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, 2019 (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)
Florida	11	1,418	$	209,109	$	24,594	$	—
Texas	13	1,323	181,729		19,610		—
California	11	1,023	161,785		21,481		(3,183		)
Oregon	10	954	73,488		12,542		(121		)
Washington	8	562	98,167		11,336		(95		)
Other (17 States)	37	3,343	244,049		87,918		(1,123		)
	90	8,623	968,327		177,481		(4,522		)
Senior housing—DFLs(3):
Other (12 States)	—	—	—		21,960		(43		)
Total senior housing triple-net	90	8,623	$	968,327	$	199,441	$	(4,565	)
SHOP:		(Units)
California	17	1,781	$	701,938	$	90,339	$	(67,559	)
Florida	22	2,696	554,188		117,753		(100,904		)
Virginia	10	1,319	290,313		34,901		(26,324		)
New Jersey	8	825	216,576		50,672		(37,249		)
Maryland	9	853	155,345		53,097		(42,842		)
Texas	8	1,132	159,755		130,773		(92,266		)
Other (19 States)	41	4,570	648,990		247,636		(198,569		)
Total SHOP	115	13,176	$	2,727,105	$	725,171	$	(565,713	)



Facility Location	Number of Facilities	Capacity	Gross Asset Value(1)		Real Estate Revenues(2)		Operating Expenses
Life science:		(Sq. Ft.)
California	118	6,836	$	4,439,853	$	382,986	$	(90,496	)
Other (3 States)	16	1,439	1,086,917		57,798		(16,976		)
Total life science	134	8,275	$	5,526,770	$	440,784	$	(107,472	)
Medical office:		(Sq. Ft.)
Texas	66	7,123	$	1,278,337	$	182,228	$	(65,412	)
California	18	1,011	357,815		41,295		(12,881		)
South Carolina	17	1,046	336,193		24,269		(4,648		)
Pennsylvania	4	1,058	336,121		28,159		(13,325		)
Colorado	17	1,231	269,429		40,780		(16,138		)
Other (28 States)	145	9,243	1,802,855		254,799		(89,134		)
Total medical office	267	20,712	$	4,380,750	$	571,530	$	(201,538	)
Other—Hospital(4):		(Beds)
California	1	84	$	88,800	$	13,845	$	(1	)
Texas	3	212	55,719		6,790		(73		)
Other (6 States)	7	946	142,110		29,006		(8		)
	11	1,242	$	286,629	$	49,641	$	(82	)
Other—SNF(5):		(Beds)
Virginia	—	—	—		972		—
Total other non-reportable segments	11	1,242	$	286,629	$	50,613	$	(82	)
Total properties	617		$	13,889,581	$	1,987,539	$	(879,370	)

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(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 $719 million.


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


(3)	Represents income from DFLs that were transitioned or sold in 2019.


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


(5)	Represents revenues generated from a real estate asset that was sold in October 2019.

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):



	2019			2018			2017			2016			2015
Senior housing triple-net:
Average annual rent per unit(1)	$	17,373		$	16,449		$	15,352		$	14,604		$	14,544
Average capacity (available units)	11,565			16,914			21,536			28,455			28,777
SHOP:
Average occupancy percentage	83		%	85		%	87		%	88		%	87		%
Average annual rent per unit(1)	$	49,784		$	48,433		$	41,133		$	42,851		$	41,435
Average capacity (available units)	14,633			11,248			12,758			16,028			12,704
Life science:
Average occupancy percentage	97		%	95		%	96		%	98		%	97		%
Average annual rent per square foot(1)	$	57		$	54		$	52		$	48		$	46
Average occupied square feet	7,288			7,078			6,841			7,332			7,179
Medical office:
Average occupancy percentage	92		%	93		%	92		%	92		%	92		%
Average annual rent per square foot(1)	$	29		$	29		$	28		$	28		$	28
Average occupied square feet	19,069			18,655			17,950			16,973			15,844
Other non-reportable segments:
Average annual rent per bed - Hospital(1)	$	39,113		$	39,246		$	38,017		$	39,076		$	39,834
Average capacity (available beds) - Hospital	1,304			1,300			1,337			1,478			1,487
Average annual rent per unit - U.K.(1)(2)	—			—			9,097			9,200			10,048
Average capacity (available units) - U.K.(2)	—			—			3,188			3,190			2,515
Average annual rent per bed - SNF(1)	—			10,504			10,298			10,803			8,292
Average capacity (available beds) - SNF	—			120			120			426			1,047

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(1)	Average annual rent is presented as a ratio of real estate revenues (comprised of rental and related revenues, resident fees and services, 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 real estate revenues (comprised of rental and related revenues, resident fees and services, 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 previous investments in the U.K. were deconsolidated in June 2018. We then sold our remaining unconsolidated investments in the U.K. in December 2019 (see Note 4 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, 2019 (dollars and square feet in thousands):



	Expiration Year
Segment	Total		2020(1)		2021		2022		2023		2024		2025		2026		2027		2028		2029		Thereafter
Senior housing triple-net:
Properties	63		5		3		—		8		1		1		6		1		11		7		20
Base rent(2)	$	102,946	$	7,684	$	1,861	$	—	$	20,047	$	1,533	$	1,932	$	4,397	$	5,377	$	16,941	$	6,994	$	36,180
% of segment base rent	100		7		2		—		19		1		2		4		5		16		7		37
Life science:
Square feet	7,940		520		530		761		768		476		1,190		524		781		460		1,110		820
Base rent(2)	$	372,783	$	22,230	$	29,177	$	31,751	$	44,557	$	28,217	$	49,707	$	24,574	$	38,770	$	21,498	$	58,171	$	24,131
% of segment base rent	100		6		8		9		12		8		13		7		10		6		16		5
Medical office:
Square feet	18,967		3,040		2,079		2,132		1,615		1,543		3,510		935		629		1,544		524		1,416
Base rent(2)	$	451,725	$	81,276	$	54,448	$	54,672	$	42,534	$	43,023	$	62,066	$	24,317	$	15,444	$	32,097	$	12,746	$	29,102
% of segment base rent	100		18		12		12		9		10		14		5		3		7		3		7
Other non-reportable segments:
Properties	11		1		—		3		—		6		—		—		—		—		—		1
Base rent(2)	$	49,394	$	8,301	$	—	$	12,374	$	—	$	23,260	$	—	$	—	$	—	$	—	$	—	$	5,459
% of segment base rent	100		17		—		25		—		47		—		—		—		—		—		11
Total:
Base rent(2)	$	976,848	$	119,491	$	85,486	$	98,797	$	107,138	$	96,033	$	113,705	$	53,288	$	59,591	$	70,536	$	77,911	$	94,872
% of total base rent	100		12		9		10		11		10		12		5		6		7		8		10

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(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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