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Real Estate Properties | 9 Months Ended
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Sep. 30, 2015
Real Estate Properties |
Real Estate Properties | Note 3. Real Estate Properties At September 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. Senior Living Community Acquisitions: In December 2014, we entered into an agreement to acquire 38 senior living communities with 3,439 living units for an aggregate purchase price of $790,000, excluding net closing adjustments of $76 and closing costs. In May 2015, we acquired 37 of these 38 senior living communities and in September 2015 we acquired the one remaining community. We funded the acquisitions of these 38 senior living communities using cash on hand, borrowings under our revolving credit facility and the assumption of approximately $151,477 of mortgage debt with a weighted average annual interest rate of 4.57%. Nineteen of the 38 communities are triple net leased senior living communities with 2,206 living units, and are leased to seven senior living operators. As of the date acquired, the weighted average amortization period for capitalized lease origination values was 11.5 years. The remaining 19 acquired managed communities with 1,233 living units were acquired using taxable REIT subsidiary, or TRS, structures, and are being managed by third parties for our account. We paid fees of $975 and terminated the pre-existing management agreements that were in place for 14 of these 19 managed communities, with 838 living units as of the time we acquired those communities, and we entered into management agreements with Five Star Quality Care, Inc. or its subsidiaries, or Five Star, to manage those 14 communities. The remaining five managed communities, with 395 living units, continue to be managed by the pre-existing third party senior living operator. Also in September 2015, we acquired one triple net leased senior living community with 84 living units for a purchase price of $18,250, excluding closing costs. We funded the acquisition of this community using cash on hand and borrowings under our revolving credit facility. This community is leased to a privately owned third party senior living operator. This acquisition was accounted for as an acquisition of assets. In May 2015, we acquired one senior living community with 40 private pay independent living units for a 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 September 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 now conducted as a single integrated community under one management agreement. The table below represents the purchase price allocations (including net closing adjustments) of the managed and triple net leased senior living community acquisitions described above. Senior Living Community Acquisitions since January 1, 2015:
|  |  |  |  |  |  |  |  |  | Cash Paid |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (Premium) /
|  |  |  |  |  | Number |  |  |  | plus |  |  |  |  |  |  |  |  |  | Acquired |  |  |  |  |  |  |  | Discount
|  |  |  | Leased / |  | of |  | Units / |  | Assumed |  |  |  |  | Buildings and |  |  |  | Real Estate |  | Other |  | Assumed |  | on Assumed
Date |  | Location |  | Managed |  | Properties |  | Beds |  | Debt (1) |  | Land |  | Improvements |  | FF&E |  | Leases |  | Liabilities |  | Debt |  | Debt
May-15 |  | 11 States |  | Leased |  | 18 |  | 2,119 |  | $ | 459,183 |  | $ | 29,715 |  | $ | 373,471 |  | $ | 21,117 |  | $ | 54,096 |  | $ | (18,091) |  | $ | (44,395) |  | $ | (1,125)
May-15 |  | 5 States |  | Managed |  | 19 |  | 1,233 |  |  | 313,345 |  |  | 12,267 |  |  | 214,064 |  |  | 12,342 |  |  | 73,840 |  |  | — |  |  | (94,786) |  |  | 832
Sep-15 |  | NC |  | Leased |  | 1 |  | 87 |  |  | 17,548 |  |  | 1,134 |  |  | 13,749 |  |  | 1,022 |  |  | 2,208 |  |  | — |  |  | (12,297) |  |  | (565)
Subtotal 38 senior living communities portfolio |  | 38 |  | 3,439 |  |  | 790,076 |  |  | 43,117 |  |  | 601,284 |  |  | 34,481 |  |  | 130,145 |  |  | (18,091) |  |  | (151,477) |  |  | (858)
Sep-15 |  | GA |  | Leased |  | 1 |  | 84 |  |  | 18,250 |  |  | 1,825 |  |  | 16,425 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | —
May-15 |  | GA |  | Managed |  | — (2) |  | 40 |  |  | 8,750 |  |  | 993 |  |  | 8,169 |  |  | 427 |  |  | 161 |  |  | (1,000) |  |  | — |  |  | —
|  |  |  |  |  | 39 |  | 3,563 |  | $ | 817,076 |  | $ | 45,935 |  | $ | 625,878 |  | $ | 34,907 |  | $ | 130,305 |  | $ | (19,091) |  | $ | (151,477) |  | $ | (858)
| (1) |  | These amounts include the cash we paid plus the debt we assumed, if any, as well as various closing settlement adjustments, but exclude closing costs. The allocation of the purchase price of these acquisitions shown above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. These 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 now conducted as a single integrated community under one 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 purchase price of $539,000, excluding net credits received of $7,377 related to debt assumption 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 costs 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) |  | This amount includes the cash we paid plus the debt we assumed, if any, as well as various closing settlement adjustments, but excludes closing costs. The allocation of the purchase price of these acquisitions shown above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. These 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 September 30, 2015, we had two senior living communities with 257 living units categorized as properties held for sale. These tw o properties are included in other assets in our condensed consolidated balance sheets and have a net book value (after impairment) of approximately $5,077 at September 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. 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 prior to the adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, is as follows:
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Rental income |  | $ | — |  | $ | 111 |  | $ | 56 |  | $ | 3,837 |
Property operating expenses |  |  | — |  |  | (668) |  |  | (406) |  |  | (2,353) |
(Loss) income from discontinued operations |  | $ | — |  | $ | (557) |  | $ | (350) |  | $ | 1,484 |
Dispositions: In February 2015, we sold one vacant senior living community for $250, excluding closing costs. In July 2015, we sold one senior living community for $155, excluding closing costs. In August 2015, we sold one senior living community for $850, excluding closing costs. In April 2015, we sold one MOB (four buildings) for $1,500, excluding closing costs.

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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 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 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 11 -Article 9 Reference 3: 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 4: 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 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a -Article 5 + Details
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