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Leases | 9 Months Ended
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Sep. 30, 2023
Leases [Abstract] |
Leases | Leases Lease Income The following table summarizes the Company’s lease income (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fixed income from operating leases | $ | 317,106 |  |  | $ | 298,680 |  |  | $ | 923,285 |  |  | $ | 882,700 |
Variable income from operating leases | 99,969 |  |  | 93,621 |  |  | 296,188 |  |  | 266,830 |
Interest income from direct financing leases | — |  |  | — |  |  | — |  |  | 1,168 |
Direct Financing Leases 2022 Direct Financing Lease Sale During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at September 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL. Straight-Line Rents For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue. Tenant Updates During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations for the nine months ended September 30, 2023. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of September 30, 2023. In October 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million. This cash payment is inclusive of termination and related fees and the prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.
Leases | Leases Lease Income The following table summarizes the Company’s lease income (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fixed income from operating leases | $ | 317,106 |  |  | $ | 298,680 |  |  | $ | 923,285 |  |  | $ | 882,700 |
Variable income from operating leases | 99,969 |  |  | 93,621 |  |  | 296,188 |  |  | 266,830 |
Interest income from direct financing leases | — |  |  | — |  |  | — |  |  | 1,168 |
Direct Financing Leases 2022 Direct Financing Lease Sale During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at September 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL. Straight-Line Rents For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue. Tenant Updates During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations for the nine months ended September 30, 2023. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of September 30, 2023. In October 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million. This cash payment is inclusive of termination and related fees and the prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.
Lessee | Leases Lease Income The following table summarizes the Company’s lease income (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Fixed income from operating leases | $ | 317,106 |  |  | $ | 298,680 |  |  | $ | 923,285 |  |  | $ | 882,700 |
Variable income from operating leases | 99,969 |  |  | 93,621 |  |  | 296,188 |  |  | 266,830 |
Interest income from direct financing leases | — |  |  | — |  |  | — |  |  | 1,168 |
Direct Financing Leases 2022 Direct Financing Lease Sale During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at September 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL. Straight-Line Rents For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue. Tenant Updates During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations for the nine months ended September 30, 2023. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of September 30, 2023. In October 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million. This cash payment is inclusive of termination and related fees and the prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.

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