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Leases and Management Agreements with Five Star
9 Months Ended
Sep. 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 September 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 $51,757 and $51,333 for the three months ended September 30, 2018 and 2017, respectively, and $155,207 and $153,441 for the nine months ended September 30, 2018 and 2017, respectively. These amounts exclude percentage rent payments we received from Five Star of $1,386 and $1,353 for the three months ended September 30, 2018 and 2017, respectively, and $4,050 and $4,190 for the nine months ended September 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 September 30, 2018 and December 31, 2017, we had rents receivable from Five Star of $17,256 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 nine months ended September 30, 2018, respectively, and the properties Five Star leases from us represented 27.0% of our real estate investments, at cost, as of September 30, 2018.
Pursuant to the terms of our leases with Five Star, for the nine months ended September 30, 2018 and 2017, we funded $14,749 and $30,698, 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 $1,177 and $2,464 as of September 30, 2018 and 2017, respectively.
Our Senior Living Communities Managed by Five Star. As of September 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, pursuant to a management agreement and our existing Pooling Agreement No. 12 with Five Star, as amended and restated, a senior living community we own located in California with 98 living units after the previous tenant defaulted on its lease with us. We incurred management fees payable to Five Star of $3,666 and $3,414 for the three months ended September 30, 2018 and 2017, respectively, and $10,694 and $10,531 for the nine months ended September 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. In November 2018, Five Star began managing for our account, pursuant to a management agreement with Five Star, a senior living community we own located in Colorado with 238 living units after the previous tenant defaulted on its lease with us.
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 $1,584 and $1,841 for the three months ended September 30, 2018 and 2017, respectively, and $4,944 and $5,709 for the nine months ended September 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.