Bonds and Sustainability Initiatives - The company issued an inaugural green bond of$500,000,000 with a 2.700% interest rate due in 2027 and an additional green bond of $550,000,000 with a 3.85$572,090,000 of proceeds from green bond issuances for energy efficiency, water conservation, and green building projects as of September 30, 2022[56]. - The company has been recognized as an ENERGY STAR Partner of the Year for four consecutive years, maintaining the highest level of Sustained Excellence[59]. - The company’s ESG initiatives have led to an MSCI ESG rating improvement from AA to AAA[52]. Employee and Board Diversity - The company’s U.S. employees self-identified as 51% male and 49% female, with a diverse ethnic composition including 80% White, 8% Hispanic or Latino, and 4% Black or African American[58]. - The Board of Directors consists of 60% male and 40% female members, with 20% identifying as Black or African American and 20% as Hispanic or Latino[62]. - The company’s overall employee engagement score improved in 2022 compared to 2021 due to management actions taken on previous survey results[65]. - The company has a commitment to diversity and inclusion, supported by various employee network groups and initiatives[60]. Regulatory Compliance and Risks - Compliance with federal and state health care regulations is critical, as failure to do so can result in loss of accreditation, fines, or exclusion from government programs[74]. - The Health Reform Laws have significantly altered health care delivery and reimbursement, with ongoing reforms expected to impact operators and tenants[77]. - Data privacy laws, including the California Consumer Privacy Act and the Virginia Consumer Data Protection Act, impose new compliance obligations that may affect business operations[81]. - Operators face substantial financial penalties for noncompliance with health care fraud and abuse laws, which could adversely affect their financial condition[78]. - Increased scrutiny and enforcement actions in the health care industry are expected to continue, potentially impacting operators' liquidity and ability to meet obligations[79]. Taxation and REIT Compliance - The company intends to maintain its qualification as a REIT, which allows it to avoid U.S. federal income tax on distributed taxable income[89]. - If the company fails to distribute at least 90% of its REIT taxable income, it will be subject to tax on the undistributed amount at regular corporate tax rates[90]. - The company must satisfy two percentage tests regarding gross income each taxable year to maintain REIT status[99]. - The company is required to make distributions equal to at least 90% of its "REIT taxable income" to avoid being taxed as a regular corporation[117]. - The company must comply with various asset tests, including the 10% vote test and the 5% asset test, to maintain REIT status[104]. - Failure to qualify as a REIT would subject the company to U.S. federal income tax at regular corporate rates, reducing cash available for distribution to stockholders[121]. Market Risks and Financial Strategies - The company is exposed to market risks, including interest rate fluctuations and foreign currency exchange rates, which it seeks to mitigate through various financial strategies[410]. - The company historically borrows on its unsecured revolving credit facility and commercial paper program to finance health care and seniors housing properties[411]. - The total variable rate debt outstanding as of December 31, 2022, was $2,426,134,000, with a projected increase in annual interest expense of$24,261,000 due to a hypothetical 1% increase in interest rates[412]. - Currency fluctuations may impact net income from investments in Canada and the UK, with a potential increase or decrease of less than $8,000,000 if exchange rates change by 10%[413]. - The company plans to mitigate foreign currency exposures through non-U.S. denominated borrowings and derivative contracts[413]. - The company may increase its international presence through investments or acquisitions in seniors housing and healthcare properties outside the U.S.[413].