Real Property Acquisitions and Development

6 Months Ended

Jun. 30, 2022

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, 2022								June 30, 2021
	Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$	130,282	$	—	$	26,714	$	156,996	$	25,636	$	30,849	$	29,735	$	86,220
Buildings and improvements	1,249,982		171		205,161		1,455,314		167,791		268,210		152,737		588,738
Acquired lease intangibles	77,705		—		26,836		104,541		10,679		—		6,274		16,953
Construction in progress	108,141		—		—		108,141		—		—		—		—

Right of use assets, net	169		—		3,852		4,021		—		—		—		—
Total net real estate assets	1,566,279		171		262,563		1,829,013		204,106		299,059		188,746		691,911
Receivables and other assets	6,091		—		260		6,351		634		—		8		642
Total assets acquired (1)	1,572,370		171		262,823		1,835,364		204,740		299,059		188,754		692,553
Secured debt	(219,067)		—		—		(219,067)		—		—		—		—
Lease liabilities	—		—		(3,852)		(3,852)		—		—		—		—
Accrued expenses and other liabilities	(11,937)		—		(393)		(12,330)		(2,923)		(8,703)		(266)		(11,892)
Total liabilities acquired	(231,004)		—		(4,245)		(235,249)		(2,923)		(8,703)		(266)		(11,892)
Noncontrolling interests (2)	(101,885)		(4)		(664)		(102,553)		(2,597)		(2,056)		(14,723)		(19,376)
Non-cash acquisition related activity(3)	(25,795)		—		—		(25,795)		—		—		—		—
Cash disbursed for acquisitions	1,213,686		167		257,914		1,471,767		199,220		288,300		173,765		661,285
Construction in progress additions	229,044		45,939		24,336		299,319		93,108		46,904		13,371		153,383
Less: Capitalized interest	(9,305)		(2,031)		(530)		(11,866)		(6,014)		(1,238)		(2,106)		(9,358)
Accruals (4)	(3,479)		—		2,453		(1,026)		8		—		311		319
Cash disbursed for construction in progress	216,260		43,908		26,259		286,427		87,102		45,666		11,576		144,344
Capital improvements to existing properties	146,052		25,016		29,001		200,069		64,438		15,568		14,477		94,483
Total cash invested in real property, net of cash acquired	$	1,575,998	$	69,091	$	313,174	$	1,958,263	$	350,760	$	349,534	$	199,818	$	900,112

(1) Excludes $5,491,000 and $301,000 of unrestricted and restricted cash acquired during the six months ended June 30, 2022 and June 30, 2021, respectively.

(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, off-set 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 conjunction 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, 2022		June 30, 2021
Development projects:
Seniors Housing Operating	$	134,562	$	58,844
Triple-net	—		22,990
Outpatient Medical	—		101,867


Total construction in progress conversions	$	134,562	$	183,701