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Real Estate Properties | 6 Months Ended
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Jun. 30, 2015
Real Estate Properties |
Real Estate Properties | Note 3. Real Estate Properties At June 30, 2015, we owned 428 properties (4 52 buildings) located in 43 states and Washington, D.C. We have accounted, or expect to account for, the following acquisitions as business combinations unless otherwise noted. Triple Net Leased Senior Living Community Acquisitions: As previously disclosed, in May 2015, we acquired 37 senior living communities with 3,352 living units for an aggregate contractual purchase price of approximately $762,611, excluding additional consideration of $1,391 related to allocated debt issuance costs. Eighteen of the 37 acquired communities are triple net leased senior living communities with 2,119 living units. We acquired these 18 communities for an allocated purchase price of approximately $454,026, including the assumption of approximately $44,395 of mortgage debt with a weighted average annual interest rate of 5.07%, and excluding closing costs. As of the date acquired, the weighted average amortization period for capitalized lease origination values was 11.8 years. These 18 communities are leased to seven senior living operators. The remaining 19 senior living communities are managed as described below. The closing of one additional triple net leased senior living community, under the same purchase agreement for the 37 senior living communities described above, with 87 living units was delayed. The acquisition of this community is subject to various conditions; accordingly, we can provide no assurance that we will acquire this community, that the acquisition will not be delayed further or that the terms will not change. Triple Net Leased Senior Living Community Acquisitions since January 1, 2015:
|  |  |  |  |  |  |  | Cash Paid |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Number |  |  |  | plus |  |  |  |  |  |  |  |  |  | Acquired |  |  |  |  |  |  |  | Premium
|  |  |  | of |  | Units / |  | Assumed |  |  |  |  | Buildings and |  |  |  | Real Estate |  | Other |  | Assumed |  | on Assumed
Date |  | Location |  | Properties |  | Beds |  | Debt (1) |  | Land |  | Improvements |  | FF&E |  | Leases |  | Liabilities |  | Debt |  | Debt
May-15 |  | 11 States |  | 18 |  | 2,119 |  | $ | 454,026 |  | $ | 29,395 |  | $ | 369,445 |  | $ | 20,889 |  | $ | 53,513 |  | $ | (18,091) |  | $ | (44,395) |  | $ | (1,125)
|  |  |  | 18 |  | 2,119 |  | $ | 454,026 |  | $ | 29,395 |  | $ | 369,445 |  | $ | 20,889 |  | $ | 53,513 |  | $ | (18,091) |  | $ | (44,395) |  | $ | (1,125)
| (1) |  | These amounts include the cash we paid plus the debt we assumed, if any, as well as other settlement adjustments described above, 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 2015, we entered into an agreement to acquire one senior living community with 84 living units for approximately $18,250, excluding closing costs. We intend to lease this community to a third party senior living operator. The acquisition of this community is subject to various conditions; accordingly, we can provide no assurance that we will acquire this community, that the acquisition will not be delayed further or that the terms will not change or that we will enter the expected lease for this community. Managed Senior Living Community Acquisitions: As part of the transaction described above, in which we acquired 37 senior living communities in May 2015, we acquired 19 managed senior living communities with 1,233 living units for an allocated purchase price of approximately $309,976, including the assumption of approximately $94,786 of mortgage debt with a weighted average annual interest rate of 4.12%, and excluding closing costs. These 19 communities were acquired using taxable REIT subsidiary, or TRS, structures. Pursuant to pre-existing management agreements, we paid fees of $975 and terminated the pre-existing management agreements for 14 of the 19 communities, with 838 living units, and we entered into management agreements with Five Star Quality Care, Inc. or its subsidiaries, or Five Star, to manage these communities. The remaining five communities, with 395 living units, continue to be managed by the pre-existing third party senior living operator. We funded the acquisition of these 37 senior living communities using cash on hand, borrowings under our revolving credit facility and the assumption of mortgage debt described above. Also in May 2015, we acquired one senior living community with 40 private pay independent living units for a contractual purchase price of approximately $9,750, excluding closing costs. Pursuant to the purchase agreement, $1,000 of the purchase price has been withheld until the seller satisfies various conditions. We anticipate these conditions will be satisfied and therefore have recorded the withheld $1,000 as a liability as of June 30, 2015. This liability is included in other liabilities in our condensed consolidated balance sheets. This senior living community is adjacent to another community that we own which is managed by Five Star. The operations of this community and the community already owned are conducted as a single integrated community under the same management agreement. Managed Senior Living Community Acquisitions since January 1, 2015:
|  |  |  |  |  |  |  | Cash Paid |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Number |  |  |  | plus |  |  |  |  |  |  |  |  |  | Acquired |  |  |  |  |  |  |  | Discount
|  |  |  | of |  | Units / |  | Assumed |  |  |  |  | Buildings and |  |  |  | Real Estate |  | Other |  | Assumed |  | on Assumed
Date |  | Location |  | Properties |  | Beds |  | Debt (1) |  | Land |  | Improvements |  | FF&E |  | Leases |  | Liabilities |  | Debt |  | Debt
May-15 |  | 5 States |  | 19 |  | 1,233 |  | $ | 309,976 |  | $ | 12,135 |  | $ | 211,756 |  | $ | 12,209 |  | $ | 73,044 |  | $ | — |  | $ | (94,786) |  | $ | 832
May-15 |  | GA |  | — (2) |  | 40 |  |  | 8,750 |  |  | 975 |  |  | 8,775 |  |  | — |  |  | — |  |  | (1,000) |  |  | — |  |  | —
|  |  |  | 19 |  | 1,273 |  | $ | 318,726 |  | $ | 13,110 |  | $ | 220,531 |  | $ | 12,209 |  | $ | 73,044 |  | $ | (1,000) |  | $ | (94,786) |  | $ | 832
| (1) |  | These amounts include the cash we paid plus the debt we assumed, if any, as well as other settlement adjustments described above, 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.
| (2) |  | This senior living community is adjacent to another community that we own which is managed by Five Star. The operations of this community and the community already owned are conducted as a single integrated community under the same management agreement.
MOB Acquisitions: In January 2015, we acquired 2 3 properties (23 buildings) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, for an aggregate contractual purchase price of $539,000, net of credits received of $7,377 related to debt issuance costs and outstanding tenant improvement allowances and excluding closing costs. These MOBs include approximately 2,170,000 leasable square feet. We funded this acquisition using cash on hand, borrowings under our revolving credit facility and the assumption of $29,955 of mortgage debt with a weighted average annual interest rate of 4.73%. As of the date acquired, the weighted average amortization periods for capitalized above market lease values, lease origination values and capitalized below market lease values were 9.8 years, 9.5 years and 11.1 years, respectively. These 23 properties were purchased from Select Income REIT, or SIR, in connection with the acquisition by SIR of Cole Corporate Income Trust, Inc., or CCIT. See Note 10 for further information regarding this transaction. MOB Acquisitions since January 1, 2015:
|  |  |  |  |  |  |  | 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 |
Jan-15 |  | 12 States |  | 23 |  | 2,170 |  | $ | 531,623 |  | $ | 58,294 |  | $ | 392,205 |  | $ | 85,496 |  | $ | (3,298) |  | $ | (29,955) |  | $ | (1,074) |
|  |  |  | 23 |  | 2,170 |  | $ | 531,623 |  | $ | 58,294 |  | $ | 392,205 |  | $ | 85,496 |  | $ | (3,298) |  | $ | (29,955) |  | $ | (1,074) |
| (1) |  | These amounts include the cash we paid plus the debt we assumed, if any, as well as other settlement adjustments described above, 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.
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. Discontinued Operations and Properties Held for Sale: As of June 30, 2015, we had three senior living communities with 192 living units categorized as properties held for sale. These three properties are included in other assets in our condensed consolidated balance sheets and have a net book value (after impairment) of approximately $1,280 at June 30, 2015. 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. During 2015, we had one MOB (four buildings) classified in discontinued operations. We sold this MOB in April 2015 as described below. During 2014, we had four MOBs (seven buildings) classified in discontinued operations, three of which (three buildings) were sold in 2014. Summarized income statement information for these MOBs that met the criteria for inclusion in discontinued operations is as follows:
|  | Three Months Ended |  | Six Months Ended |
|  | June 30, |  | June 30, |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Rental income |  | $ | 24 |  | $ | 1,432 |  | $ | 56 |  | $ | 3,726 |
Property operating expenses |  |  | (133) |  |  | (691) |  |  | (406) |  |  | (1,685) |
(Loss) income from discontinued operations |  | $ | (109) |  | $ | 741 |  | $ | (350) |  | $ | 2,041 |
Dispositions: In February 2015, we sold one vacant senior living community for a sale price of $250, excluding closing costs. In the second quarter of 2015, we recorded an impairment charge of $602 to adjust the remaining held for sale MOB (four buildings) to its aggregate estimated net sale price. We sold this MOB in April 2015 for a sale price of $1,500, excluding closing costs. In July 2015, we sold one of the three senior living communities we categorized as held for sale at June 30, 2015 for a sale price of $155, excluding closing costs. In August 2015, we sold a second of the three senior living communities we categorized as held for sale at June 30, 2015 for a sale price of $850, excluding closing costs.

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