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Net Investment in Direct Financing Leases | 12 Months Ended
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Dec. 31, 2016
Net Investment in Direct Financing Leases |
Net Investment in Direct Financing Leases | NOTE 6. Net Investment in Direct Financing Leases The components of net investment in DFLs consisted of the following (dollars in thousands):
|  | December 31, |
|  | 2016 |  | 2015 |
Minimum lease payments receivable |  | $ | 1,108,237 |  | $ | 1,155,215 |
Estimated residual values |  |  | 539,656 |  |  | 535,161 |
Less unearned income |  |  | (895,304) |  |  | (939,683) |
Net investment in direct financing leases |  | $ | 752,589 |  | $ | 750,693 |
Properties subject to direct financing leases |  |  | 30 |  |  | 30 |
Certain DFLs contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms. The following table summarizes future minimum lease payments contractually due under DFLs at December 31, 2016 (in thousands):
Year |  | Amount |
2017 |  | $ | 91,770 |
2018 |  |  | 66,121 |
2019 |  |  | 67,526 |
2020 |  |  | 62,234 |
2021 |  |  | 62,641 |
Thereafter |  |  | 757,945 |
|  | $ | 1,108,237 |
Direct Financing Lease Internal Ratings The following table summarizes the Company’s internal ratings for net investment in DFLs at December 31, 2016 (dollars in thousands):
|  | Carrying |  | Percentage of |  | Internal Ratings |
Segment |  | Amount |  | DFL Portfolio |  | Performing DFLs |  | Watch List DFLs |  | Workout DFLs |
SH NNN |  | $ | 628,698 |  | 84 |  | $ | 267,897 |  | $ | 360,801 |  | $ | — |
Other |  |  | 123,891 |  | 16 |  |  | 123,891 |  |  | — |  |  | — |
|  | $ | 752,589 |  | 100 |  | $ | 391,788 |  | $ | 360,801 |  | $ | — |
Beginning September 30, 2013, the Company placed a 14 property senior housing DFL (the “DFL Portfolio”) on nonaccrual status and classified the DFL Portfolio on “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Portfolio has been recognized on a cash basis. The Company re-assessed the DFL Portfolio for impairment on December 31, 2016 and determined that the DFL Portfolio was not impaired 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 carrying amount. The fair value of the DFL Portfolio was estimated based on a discounted cash flow model, the inputs to which 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 years ended December 31, 2016, 2015 and 2014, the Company recognized DFL income of $13 million, $15 million and $19 million, respectively, and received cash payments of $18 million, $20 million and $24 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $361 million and $366 million at December 31, 2016 and 2015, respectively.

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- 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
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