Item 2. Properties

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Item 2. Properties

We are organized to invest in income-producing healthcare-related facilities. In evaluating potential investments, we consider a multitude of factors, including:


•	location, construction quality, age, condition and design of the property;


•	geographic area, proximity to other healthcare facilities, type of property and demographic profile, including new competitive supply;


•	whether the expected risk-adjusted return exceeds the incremental cost of capital;


•	whether the rent or operating income provides a competitive market return to our investors;


•	duration, rental rates, tenant and operator quality and other attributes of in-place leases, including master lease structures and coverage;


•	current and anticipated cash flow and its adequacy to meet our operational needs;


•	availability of security such as letters of credit, security deposits and guarantees;


•	potential for capital appreciation;


•	expertise and reputation of the tenant or operator;


•	occupancy and demand for similar healthcare facilities in the same or nearby communities;


•	the mix of revenues generated at healthcare facilities between privately paid and government reimbursed;


•	availability of qualified operators or property managers and whether we can manage the property;


•	potential alternative uses of the facilities;


•	the regulatory and reimbursement environment in which the properties operate;


•	tax laws related to REITs;


•	prospects for liquidity through financing or refinancing; and


•	our access to and cost of capital.

Property and Direct Financing Lease Investments

The following table summarizes our consolidated property and direct financing leases ("DFL") investments as of and for the year ended December 31, 2017 (square feet and dollars in thousands):



Facility Location	Number of Facilities	Capacity	Gross Asset Value(1)		Rental Revenues(2)		Operating Expenses
Senior housing triple-net—real estate:		(Units)
California	17	1,727	$	416,949	$	53,589	$	(3,139	)
Virginia	10	1,227	273,045		20,409		—
Florida	13	1,683	258,538		25,691		—
Texas	16	1,762	218,137		5,058		—
Washington	14	953	190,674		16,361		—
Oregon	13	1,118	162,628		17,082		(243		)
New Jersey	7	680	144,574		100		3
Other (25 States)	64	6,063	1,082,775		138,144		(392		)
	154	15,213	2,747,320		276,434		(3,771		)
Senior housing—DFLs(3):
Other (12 States)	27	3,118	629,748		37,113		(48		)
Total Senior Housing Triple-Net	181	18,331	$	3,377,068	$	313,547	$	(3,819	)
SHOP:		(Units)
Texas	21	3,640	$	518,021	$	135,763	$	(98,929	)
Florida	23	3,234	436,429		135,751		(108,063		)
Colorado	6	952	203,717		46,755		(27,042		)
Illinois	5	1,063	203,644		42,126		(32,189		)
Maryland	6	590	176,702		33,292		(24,341		)
Other (16 States)	41	4,265	680,298		131,786		(105,927		)
Total SHOP	102	13,744	$	2,218,811	$	525,473	$	(396,491	)



Facility Location	Number of Facilities	Capacity	Gross Asset Value(1)		Rental Revenues(2)		Operating Expenses
Life science:		(Sq. Ft.)
California	121	6,818	$	3,618,619	$	338,668	$	(74,066	)
Other (3 States)	10	909	359,157		20,148		(3,935		)
Total life science	131	7,727	$	3,977,776	$	358,816	$	(78,001	)
Medical office:		(Sq. Ft.)
Texas	67	5,867	$	1,078,259	$	135,349	$	(55,733	)
California	18	1,031	324,021		35,418		(18,532		)
Pennsylvania	4	1,059	309,085		31,326		(12,523		)
Florida	23	1,329	235,550		31,227		(12,317		)
Other (29 States)	142	9,169	1,783,694		244,139		(84,092		)
Total medical office	254	18,455	$	3,730,609	$	477,459	$	(183,197	)
Other(4):		(Beds)
Texas	4	1,035	$	231,645	$	35,650	$	(4,489	)
California	2	111	143,500		19,350		(172		)
Other (7 States)	8	988	154,558		28,813		(82		)
	14	2,134	$	529,703	$	83,813	$	(4,743	)
Other—U.K.:		(Units)
Other (U.K.)	61	3,183	337,179		31,798		—
Other—Post-acute/skilled nursing.:		(Beds)
Virginia	1	120	16,596		1,235		—
Total other non-reportable segments	76		$	883,478	$	116,846	$	(4,743	)
Total properties	744		$	14,187,742	$	1,792,141	$	(666,251	)


(1)	Represents gross real estate and the carrying value of DFLs. Gross real estate represents the carrying amount of real estate after adding back accumulated depreciation and amortization. Includes real estate held for sale with an aggregate gross asset value of $485 million.


(2)	Represent the combined amount of rental and related revenues, tenant recoveries, resident fees and services and income from DFLs.


(3)	Represents leased properties that are classified as DFLs.


(4)	Includes leased properties that are classified as DFLs.

Occupancy and Annual Rent Trends

The following table summarizes occupancy and average annual rent trends for our consolidated property and DFL investments for the years ended December 31, (average occupied square feet in thousands). Average annual rent is presented as a ratio of revenues comprised of rental and related revenues, tenant recoveries and income from DFLs divided by the average capacity or average occupied square feet of the facilities and annualized for mergers and acquisitions for the year in which they occurred. Average annual rent for leased properties (including DFLs) excludes termination fees and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles and DFL non-cash interest).



	2017			2016			2015			2014			2013
Senior Housing Triple-Net:
Average annual rent per unit	$	15,352		$	14,604		$	14,544		$	13,907		$	13,361
Average capacity (available units)	21,536			28,455			28,777			33,917			35,932
SHOP:
Average annual rent per unit	$	41,133		$	42,851		$	41,435		$	38,017		$	32,070
Average capacity (available units)	12,758			16,028			12,704			6,408			4,620
Life science:
Average occupancy percentage	96		%	98		%	97		%	93		%	92		%
Average annual rent per square foot	$	52		$	48		$	46		$	46		$	44
Average occupied square feet	6,841			7,332			7,179			6,637			6,480
Medical office:
Average occupancy percentage	92		%	91		%	91		%	91		%	91		%
Average annual rent per square foot	$	28		$	28		$	28		$	28		$	27
Average occupied square feet	16,674			15,697			14,677			13,136			12,767
Other non-reportable segments:
Average annual rent per bed - Hospital	$	38,017		$	39,076		$	39,834		$	38,756		$	38,089
Average capacity (available beds) - Hospital	2,161			2,271			2,187			2,184			2,138
Average annual rent per unit - U.K.	9,097			9,200			10,048			11,240			—
Average capacity (available units) - U.K.	3,188			3,190			2,515			501			—
Average annual rent per bed - SNF	10,298			10,803			8,292			8,062			7,537
Average capacity (available beds) - SNF	120			426			1,047			1,022			974

Tenant Lease Expirations

The following table shows tenant lease expirations, including those related to DFLs, for the next 10 years and thereafter at our consolidated properties, assuming that none of the tenants exercise any of their renewal or purchase options, unless otherwise noted below (dollars and square feet in thousands), and excludes properties in our SHOP segment and assets held for sale. See “Tenant Purchase Options” section of Note 11 to the Consolidated Financial Statements for additional information on leases subject to purchase options.



	Expiration Year
Segment	Total		2018(1)		2019		2020		2021		2022		2023		2024		2025		2026		2027		Thereafter
Senior housing triple-net:
Properties	179		5		2		22		6		1		24		11		5		7		4		92
Base rent(2)	$	304,452	$	6,191	$	2,238	$	39,646	$	10,191	$	1,513	$	44,926	$	18,052	$	9,618	$	5,746	$	12,090	$	154,241
% of segment base rent	100		2		1		13		3		—		15		6		3		2		4		51
Life science:
Square feet	6,900		457		832		556		948		631		1,035		83		845		203		373		937
Base rent(2)	$	291,683	$	15,081	$	31,693	$	19,598	$	50,307	$	22,656	$	60,929	$	4,618	$	34,653	$	8,991	$	15,328	$	27,829
% of segment base rent	100		5		11		7		17		8		21		2		12		3		5		9
Medical office:
Square feet	16,945		2,939		2,172		2,280		1,548		1,670		719		809		1,926		758		722		1,402
Base rent(2)	$	389,497	$	70,049	$	53,422	$	58,461	$	39,115	$	41,392	$	17,213	$	21,240	$	31,625	$	18,541	$	14,387	$	24,052
% of segment base rent	100		18		14		15		10		11		4		5		8		5		4		6
Other non-reportable segments:
Properties	76		—		5		1		1		4		—		2		1		—		—		62
Base rent(2)	$	105,051	$	—	$	7,594	$	7,977	$	1,572	$	13,179	$	—	$	15,375	$	20,619	$	—	$	—	$	38,735
% of segment base rent	100		—		7		8		1		13		—		15		20		—		—		36
Total:
Base rent(2)	$	1,090,683	$	91,321	$	94,947	$	125,682	$	101,185	$	78,740	$	123,068	$	59,285	$	96,515	$	33,278	$	41,805	$	244,857
% of total base rent	100		8		9		12		9		7		11		5		9		3		4		23


(1)	Includes month-to-month leases.


(2)	The most recent month’s (or subsequent month’s if acquired in the most recent month) base rent including additional rent floors and cash income from DFLs annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest and deferred revenues).

(2)

The most recent month’s (or subsequent month’s if acquired in the most recent month) base rent including additional rent floors and cash income from DFLs annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest and deferred revenues).

See Schedule III: Real Estate and Accumulated Depreciation, included in this report, which information is incorporated by reference in this Item 2.

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