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Leases | 9 Months Ended
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Sep. 30, 2020
Leases [Abstract] |
Leases | Leases Lease Income The following table summarizes the Company’s lease income (dollars in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Fixed income from operating leases | $ | 262,558 |  |  | $ | 255,447 |  |  | $ | 770,327 |  |  | $ | 730,277 |
Variable income from operating leases | 63,972 |  |  | 57,153 |  |  | 183,254 |  |  | 177,742 |
Interest income from direct financing leases | 2,150 |  |  | 9,590 |  |  | 7,569 |  |  | 33,304 |
Direct Financing Leases Net investment in DFLs consists of the following (dollars in thousands):
| September 30, 2020 |  | December 31, 2019
Present value of minimum lease payments receivable | $ | 11,955 |  |  | $ | 19,138 |
Present value of estimated residual value | 44,706 |  |  | 84,604 |
Less deferred selling profits | (11,955) |  |  | (19,138) |
Net investment in direct financing leases | $ | 44,706 |  |  | $ | 84,604 |
Properties subject to direct financing leases | 1 |  |  | 2 |
Direct Financing Lease Internal Ratings The following table summarizes the Company’s internal ratings for DFLs at September 30, 2020 (dollars in thousands):
|  | Carrying Amount |  | Percentage of DFL Portfolio |  | Internal Ratings
Segment |  |  |  | Performing DFLs |  | Watch List DFLs |  | Workout DFLs
Other non-reportable segments |  | $ | 44,706 |  |  | 100 |  | $ | 44,706 |  |  | $ | — |  |  | $ | — |
|  | $ | 44,706 |  |  | 100 |  | $ | 44,706 |  |  | $ | — |  |  | $ | — |
2020 Direct Financing Lease Sale During the first quarter of 2020, the Company sold a hospital under a DFL for $82 million and recognized a gain on sale of $42 million, which is included in other income (expense), net. 2019 Direct Financing Lease Conversion During the first quarter of 2019, the Company converted a DFL portfolio of 14 senior housing triple-net properties, previously on “Watch List” status, to a RIDEA structure, requiring the Company to recognize net assets equal to the lower of the net assets’ fair value or the carrying value of the net investment in the DFL. As a result, the Company derecognized the $351 million carrying value of the net investment in DFL related to the 14 properties and recognized a combination of net real estate ($331 million) and net intangibles assets ($20 million) for the same aggregate amount, with no gain or loss recognized. As a result of the transaction, the 14 properties were transferred from the senior housing triple-net segment to the SHOP segment during the first quarter of 2019. 2019 Direct Financing Lease Sale During the second quarter of 2019, the Company entered into agreements to sell 13 senior housing facilities under DFLs (the “DFL Sale Portfolio”) for $274 million. Upon entering into the agreements, the Company recognized an allowance for DFL losses and related impairment charge of $10 million to write-down the carrying value of the DFL Sale Portfolio to its fair value. The fair value of the DFL Sale Portfolio was based upon the agreed upon sale price, less estimated costs to sell, which was considered to be a Level 2 measurement within the fair value hierarchy. In conjunction with the entering into agreements to sell the DFL Sale Portfolio, the Company placed the portfolio on nonaccrual status and began recognizing income equal to the amount of cash received. The Company completed the sale of the DFL Sale Portfolio in September 2019. For the DFL Sale Portfolio, during the three and nine months ended September 30, 2019, income from DFLs was $5 million and $17 million, respectively, and cash payments received were $5 million and $16 million, respectively. Lease Costs The following table provides supplemental cash flow information regarding the Company’s leases for which it is the lessee, such as ground leases (dollars in thousands):
|  | Nine Months Ended September 30,
Supplemental Cash Flow Information: |  | 2020 |  | 2019
Right-of-use asset obtained in exchange for new lease liability: |  |  |  |
Operating leases |  | $ | 24,984 |  |  | $ | 4,084 |
COVID-19 Rent Deferrals During the second and third quarters of 2020, the Company agreed to defer rent from certain tenants in the medical office segment, with the requirement that all deferred rent be repaid by the end of 2020. Under this program, through September 30, 2020, approximately $6 million of rent was deferred for the medical office segment, of which $3 million remained outstanding as of September 30, 2020. Additionally, through September 30, 2020, the Company granted approximately $1 million of rent deferrals to certain tenants in the life science segment, an immaterial amount of which remained outstanding as of September 30, 2020. The rent deferrals granted are probable of collection and do not impact the pattern of revenue recognition or amount of revenue recognized (refer to Note 2 for additional information).
Leases | Leases Lease Income The following table summarizes the Company’s lease income (dollars in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Fixed income from operating leases | $ | 262,558 |  |  | $ | 255,447 |  |  | $ | 770,327 |  |  | $ | 730,277 |
Variable income from operating leases | 63,972 |  |  | 57,153 |  |  | 183,254 |  |  | 177,742 |
Interest income from direct financing leases | 2,150 |  |  | 9,590 |  |  | 7,569 |  |  | 33,304 |
Direct Financing Leases Net investment in DFLs consists of the following (dollars in thousands):
| September 30, 2020 |  | December 31, 2019
Present value of minimum lease payments receivable | $ | 11,955 |  |  | $ | 19,138 |
Present value of estimated residual value | 44,706 |  |  | 84,604 |
Less deferred selling profits | (11,955) |  |  | (19,138) |
Net investment in direct financing leases | $ | 44,706 |  |  | $ | 84,604 |
Properties subject to direct financing leases | 1 |  |  | 2 |
Direct Financing Lease Internal Ratings The following table summarizes the Company’s internal ratings for DFLs at September 30, 2020 (dollars in thousands):
|  | Carrying Amount |  | Percentage of DFL Portfolio |  | Internal Ratings
Segment |  |  |  | Performing DFLs |  | Watch List DFLs |  | Workout DFLs
Other non-reportable segments |  | $ | 44,706 |  |  | 100 |  | $ | 44,706 |  |  | $ | — |  |  | $ | — |
|  | $ | 44,706 |  |  | 100 |  | $ | 44,706 |  |  | $ | — |  |  | $ | — |
2020 Direct Financing Lease Sale During the first quarter of 2020, the Company sold a hospital under a DFL for $82 million and recognized a gain on sale of $42 million, which is included in other income (expense), net. 2019 Direct Financing Lease Conversion During the first quarter of 2019, the Company converted a DFL portfolio of 14 senior housing triple-net properties, previously on “Watch List” status, to a RIDEA structure, requiring the Company to recognize net assets equal to the lower of the net assets’ fair value or the carrying value of the net investment in the DFL. As a result, the Company derecognized the $351 million carrying value of the net investment in DFL related to the 14 properties and recognized a combination of net real estate ($331 million) and net intangibles assets ($20 million) for the same aggregate amount, with no gain or loss recognized. As a result of the transaction, the 14 properties were transferred from the senior housing triple-net segment to the SHOP segment during the first quarter of 2019. 2019 Direct Financing Lease Sale During the second quarter of 2019, the Company entered into agreements to sell 13 senior housing facilities under DFLs (the “DFL Sale Portfolio”) for $274 million. Upon entering into the agreements, the Company recognized an allowance for DFL losses and related impairment charge of $10 million to write-down the carrying value of the DFL Sale Portfolio to its fair value. The fair value of the DFL Sale Portfolio was based upon the agreed upon sale price, less estimated costs to sell, which was considered to be a Level 2 measurement within the fair value hierarchy. In conjunction with the entering into agreements to sell the DFL Sale Portfolio, the Company placed the portfolio on nonaccrual status and began recognizing income equal to the amount of cash received. The Company completed the sale of the DFL Sale Portfolio in September 2019. For the DFL Sale Portfolio, during the three and nine months ended September 30, 2019, income from DFLs was $5 million and $17 million, respectively, and cash payments received were $5 million and $16 million, respectively. Lease Costs The following table provides supplemental cash flow information regarding the Company’s leases for which it is the lessee, such as ground leases (dollars in thousands):
|  | Nine Months Ended September 30,
Supplemental Cash Flow Information: |  | 2020 |  | 2019
Right-of-use asset obtained in exchange for new lease liability: |  |  |  |
Operating leases |  | $ | 24,984 |  |  | $ | 4,084 |
COVID-19 Rent Deferrals During the second and third quarters of 2020, the Company agreed to defer rent from certain tenants in the medical office segment, with the requirement that all deferred rent be repaid by the end of 2020. Under this program, through September 30, 2020, approximately $6 million of rent was deferred for the medical office segment, of which $3 million remained outstanding as of September 30, 2020. Additionally, through September 30, 2020, the Company granted approximately $1 million of rent deferrals to certain tenants in the life science segment, an immaterial amount of which remained outstanding as of September 30, 2020. The rent deferrals granted are probable of collection and do not impact the pattern of revenue recognition or amount of revenue recognized (refer to Note 2 for additional information).

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