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Leases and Management Agreements with Five Star | 6 Months Ended
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Jun. 30, 2018
Risks and Uncertainties [Abstract] |
Leases and Management Agreements with Five Star | Leases and Management Agreements with Five Star Our Senior Living Communities Leased by Five Star. We are Five Star’s largest landlord and Five Star is our largest tenant. As of June 30, 2018 and 2017, we leased 184 and 185 senior living communities to Five Star, respectively. We lease senior living communities to Five Star pursuant to five leases. We recognized total rental income payable by Five Star of $51,692 and $51,123 for the three months ended June 30, 2018 and 2017, respectively, and $103,450 and $102,108 for the six months ended June 30, 2018 and 2017, respectively. These amounts exclude percentage rent payments we received from Five Star of $1,289 and $1,392 for the three months ended June 30, 2018 and 2017, respectively, and $2,664 and $2,837 for the six months ended June 30, 2018 and 2017, respectively. We determine actual percentage rent due under our Five Star leases annually and recognize any resulting amount as rental income at year end when all contingencies are met. As of June 30, 2018 and December 31, 2017, we had rents receivable from Five Star of $17,198 and $18,539, respectively, which amounts are included in other assets in our condensed consolidated balance sheets. Rental income from Five Star represented 18.6% and 18.7% of our total revenues for the three and six months ended June 30, 2018, respectively, and the properties Five Star leases from us represented 26.9% of our real estate investments, at cost, as of June 30, 2018. Pursuant to the terms of our leases with Five Star, for the six months ended June 30, 2018 and 2017, we funded $8,529 and $19,308, respectively, of improvements to communities leased to Five Star. As a result, the annual minimum rent payable to us by Five Star increased by approximately $680 and $1,547 as of June 30, 2018 and 2017, respectively. Our Senior Living Communities Managed by Five Star. As of June 30, 2018 and 2017, Five Star managed 75 and 68 senior living communities for our account, respectively. We lease our senior living communities that are managed by Five Star and include assisted living units or SNF units to our TRSs and Five Star manages these communities pursuant to long term management agreements. See Note 3 above for certain senior living communities we acquired since December 2017 and which are managed by Five Star for our account. In addition, in June 2018, Five Star began managing for our account a senior living community we own located in California with 98 living units after the previous tenant defaulted on its lease with us pursuant to a management agreement and our existing Pooling Agreement No. 12 with Five Star, which we and Five Star amended and restated to include that senior living community. Pursuant to the terms of the management agreement for this senior living community and our Amended and Restated Pooling Agreement No. 12 with Five Star, we will pay Five Star a management fee equal to 5% of the gross revenues realized at this community plus reimbursement for Five Star’s direct costs and expenses related to its operation of this community, as well as an annual incentive fee equal to 20% of the annual net operating income, or NOI, of the community remaining after we realize an annual minimum return of $1,000 plus 7% of our invested capital for this community in excess of $500 made after the date Five Star began managing this community, and that our annual minimum return for this community will not be used in determining whether or not there is a priority return shortfall, as defined, under the pooling agreement until 2019. We incurred management fees payable to Five Star of $3,533 and $3,554 for the three months ended June 30, 2018 and 2017, respectively, and $7,027 and $7,117 for the six months ended June 30, 2018 and 2017, respectively. These amounts are included in property operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. Five Star also provides certain other services directly to residents at some of the senior living communities it manages for us, such as rehabilitation services. At senior living communities Five Star manages for us where Five Star provides rehabilitation services on an outpatient basis, the residents, third party payers or government programs pay Five Star for those rehabilitation services. At senior living communities Five Star manages for us where Five Star provides both inpatient and outpatient rehabilitation services, we generally pay Five Star for these services and charges for these services are included in amounts charged to residents, third party payers or government programs. We incurred fees payable to Five Star of $1,660 and $1,886 for the three months ended June 30, 2018 and 2017, respectively, and $3,359 and $3,868 for the six months ended June 30, 2018 and 2017, respectively, for rehabilitation services Five Star provided at senior living communities it manages for us; we include these amounts in property operating expenses in our condensed consolidated statement of comprehensive income.

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- Definition The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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