WELLTOWER INC.WELL
WELLTOWER INC. Fair Value Disclosure
Disclosure about Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three level valuation hierarchy exists for disclosures of fair value measurements based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels are defined below:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Investments in Sales-Type Leases — The fair value of sales-type leases is generally estimated by using Level 2 and Level 3 inputs to discount the estimated future cash flows of the lease using rates implicit in the lease, and an estimate of the unguaranteed residual value.
Mortgage Loans, Other Real Estate Loans and Non-real Estate Loans Receivable — The fair value of mortgage loans, other real estate loans and non-real estate loans receivable is generally estimated by using Level 2 and Level 3 inputs such as discounting the estimated future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Cash and Cash Equivalents and Restricted Cash — The carrying amount approximates fair value.
Equity Warrants — The fair value of equity warrants is estimated using Level 3 inputs and includes data points such as enterprise value of the underlying HC-One Group real estate portfolio, marketability discount for private company warrants, dividend yield, volatility and risk-free rate. The enterprise value is driven by projected cash flows, weighted average cost of capital and a terminal capitalization rate.
Borrowings Under Primary Unsecured Credit Facility and Commercial Paper Program — The carrying amount of the primary unsecured credit facility and commercial paper program approximates fair value because the borrowings are interest rate adjustable.
Senior Unsecured Notes — The fair value of the senior unsecured notes payable is estimated based on Level 1 publicly available trading prices. The carrying amount of the variable-rate senior unsecured notes approximates fair value because they are interest rate adjustable.
Secured Debt — The fair value of fixed-rate secured debt is estimated using Level 2 inputs by discounting the estimated future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities. The carrying amount of variable-rate secured debt approximates fair value because the borrowings are interest rate adjustable.
Foreign Currency Forward Contracts, Interest Rate Swaps and Cross Currency Swaps — Foreign currency forward contracts, interest rate swaps and cross currency swaps are recorded in other assets or other liabilities on the balance sheet at fair value that is derived from Level 2 observable market data, including yield curves and foreign exchange rates.
Redeemable DownREIT Unitholder Interests — Our redeemable DownREIT Unitholder interests are recorded on the balance sheet at fair value using Level 2 inputs unless the fair value is below the initial amount, in which case the redeemable DownREIT Unitholder interests are recorded at the initial amount adjusted for distributions to the unitholders and income or loss attributable to the unitholders. The fair value is measured using the closing price of our common stock, as units may be redeemed at the election of the holder for cash or, at our option, one share of our common stock per unit, subject to adjustment in certain circumstances.
The carrying amounts and estimated fair values of our financial instruments are as follows (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||||||||||||
| Amount | Value | Amount | Value | |||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||
| Investments in sales-type leases, net | $ | 497,963 | $ | 497,963 | $ | 172,260 | $ | 172,260 | ||||||||||||||||||
| Mortgage loans receivable | 998,699 | 1,008,879 | 1,520,503 | 1,587,896 | ||||||||||||||||||||||
| Other real estate loans receivable | 832,511 | 803,247 | 284,541 | 286,096 | ||||||||||||||||||||||
| Cash and cash equivalents | 5,033,678 | 5,033,678 | 3,506,586 | 3,506,586 | ||||||||||||||||||||||
| Restricted cash | 175,861 | 175,861 | 204,871 | 204,871 | ||||||||||||||||||||||
| Non-real estate loans receivable | 251,055 | 245,415 | 222,542 | 219,813 | ||||||||||||||||||||||
| Foreign currency forward contracts, interest rate swaps and cross currency swaps | 43,223 | 43,223 | 99,968 | 99,968 | ||||||||||||||||||||||
| Equity warrants | — | — | 62,320 | 62,320 | ||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||
| Senior unsecured notes | $ | 16,383,522 | $ | 17,872,001 | $ | 13,162,102 | $ | 13,276,784 | ||||||||||||||||||
| Secured debt | 2,813,780 | 2,768,807 | 2,338,155 | 2,271,886 | ||||||||||||||||||||||
| Foreign currency forward contracts, interest rate swaps and cross currency swaps | 416,210 | 416,210 | 13,001 | 13,001 | ||||||||||||||||||||||
| Redeemable DownREIT Unitholder interests | $ | 72,497 | $ | 72,497 | $ | 49,226 | $ | 49,226 | ||||||||||||||||||
Items Measured at Fair Value on a Recurring Basis
The market approach is utilized to measure fair value for our financial assets and liabilities reported at fair value on a recurring basis. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following summarizes items measured at fair value on a recurring basis (in thousands):
Fair Value Measurements as of December 31, 2025 | ||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
Foreign currency forward contracts, interest rate swaps and cross currency swaps, net asset (liability) (1) | $ | (372,987) | $ | — | $ | (372,987) | $ | — | ||||||||||||||||||
(1) Please see Note 12 for additional information.
The following table summarizes the change in fair value of equity warrants using unobservable Level 3 inputs for the years presented (in thousands):
| Years Ended | ||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Beginning balance | $ | 62,320 | $ | 35,772 | ||||||||||
| Mark-to-market adjustment | (22,407) | 27,898 | ||||||||||||
| Foreign currency | 4,602 | (1,350) | ||||||||||||
Warrant settlement (1) | (44,515) | — | ||||||||||||
| Ending balance | $ | — | $ | — | $ | 62,320 | ||||||||
(1) Refer to Note 3 for information related to consideration for the HC-One acquisition, which included the settlement of the outstanding warrants.
The most significant assumptions utilized in the valuation of the equity warrants are the cash flows of the underlying HC-One Group enterprise, as well as the terminal capitalization rate which was 10.0% as of December 31, 2024.
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities in our balance sheet that are measured at fair value on a nonrecurring basis that are not included in the tables above. Assets, liabilities and noncontrolling interests that are measured at fair value on a nonrecurring basis include those acquired, consolidated, exchanged or assumed (see Note 3 for related business combination acquisitions). Asset impairments (if applicable, see Note 5 for impairments of real property, Note 7 for impairments of loans receivable and Note 8 for impairments of investments in unconsolidated entities) are also measured at fair value on a nonrecurring basis. We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on company-specific inputs and our assumptions about the use of the assets and settlement of liabilities, as observable inputs are not available, and are generally Level 3 inputs. We estimate the fair value of real estate and related intangible assets acquired in asset acquisitions and business combinations using the income approach and unobservable data, such as net operating income, estimated capitalization and discount rates which are Level 3 inputs. We also consider local and national industry market data including comparable sales, and commonly engage an external real estate appraiser to assist us in our estimation of fair value. We estimate the fair value of assets held for sale based on current sales price expectations or, in the absence of such price expectations, Level 3 inputs described above. We estimate the fair value of loans receivable using projected payoff valuations based on the expected future cash flows and/or the estimated fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the collateral. We estimate the fair value of secured debt assumed in asset acquisitions or business combinations using current interest rates at which similar borrowings could be obtained on the transaction date.
The following table summarizes the Level 3 inputs related to acquired real property from business combinations measured at fair value that occurred during the year ended December 31, 2025 (in thousands):
| Quantitative Information about Level 3 Fair Value Measurements for December 31, 2025 | ||||||||||||||||||||||||||||||||
| Asset Class | Fair Value | Valuation Technique | Unobservable Input(1) | Range | Weighted Average | |||||||||||||||||||||||||||
| Seniors Housing Operating | $ | 4,805,517 | Income approach | Stable EBITDARM capitalization rate | 9.09% to 20.00% | 11.36% | ||||||||||||||||||||||||||
| Triple-net | $ | 3,384,649 | Income approach | Rent capitalization rate | 5.18% to 7.27% | 7.21% | ||||||||||||||||||||||||||
(1) Stable EBITDARM represents projected earnings before interest, taxes, depreciation, amortization, rent and management fees.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 10, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 18, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.