XML 27 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Real Estate Properties
 6 Months Ended
Jun. 30, 2012
Real Estate Properties  
Real Estate Properties

Note 3.  Real Estate Properties

 

At June 30, 2012, we owned 375 properties located in 39 states and Washington, D.C.

 

In February 2012, we acquired a previously disclosed senior living community located in Priceville, Alabama with 92 living units for approximately $11,300, excluding closing costs.  We recorded intangible assets of approximately $583 related to this acquisition.  A subsidiary of Five Star Quality Care, Inc., which, together with its subsidiaries, we refer to in this report as Five Star, manages this community for our account under a long term contract.  We funded this acquisition using cash on hand.  As of June 30, 2012, we own 24 communities that are managed by Five Star, or the Managed Communities.  We use the taxable REIT subsidiary, or TRS, structure authorized by the Real Estate Investment Trust Investment Diversification and Empowerment Act, or RIDEA, for our Managed Communities, which we began acquiring in June 2011.  The results of operations for the Managed Communities are included in our short and long term residential care communities segment.  See Note 11 for further information regarding the arrangements we have with Five Star regarding the lease, operations and management of our senior living communities and see Note 9 for further information regarding our reportable operating segments.

 

In May 2012, we acquired a previously disclosed senior living community located in Charleston, South Carolina with 59 assisted living units for approximately $8,059, excluding closing costs.  We recorded intangible assets of approximately $362 related to this acquisition.  A subsidiary of Five Star manages this community for our account under a long term contract.  We funded this acquisition using cash on hand and by assuming approximately $4,789 of mortgage debt.

 

In May 2012, we acquired a previously disclosed property leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or an MOB, with 28,440 square feet located in Georgia for approximately $8,600, excluding closing costs.  We recorded intangible lease assets and liabilities of $1,392 and $10, respectively, related to this acquisition.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

In May 2012, we acquired another previously disclosed MOB with 111,538 square feet located in Georgia for approximately $23,100, excluding closing costs.  We recorded intangible lease assets of $6,421 related to this acquisition.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

In June 2012, we acquired a previously disclosed MOB with 204,429 square feet located in Hawaii for approximately $70,495, excluding closing costs.  We recorded intangible lease assets and liabilities of $4,306 and $629, respectively, related to this acquisition.  We funded this acquisition using cash on hand, borrowings under our revolving credit facility and by assuming approximately $52,000 of mortgage debt.

 

In June 2012, we acquired another previously disclosed MOB with 92,180 square feet located in Maryland for approximately $18,250, excluding closing costs.  We funded this acquisition using cash on hand and borrowings under our revolving credit facility.

 

In July 2012, we acquired a previously disclosed senior living community located in Mount Pleasant, South Carolina with 232 living units for approximately $37,273, excluding closing costs.  A subsidiary of Five Star manages this community for our TRS under a long term contract.  We funded this acquisition in escrow in June 2012 prior to and pending closing using cash on hand and borrowings under our revolving credit facility, and as of June 30, 2012, the amount funded is included in other assets on our condensed consolidated balance sheet.

 

In July 2012, we acquired one MOB with 63,082 square feet located in Houston, Texas for approximately $16,850, excluding closing costs.  We funded this acquisition using cash on hand.

 

In July 2012, we acquired another MOB with 52,858 square feet located in Boynton Beach, Florida for approximately $7,750, excluding closing costs.  We funded this acquisition using cash on hand.

 

On July 31, 2012, we acquired four previously disclosed senior living communities located in Colorado, Idaho and Washington with a total of 511 living units for total purchase prices of approximately $36,500, excluding closing costs.  We leased these properties to Stellar Senior Living, LLC, a third party operator, with a current term expiring in 2027 for initial rent of approximately $2,920 per year.  Percentage rent, based on increases in gross revenues at these properties, will commence in 2014.  We funded this acquisition using cash on hand, borrowings under our revolving credit facility and by assuming approximately $6,876 of mortgage debt.

 

We have previously disclosed agreements to acquire three properties which have not yet closed, including two senior living communities and one MOB for total purchase prices of approximately $126,700, including the assumption of approximately $49,447 of mortgage debt and excluding closing costs.  The two senior living communities are located in Missouri and New York and include a total of 397 living units, and the MOB is located in Massachusetts and includes 35,000 square feet.  The closings of these acquisitions are contingent upon customary closing conditions; accordingly, we can provide no assurance that we will purchase these properties.

 

In July 2012, we entered an agreement to acquire one MOB for approximately $15,275, including the assumption of approximately $9,676 of mortgage debt and excluding closing costs.  The MOB is located in Minnesota and includes a total of 76,637 square feet.  This acquisition has not yet closed.  The closing of this acquisition is contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase this property.

 

In May 2012, we entered into an operations transfer agreement, or the Operations Transfer Agreement, with Sunrise Senior Living, Inc., or Sunrise, and Five Star related to 10 senior living communities, or the 10 Communities, that we currently lease to Sunrise.  The Operations Transfer Agreement provides that we and Sunrise will accelerate the December 31, 2013 termination date of these Sunrise leases, that we will lease the 10 Communities to our TRSs and that Five Star will manage the 10 Communities pursuant to long term contracts.  The Operations Transfer Agreement provides that these transactions will occur when we and Five Star have obtained required regulatory approvals to operate the 10 Communities.  Because of the required regulatory approval processes, we expect the transition of the 10 Communities’ operations to occur on various dates during the remainder of 2012.  Pursuant to the Operations Transfer Agreement, we paid Sunrise $1,000 to purchase the inventory and certain improvements owned by Sunrise at these 10 Communities, which will be transferred to our applicable TRSs when the leases of the 10 Communities commence.

 

In July 2012, we sold one MOB located in Massachusetts for a sale price of approximately $1,100.  At June 30, 2012, two of our properties, including one senior living community located in Pennsylvania and this MOB, are classified as held for sale.  These two properties are included in real estate properties on our condensed consolidated balance sheets and have an aggregate net book value of approximately $1,715 at both June 30, 2012 and December 31, 2011.

 

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 net cash flows to be generated from that property. If the sum of these expected future net 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, 2012, we recorded an impairment of assets charge of $3,071 to reduce the carrying value of one of our properties to its estimated sale price less costs to sell.  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 sales prices less costs to sell.

 

During the three and six months ended June 30, 2012, pursuant to the terms of our existing leases with Five Star, we purchased $7,775 and $14,093, 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 $625 and $1,137, respectively.

 

The allocation of the purchase price of certain of our acquisitions described above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed.  Consequently, amounts preliminarily allocated to assets acquired and liabilities assumed could change significantly from those used in these condensed consolidated financial statements.