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Leases
 12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
 Year Ended December 31,
 202020192018
Fixed income from operating leases$943,638 $853,545 $829,774 
Variable income from operating leases238,470 215,957 190,574 
Interest income from direct financing leases9,720 16,666 16,349 
Direct Financing Leases
Net investment in DFLs consists of the following (dollars in thousands):
December 31,
 20202019
Present value of minimum lease payments receivable$9,804 $19,138 
Present value of estimated residual value44,706 84,604 
Less deferred selling profits(9,804)(19,138)
Net investment in direct financing leases$44,706 $84,604 
Properties subject to direct financing leases1 2 
Direct Financing Lease Internal Ratings
The following table summarizes the Company’s internal ratings for DFLs at December 31, 2020 (dollars in thousands):
 Internal Ratings
SegmentCarrying
Amount		Percentage of
DFL Portfolio		Performing DFLsWatch List DFLsWorkout DFLs
Medical office$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 (recognized in income (loss) from discontinued operations) 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 years ended December 31, 2019 and 2018, income from DFLs was $17 million and $24 million (recognized in income (loss) from discontinued operations), respectively, and cash payments received were $16 million and $20 million, respectively.
Direct Financing Lease Receivable Maturities
The following table summarizes future minimum lease payments contractually due under DFLs at December 31, 2020 (in thousands):
YearAmount
2021$8,601 
20221,203 
2023— 
2024— 
2025— 
Thereafter— 
     Undiscounted minimum lease payments receivable9,804 
Less: imputed interest— 
     Present value of minimum lease payments receivable$9,804 
Residual Value Risk
Quarterly, the Company reviews the estimated unguaranteed residual value of assets under DFLs to determine if there have been any material changes compared to the prior quarter. As needed, the Company and/or the related tenants will invest necessary funds to maintain the residual value of each asset.
Operating Leases
Future Minimum Rents
The following table summarizes future minimum lease payments to be received, excluding future minimum lease payments from assets classified as discontinued operations, from tenants under non-cancelable operating leases as of December 31, 2020 (in thousands):
Year
Amount(1)
2021$969,519 
2022929,437 
2023869,628 
2024774,641 
2025669,289 
Thereafter2,431,032 
$6,643,546 
_______________________________________
(1)Excludes future minimum lease payments from assets classified as discontinued operations.
Tenant Purchase Options
Certain leases, including DFLs, contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable, excluding leases related to assets classified as discontinued operations, are as follows (dollars in thousands):
Year
Annualized
Base Rent(1)(2)
Number of
Properties
2021$29,394 12 
202211,187 3 
2023— — 
20243,190 1 
20259,065 13 
Thereafter5,815 2 
 $58,651 31 
_______________________________________
(1)Represents the most recent month’s base rent including additional rent floors and cash income from DFLs 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, DFL non-cash interest and deferred revenues).
(2)Excludes tenant purchase options related to assets classified as discontinued operations.
During the fourth quarter of 2019, one of the Company's tenants exercised its option to acquire from the Company an acute care hospital and adjacent land parcel located in Irvine, California for $226 million. The sale is scheduled to close during the first half of 2021. The annualized base rent associated with the assets covered by this purchase option is included in the table above for 2021.
Lease Costs
The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to assets classified as discontinued operations (dollars in thousands):
Year Ended December 31,
Lease Expense Information:202020192018
Total lease expense(1)
$13,601 $11,852 $10,569 
_______________________________________
(1)Lease expense related to corporate assets is included in general and administrative expenses and lease expense related to ground leases is included within operating expenses in the Company’s consolidated statements of operations.
Year Ended December 31,
Supplemental Cash Flow Information:202020192018
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows for operating leases$9,940 $8,158 $7,326 
Right-of-use asset obtained in exchange for new lease liability:
Operating leases$32,208 $5,733 $— 
Weighted Average Lease Term and Discount Rate:December 31,
2020		December 31,
2019
Weighted average remaining lease term (years):
Operating leases 5751
Weighted average discount rate:
Operating leases4.26 %4.36 %
The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability, excluding future minimum lease payments related to assets classified as held for sale or discontinued operations, as of December 31, 2020 (in thousands):
Year    
Amount(1)
2021$11,106 
202211,262 
202311,445 
202410,246 
20258,886 
Thereafter469,453 
Undiscounted minimum lease payments included in the lease liability522,398 
Less: imputed interest(342,503)
Present value of lease liability$179,895 
_______________________________________
(1)Excludes future minimum lease payments under non-cancelable ground and other operating leases from assets classified as discontinued operations.
Depreciation Expense
While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases and DFLs, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s consolidated balance sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s consolidated statements of operations. Included within other assets, net as of December 31, 2020 and December 31, 2019 is $6 million and $4 million, respectively, of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2020, 2019, and 2018 is $2 million, $2 million and $4 million, respectively, of depreciation expense related to corporate assets.
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 December 31, 2020, approximately $6 million of rent was deferred for the medical office segment, substantially all of which had been collected as of December 31, 2020.
Additionally, through December 31, 2020, the Company granted approximately $1 million of rent deferrals to certain tenants in the life science segment, all of which had been collected as of December 31, 2020.
The rent deferrals granted 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, excluding discontinued operations (in thousands):
 Year Ended December 31,
 202020192018
Fixed income from operating leases$943,638 $853,545 $829,774 
Variable income from operating leases238,470 215,957 190,574 
Interest income from direct financing leases9,720 16,666 16,349 
Direct Financing Leases
Net investment in DFLs consists of the following (dollars in thousands):
December 31,
 20202019
Present value of minimum lease payments receivable$9,804 $19,138 
Present value of estimated residual value44,706 84,604 
Less deferred selling profits(9,804)(19,138)
Net investment in direct financing leases$44,706 $84,604 
Properties subject to direct financing leases1 2 
Direct Financing Lease Internal Ratings
The following table summarizes the Company’s internal ratings for DFLs at December 31, 2020 (dollars in thousands):
 Internal Ratings
SegmentCarrying
Amount		Percentage of
DFL Portfolio		Performing DFLsWatch List DFLsWorkout DFLs
Medical office$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 (recognized in income (loss) from discontinued operations) 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 years ended December 31, 2019 and 2018, income from DFLs was $17 million and $24 million (recognized in income (loss) from discontinued operations), respectively, and cash payments received were $16 million and $20 million, respectively.
Direct Financing Lease Receivable Maturities
The following table summarizes future minimum lease payments contractually due under DFLs at December 31, 2020 (in thousands):
YearAmount
2021$8,601 
20221,203 
2023— 
2024— 
2025— 
Thereafter— 
     Undiscounted minimum lease payments receivable9,804 
Less: imputed interest— 
     Present value of minimum lease payments receivable$9,804 
Residual Value Risk
Quarterly, the Company reviews the estimated unguaranteed residual value of assets under DFLs to determine if there have been any material changes compared to the prior quarter. As needed, the Company and/or the related tenants will invest necessary funds to maintain the residual value of each asset.
Operating Leases
Future Minimum Rents
The following table summarizes future minimum lease payments to be received, excluding future minimum lease payments from assets classified as discontinued operations, from tenants under non-cancelable operating leases as of December 31, 2020 (in thousands):
Year
Amount(1)
2021$969,519 
2022929,437 
2023869,628 
2024774,641 
2025669,289 
Thereafter2,431,032 
$6,643,546 
_______________________________________
(1)Excludes future minimum lease payments from assets classified as discontinued operations.
Tenant Purchase Options
Certain leases, including DFLs, contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable, excluding leases related to assets classified as discontinued operations, are as follows (dollars in thousands):
Year
Annualized
Base Rent(1)(2)
Number of
Properties
2021$29,394 12 
202211,187 3 
2023— — 
20243,190 1 
20259,065 13 
Thereafter5,815 2 
 $58,651 31 
_______________________________________
(1)Represents the most recent month’s base rent including additional rent floors and cash income from DFLs 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, DFL non-cash interest and deferred revenues).
(2)Excludes tenant purchase options related to assets classified as discontinued operations.
During the fourth quarter of 2019, one of the Company's tenants exercised its option to acquire from the Company an acute care hospital and adjacent land parcel located in Irvine, California for $226 million. The sale is scheduled to close during the first half of 2021. The annualized base rent associated with the assets covered by this purchase option is included in the table above for 2021.
Lease Costs
The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to assets classified as discontinued operations (dollars in thousands):
Year Ended December 31,
Lease Expense Information:202020192018
Total lease expense(1)
$13,601 $11,852 $10,569 
_______________________________________
(1)Lease expense related to corporate assets is included in general and administrative expenses and lease expense related to ground leases is included within operating expenses in the Company’s consolidated statements of operations.
Year Ended December 31,
Supplemental Cash Flow Information:202020192018
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows for operating leases$9,940 $8,158 $7,326 
Right-of-use asset obtained in exchange for new lease liability:
Operating leases$32,208 $5,733 $— 
Weighted Average Lease Term and Discount Rate:December 31,
2020		December 31,
2019
Weighted average remaining lease term (years):
Operating leases 5751
Weighted average discount rate:
Operating leases4.26 %4.36 %
The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability, excluding future minimum lease payments related to assets classified as held for sale or discontinued operations, as of December 31, 2020 (in thousands):
Year    
Amount(1)
2021$11,106 
202211,262 
202311,445 
202410,246 
20258,886 
Thereafter469,453 
Undiscounted minimum lease payments included in the lease liability522,398 
Less: imputed interest(342,503)
Present value of lease liability$179,895 
_______________________________________
(1)Excludes future minimum lease payments under non-cancelable ground and other operating leases from assets classified as discontinued operations.
Depreciation Expense
While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases and DFLs, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s consolidated balance sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s consolidated statements of operations. Included within other assets, net as of December 31, 2020 and December 31, 2019 is $6 million and $4 million, respectively, of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2020, 2019, and 2018 is $2 million, $2 million and $4 million, respectively, of depreciation expense related to corporate assets.
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 December 31, 2020, approximately $6 million of rent was deferred for the medical office segment, substantially all of which had been collected as of December 31, 2020.
Additionally, through December 31, 2020, the Company granted approximately $1 million of rent deferrals to certain tenants in the life science segment, all of which had been collected as of December 31, 2020.
The rent deferrals granted 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, excluding discontinued operations (in thousands):
 Year Ended December 31,
 202020192018
Fixed income from operating leases$943,638 $853,545 $829,774 
Variable income from operating leases238,470 215,957 190,574 
Interest income from direct financing leases9,720 16,666 16,349 
Direct Financing Leases
Net investment in DFLs consists of the following (dollars in thousands):
December 31,
 20202019
Present value of minimum lease payments receivable$9,804 $19,138 
Present value of estimated residual value44,706 84,604 
Less deferred selling profits(9,804)(19,138)
Net investment in direct financing leases$44,706 $84,604 
Properties subject to direct financing leases1 2 
Direct Financing Lease Internal Ratings
The following table summarizes the Company’s internal ratings for DFLs at December 31, 2020 (dollars in thousands):
 Internal Ratings
SegmentCarrying
Amount		Percentage of
DFL Portfolio		Performing DFLsWatch List DFLsWorkout DFLs
Medical office$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 (recognized in income (loss) from discontinued operations) 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 years ended December 31, 2019 and 2018, income from DFLs was $17 million and $24 million (recognized in income (loss) from discontinued operations), respectively, and cash payments received were $16 million and $20 million, respectively.
Direct Financing Lease Receivable Maturities
The following table summarizes future minimum lease payments contractually due under DFLs at December 31, 2020 (in thousands):
YearAmount
2021$8,601 
20221,203 
2023— 
2024— 
2025— 
Thereafter— 
     Undiscounted minimum lease payments receivable9,804 
Less: imputed interest— 
     Present value of minimum lease payments receivable$9,804 
Residual Value Risk
Quarterly, the Company reviews the estimated unguaranteed residual value of assets under DFLs to determine if there have been any material changes compared to the prior quarter. As needed, the Company and/or the related tenants will invest necessary funds to maintain the residual value of each asset.
Operating Leases
Future Minimum Rents
The following table summarizes future minimum lease payments to be received, excluding future minimum lease payments from assets classified as discontinued operations, from tenants under non-cancelable operating leases as of December 31, 2020 (in thousands):
Year
Amount(1)
2021$969,519 
2022929,437 
2023869,628 
2024774,641 
2025669,289 
Thereafter2,431,032 
$6,643,546 
_______________________________________
(1)Excludes future minimum lease payments from assets classified as discontinued operations.
Tenant Purchase Options
Certain leases, including DFLs, contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable, excluding leases related to assets classified as discontinued operations, are as follows (dollars in thousands):
Year
Annualized
Base Rent(1)(2)
Number of
Properties
2021$29,394 12 
202211,187 3 
2023— — 
20243,190 1 
20259,065 13 
Thereafter5,815 2 
 $58,651 31 
_______________________________________
(1)Represents the most recent month’s base rent including additional rent floors and cash income from DFLs 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, DFL non-cash interest and deferred revenues).
(2)Excludes tenant purchase options related to assets classified as discontinued operations.
During the fourth quarter of 2019, one of the Company's tenants exercised its option to acquire from the Company an acute care hospital and adjacent land parcel located in Irvine, California for $226 million. The sale is scheduled to close during the first half of 2021. The annualized base rent associated with the assets covered by this purchase option is included in the table above for 2021.
Lease Costs
The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to assets classified as discontinued operations (dollars in thousands):
Year Ended December 31,
Lease Expense Information:202020192018
Total lease expense(1)
$13,601 $11,852 $10,569 
_______________________________________
(1)Lease expense related to corporate assets is included in general and administrative expenses and lease expense related to ground leases is included within operating expenses in the Company’s consolidated statements of operations.
Year Ended December 31,
Supplemental Cash Flow Information:202020192018
Cash paid for amounts included in the measurement of lease liability:
Operating cash flows for operating leases$9,940 $8,158 $7,326 
Right-of-use asset obtained in exchange for new lease liability:
Operating leases$32,208 $5,733 $— 
Weighted Average Lease Term and Discount Rate:December 31,
2020		December 31,
2019
Weighted average remaining lease term (years):
Operating leases 5751
Weighted average discount rate:
Operating leases4.26 %4.36 %
The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability, excluding future minimum lease payments related to assets classified as held for sale or discontinued operations, as of December 31, 2020 (in thousands):
Year    
Amount(1)
2021$11,106 
202211,262 
202311,445 
202410,246 
20258,886 
Thereafter469,453 
Undiscounted minimum lease payments included in the lease liability522,398 
Less: imputed interest(342,503)
Present value of lease liability$179,895 
_______________________________________
(1)Excludes future minimum lease payments under non-cancelable ground and other operating leases from assets classified as discontinued operations.
Depreciation Expense
While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases and DFLs, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s consolidated balance sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s consolidated statements of operations. Included within other assets, net as of December 31, 2020 and December 31, 2019 is $6 million and $4 million, respectively, of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2020, 2019, and 2018 is $2 million, $2 million and $4 million, respectively, of depreciation expense related to corporate assets.
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 December 31, 2020, approximately $6 million of rent was deferred for the medical office segment, substantially all of which had been collected as of December 31, 2020.
Additionally, through December 31, 2020, the Company granted approximately $1 million of rent deferrals to certain tenants in the life science segment, all of which had been collected as of December 31, 2020.
The rent deferrals granted do not impact the pattern of revenue recognition or amount of revenue recognized (refer to Note 2 for additional information).