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;


•	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 lease ("DFL") investments as of and for the year ended December 31, 2018 (square feet and dollars in thousands):



Facility Location	Number of Facilities	Capacity	Gross Asset Value(1)		Real Estate Revenues(2)		Operating Expenses
Senior housing triple-net—real estate:		(Units)
California	16	1,572	$	389,349	$	36,979	$	(3,219	)
Virginia	9	1,157	257,298		25,041		—
Florida	11	1,418	228,047		25,453		(8		)
Texas	13	1,323	189,144		21,535		—
Pennsylvania	2	623	144,645		13,832		—
Washington	10	670	137,713		14,552		(1		)
Oregon	10	955	137,180		13,821		(123		)
Other (18 States)	48	4,157	772,101		86,953		(197		)
	119	11,875	2,255,477		238,166		(3,548		)
Senior housing—DFLs(3):
Other (12 States)	27	3,126	629,214		37,925		(70		)
Total senior housing triple-net	146	15,001	$	2,884,691	$	276,091	$	(3,618	)
SHOP:		(Units)
Texas	19	3,171	$	479,786	$	136,560	$	(94,433	)
Florida	17	2,090	338,843		109,289		(86,380		)
Colorado	5	687	206,592		35,414		(20,849		)
Maryland	7	644	185,982		34,768		(26,261		)
Illinois	4	771	143,924		38,960		(28,447		)
Other (18 States)	41	4,345	707,302		192,985		(157,942		)
Total SHOP	93	11,708	$	2,062,429	$	547,976	$	(414,312	)



Facility Location	Number of Facilities	Capacity	Gross Asset Value(1)		Real Estate Revenues(2)		Operating Expenses
Life science:		(Sq. Ft.)
California	113	5,805	$	3,765,565	$	357,868	$	(79,714	)
Other (3 States)	11	910	417,629		37,196		(12,028		)
Total life science	124	6,715	$	4,183,194	$	395,064	$	(91,742	)
Medical office:		(Sq. Ft.)
Texas	67	5,910	$	1,103,777	$	143,567	$	(59,163	)
Pennsylvania	4	1,054	329,054		28,875		(12,364		)
South Carolina	20	1,028	314,304		10,758		(1,601		)
California	17	955	302,725		35,862		(16,234		)
Other (29 States)	159	10,301	2,042,081		289,957		(100,497		)
Total medical office	267	19,248	$	4,091,941	$	509,019	$	(189,859	)
Other—Hospital(4):		(Beds)
Texas	4	1,077	$	232,715	$	39,196	$	(5,240	)
California	2	111	143,500		19,406		(127		)
Other (7 States)	8	988	150,965		28,778		(140		)
	14	2,176	$	527,180	$	87,380	$	(5,507	)
Other—U.K.:		(Units)
Other (U.K.)(5)	—	—	—		19,492		—
Other—SNF:		(Beds)
Virginia	1	120	16,780		1,261		—
Total other non-reportable segments	15		$	543,960	$	108,133	$	(5,507	)
Total properties	645		$	13,766,215	$	1,836,283	$	(705,038	)


(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. Excludes real estate held for sale with an aggregate gross asset value of $131 million.


(2)	Represent the combined amount of rental and related revenues, 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.


(5)	Represents real estate revenues generated from real estate assets that were deconsolidated in June 2018 (see Note 5 to the Consolidated Financial Statements).

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):



	2018			2017			2016			2015			2014
Senior housing triple-net:
Average annual rent per unit(1)	$	16,449		$	15,352		$	14,604		$	14,544		$	13,907
Average capacity (available units)	16,914			21,536			28,455			28,777			33,917
SHOP:
Average annual rent per unit(1)	$	48,433		$	41,133		$	42,851		$	41,435		$	38,017
Average capacity (available units)	11,248			12,758			16,028			12,704			6,408
Life science:
Average occupancy percentage	95		%	96		%	98		%	97		%	93		%
Average annual rent per square foot(1)	$	54		$	52		$	48		$	46		$	46
Average occupied square feet	7,078			6,841			7,332			7,179			6,637
Medical office:
Average occupancy percentage	92		%	92		%	91		%	91		%	91		%
Average annual rent per square foot(1)	$	29		$	28		$	28		$	28		$	28
Average occupied square feet	17,280			16,674			15,697			14,677			13,136
Other non-reportable segments:
Average annual rent per bed - Hospital(1)	$	39,246		$	38,017		$	39,076		$	39,834		$	38,756
Average capacity (available beds) - Hospital	2,147			2,161			2,271			2,187			2,184
Average annual rent per unit - U.K.(1)(2)	—			9,097			9,200			10,048			11,240
Average capacity (available units) - U.K.(2)	—			3,188			3,190			2,515			501
Average annual rent per bed - SNF(1)	10,504			10,298			10,803			8,292			8,062
Average capacity (available beds) - SNF	120			120			426			1,047			1,022


(1)	Average annual rent is presented as a ratio of revenues comprised of rental and related revenues and income from DFLs divided by the average capacity or average occupied square feet of the facilities. 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, DFL non-cash interest and the impact of deferred community fee income).

(1)

Average annual rent is presented as a ratio of revenues comprised of rental and related revenues and income from DFLs divided by the average capacity or average occupied square feet of the facilities. 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, DFL non-cash interest and the impact of deferred community fee income).


(2)	Our investments in the U.K. were deconsolidated in June 2018 (see Note 5 to the Consolidated Financial Statements).

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, and excludes properties in our SHOP segment and assets held for sale as of and for the year ended December 31, 2018 (dollars and square feet in thousands):



	Expiration Year
Segment	Total		2019(1)		2020		2021		2022		2023		2024		2025		2026		2027		2028		Thereafter
Senior housing triple-net:
Properties	146		2		22		6		1		24		9		5		6		4		15		52
Base rent(2)	$	263,173	$	2,305	$	40,753	$	7,969	$	1,548	$	46,215	$	13,445	$	9,354	$	4,316	$	12,359	$	36,949	$	87,960
% of segment base rent	100		1		15		3		1		18		5		4		2		5		14		32
Life science:
Square feet	6,488		604		546		850		632		639		111		1,035		379		489		338		865
Base rent(2)	$	285,294	$	24,653	$	19,890	$	50,365	$	21,345	$	36,210	$	6,213	$	46,238	$	17,955	$	22,898	$	15,079	$	24,448
% of segment base rent	100		9		7		18		7		13		2		16		6		8		5		9
Medical office:
Square feet	17,731		2,806		2,444		1,923		1,796		1,530		888		2,084		795		735		1,325		1,405
Base rent(2)	$	415,123	$	69,775	$	63,355	$	48,606	$	45,566	$	39,366	$	24,008	$	36,526	$	20,040	$	15,229	$	28,161	$	24,491
% of segment base rent	100		17		15		12		11		9		6		9		5		4		7		5
Other non-reportable segments:
Properties	15		—		1		1		5		—		6		1		—		—		—		1
Base rent(2)	$	75,370	$	—	$	8,145	$	1,619	$	14,099	$	—	$	22,972	$	20,051	$	—	$	—	$	—	$	8,484
% of segment base rent	100		—		11		2		19		—		30		27		—		—		—		11
Total:
Base rent(2)	$	1,038,960	$	96,733	$	132,143	$	108,559	$	82,558	$	121,791	$	66,638	$	112,169	$	42,311	$	50,486	$	80,189	$	145,383
% of total base rent	100		9		13		10		8		12		6		11		4		5		8		14


(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 the “Tenant Purchase Options” section of Note 6 to the Consolidated Financial Statements for additional information on leases subject to purchase options. 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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