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Segment Disclosures
 3 Months Ended
Mar. 31, 2015
Segment Disclosures  
Segment Disclosures

NOTE 14.  Segment Disclosures

The Company evaluates its business and makes resource allocations based on its five business segments: (i) senior housing, (ii) post-acute/skilled nursing, (iii) life science, (iv) medical office and (v) hospital. Under the medical office segment, the Company invests through the acquisition and development of MOBs, which generally require a greater level of property management. Otherwise, the Company primarily invests, through the acquisition and development of real estate, in single tenant and operator properties and debt issued by tenants and operators in these sectors. The accounting policies of the segments are the same as those described in Note 2 to the Consolidated Financial Statements herein and in the Company’s 2014 Annual Report on Form 10-K filed with the SEC. There were no intersegment sales or transfers during the three months ended March 31, 2015 and 2014. The Company evaluates performance based upon property net operating income from continuing operations (“NOI”), adjusted NOI (cash NOI) and interest income of the combined investments in each segment.

 

Non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities, deferred financing costs and, if any, real estate held for sale. Interest expense, depreciation and amortization, and non-property specific revenues and expenses are not allocated to individual segments in determining the Company’s segment-level performance. See Note 18 for other information regarding concentrations of credit risk.

 

Summary information for the reportable segments follows (in thousands):

 

For the three months ended March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

Resident Fees

 

Interest

 

Management

 

Total

 

 

 

Adjusted

 

Segments

  

Revenues(1)

  

and Services

  

Income

  

Fee Income

  

Revenues

  

NOI(2)

  

(Cash) NOI(2)

 

Senior housing

 

$
127,382 

 

$
105,013 

 

$
7,394 

 

$

 —

 

$
239,789 

 

$
156,885 

 

$
150,472 

 

Post-acute/skilled

 

 
140,576 

 

 

 —

 

 
25,868 

 

 

 —

 

 
166,444 

 

 
140,043 

 

 
121,960 

 

Life science

 

 
83,551 

 

 

 —

 

 

 —

 

 
1 

 

 
83,552 

 

 
66,852 

 

 
63,777 

 

Medical office

 

 
98,305 

 

 

 —

 

 

 —

 

 
459 

 

 
98,764 

 

 
60,053 

 

 
58,187 

 

Hospital

 

 
22,242 

 

 

 —

 

 

 —

 

 

 —

 

 
22,242 

 

 
21,205 

 

 
21,457 

 

Total

 

$
472,056 

 

$
105,013 

 

$
33,262 

 

$
460 

 

$
610,791 

 

$
445,038 

 

$
415,853 

 

 

For the three months ended March 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

Resident Fees

 

Interest

 

Management

 

Total

 

 

 

Adjusted

 

Segments

  

Revenues(1)

  

and Services

  

Income

  

Fee Income

  

Revenues

  

NOI(2)

  

(Cash) NOI(2)

 

Senior housing

 

$
150,085 

 

$
38,053 

 

$
3,284 

 

$

 —

 

$
191,422 

 

$
163,590 

 

$
150,375 

 

Post-acute/skilled

 

 
137,780 

 

 

 —

 

 
13,412 

 

 

 —

 

 
151,192 

 

 
137,248 

 

 
118,099 

 

Life science

 

 
76,122 

 

 

 —

 

 

 —

 

 
1 

 

 
76,123 

 

 
61,961 

 

 
58,829 

 

Medical office

 

 
89,262 

 

 

 —

 

 

 —

 

 
448 

 

 
89,710 

 

 
53,746 

 

 
53,029 

 

Hospital

 

 
21,545 

 

 

 —

 

 

 —

 

 

 —

 

 
21,545 

 

 
20,595 

 

 
20,661 

 

Total

 

$
474,794 

 

$
38,053 

 

$
16,696 

 

$
449 

 

$
529,992 

 

$
437,140 

 

$
400,993 

 

 

(1)

Represents rental and related revenues, tenant recoveries and income from DFLs.

(2)

NOI and Adjusted NOI are non-GAAP supplemental financial measures used to evaluate the operating performance of real estate. The Company defines NOI as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expense; NOI excludes all other financial statement amounts included in net (loss) income as presented below. The Company believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL accretion, amortization of market lease intangibles and lease termination fees. Adjusted NOI is oftentimes referred to as “cash NOI.” The Company uses NOI and adjusted NOI to make decisions about resource allocations and to assess and compare property level performance. The Company believes that net (loss) income is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net (loss) income as defined by GAAP because it does not reflect various excluded items. Further, the Company’s definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as those companies may use different methodologies for calculating NOI.

 

The following is a reconciliation of reported net (loss) income to NOI and adjusted NOI (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

  

2015

  

2014

 

Net (loss) income

 

$
(237,503)

 

$
263,623 

 

Interest income

 

 
(33,262)

 

 
(16,696)

 

Investment management fee income

 

 
(460)

 

 
(449)

 

Interest expense

 

 
116,780 

 

 
106,638 

 

Depreciation and amortization

 

 
114,522 

 

 
107,388 

 

General and administrative

 

 
24,773 

 

 
20,899 

 

Acquisition and pursuit costs

 

 
3,390 

 

 
495 

 

Impairments

 

 
478,464 

 

 

 —

 

Gains on sales of real estate, net of income taxes

 

 
(6,264)

 

 

 —

 

Other income, net

 

 
(1,724)

 

 
(1,930)

 

Income taxes (benefit) provision

 

 
(77)

 

 
1,446 

 

Equity income from unconsolidated joint ventures

 

 
(13,601)

 

 
(14,528)

 

Total discontinued operations

 

 

 —

 

 
(29,746)

 

NOI

 

 
445,038 

 

 
437,140 

 

Straight-line rents

 

 
(9,546)

 

 
(13,968)

 

DFL accretion

 

 
(20,304)

 

 
(21,422)

 

Amortization of above and below market lease intangibles, net

 

 
(378)

 

 
(168)

 

Lease termination fees

 

 
1,043 

 

 
(578)

 

NOI adjustments related to discontinued operations

 

 

 —

 

 
(11)

 

Adjusted (Cash) NOI

 

$
415,853 

 

$
400,993 

 

 

The Company’s total assets by segment were (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

Segments

    

2015

    

2014

 

Senior housing 

 

$
8,445,616 

 

$
8,383,345 

 

Post-acute/skilled nursing 

 

 
6,488,822 

 

 
6,875,122 

 

Life science 

 

 
4,171,320 

 

 
4,154,789 

 

Medical office 

 

 
2,997,583 

 

 
2,988,888 

 

Hospital 

 

 
639,807 

 

 
640,253 

 

Gross segment assets 

 

 
22,743,148 

 

 
23,042,397 

 

Accumulated depreciation and amortization 

 

 
(2,680,584)

 

 
(2,600,072)

 

Net segment assets 

 

 
20,062,564 

 

 
20,442,325 

 

Other non-segment assets 

 

 
961,878 

 

 
927,615 

 

Total assets 

 

$
21,024,442 

 

$
21,369,940 

 

 

At both March 31, 2015 and December 31, 2014, goodwill of $50 million was allocated to segment assets as follows: (i) senior housing—$31 million, (ii) post-acute/skilled nursing—$3 million, (iii) medical office—$11 million, and (iv) hospital—$5 million.