XML 76 R14.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Net Investment in Direct Financing Leases | 9 Months Ended
--- | ---
Sep. 30, 2014
Net Investment in Direct Financing Leases |
Net Investment in Direct Financing Leases | (6)Net Investment in Direct Financing Leases The components of net investment in DFLs consisted of the following (dollars in thousands):
|  | September 30, |  | December 31, |
|  | 2014 |  | 2013 |
Minimum lease payments receivable |  | $ | 24,329,517 |  | $ | 24,808,386 |
Estimated residual values |  |  | 4,126,426 |  |  | 4,134,405 |
Less unearned income |  |  | (21,210,821) |  |  | (21,789,392) |
Net investment in direct financing leases |  | $ | 7,245,122 |  | $ | 7,153,399 |
Properties subject to direct financing leases |  |  | 363 |  |  | 364 |
The minimum lease payments receivable are primarily attributable to HCR ManorCare, Inc. (“HCR ManorCare”) ($23.1 billion and $23.5 billion at September 30, 2014 and December 31, 2013, respectively). The triple-net master lease with HCR ManorCare provides for annual rent of $524 million beginning April 1, 2014 (prior to April 1, 2014, annual rent was $506 million). The rent increases by 3.5% per year over the next two years and by a minimum of 3% for the remaining portion of the initial lease term. The properties are grouped into four pools, and HCR ManorCare has a one-time extension option for each pool with rent increased for the first year of the extension option to the greater of fair market rent or a 3% increase over the rent for the prior year. Including the extension options, which the Company determined to be bargain renewal options, the four leased pools had total initial available terms ranging from 23 to 35 years. During the nine months ended September 30, 2014, the Company received a $13 million payoff from the HCR ManorCare proceeds of the sale of a post-acute/skilled nursing facility that collateralized this DFL. The following table summarizes the Company’s internal ratings for net investment in DFLs at September 30, 2014 (in thousands):
|  | Carrying |  | Percentage of DFL |  | Internal Ratings |
Investment Type |  | Amount |  | Portfolio |  | Performing DFLs |  | Watch List DFLs |  | Workout DFLs |
Senior housing |  | $ | 1,492,862 |  | 20 |  | $ | 1,121,658 |  | $ | 371,204 |  | $ | — |
Post-acute/skilled nursing |  |  | 5,628,369 |  | 78 |  |  | 5,628,369 |  |  | — |  |  | — |
Hospital |  |  | 123,891 |  | 2 |  |  | 123,891 |  |  | — |  |  | — |
|  | $ | 7,245,122 |  | 100 |  | $ | 6,873,918 |  | $ | 371,204 |  | $ | — |
During the quarter ended September 30, 2013, the Company placed a 14-property senior housing DFL (the “DFL Portfolio”) on non-accrual status. Based on the Company’s determination that the timing of the collection of all rental payments was no longer reasonably assured, rental revenue for the DFL Portfolio is recognized on a cash basis. Furthermore, the Company determined that the DFL Portfolio was not impaired at September 30, 2013, based on its belief that: (i) it was not probable that it will not collect all of the rental payments under the terms of the lease; and (ii) the fair value of the underlying collateral exceeded the DFL Portfolio’s $376 million carrying amount. The fair value of the DFL Portfolio was estimated based on a discounted cash flow model, which inputs are considered to be a Level 3 measurement within the fair value hierarchy. Inputs to this valuation model include real estate capitalization rates, industry growth rates and operating margins, some of which influence the Company’s expectation of future cash flows from the DFL Portfolio and, accordingly, the fair value of its investment. During the three months ended September 30, 2014 and 2013, the Company recognized DFL income of $5 million in each period, and received cash payments of $6 million in each period from the DFL Portfolio. During the nine months ended September 30, 2014 and 2013, the Company recognized DFL income of $15 million and $19 million, respectively, and received cash payments of $18 million in each period from the DFL Portfolio. The carrying value of the DFL Portfolio was $371 million and $374 million at September 30, 2014 and December 31, 2013, respectively. At September 30, 2014, the Company continues to believe that the fair value of the underlying collateral is in excess of the carrying value of this DFL.

X
- Definition The entire disclosure for lessor's leasing arrangements, which includes direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25496975&loc=d3e45377-112738 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6452767&loc=d3e37045-112695 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -SubTopic 10 -Section 55 -Paragraph 47 -URI http://asc.fasb.org/extlink&oid=6584217&loc=d3e38847-112698 + Details
Name: | us-gaap_CapitalLeasesInFinancialStatementsOfLessorDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_LeasesCapitalAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration