filings.toolsItem 2. Properties
22K characters. Original on sec.gov · Markdown
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, excluding investments classified as discontinued operations, as of and for the year ended December 31, 2020 (square feet and dollars in thousands):
| Facility Location | Number of Facilities | Capacity | Gross Asset Value**(1)** | Real Estate Revenues**(2)** | Operating Expenses | |||||||||||||||||||||||||||
| Life science: | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| California | 118 | 7,536 | $ | 4,840,637 | $ | 454,506 | $ | (106,100) | ||||||||||||||||||||||||
| Massachusetts | 14 | 1,960 | 1,986,911 | 95,104 | (26,901) | |||||||||||||||||||||||||||
| Other (2 States) | 7 | 476 | 136,120 | 19,686 | (5,004) | |||||||||||||||||||||||||||
| Total life science | 139 | 9,972 | $ | 6,963,668 | $ | 569,296 | $ | (138,005) | ||||||||||||||||||||||||
| Medical office*(3)**:* | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| Texas | 71 | 7,596 | $ | 1,353,419 | $ | 189,120 | $ | (64,811) | ||||||||||||||||||||||||
| California | 16 | 1,174 | 309,778 | 52,809 | (13,623) | |||||||||||||||||||||||||||
| Pennsylvania | 4 | 1,278 | 354,889 | 31,396 | (14,064) | |||||||||||||||||||||||||||
| South Carolina | 18 | 1,103 | 339,265 | 25,990 | (5,315) | |||||||||||||||||||||||||||
| Colorado | 18 | 1,315 | 288,488 | 41,179 | (15,377) | |||||||||||||||||||||||||||
| Florida | 25 | 1,398 | 275,240 | 35,231 | (12,419) | |||||||||||||||||||||||||||
| Other (27 States) | 126 | 8,769 | 1,850,004 | 246,673 | (78,399) | |||||||||||||||||||||||||||
| Total medical office | 278 | 22,633 | $ | 4,771,083 | $ | 622,398 | $ | (204,008) | ||||||||||||||||||||||||
| CCRC: | (Units) | |||||||||||||||||||||||||||||||
| Florida | 9 | 5,135 | $ | 1,261,321 | $ | 291,397 | $ | (301,849) | ||||||||||||||||||||||||
| Other (5 States) | 6 | 2,302 | 577,527 | 161,295 | (138,679) | |||||||||||||||||||||||||||
| Total CCRC | 15 | 7,437 | $ | 1,838,848 | $ | 452,692 | $ | (440,528) | ||||||||||||||||||||||||
| Other─non-reportable*(4)**:* | ||||||||||||||||||||||||||||||||
| Arizona | — | — | $ | — | $ | 134 | $ | — | ||||||||||||||||||||||||
| Total other non-reportable segments | — | — | $ | — | $ | 134 | $ | — | ||||||||||||||||||||||||
| Total properties in continuing operations | 432 | $ | 13,573,599 | $ | 1,644,520 | $ | (782,541) |
_______________________________________
(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 gross real estate related to medical office assets held for sale of $133 million.
(2)Represents the combined amount of rental and related revenues, resident fees and services, income from DFLs, and government grant income.
(3)Includes one leased property that is classified as a DFL.
(4)Represents real estate revenues generated from a real estate asset that was sold in July 2020.
The following table summarizes our consolidated property investments classified as discontinued operations as of and for the year ended December 31, 2020 (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 | 8 | 1,063 | $ | 172,890 | $ | 21,289 | $ | — | ||||||||||||||||||||||||
| Texas | 6 | 767 | 142,693 | 13,890 | — | |||||||||||||||||||||||||||
| New York | 2 | 201 | 76,333 | 2,513 | — | |||||||||||||||||||||||||||
| Oregon | 6 | 447 | 73,839 | 7,068 | (157) | |||||||||||||||||||||||||||
| Washington | 4 | 274 | 42,874 | 11,882 | (4) | |||||||||||||||||||||||||||
| Other (10 States) | 15 | 1,218 | 131,519 | 42,448 | (1,746) | |||||||||||||||||||||||||||
| Total senior housing triple-net | 41 | 3,970 | $ | 640,148 | $ | 99,090 | $ | (1,907) | ||||||||||||||||||||||||
| SHOP: | (Units) | |||||||||||||||||||||||||||||||
| California | 15 | 1,391 | $ | 658,523 | $ | 128,620 | $ | (100,201) | ||||||||||||||||||||||||
| Florida | 15 | 1,996 | 392,379 | 117,569 | (110,790) | |||||||||||||||||||||||||||
| Virginia | 9 | 865 | 206,958 | 41,985 | (35,889) | |||||||||||||||||||||||||||
| Texas | 15 | 1,685 | 199,018 | 53,126 | (41,036) | |||||||||||||||||||||||||||
| New Jersey | 5 | 562 | 182,408 | 58,896 | (49,551) | |||||||||||||||||||||||||||
| Maryland | 9 | 846 | 166,213 | 49,079 | (44,745) | |||||||||||||||||||||||||||
| Other (14 States) | 29 | 2,896 | 484,919 | 186,141 | (166,107) | |||||||||||||||||||||||||||
| Total SHOP | 97 | 10,241 | $ | 2,290,418 | $ | 635,416 | $ | (548,319) | ||||||||||||||||||||||||
| Total properties in discontinued operations | 138 | $ | 2,930,566 | $ | 734,506 | $ | (550,226) |
_______________________________________
(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.
(2)Represents the combined amount of rental and related revenues, resident fees and services, income from DFLs, and government grant income.
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):
| 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||
| Continuing operations: | |||||||||||||||||||||||||||||
| Life science: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 96 | % | 97 | % | 95 | % | 96 | % | 98 | % | |||||||||||||||||||
| Average annual rent per square foot(1) | $ | 63 | $ | 57 | $ | 54 | $ | 52 | $ | 48 | |||||||||||||||||||
| Average occupied square feet | 8,714 | 7,288 | 7,078 | 6,841 | 7,332 | ||||||||||||||||||||||||
| Medical office: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 91 | % | 93 | % | 93 | % | 92 | % | 93 | % | |||||||||||||||||||
| Average annual rent per square foot(1) | $ | 30 | $ | 30 | $ | 29 | $ | 29 | $ | 28 | |||||||||||||||||||
| Average occupied square feet | 20,225 | 20,512 | 20,102 | 19,431 | 18,729 | ||||||||||||||||||||||||
| CCRC: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 81 | % | 87 | % | — | % | — | % | — | % | |||||||||||||||||||
| Average annual rent per unit(1) | $ | 65,672 | $ | 62,856 | $ | — | $ | — | $ | — | |||||||||||||||||||
| Average capacity (available units) | 6,893 | 40 | — | — | — | ||||||||||||||||||||||||
| Other non-reportable segments: | |||||||||||||||||||||||||||||
| Average annual rent per unit (1) | $ | — | $ | 39,517 | $ | 44,091 | $ | 45,961 | $ | 40,757 | |||||||||||||||||||
| Average capacity (available units) | — | 4,178 | 4,304 | 4,308 | 4,316 | ||||||||||||||||||||||||
| Average annual rent per unit - U.K.(1) | — | — | — | 9,097 | 9,200 | ||||||||||||||||||||||||
| Average capacity (available units) - U.K. | — | — | — | 3,188 | 3,190 | ||||||||||||||||||||||||
| Average annual rent per bed - SNF(1) | — | — | 10,504 | 10,298 | 10,803 | ||||||||||||||||||||||||
| Average capacity (available beds) - SNF | — | — | 120 | 120 | 426 | ||||||||||||||||||||||||
| Discontinued operations: | |||||||||||||||||||||||||||||
| Senior housing triple-net: | |||||||||||||||||||||||||||||
| Average annual rent per unit(1) | $ | 17,042 | $ | 17,198 | $ | 16,187 | $ | 15,097 | $ | 14,467 | |||||||||||||||||||
| Average capacity (available units) | 5,910 | 10,551 | 15,859 | 20,481 | 27,089 | ||||||||||||||||||||||||
| SHOP: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 75 | % | 80 | % | 80 | % | 84 | % | 86 | % | |||||||||||||||||||
| Average annual rent per unit(1) | $ | 53,255 | $ | 50,196 | $ | 40,786 | $ | 40,070 | $ | 43,533 | |||||||||||||||||||
| Average capacity (available units) | 11,940 | 11,635 | 9,823 | 9,505 | 13,079 |
_______________________________________
(1)Average annual rent is presented as a ratio of the sum of rental and related revenues, resident fees and services, income from DFLs, and government grant income 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).
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 CCRC segment, assets held for sale, and discontinued operations as of and for the year ended December 31, 2020 (dollars and square feet in thousands):
| Expiration Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Total | 2021**(1)** | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life science*:* | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 9,600 | 468 | 762 | 780 | 436 | 1,321 | 612 | 1,081 | 502 | 1,287 | 1,260 | 1,091 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 475,353 | $ | 27,302 | $ | 33,405 | $ | 47,999 | $ | 27,360 | $ | 57,615 | $ | 26,818 | $ | 51,569 | $ | 24,513 | $ | 68,160 | $ | 76,576 | $ | 34,036 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 6 | 7 | 10 | 6 | 12 | 6 | 11 | 5 | 14 | 16 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Medical office: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 20,025 | 2,834 | 2,661 | 1,920 | 2,147 | 4,327 | 821 | 762 | 1,672 | 628 | 1,012 | 1,241 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 492,508 | $ | 77,019 | $ | 72,599 | $ | 51,712 | $ | 59,524 | $ | 86,889 | $ | 20,008 | $ | 19,388 | $ | 36,532 | $ | 15,378 | $ | 24,118 | $ | 29,341 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 16 | 15 | 10 | 12 | 18 | 4 | 4 | 7 | 3 | 5 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 967,861 | $ | 104,321 | $ | 106,004 | $ | 99,711 | $ | 86,884 | $ | 144,504 | $ | 46,826 | $ | 70,957 | $ | 61,045 | $ | 83,538 | $ | 100,694 | $ | 63,377 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of total base rent | 100 | 11 | 11 | 10 | 9 | 15 | 5 | 7 | 6 | 9 | 10 | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
_______________________________________
(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).
See the “Tenant Purchase Options” section of Note 7 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.
Previous: Item 1B. Unresolved Staff Comments · Next: Item 3. Legal Proceedings