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Assets and Associated Liabilities Held For Sale and Discontinued Operations
3 Months Ended
Mar. 31, 2019
Real Estate Liabilities Associated With Assets Held For Development And Sale [Abstract]  
Assets and Associated Liabilities Held For Sale and Discontinued Operations

5.

Assets and Associated Liabilities Held For Sale and Discontinued Operations

As of March 31, 2019, as part of executing on Possible Strategic Alternatives, the Company had committed to a plan to sell a total of 70 properties, including: (1) six skilled nursing facilities located in Arkansas (“Perennial Communities”); (2) a portfolio of 53 MOBs, five post-acute care facilities and five acute care hospitals located across the U.S. (collectively, the “MOB/Healthcare Portfolio”); and (3) a post-acute care property located in Colorado (“Welbrook Senior Living Grand Junction”).  As such, the Company has classified the 70 properties as held for sale.  The Company believes the sale of the MOB/Healthcare Portfolio would cause a strategic shift in the Company’s operations and, therefore, has classified the operations of those properties as discontinued operations.  The sale of the other seven properties would not cause a strategic shift in the Company’s operations, and are not considered individually significant; therefore, those properties do not qualify as discontinued operations.

In December 2018, the Company entered into the MOB Sale Agreement related to the 55 property MOB Sale for a gross price of $1.25 billion, subject to certain pro-rations and other adjustments as described in the MOB Sale Agreement.  As of March 31, 2019, approximately $76 million had been placed by the buyer in escrow, which is non-refundable, except for a seller breach or default under the MOB Sale Agreement, and will be applied to the purchase price at closing.  The parties anticipate that the closing of the MOB Sale will occur in the second quarter of 2019, subject to customary closing conditions, governmental and other third-party consents.  There can be no assurance that the closing conditions will be satisfied or that the MOB Sale will be consummated.  The net sales proceeds are expected to exceed the net carrying value of the 55 properties comprising the MOB Sale.

In March 2019, the Company entered into the IRF Sale Agreement related to the IRF Sale, consisting of four properties within the MOB/Healthcare Portfolio, for a gross sales price of $94 million, subject to certain pro-rations and other adjustments as described in the IRF Sale Agreement.  The Company completed the IRF Sale in April 2019; refer to Note 14. “Subsequent Events” for additional information.

As of March 31, 2019, the 70 properties classified as assets held for sale and the liabilities associated with those assets held for sale consisted of the following (in thousands):

 

 

 

As of March 31, 2019

 

 

 

MOB/Healthcare

Portfolio

 

 

Other

 

 

Total

 

Real estate investment properties, net

 

$

952,987

 

 

$

51,339

 

 

$

1,004,326

 

Real estate under development

 

 

3,539

 

 

 

 

 

 

3,539

 

Intangibles, net

 

 

71,295

 

 

 

800

 

 

 

72,095

 

Deferred rent and lease incentives

 

 

38,415

 

 

 

6,568

 

 

 

44,983

 

Other assets

 

 

11,954

 

 

 

490

 

 

 

12,444

 

Operating lease assets, net

 

 

11,525

 

 

 

 

 

 

11,525

 

Restricted cash

 

 

2,166

 

 

 

145

 

 

 

2,311

 

Assets held for sale, net

 

$

1,091,881

 

 

$

59,342

 

 

$

1,151,223

 

Mortgages and other notes payable, net

 

$

491,254

 

 

$

8,117

 

 

$

499,371

 

Credit facilities

 

 

233,002

 

 

 

32,595

 

 

 

265,597

 

Other liabilities

 

 

10,890

 

 

 

634

 

 

 

11,524

 

Accounts payable and accrued liabilities

 

 

11,058

 

 

 

6

 

 

 

11,064

 

Operating lease liabilities

 

 

3,357

 

 

 

 

 

 

3,357

 

Liabilities associated with assets held for sale

 

$

749,561

 

 

$

41,352

 

 

$

790,913

 

 

5.

Assets and Associated Liabilities Held For Sale and Discontinued Operations (continued)

 

As of December 31, 2018, the 70 properties classified as assets held for sale and the liabilities associated with those assets held for sale consisted of the following (in thousands):

 

 

 

As of December 31, 2018

 

 

 

MOB/Healthcare

Portfolio

 

 

Other

 

 

Total

 

Real estate held for sale, net

 

$

952,656

 

 

$

51,339

 

 

$

1,003,995

 

Real estate under development

 

 

3,490

 

 

 

 

 

 

3,490

 

Intangibles, net

 

 

82,417

 

 

 

800

 

 

 

83,217

 

Deferred rent and lease incentives

 

 

36,562

 

 

 

6,501

 

 

 

43,063

 

Other assets

 

 

11,425

 

 

 

182

 

 

 

11,607

 

Restricted cash

 

 

2,013

 

 

 

260

 

 

 

2,273

 

Assets held for sale, net

 

$

1,088,563

 

 

$

59,082

 

 

$

1,147,645

 

Mortgages and other notes payable, net

 

$

492,701

 

 

$

8,097

 

 

$

500,798

 

Credit facilities

 

 

212,731

 

 

 

34,778

 

 

 

247,509

 

Other liabilities

 

 

16,653

 

 

 

634

 

 

 

17,287

 

Accounts payable and accrued liabilities

 

 

8,425

 

 

 

 

 

 

8,425

 

Liabilities associated with assets held for sale

 

$

730,510

 

 

$

43,509

 

 

$

774,019

 

 

The Company classified the revenues and expenses related to the Company’s MOB/Healthcare Portfolio, which consists of 63 properties, as discontinued operations in the accompanying condensed consolidated statements of operations, as it believes the sale of these properties represents a strategic shift in the Company’s operations.  The following table is a summary of the Company’s loss from discontinued operations for the three months ended March 31, 2019 and 2018 (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

Rental income and related revenues

 

$

29,596

 

 

$

28,266

 

Operating expenses:

 

 

 

 

 

 

 

 

Property operating expenses

 

 

6,862

 

 

 

7,611

 

General and administrative expenses

 

 

293

 

 

 

308

 

Asset management fees

 

 

2,996

 

 

 

3,031

 

Property management fees

 

 

758

 

 

 

1,077

 

Depreciation and amortization

 

 

 

 

 

10,681

 

Total operating expenses

 

 

10,909

 

 

 

22,708

 

Operating income

 

 

18,687

 

 

 

5,558

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest and other income

 

 

9

 

 

 

104

 

Interest expense and loan cost amortization

 

 

(8,202

)

 

 

(7,822

)

Total other expense

 

 

(8,193

)

 

 

(7,718

)

Income (loss) before income taxes

 

 

10,494

 

 

 

(2,160

)

Income tax expense

 

 

(20

)

 

 

(18

)

Income (loss) from discontinued operations

 

$

10,474

 

 

$

(2,178

)