well-20230331

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 March 31, 2023



☐						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)

(IRS Employer
Identification No.)

4500 Dorr Street

Toledo,

Ohio

43615

(Address of principal executive office)

(Zip Code)

(419) -

247-2800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $1.00 par value per share	WELL	New York Stock Exchange
Guarantee of 4.800% Notes due 2028 issued by Welltower OP LLC	WELL/28	New York Stock Exchange
Guarantee of 4.500% Notes due 2034 issued by Welltower OP LLC	WELL/34	New York Stock Exchange

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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted 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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of April 28, 2023, Welltower Inc. had 497,031,161 shares of common stock outstanding.

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION		Page

Item 1. Financial Statements (Unaudited)		3

	Consolidated Balance Sheets	3

	Consolidated Statements of Comprehensive Income	4

	Consolidated Statements of Equity	6

	Consolidated Statements of Cash Flows	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3. Quantitative and Qualitative Disclosures About Market Risk		47

Item 4. Controls and Procedures		48

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		49

Item 1A. Risk Factors		49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		49

Item 5. Other Information		49

Item 6. Exhibits		50

Signatures		51

PART I. FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEETS

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


	March 31, 2023 (Unaudited)		December 31, 2022 (Note)
Assets:
Real estate investments:
Real property owned:
Land and land improvements	$	4,324,541	$	4,249,834
Buildings and improvements	34,161,466		33,651,336
Acquired lease intangibles	1,990,830		1,945,458
Real property held for sale, net of accumulated depreciation	215,583		133,058
Construction in progress	1,121,446		1,021,080
Less accumulated depreciation and amortization	(8,417,151)		(8,075,733)
Net real property owned	33,396,715		32,925,033
Right of use assets, net	322,896		323,942
Real estate loans receivable, net of credit allowance	954,156		890,844
Net real estate investments	34,673,767		34,139,819
Other assets:
Investments in unconsolidated entities	1,596,413		1,499,790
Goodwill	68,321		68,321
Cash and cash equivalents	571,902		631,681
Restricted cash	66,894		90,611
Straight-line rent receivable	357,359		322,173
Receivables and other assets	1,159,233		1,140,838
Total other assets	3,820,122		3,753,414
Total assets	$	38,493,889	$	37,893,233

Liabilities and equity
Liabilities:
Unsecured credit facility and commercial paper	$	—	$	—
Senior unsecured notes	12,486,229		12,437,273
Secured debt	2,474,837		2,110,815
Lease liabilities	415,169		415,824
Accrued expenses and other liabilities	1,521,499		1,535,325
Total liabilities	16,897,734		16,499,237
Redeemable noncontrolling interests	392,195		384,443
Equity:
Common stock	497,928		491,919
Capital in excess of par value	27,160,014		26,742,750
Treasury stock	(112,925)		(111,001)
Cumulative net income	8,830,623		8,804,950
Cumulative dividends	(15,815,926)		(15,514,097)
Accumulated other comprehensive income (loss)	(111,559)		(119,707)
Total Welltower Inc. stockholders’ equity	20,448,155		20,294,814
Noncontrolling interests	755,805		714,739
Total equity	21,203,960		21,009,553
Total liabilities and equity	$	38,493,889	$	37,893,233

Note: The consolidated balance sheet at December 31, 2022 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.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands, except per share data)


	Three Months Ended
	March 31,
		2023		2022
Revenues:
Resident fees and services		$	1,131,685	$	994,335
Rental income		384,059		356,390
Interest income		36,405		38,994
Other income		8,580		5,985
Total revenues		1,560,729		1,395,704

Expenses:
Property operating expenses		957,753		853,669
Depreciation and amortization		339,112		304,088
Interest expense		144,403		121,696
General and administrative expenses		44,371		37,706
Loss (gain) on derivatives and financial instruments, net		930		2,578
Loss (gain) on extinguishment of debt, net		5		(12)
Provision for loan losses, net		777		(804)
Impairment of assets		12,629		—
Other expenses		22,745		26,069
Total expenses		1,522,725		1,344,990

Income (loss) from continuing operations before income taxes and other items		38,004		50,714
Income tax (expense) benefit		(3,045)		(5,013)
Income (loss) from unconsolidated entities		(7,071)		(2,884)
Gain (loss) on real estate dispositions, net		747		22,934
Income (loss) from continuing operations		28,635		65,751

Net income (loss)		28,635		65,751
Less: Net income (loss) attributable to noncontrolling interests(1)		2,962		3,826
Net income (loss) attributable to common stockholders		$	25,673	$	61,925

Weighted average number of common shares outstanding:
Basic		492,061		447,379
Diluted		494,494		449,802

Earnings per share:
Basic:
Income (loss) from continuing operations		$	0.06	$	0.15
Net income (loss) attributable to common stockholders		$	0.05	$	0.14

Diluted:
Income (loss) from continuing operations		$	0.06	$	0.15
Net income (loss) attributable to common stockholders(2)		$	0.05	$	0.14

Dividends declared and paid per common share		$	0.61	$	0.61

(1) Includes amounts attributable to redeemable noncontrolling interests.

(2) Includes adjustment to the numerator for income (loss) attributable to OP Units and DownREIT Units.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


	Three Months Ended
	March 31,
		2023		2022
Net income (loss)		$	28,635	$	65,751

Other comprehensive income (loss):
Foreign currency translation gain (loss)		80,765		(66,948)
Derivative and financial instruments designated as hedges gain (loss)		(69,738)		51,940
Total other comprehensive income (loss)		11,027		(15,008)

Total comprehensive income (loss)		39,662		50,743
Less: Total comprehensive income (loss) attributable to noncontrolling interests(1)		5,841		5,974
Total comprehensive income (loss) attributable to common stockholders		$	33,821	$	44,769

(1) Includes amounts attributable to redeemable noncontrolling interests.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


	Three Months Ended March 31, 2023
	Common Stock		Capital in Excess of Par Value		Treasury Stock		Cumulative Net Income		Cumulative Dividends		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total
Balances at January 1, 2023	$	491,919	$	26,742,750	$	(111,001)	$	8,804,950	$	(15,514,097)	$	(119,707)	$	714,739	$	21,009,553
Comprehensive income:
Net income (loss)							25,673						2,688		28,361
Other comprehensive income (loss)											8,148		3,023		11,171
Total comprehensive income															39,532
Net change in noncontrolling interests			(8,304)										29,648		21,344
Adjustment to members' interest from change in ownership in Welltower OP			(6,139)										6,139		—
Redemption of OP Units and DownREIT Units	272		17,515										(432)		17,355
Amounts related to stock incentive plans, net of forfeitures	134		9,330		(1,924)										7,540
Net proceeds from issuance of common stock	5,603		404,862												410,465
Dividends paid:
Common stock dividends									(301,829)						(301,829)
Balances at March 31, 2023	$	497,928	$	27,160,014	$	(112,925)	$	8,830,623	$	(15,815,926)	$	(111,559)	$	755,805	$	21,203,960


	Three Months Ended March 31, 2022
	Common Stock		Capital in Excess of Par Value		Treasury Stock		Cumulative Net Income		Cumulative Dividends		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total
Balances at January 1, 2022	$	448,605	$	23,133,641	$	(107,750)	$	8,663,736	$	(14,380,915)	$	(121,316)	$	960,578	$	18,596,579
Comprehensive income:
Net income (loss)							61,925						2,752		64,677
Other comprehensive income (loss)											(17,156)		1,465		(15,691)
Total comprehensive income															48,986
Net change in noncontrolling interests			(63,026)										(128,305)		(191,331)
Amounts related to stock incentive plans, net of forfeitures	166		7,279		(4,768)										2,677
Net proceeds from issuance of common stock	6,605		542,218												548,823
Dividends paid:
Common stock dividends									(273,668)						(273,668)
Balances at March 31, 2022	$	455,376	$	23,620,112	$	(112,518)	$	8,725,661	$	(14,654,583)	$	(138,472)	$	836,490	$	18,732,066

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

WELLTOWER INC. AND SUBSIDIARIES

(In thousands)


	Three Months Ended
	March 31,
	2023		2022
Operating activities:
Net income	$	28,635	$	65,751
Adjustments to reconcile net income to net cash provided from (used in) operating activities:
Depreciation and amortization	339,112		304,088
Other amortization expenses	9,792		5,592
Provision for loan losses, net	777		(804)
Impairment of assets	12,629		—
Stock-based compensation expense	9,456		7,445
Loss (gain) on derivatives and financial instruments, net	930		2,578
Loss (gain) on extinguishment of debt, net	5		(12)
Loss (income) from unconsolidated entities	7,071		2,884
Rental income less than (in excess of) cash received	(36,827)		(22,215)
Amortization related to above (below) market leases, net	(82)		(419)
Loss (gain) on real estate dispositions, net	(747)		(22,934)
Distributions by unconsolidated entities	3,418		6,982
Increase (decrease) in accrued expenses and other liabilities	(4,503)		(23,416)
Decrease (increase) in receivables and other assets	6,392		(1,000)
Net cash provided from (used in) operating activities	376,058		324,520

Investing activities:
Cash disbursed for acquisitions, net of cash acquired	(402,719)		(601,410)
Cash disbursed for capital improvements to existing properties	(91,339)		(90,229)
Cash disbursed for construction in progress	(226,226)		(138,141)
Capitalized interest	(10,335)		(5,479)
Investment in loans receivable	(54,831)		(39,201)
Principal collected on loans receivable	15,592		89,207
Other investments, net of payments	(80,548)		2,401
Contributions to unconsolidated entities	(112,822)		(115,249)
Distributions by unconsolidated entities	4,800		5,882
Proceeds from (payments on) derivatives	3,933		10,104
Proceeds from sales of real property	21,658		73,568
Net cash provided from (used in) investing activities	(932,837)		(808,547)

Financing activities:
Net increase (decrease) under unsecured credit facility and commercial paper	—		(24,967)
Net proceeds from issuance of senior unsecured notes	—		545,082

Net proceeds from the issuance of secured debt	362,900		5,385
Payments on secured debt	(39,573)		(116,789)
Net proceeds from the issuance of common stock	411,032		549,346

Payments for deferred financing costs and prepayment penalties	(6,444)		(69)
Contributions by noncontrolling interests(1)	83,480		4,101
Distributions to noncontrolling interests(1)	(35,664)		(177,979)

Cash distributions to stockholders	(300,195)		(273,045)
Other financing activities	(5,066)		(5,960)
Net cash provided from (used in) financing activities	470,470		505,105
Effect of foreign currency translation on cash and cash equivalents and restricted cash	2,813		(790)
Increase (decrease) in cash, cash equivalents and restricted cash	(83,496)		20,288
Cash, cash equivalents and restricted cash at beginning of period	722,292		346,755
Cash, cash equivalents and restricted cash at end of period	$	638,796	$	367,043

Supplemental cash flow information:
Interest paid	$	148,399	$	123,012
Income taxes paid (received), net	325		631

(1) Includes amounts attributable to redeemable noncontrolling interests.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

Welltower Inc., an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. We invest 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 Inc., a real estate investment trust (“REIT”), owns interests in properties concentrated in major, high-growth markets in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), consisting of seniors housing and post-acute communities and outpatient medical properties.

As of May 24, 2022, we are structured as an umbrella partnership REIT under which substantially all of our business is conducted through Welltower OP LLC, the day-to-day management of which is exclusively controlled by Welltower Inc. Unless stated otherwise or the context otherwise requires, references to "Welltower" mean Welltower Inc. and references to "Welltower OP" mean Welltower OP LLC. References to "we," "us" and "our" mean collectively Welltower, Welltower OP and those entities/subsidiaries owned or controlled by Welltower and/or Welltower OP. Welltower's weighted average ownership in Welltower OP was 99.735% for the three months ended March 31, 2023. As of March 31, 2023, Welltower owned 99.721% of the issued and outstanding units of Welltower OP, with other investors owning the remaining 0.279% of outstanding units. We adjust the noncontrolling members' interest at the end of each period to reflect their interest in the net assets of Welltower OP.

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 (such as normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2023 are not necessarily an indication of the results that may be expected for the year ending December 31, 2023. 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, 2022.

Impact of COVID-19 Pandemic & Government Grants

The extent to which the COVID-19 pandemic impacts our operations and those of our operators and tenants in the future is uncertain and cannot be predicted with confidence. We have received government grants under the CARES Act, as well as under similar programs in the U.K. and Canada, primarily to cover increased expenses and lost revenue during the COVID-19 pandemic. We recognized $4,136,000 and $5,760,000 during the three months ended March 31, 2023 and 2022, respectively. These grants represent a reduction to property operating expenses in our Consolidated Statements of Comprehensive Income. The amount of qualifying expenditures and lost revenue exceeded grant income recognized and we believe we have complied and will continue to comply with all grant conditions. In the event of non-compliance, all such amounts are subject to recapture.

New Accounting Standards

In March 2020, the FASB issued an amendment to the reference rate reform standard, which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting for relationships affected by reference rate reform. In December 2022, the FASB extended the date for which this guidance can be applied from December 31, 2022 to December 31, 2024. We continue to monitor developments related to the LIBOR transition and identification of an alternative, market-accepted rate.

3. 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.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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


	Three Months Ended
	March 31, 2023								March 31, 2022
	Seniors Housing Operating		Triple-net		Outpatient Medical		Totals		Seniors Housing Operating		Triple-net		Outpatient Medical		Totals
Land and land improvements	$	2,517	$	7,370	$	60,527	$	70,414	$	43,897	$	—	$	240	$	44,137
Buildings and improvements	16,434		74,289		255,706		346,429		402,342		171		131,412		533,925
Acquired lease intangibles	865		—		39,090		39,955		31,366		—		16,978		48,344


Right of use assets, net	—		—		927		927		—		—		3,852		3,852
Total net real estate assets	19,816		81,659		356,250		457,725		477,605		171		152,482		630,258
Receivables and other assets	234		—		358		592		1,630		—		—		1,630
Total assets acquired	20,050		81,659		356,608		458,317		479,235		171		152,482		631,888
Secured debt	(5,501)		—		(40,953)		(46,454)		—		—		—		—
Lease liabilities	—		—		(953)		(953)		—		—		(3,852)		(3,852)
Accrued expenses and other liabilities	(120)		—		(8,071)		(8,191)		(4,154)		—		—		(4,154)
Total liabilities acquired	(5,621)		—		(49,977)		(55,598)		(4,154)		—		(3,852)		(8,006)
Noncontrolling interests (1)	—		—		—		—		(20,348)		(4)		—		(20,352)
Non-cash acquisition related activity(2)	—		—		—		—		(2,120)		—		—		(2,120)
Cash disbursed for acquisitions	14,429		81,659		306,631		402,719		452,613		167		148,630		601,410
Construction in progress additions	131,944		4,995		101,609		238,548		113,407		20,756		9,642		143,805
Less: Capitalized interest	(7,950)		(1,248)		(1,137)		(10,335)		(4,179)		(1,089)		(211)		(5,479)
Accruals (3)	2,303		—		(4,290)		(1,987)		(1,963)		—		1,778		(185)
Cash disbursed for construction in progress	126,297		3,747		96,182		226,226		107,265		19,667		11,209		138,141
Capital improvements to existing properties	69,783		4,427		17,129		91,339		68,612		8,294		13,323		90,229
Total cash invested in real property, net of cash acquired	$	210,509	$	89,833	$	419,942	$	720,284	$	628,490	$	28,128	$	173,162	$	829,780

(1) Includes amounts attributable to both redeemable noncontrolling interests and noncontrolling interests.

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

(3) 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):


	Three Months Ended
	March 31, 2023		March 31, 2022
Development projects:
Seniors Housing Operating	$	26,712	$	73,458

Outpatient Medical	9,351		—
Total development projects	36,063		73,458
Expansion projects	17,245		—
Total construction in progress conversions	$	53,308	$	73,458

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Real Estate Intangibles

The following is a summary of our real estate intangibles, excluding those related to ground leases or classified as held for sale, as of the dates indicated (dollars in thousands):


	March 31, 2023		December 31, 2022
Assets:
In place lease intangibles	$	1,846,945	$	1,817,580
Above market tenant leases	66,354		57,203
Lease commissions	77,531		70,675
Gross historical cost	1,990,830		1,945,458
Accumulated amortization	(1,543,457)		(1,484,048)
Net book value	$	447,373	$	461,410

Liabilities:
Below market tenant leases	$	82,084	$	77,985
Accumulated amortization	(54,872)		(52,701)
Net book value	$	27,212	$	25,284

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


	Three Months Ended March 31,
		2023		2022
Rental income related to (above)/below market tenant leases, net		$	45	$	385
Amortization related to in place lease intangibles and lease commissions		(56,151)		(47,994)

5. Dispositions, Real Property Held for Sale and Impairment

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (i.e., property type, relationship or geography). At March 31, 2023, five Seniors Housing Operating properties, seven Triple-net properties and one Outpatient Medical property with an aggregate real estate balance of $215,583,000 were classified as held for sale. In addition to the real property balances, lease liabilities of $66,530,000 and net other assets and (liabilities) of $6,095,000 are included in the Consolidated Balance Sheets related to the held for sale properties. Expected gross sales proceeds related to the held for sale properties are approximately $292,623,000.

During the three months ended March 31, 2023, we recorded $12,629,000 of impairment charges related to three Seniors Housing Operating properties classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell and one Seniors Housing Operating property classified as held for use for which the carrying value exceeded the estimated fair value. We did not record any impairment charges during the three months ended March 31, 2022.

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


	Three Months Ended
	March 31, 2023		March 31, 2022
Real estate dispositions:
Seniors Housing Operating	$	18,572	$	—
Triple-net	2,028		52,661

Total dispositions	20,600		52,661
Gain (loss) on real estate dispositions, net	747		22,934
Net other assets/(liabilities) disposed	311		(2,027)
Proceeds from real estate dispositions	$	21,658	$	73,568

Operating results attributable to properties sold or classified as held for sale which do not meet the definition of discontinued operations are not reclassified on our Consolidated Statements of Comprehensive Income. We recognized income (loss) from continuing operations before income taxes and other items from properties sold or classified as held for sale as of March 31, 2023 of $(11,733,000) and $1,337,000 for the three month periods ended March 31, 2023 and 2022, respectively.

WELLTOWER INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities.

The components of lease expense were as follows for the periods presented (in thousands):


		Three Months Ended
	Classification	March 31, 2023		March 31, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,520	$	5,816
Non-real estate investment lease expense	General and administrative expenses	1,863		978
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,284		1,156
Interest on lease liabilities	Interest expense	1,427		1,618
Sublease income	Rental income	(2,950)		(2,715)
Total		$	8,144	$	6,853

(1) Includes short-term leases which are immaterial.

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):


	Classification	March 31, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,275	$	287,984
Finance leases - real estate	Right of use assets, net	35,621		35,958
Real estate right of use assets, net		322,896		323,942
Operating leases - non-real estate investments	Receivables and other assets	9,281		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	115,359		116,453
Total right of use assets, net		$	447,536	$	450,514

Lease liabilities:
Operating leases		$	301,915	$	302,360