XML 86 R17.htm IDEA: XBRL DOCUMENT
v3.19.3

Leases | 9 Months Ended
--- | ---
Sep. 30, 2019
Leases [Abstract] |
Leases | Leases As of September 30, 2019, the Company operated 335 communities under long-term leases (244 operating leases and 91 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of such leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs, property taxes, and insurance. As of September 30, 2019, the weighted-average remaining lease term of the Company’s operating and financing leases was 7.1 years and 8.5 years, respectively. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum net worth and stockholders’ equity levels and lease coverage ratios, and not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company’s lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements. The Company’s failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company’s debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company’s leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of September 30, 2019, the Company is in compliance with the financial covenants of its long-term leases. A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and cash flows from leasing transactions is as follows:
Operating Leases (in thousands) | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Facility operating expense | $ | 4,532 |  |  | $ | 13,761 |
Facility lease expense | 67,253 |  |  | 203,610 |
Operating lease expense | 71,785 |  |  | 217,371 |
Operating lease expense adjustment | 4,814 |  |  | 13,626 |
Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements | (11,043 | ) |  | (12,043 | )
Operating cash flows from operating leases | $ | 65,556 |  |  | $ | 218,954 |
Non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations | $ | 22,375 |  |  | $ | 26,356 |
Financing Leases (in thousands) | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Depreciation and amortization | $ | 11,675 |  |  | $ | 35,030 |
Interest expense: financing lease obligations | 16,567 |  |  | 49,959 |
Financing lease expense | $ | 28,242 |  |  | $ | 84,989 |
Operating cash flows from financing leases | $ | 16,567 |  |  | $ | 49,959 |
Financing cash flows from financing leases | 5,549 |  |  | 16,502 |
Total cash flows from financing leases | $ | 22,116 |  |  | $ | 66,461 |
As of September 30, 2019, the weighted-average discount rate of the Company’s operating and financing leases was 8.6% and 7.8%, respectively. As the Company's community leases do not contain an implicit rate, the Company utilized its incremental borrowing rate based on information available on January 1, 2019 to determine the present value of lease payments for operating leases that commenced prior to that date. The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of September 30, 2019 are as follows (in thousands):
Year Ending December 31, | Operating Leases |  | Financing Leases
2019 (three months) | $ | 77,495 |  |  | $ | 22,052 |
2020 | 312,861 |  |  | 89,090 |
2021 | 298,025 |  |  | 90,330 |
2022 | 294,696 |  |  | 91,719 |
2023 | 290,698 |  |  | 93,190 |
Thereafter | 806,856 |  |  | 429,663 |
Total lease payments | 2,080,631 |  |  | 816,044 |
Purchase option liability and non-cash gain on future sale of property | — |  |  | 575,791 |
Imputed interest and variable lease payments | (572,238 | ) |  | (533,798 | )
Total lease obligations | $ | 1,508,393 |  |  | $ | 858,037 |
The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases not recognized on the condensed consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):
Year Ending December 31, | Operating Leases
2019 | $ | 310,340 |
2020 | 307,493 |
2021 | 290,661 |
2022 | 291,114 |
2023 | 285,723 |
Thereafter | 786,647 |
Total lease payments | $ | 2,271,978 |
Leases | Leases As of September 30, 2019, the Company operated 335 communities under long-term leases (244 operating leases and 91 financing leases). The substantial majority of the Company's lease arrangements are structured as master leases. Under a master lease, numerous communities are leased through an indivisible lease. The Company typically guarantees the performance and lease payment obligations of its subsidiary lessees under the master leases. Due to the nature of such master leases, it is difficult to restructure the composition of such leased portfolios or economic terms of the leases without the consent of the applicable landlord. In addition, an event of default related to an individual property or limited number of properties within a master lease portfolio may result in a default on the entire master lease portfolio. The leases relating to these communities are generally fixed rate leases with annual escalators that are either fixed or based upon changes in the consumer price index or the leased property revenue. The Company is responsible for all operating costs, including repairs, property taxes, and insurance. As of September 30, 2019, the weighted-average remaining lease term of the Company’s operating and financing leases was 7.1 years and 8.5 years, respectively. The leases generally provide for renewal or extension options from 5 to 20 years and in some instances, purchase options. The community leases contain other customary terms, which may include assignment and change of control restrictions, maintenance and capital expenditure obligations, termination provisions and financial covenants, such as those requiring the Company to maintain prescribed minimum net worth and stockholders’ equity levels and lease coverage ratios, and not to exceed prescribed leverage ratios, in each case on a consolidated, portfolio-wide, multi-community, single-community and/or entity basis. In addition, the Company’s lease documents generally contain non-financial covenants, such as those requiring the Company to comply with Medicare or Medicaid provider requirements. The Company’s failure to comply with applicable covenants could constitute an event of default under the applicable lease documents. Many of the Company’s debt and lease documents contain cross-default provisions so that a default under one of these instruments could cause a default under other debt and lease documents (including documents with other lenders and lessors). Certain leases contain cure provisions, which generally allow the Company to post an additional lease security deposit if the required covenant is not met. Furthermore, the Company’s leases are secured by its communities and, in certain cases, a guaranty by the Company and/or one or more of its subsidiaries. As of September 30, 2019, the Company is in compliance with the financial covenants of its long-term leases. A summary of operating and financing lease expense (including the respective presentation on the condensed consolidated statements of operations) and cash flows from leasing transactions is as follows:
Operating Leases (in thousands) | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Facility operating expense | $ | 4,532 |  |  | $ | 13,761 |
Facility lease expense | 67,253 |  |  | 203,610 |
Operating lease expense | 71,785 |  |  | 217,371 |
Operating lease expense adjustment | 4,814 |  |  | 13,626 |
Changes in operating lease assets and liabilities for lessor capital expenditure reimbursements | (11,043 | ) |  | (12,043 | )
Operating cash flows from operating leases | $ | 65,556 |  |  | $ | 218,954 |
Non-cash recognition of right-of-use assets obtained in exchange for new operating lease obligations | $ | 22,375 |  |  | $ | 26,356 |
Financing Leases (in thousands) | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Depreciation and amortization | $ | 11,675 |  |  | $ | 35,030 |
Interest expense: financing lease obligations | 16,567 |  |  | 49,959 |
Financing lease expense | $ | 28,242 |  |  | $ | 84,989 |
Operating cash flows from financing leases | $ | 16,567 |  |  | $ | 49,959 |
Financing cash flows from financing leases | 5,549 |  |  | 16,502 |
Total cash flows from financing leases | $ | 22,116 |  |  | $ | 66,461 |
As of September 30, 2019, the weighted-average discount rate of the Company’s operating and financing leases was 8.6% and 7.8%, respectively. As the Company's community leases do not contain an implicit rate, the Company utilized its incremental borrowing rate based on information available on January 1, 2019 to determine the present value of lease payments for operating leases that commenced prior to that date. The aggregate amounts of future minimum lease payments, including community, office, and equipment leases recognized on the condensed consolidated balance sheet as of September 30, 2019 are as follows (in thousands):
Year Ending December 31, | Operating Leases |  | Financing Leases
2019 (three months) | $ | 77,495 |  |  | $ | 22,052 |
2020 | 312,861 |  |  | 89,090 |
2021 | 298,025 |  |  | 90,330 |
2022 | 294,696 |  |  | 91,719 |
2023 | 290,698 |  |  | 93,190 |
Thereafter | 806,856 |  |  | 429,663 |
Total lease payments | 2,080,631 |  |  | 816,044 |
Purchase option liability and non-cash gain on future sale of property | — |  |  | 575,791 |
Imputed interest and variable lease payments | (572,238 | ) |  | (533,798 | )
Total lease obligations | $ | 1,508,393 |  |  | $ | 858,037 |
The aggregate amounts of future minimum operating lease payments, including community, office, and equipment leases not recognized on the condensed consolidated balance sheet under ASC 840 as of December 31, 2018 are as follows (in thousands):
Year Ending December 31, | Operating Leases
2019 | $ | 310,340 |
2020 | 307,493 |
2021 | 290,661 |
2022 | 291,114 |
2023 | 285,723 |
Thereafter | 786,647 |
Total lease payments | $ | 2,271,978 |

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeFinanceLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeOperatingLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration