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Senior Living Community Management Agreements | 6 Months Ended
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Jun. 30, 2022
Risks and Uncertainties [Abstract] |
Senior Living Community Management Agreements | Senior Living Community Management Agreements Our managed senior living communities are operated by third parties pursuant to management agreements. Five Star Senior Living, or Five Star, which is an operating division of AlerisLife, manages certain of our SHOP communities. 2021 Amendments to our Management Arrangements with Five Star. On June 9, 2021, we amended our management arrangements with Five Star. The principal changes to the management arrangements included: •that Five Star agreed to cooperate with us in transitioning 108 of our senior living communities with approximately 7,500 living units to other third party managers without our payment of any termination fee to Five Star; •that we no longer have the right to sell up to an additional $682,000 of senior living communities currently managed by Five Star and terminate Five Star's management of those communities without our payment of a fee to Five Star upon sale; •that Five Star is continuing to manage 120 of our senior living communities, and that the skilled nursing units in all of our continuing care retirement communities that Five Star is continuing to manage, which then included approximately 1,500 living units, were closed and are being evaluated and repositioned; •that beginning in 2025, we will have the right to terminate up to 10% of the senior living communities that Five Star is continuing to manage, based on total revenues per year for failure to meet 80% of a target earnings before interest, taxes, depreciation and amortization for the applicable period; •that the incentive fee that Five Star may earn in any calendar year for the senior living communities that Five Star is continuing to manage is no longer subject to a cap and that any senior living communities that are undergoing a major renovation or repositioning are excluded from the calculation of the incentive fee; •that RMR will oversee any major renovation or repositioning activities at the senior living communities that Five Star is continuing to manage; and •that the term of our management agreements with Five Star for our senior living communities that Five Star is continuing to manage was extended by two years to December 31, 2036. Pursuant to these changes, we and Five Star entered into an amended and restated master management agreement, or the Master Management Agreement, for the senior living communities that Five Star is continuing to manage and interim management agreements for the senior living communities that we and Five Star agreed to transition to new third party managers. These agreements replaced our prior master leases and management and pooling agreements with Five Star. In addition, AlerisLife delivered to us a related amended and restated guaranty agreement pursuant to which AlerisLife is continuing to guarantee the payment and performance of its subsidiaries' obligations under the applicable management agreements. As of December 31, 2021, we had transitioned 107 of the 108 senior living communities, containing 7,340 living units, from Five Star to new third party managers. The remaining senior living community was closed in February 2022 and we are assessing opportunities to redevelop that property. We continue to lease our senior living communities that have been transitioned to new managers to our taxable REIT subsidiaries, or TRSs. We incurred costs related to retention and other transition costs for these communities. We recorded $517 and $11,914 for the three months ended June 30, 2022 and 2021, respectively, and $1,445 and $11,914 for the six months ended June 30, 2022 and 2021, respectively, of these costs to acquisition and certain other transaction related costs in our condensed consolidated statements of comprehensive income (loss). Our Senior Living Communities Managed by Five Star. Five Star managed 120 and 235 of our senior living communities as of June 30, 2022 and 2021, respectively. We lease our senior living communities that are managed by Five Star to our TRSs. We incurred management fees payable to Five Star of $8,971 and $12,927 for the three months ended June 30, 2022 and 2021, respectively, and $17,903 and $26,777 for the six months ended June 30, 2022 and 2021, respectively. For the three months ended June 30, 2022 and 2021, $8,274 and $12,212, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $697 and $715, respectively, were capitalized in our condensed consolidated balance sheets. For the six months ended June 30, 2022 and 2021, $16,416 and $25,228, respectively, of the total management fees were expensed to property operating expenses in our condensed consolidated statements of comprehensive income (loss) and $1,487 and $1,549, respectively, were capitalized in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets. We incurred fees of $1,736 and $2,630 for the three months ended June 30, 2022 and 2021, respectively, and $3,652 and $8,071 for the six months ended June 30, 2022 and 2021, respectively, with respect to rehabilitation services Five Star provided at our senior living communities that are payable by us. These amounts are included in property operating expenses in our condensed consolidated statements of comprehensive income (loss). We lease to Five Star space at certain of our senior living communities, which it uses to provide certain outpatient rehabilitation and wellness services. We recorded $379 and $398 for the three months ended June 30, 2022 and 2021, respectively, and $767 and $795 for the six months ended June 30, 2022 and 2021, respectively, with respect to these leases. Our Senior Living Communities Managed by Other Third Party Managers. We incurred management fees payable to our other third party managers of $5,218 and $10,326 for the three and six months ended June 30, 2022, respectively. These amounts are included in property operating expenses in our condensed consolidated financial statements. The following table presents residents fees and services revenue from all of our managed senior living communities disaggregated by the type of contract and payer:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
Revenue from contracts with customers: |  | 2022 |  | 2021 |  | 2022 |  | 2021
Basic housing and support services |  | $ | 196,999 |  |  | $ | 188,169 |  |  | $ | 389,873 |  |  | $ | 376,198 |
Medicare and Medicaid programs |  | 18,966 |  |  | 24,907 |  |  | 38,783 |  |  | 60,855 |
Private pay and other third party payer SNF services |  | 34,541 |  |  | 30,871 |  |  | 67,298 |  |  | 66,860 |
Total residents fees and services |  | $ | 250,506 |  |  | $ | 243,947 |  |  | $ | 495,954 |  |  | $ | 503,913 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI https://asc.fasb.org/topic&trid=2134479 + Details
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