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Real Estate Properties | 9 Months Ended
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Sep. 30, 2014
Real Estate Properties |
Real Estate Properties | Note 3. Real Estate Properties At September 30, 2014, we owned 371 properties (398 buildings) located in 38 states and Washington, D.C. We have accounted, or expect to account for, the following acquisitions as business combinations unless otherwise noted. MOB Acquisitions: In April 2014, we acquired one property (one building) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or an MOB, for approximately $32,658, including the assumption of approximately $15,630 of mortgage debt, and excluding closing costs. This MOB is located in Texas and includes 125,240 square feet of leasable space. We funded this acquisition using cash on hand and borrowings under our revolving credit facility. In May 2014, we acquired one MOB (two buildings) for approximately $1,125,420, excluding closing costs. This MOB is located in Massachusetts and includes approximately 1,651,037 gross building square feet. We funded this acquisition using the proceeds of equity and debt offerings and borrowings under our revolving credit facility. MOB Acquisitions since January 1, 2014:
|  |  |  |  |  |  |  | Cash Paid |  |  |  |  |  |  |  |  |  |  | Acquired |  |  |  |  |  |  |
|  |  |  | Number |  |  |  | plus |  |  |  |  |  |  |  | Acquired |  | Real Estate |  |  |  |  | Premium |
|  |  |  | of |  | Square |  | Assumed |  |  |  |  | Buildings and |  | Real Estate |  | Lease |  | Assumed |  | on Assumed |
Date |  | Location |  | Properties |  | Feet (000’s) |  | Debt (1) |  | Land |  | Improvements |  | Leases |  | Obligations |  | Debt |  | Debt |
Apr-14 |  | San Antonio, TX |  | 1 |  | 125 |  | $ | 32,932 |  | $ | 3,141 |  | $ | 26,421 |  | $ | 4,393 |  | $ | 10 |  | $ | 15,630 |  | $ | 1,013 |
May-14 |  | Boston, MA |  | 1 |  | 1,651 |  |  | 1,124,031 |  |  | 52,643 |  |  | 944,362 |  |  | 245,511 |  |  | 118,485 |  |  | — |  |  | — |
|  |  |  | 2 |  | 1,776 |  | $ | 1,156,963 |  | $ | 55,784 |  | $ | 970,783 |  | $ | 249,904 |  | $ | 118,495 |  | $ | 15,630 |  | $ | 1,013 |
| (1) |  | These amounts include the cash we paid plus debt we assumed, if any, as well as other settlement adjustments with respect to the acquisitions but exclude closing costs. The allocation of the purchase price of our acquisitions shown 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 may change from those used in these condensed consolidated financial statements.
In July 2014, we entered into an agreement to acquire one senior living community for approximately $7,000, excluding closing costs. The senior living community is located in Jackson, Wisconsin and includes 52 assisted living units. In September 2014, we entered into an agreement to acquire one senior living community for approximately $40,430, excluding closing costs. The senior living community is located in Madison, Wisconsin and includes 176 independent and assisted living units. If these acquisitions are completed, we expect that a subsidiary of Five Star Quality Care, Inc. will manage these communities for our account pursuant to long term management agreements. In this Quarterly Report on Form 10-Q, we refer to Five Star Quality Care, Inc. and its applicable subsidiaries as Five Star. In August 2014, we entered into an agreement to acquire the entities owning 23 MOBs for approximately $539,000, including the assumption of approximately $30,000 of mortgage debt. The MOBs contain approximately 2,200,000 square feet and are located in 12 states. The closing of this acquisition is subject to various conditions; accordingly, we may not purchase some or all of these properties, these purchases may be delayed or the terms of these purchases may change. See Note 10 for further information about this acquisition. Impairment: 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. As of September 30, 2014, we had seven senior living communities with 552 living units and one MOB (four buildings) with 323,541 square feet categorized as properties held for sale. During the nine months ended September 30, 2014, we recorded net impairment of assets charges of $117 to adjust the carrying value of four MOBs included in discontinued operations to their aggregate estimated net sale price. The eight properties are included in other assets in our condensed consolidated balance sheets and have a net book value (after impairment) of approximately $12,924 at September 30, 2014. As of December 31, 2013, we had 10 senior living communities with 744 units and four MOBs (seven buildings) with 831,499 square feet categorized as properties held for sale, which were similarly recorded and categorized at September 30, 2014, except that three of the senior living communities and three of the MOBs were sold during the first nine months of 2014, as noted below. These properties are included in other assets in our condensed consolidated balance sheets and had a net book value (after impairment) of approximately $27,888 at December 31, 2013. We decided to sell these properties because of what we believe to be unattractive conditions in the markets in which these properties are located or in which they operate. We classify all properties as held for sale in our condensed consolidated balance sheets that meet the applicable criteria for that treatment as set forth in the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification, or the Codification. Results of operations for properties sold or held for sale are included in discontinued operations in our condensed consolidated statements of operations once the criteria for discontinued operations in the Presentation of Financial Statements Topic of the Codification are met. The senior living properties which we are or were offering for sale as of the applicable periods do not meet the criteria for discontinued operations as they are included within combination leases with other properties that we expect to continue leasing. Summarized income statement information for the four MOBs (seven buildings) that meet the criteria for discontinued operations is included in discontinued operations as follows:
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
|  | 2014 |  | 2013 |  | 2014 |  | 2013 |
Rental income |  | $ | 111 |  | $ | 2,189 |  | $ | 3,837 |  | $ | 7,284 |
Property operating expenses |  |  | (668) |  |  | (958) |  |  | (2,353) |  |  | (2,723) |
Depreciation and amortization |  |  | — |  |  | — |  |  | — |  |  | (799) |
Income from discontinued operations |  | $ | (557) |  | $ | 1,231 |  | $ | 1,484 |  | $ | 3,762 |
In January 2014, we sold a senior living community with 36 units that was previously classified as held for sale for $2,400 and recorded a gain on the sale of this property of approximately $156. In April 2014, we sold one MOB (one building) with 210,879 square feet that was included in discontinued operations for $5,000 and recorded no gain or loss on the sale. In June 2014, we sold two senior living communities with 156 units that were previously classified as held for sale for $4,500 and recorded a gain on the sale of these properties of approximately $2,396. In June 2014, we sold one MOB (one building) with 235,079 square feet that was included in discontinued operations for $6,000 and recorded no gain or loss on the sale. In September 2014, we sold one MOB ( one building) with 62,000 square feet that was included in discontinued operations for $675 and recorded no gain or loss on the sale. In October 2014, we sold one senior living community with 70 units that was previously classified as held for sale for $2,850. Also in October 2014, we sold two senior living communities with 177 units that were previously classified as held for sale for $5,900. We will record the gain or loss on these sales during the period ending December 31, 2014 when all of the costs of the sales are known.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -SubTopic 360 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-28) -URI http://asc.fasb.org/extlink&oid=6590653&loc=d3e638233-123024 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 28 -Article 12 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule III -Article 5 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 10 -Subparagraph 4 -Article 9 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 11 -Article 9 + Details
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