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Real Estate Properties
 6 Months Ended
Jun. 30, 2011
Real Estate Properties  
Real Estate Properties

Note 3.  Real Estate Properties

 

At June 30, 2011, we owned 339 properties located in 37 states and Washington, D.C.

 

In March 2011, we agreed to acquire 20 senior living communities located in five states in the Southeast United States for approximately $304,000, excluding closing costs. In June 2011, we acquired 14 of these 20 communities for approximately $196,594, excluding closing costs, and in July 2011, we acquired three of these communities for approximately $44,671, excluding closing costs.  We funded these acquisitions using cash on hand, proceeds from an equity offering, borrowings under our revolving credit facility and by assuming approximately $48,062 of mortgage loans in June 2011 and $12,757 of mortgage loans in July 2011.

 

In May 2011, we entered into agreements for Five Star Quality Care, Inc., or Five Star, to manage 15 of these 20 communities under long term contracts. We refer to the 15 communities as the Managed Communities and the other five communities as the Leased Communities. Ten of the 14 communities acquired in June 2011 and two of the three communities acquired in July 2011 are Managed Communities.  The management agreement with Five Star employs the taxable real estate investment trust, or REIT, subsidiary structure authorized by the REIT Investment Diversification and Empowerment Act, or RIDEA.  The results of operations for the Managed Communities are included in our consolidated results of operations beginning as of June 2011 in our short and long term residential care communities segment.  In June 2011, Five Star began leasing four of the Leased Communities, and in July 2011, Five Star began leasing the remaining Leased Community. Our acquisition of the three remaining Managed Communities are contingent upon customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

 

In May 2011, we acquired one senior living community located in Rockford, Illinois with 73 living units for approximately $7,500, excluding closing costs.  We leased this property to Five Star and added this property to Five Star Lease No. 1, which has a current term expiring in 2024, for initial rent of approximately $608 per year.  Percentage rent, based on increases in gross revenues at this property, will commence in 2013.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

In May and June 2011, we acquired four medical office buildings, or MOBs, one located in Shoreview, Minnesota and three located in Alachua, Florida, with a total of 174,408 square feet of floor space for an aggregate purchase price of $21,750, excluding closing costs.  We recorded intangible lease assets and liabilities of approximately $2,003 and $251, respectively, related to these acquisitions.  In July 2011, we acquired one additional MOB located in Alachua, Florida, with 32,476 square feet of floor space for approximately $5,200, excluding closing costs.  We funded these acquisitions with cash on hand, borrowings under our revolving credit facility and by assuming approximately $3,700 of mortgage loans in July 2011.

 

In May and July 2011, we entered two separate agreements to acquire one senior living community and two MOBs for an aggregate purchase price of $22,725, including the assumption of approximately $9,700 of mortgage debt and excluding closing costs.  The senior living community is located in California and includes 57 assisted living units, and the two MOBs are located in Virginia and include an aggregate of 45,578 square feet.  The closings of these acquisitions are contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

 

During the three months ended June 30, 2011, we sold seven properties, including four skilled nursing facilities, one assisted living community and two MOBs, for combined sales prices totaling $39,460, excluding closing costs.  We recognized a gain on sale of these properties of approximately $21,315.

 

We periodically evaluate our properties for impairments. Impairment indicators may include declining tenant occupancy, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If indicators of impairment are present, we evaluate the carrying value of the affected property by comparing it to the expected future undiscounted cash flows to be generated from that property. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.  During the six months ended June 30, 2011, we recorded impairment of assets charges of $166 to reduce the carrying value of two of our properties to their estimated fair value based upon expected sales prices less costs to sell.  During the three and six months ended June 30, 2010, we recorded impairment of assets charges of $1,095 to reduce the carrying value of five of our properties to their estimated fair value based upon expected sales prices less costs to sell.

 

During the three and six months ended June 30, 2011, pursuant to the terms of our existing leases with Five Star, we purchased $4,485 and $15,322, respectively, of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $359 and $1,228, respectively.