Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Assets and Liabilities Recurring and Nonrecurring Measured at Fair Value

The following table presents certain of our assets that are measured at fair value at March 31, 2020, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset.



			Fair Value at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	Total		(Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurements Assets:
Investment in Five Star ⁽¹⁾	$	29,723	$	29,723	$	—	$	—
Non-Recurring Fair Value Measurements Assets:
Real estate properties held for sale ⁽²⁾	$	98,927	$	—	$	98,927	$	—

(1)

Our 10,691,658 shares of common stock of Five Star Senior Living Inc., or Five Star, are included in other assets, net in our condensed consolidated balance sheets, and are reported at fair value, which is based upon quoted market prices on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs). On April 1, 2019, we entered into a transaction agreement with Five Star, or the Transaction Agreement, to restructure our business arrangements with Five Star, or the Restructuring Transaction. Pursuant to the Transaction Agreement, on January 1, 2020, Five Star issued 10,268,158 Five Star common shares to us. The fair value and initial cost basis of the Five Star common shares issued to us on January 1, 2020 was $38,095. Our adjusted cost basis inclusive of the 423,500 Five Star common shares we owned as of December 31, 2019 and the 10,268,158 Five Star common shares issued to us on January 1, 2020 was $44,448 as of March 31, 2020. During the three months ended March 31, 2020, we recorded an unrealized loss of $9,943, which is included in gains and losses on equity securities, net in our condensed consolidated statements of comprehensive income, to adjust the carrying value of our investment in Five Star common shares to their fair value. See Note 12 for further information about our investment in Five Star.

(2)

We have assets in our condensed consolidated balance sheets that are measured at fair value on a nonrecurring basis. During the three months ended March 31, 2020, we recorded impairment charges of $6,544 to reduce the carrying value of six medical office properties that are classified as held for sale to their estimated sales price, less estimated costs to sell of $1,658, based on purchase and sale agreements that we have entered into with third party buyers for these medical office properties of $51,640. We also recorded impairment charges of $5,581 to reduce the carrying value of five senior living communities that are classified as held for sale to their estimated sales price, less estimated costs to sell of $655, based on purchase and sale agreements that we have entered into with third party buyers for these senior living communities of $49,600. See Note 3 for further information about impairment charges and these and other properties we have classified as held for sale.

Schedule of Carrying Value and Fair Value of the Financial Instruments

The fair values of these financial instruments approximated their carrying values in our condensed consolidated financial statements as of such dates, except as follows:



	As of March 31, 2020				As of December 31, 2019
Description	Carrying Amount ⁽¹⁾		Estimated Fair Value		Carrying Amount ⁽¹⁾		Estimated Fair Value
Senior unsecured notes	$	1,821,560	$	1,568,167	$	1,820,681	$	1,890,386
Secured debts⁽²⁾⁽³⁾	695,228		744,082		697,729		697,142
	$	2,516,788	$	2,312,249	$	2,518,410	$	2,587,528


(1)	Includes unamortized debt issuance costs, premiums and discounts.


(2)	We assumed certain of these secured debts in connection with our acquisition of certain properties. We recorded the assumed mortgage notes at estimated fair value on the date of acquisition and we are amortizing the fair value

adjustments, if any, to interest expense over the respective terms of the mortgage notes to adjust interest expense to the estimated market interest rates as of the date of acquisition.

(3)

Includes $1,267 of principal mortgage obligations for a property classified as held for sale as of March 31, 2020. This mortgage is included in liabilities of properties held for sale in our condensed consolidated balance sheet as of March 31, 2020.

Marketable Securities

Realized and unrealized gains and losses for our equity securities for the three months ended March 31, 2020 and 2019 were as follows:



	Three Months Ended March 31,
	2020			2019
Realized gains and losses on equity securities sold ⁽¹⁾	$	—		$	20,836
Unrealized gains and losses on equity securities held	(9,943		)	2,096
Gains and losses on equity securities, net	$	(9,943	)	$	22,932

(1)

For further information about our former investment in The RMR Group Inc., or RMR Inc., that we sold on July 1, 2019, see our Annual Report.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details