filings.toolsItem 2. Properties
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Item 2. Properties
Our strategy is to invest in and manage real estate focused on healthcare discovery and delivery. In evaluating potential investments, we consider a multitude of factors, including:
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location, construction quality, age, condition, and design of the property;
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geographic area, proximity to other healthcare facilities, type of property, and demographic profile, including new competitive supply;
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whether the expected risk-adjusted return exceeds the incremental cost of capital;
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whether the rent or operating income provides a competitive market return to our investors;
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duration, rental rates, tenant and operator quality, and other attributes of in-place leases, including master lease structures and coverage;
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current and anticipated cash flow and its adequacy to meet our operational needs;
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availability of security such as letters of credit, security deposits, and guarantees;
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potential for capital appreciation;
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expertise and reputation of the tenant or operator;
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occupancy and demand for similar healthcare facilities in the same or nearby communities;
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availability of qualified operators or property managers and whether we can manage the property;
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potential for environmentally sustainable and/or resilient features of the property;
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potential alternative uses of the facilities;
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the regulatory and reimbursement environment in which the properties operate;
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tax laws related to REITs;
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prospects for liquidity through financing or refinancing; and
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our access to and cost of capital.
Properties
The following table summarizes our consolidated property investments as of and for the year ended December 31, 2023 (square feet and dollars in thousands):
| Facility Location | Number of Facilities | Capacity**(1)** | Gross Asset Value**(2)** | Real Estate Revenues**(3)** | Operating Expenses**(4)** | |||||||||||||||||||||||||||
| Lab: | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| California | 115 | 8,094 | $ | 5,869,665 | $ | 629,657 | $ | (157,795) | ||||||||||||||||||||||||
| Massachusetts | 19 | 2,613 | 2,795,913 | 240,029 | (70,259) | |||||||||||||||||||||||||||
| Other (1 State) | 4 | 240 | 54,236 | 8,640 | (1,576) | |||||||||||||||||||||||||||
| Total lab | 138 | 10,947 | $ | 8,719,814 | $ | 878,326 | $ | (229,630) | ||||||||||||||||||||||||
| Outpatient medical: | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| Texas | 75 | 7,638 | $ | 1,549,757 | $ | 220,805 | $ | (75,159) | ||||||||||||||||||||||||
| Pennsylvania | 4 | 1,270 | 367,434 | 34,321 | (15,603) | |||||||||||||||||||||||||||
| Colorado | 19 | 1,311 | 362,822 | 47,697 | (18,366) | |||||||||||||||||||||||||||
| California | 15 | 862 | 355,026 | 40,057 | (17,206) | |||||||||||||||||||||||||||
| South Carolina | 18 | 1,105 | 340,073 | 27,851 | (5,315) | |||||||||||||||||||||||||||
| Florida | 25 | 1,438 | 309,246 | 41,609 | (14,994) | |||||||||||||||||||||||||||
| Other (29 States) | 139 | 9,977 | 2,586,334 | 341,139 | (116,489) | |||||||||||||||||||||||||||
| Total outpatient medical | 295 | 23,601 | $ | 5,870,692 | $ | 753,479 | $ | (263,132) | ||||||||||||||||||||||||
| CCRC: | (Units) | |||||||||||||||||||||||||||||||
| Florida | 9 | 4,783 | $ | 1,398,609 | $ | 343,971 | $ | (275,781) | ||||||||||||||||||||||||
| Other (5 States) | 6 | 2,314 | 631,199 | 183,630 | (137,691) | |||||||||||||||||||||||||||
| Total CCRC | 15 | 7,097 | $ | 2,029,808 | $ | 527,601 | $ | (413,472) | ||||||||||||||||||||||||
| Total properties | 448 | $ | 16,620,314 | $ | 2,159,406 | $ | (906,234) |
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(1)Excludes capacity associated with developments.
(2)Represents gross real estate which includes the carrying amount of real estate after adding back accumulated depreciation and amortization. Excludes gross real estate of $123 million related to two lab buildings and one outpatient medical building classified as held for sale.
(3)Represents the combined amount of rental and related revenues, resident fees and services, and government grant income.
(4)Excludes operating expenses related to corporate non-segment assets (see Note 15 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 investments held under a direct financing lease (“DFL”) for the years ended December 31 (average occupied square feet in thousands):
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| Lab: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 98 | % | 98 | % | 97 | % | |||||||||||||||||||||||
| Average annual rent per square foot(1) | $ | 82 | $ | 71 | $ | 66 | |||||||||||||||||||||||
| Average occupied square feet | 10,334 | 10,610 | 10,143 | ||||||||||||||||||||||||||
| Outpatient medical*(2)**:* | |||||||||||||||||||||||||||||
| Average occupancy percentage | 90 | % | 90 | % | 90 | % | |||||||||||||||||||||||
| Average annual rent per square foot(1) | $ | 35 | $ | 33 | $ | 31 | |||||||||||||||||||||||
| Average occupied square feet | 21,337 | 21,472 | 21,046 | ||||||||||||||||||||||||||
| CCRC: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 84 | % | 82 | % | 79 | % | |||||||||||||||||||||||
| Average annual rent per occupied unit(3) | $ | 88,524 | $ | 84,664 | $ | 80,391 | |||||||||||||||||||||||
| Average occupied units | 5,960 | 5,926 | 5,881 | ||||||||||||||||||||||||||
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(1)Presented as a ratio of revenues comprised of rental and related revenues and income from DFLs divided by average occupied square feet and annualized for acquisitions for the year in which they occurred. Average annual rent excludes termination fees and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and DFL non-cash interest).
(2)During the first quarter of 2022, we sold our remaining hospital under a DFL.
(3)Presented as a ratio of revenues comprised of resident fees and services and government grant income divided by average occupied units of the facilities. Average annual rent excludes termination fees and non-cash revenue adjustments (i.e., the impact of deferred community fee income).
Tenant Lease Expirations
The following table shows tenant lease expirations 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, and excludes properties in our CCRC segment and assets held for sale as of December 31, 2023 (dollars and square feet in thousands):
| Expiration Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Total | 2024**(1)** | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | Thereafter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lab: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 10,303 | 537 | 1,065 | 618 | 1,407 | 681 | 806 | 1,334 | 1,393 | 866 | 531 | 1,065 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 608,770 | $ | 36,709 | $ | 50,557 | $ | 30,694 | $ | 66,918 | $ | 36,728 | $ | 50,104 | $ | 94,051 | $ | 84,727 | $ | 55,504 | $ | 36,642 | $ | 66,136 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 6 | 8 | 5 | 11 | 6 | 8 | 16 | 14 | 9 | 6 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outpatient medical: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 21,414 | 2,848 | 2,830 | 2,049 | 1,870 | 2,539 | 1,419 | 1,310 | 1,637 | 1,357 | 918 | 2,637 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 546,589 | $ | 85,359 | $ | 68,994 | $ | 57,376 | $ | 51,438 | $ | 56,996 | $ | 38,197 | $ | 36,069 | $ | 40,803 | $ | 28,096 | $ | 27,376 | $ | 55,885 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 16 | 13 | 11 | 9 | 10 | 7 | 7 | 7 | 5 | 5 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Base rent(2) | $ | 1,155,359 | $ | 122,068 | $ | 119,551 | $ | 88,070 | $ | 118,356 | $ | 93,724 | $ | 88,301 | $ | 130,120 | $ | 125,530 | $ | 83,600 | $ | 64,018 | $ | 122,021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of total base rent | 100 | 11 | 10 | 8 | 10 | 8 | 8 | 11 | 11 | 7 | 5 | 11 |
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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, 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, and deferred revenues).
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