Real Property Acquisitions and Development

9 Months Ended

Sep. 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):


	Nine Months Ended
	September 30, 2022								September 30, 2021
	Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$	199,892	$	—	$	65,688	$	265,580	$	264,706	$	48,099	$	45,350	$	358,155
Buildings and improvements	1,988,999		172		249,660		2,238,831		1,655,067		436,828		227,390		2,319,285
Acquired lease intangibles	109,049		—		33,978		143,027		142,439		—		17,333		159,772
Construction in progress	108,141		—		—		108,141		—		—		—		—

Right of use assets, net	169		—		3,852		4,021		77,455		—		—		77,455
Total net real estate assets	2,406,250		172		353,178		2,759,600		2,139,667		484,927		290,073		2,914,667
Receivables and other assets	10,410		—		460		10,870		6,041		—		3,534		9,575
Total assets acquired (1)	2,416,660		172		353,638		2,770,470		2,145,708		484,927		293,607		2,924,242
Secured debt	(219,067)		—		—		(219,067)		—		—		—		—
Lease liabilities	—		—		(3,852)		(3,852)		(138,126)		—		—		(138,126)
Accrued expenses and other liabilities	(111,373)		—		(1,294)		(112,667)		(20,748)		(8,703)		(266)		(29,717)
Total liabilities acquired	(330,440)		—		(5,146)		(335,586)		(158,874)		(8,703)		(266)		(167,843)
Noncontrolling interests (2)	(115,112)		(4)		(975)		(116,091)		(2,597)		(2,056)		(16,540)		(21,193)
Non-cash acquisition related activity(3)	(25,795)		—		—		(25,795)		—		—		—		—
Cash disbursed for acquisitions	1,945,313		168		347,517		2,292,998		1,984,237		474,168		276,801		2,735,206
Construction in progress additions	343,000		64,091		75,460		482,551		190,672		60,251		29,448		280,371
Less: Capitalized interest	(16,464)		(3,088)		(1,177)		(20,729)		(9,658)		(2,092)		(2,277)		(14,027)
Accruals (4)	(2,809)		—		4,452		1,643		38		—		(3,057)		(3,019)
Cash disbursed for construction in progress	323,727		61,003		78,735		463,465		181,052		58,159		24,114		263,325
Capital improvements to existing properties	232,618		39,526		43,691		315,835		115,115		26,496		24,080		165,691
Total cash invested in real property, net of cash acquired	$	2,501,658	$	100,697	$	469,943	$	3,072,298	$	2,280,404	$	558,823	$	324,995	$	3,164,222

(1) Excludes $6,431,000 and $301,000 of unrestricted and restricted cash acquired during the nine months ended September 30, 2022 and September 30, 2021, respectively.

(2) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests. For the nine months ended September 30, 2022, 1,227,000 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 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):


	Nine Months Ended
	September 30, 2022		September 30, 2021
Development projects:
Seniors Housing Operating	$	182,421	$	58,844
Triple-net	—		22,990
Outpatient Medical	—		116,612


Total construction in progress conversions	$	182,421	$	198,446