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Segment Reporting
9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
The Company conducts its business through the following five segments, which are based on how management reviews and manages its business.
Direct Investments - Net Lease - Healthcare properties operated under net leases with a tenant operator.
Direct Investments - Operating - Healthcare properties operated pursuant to management agreements with healthcare operators.
Unconsolidated Investments - Healthcare joint ventures, including properties operated under net leases or pursuant to management agreements with healthcare operators, in which we own a minority interest.
Debt and Securities Investments - Mortgage loans or mezzanine loans to owners of healthcare real estate and commercial mortgage backed securities backed primarily by loans secured by healthcare properties.
Corporate - The corporate segment includes corporate level asset management and other fees - related party and general and administrative expenses.
The Company primarily generates rental and resident fee income from its direct investments and net interest income on real estate debt and securities investments.
The following table presents the operators and tenants of the Company’s properties, excluding properties owned through unconsolidated joint ventures as of September 30, 2019 (dollars in thousands):
 
 
 
 
 
 
Nine Months Ended September 30, 2019
Operator / Tenant
 
Properties Under Management
 
Units Under Management(1)
 
Property and Other Revenues
 
% of Total Property and Other Revenues
Watermark Retirement Communities
 
30

 
5,265

 
$
114,092

 
51.8
%
Solstice Senior Living
(2) 
32

 
4,000

 
79,652

 
36.2
%
Avamere Health Services
 
5

 
453

 
12,587

 
5.7
%
Arcadia Management
 
4

 
572

 
7,961

 
3.6
%
Integral Senior Living
(2) 
3

 
162

 
4,704

 
2.1
%
Peregrine Senior Living
(3) 

 

 
598

 
0.3
%
Senior Lifestyle Corporation
(4) 
1

 
63

 

 
%
Other
(5) 

 

 
677

 
0.3
%
Total
 
75

 
10,515

 
$
220,271

 
100.0
%
______________________________________
(1)
Represents rooms for ALF and ILF and beds for MCF and SNF, based on predominant type.
(2)
Solstice is a joint venture of which affiliates of ISL own 80%.
(3)
In May 2019, the Company sold the two properties leased to Peregrine Senior Living.
(4)
Tenant has failed to remit rental payments during the nine months ended September 30, 2019. Properties and unit counts exclude one property held for sale.
(5)
Consists primarily of interest income earned on corporate-level cash accounts.
The following tables present segment reporting for the three months ended September 30, 2019 and 2018 (dollars in thousands):
 
 
Direct Investments
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2019
 
Net Lease
 
Operating
 
Unconsolidated Investments
 
Debt and Securities
 
Corporate(1)
 
Total
Rental and resident fee income
 
$
8,204

 
$
64,489

 
$

 
$

 
$

 
$
72,693

Net interest income on debt and securities
 

 

 

 
1,946

 

 
1,946

Other revenue
 

 
7

 

 
10

 
68

 
85

Property operating expenses
 
(5
)
 
(45,354
)
 

 

 

 
(45,359
)
Interest expense
 
(3,025
)
 
(14,193
)
 

 

 

 
(17,218
)
Transaction costs
 

 
(29
)
 

 

 

 
(29
)
Asset management and other fees - related party
 

 

 

 

 
(4,994
)
 
(4,994
)
General and administrative expenses
 
(47
)
 
19

 

 
(10
)
 
(2,769
)
 
(2,807
)
Depreciation and amortization
 
(3,595
)
 
(12,569
)
 

 

 

 
(16,164
)
Impairment loss
 

 

 

 

 

 

Realized gain (loss) on investments and other
 

 
204

 

 

 

 
204

Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)
 
1,532

 
(7,426
)
 

 
1,946

 
(7,695
)
 
(11,643
)
Equity in earnings (losses) of unconsolidated ventures
 

 

 
(3,037
)
 

 

 
(3,037
)
Income tax benefit (expense)
 

 
(17
)
 

 

 

 
(17
)
Net income (loss)
 
$
1,532

 
$
(7,443
)
 
$
(3,037
)
 
$
1,946

 
$
(7,695
)
 
$
(14,697
)
_______________________________________
(1)
Includes unallocated asset management fee-related party and general and administrative expenses.







 
 
Direct Investments
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018(1)
 
Net Lease
 
Operating
 
Unconsolidated Investments
 
Debt and Securities
 
Corporate(2)
 
Total
Rental and resident fee income
 
$
8,788

 
$
63,667

 
$

 
$

 
$

 
$
72,455

Net interest income on debt and securities
 

 

 

 
1,943

 

 
1,943

Other revenue
 

 
846

 

 

 
169

 
1,015

Property operating expenses
 
(255
)
 
(47,100
)
 

 

 

 
(47,355
)
Interest expense
 
(3,270
)
 
(14,325
)
 

 

 
(82
)
 
(17,677
)
Transaction costs
 

 

 

 

 

 

Asset management and other fees - related party
 

 

 

 

 
(5,951
)
 
(5,951
)
General and administrative expenses
 
(14
)
 
(218
)
 

 
(10
)
 
(2,576
)
 
(2,818
)
Depreciation and amortization
 
(3,468
)
 
(22,161
)
 

 

 

 
(25,629
)
Impairment loss
 

 

 

 

 

 

Realized gain (loss) on investments and other
 

 
726

 

 

 

 
726

Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)
 
1,781

 
(18,565
)
 

 
1,933

 
(8,440
)
 
(23,291
)
Equity in earnings (losses) of unconsolidated ventures
 

 

 
16,631

 

 

 
16,631

Income tax benefit (expense)
 

 
(10
)
 

 

 

 
(10
)
Net income (loss)
 
$
1,781

 
$
(18,575
)
 
$
16,631

 
$
1,933

 
$
(8,440
)
 
$
(6,670
)
_______________________________________
(1)
For the three months ended September 30, 2018, the Company did not own any healthcare-related securities as a result of having sold the Class B certificates of its consolidated Investing VIE in March 2018. Subsequent to the sale, the Company was not required to consolidate the related interest income and interest expense of the Investing VIE on the consolidated statements of operations.
(2)
Includes unallocated asset management fee-related party and general and administrative expenses.

The following tables present segment reporting for the nine months ended September 30, 2019 and 2018 (dollars in thousands):
 
 
Direct Investments
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 
Net Lease
 
Operating
 
Unconsolidated Investments
 
Debt and Securities
 
Corporate(1)
 
Total
Rental and resident fee income
 
$
25,202

 
$
193,624

 
$

 
$

 
$

 
$
218,826

Net interest income on debt and securities
 

 

 

 
5,771

 

 
5,771

Other revenue
 
1

 
767

 

 
29

 
648

 
1,445

Property operating expenses
 
(5
)
 
(135,208
)
 

 

 

 
(135,213
)
Interest expense
 
(9,424
)
 
(42,382
)
 

 

 
(102
)
 
(51,908
)
Transaction costs
 

 
(105
)
 

 

 

 
(105
)
Asset management and other fees - related party
 

 

 

 

 
(14,983
)
 
(14,983
)
General and administrative expenses
 
(159
)
 
(17
)
 

 
(28
)
 
(8,006
)
 
(8,210
)
Depreciation and amortization
 
(10,657
)
 
(43,868
)
 

 

 

 
(54,525
)
Impairment loss
 
(146
)
 
(10,000
)
 

 

 

 
(10,146
)
Realized gain (loss) on investments and other
 
5,871

 
431

 

 

 
(376
)
 
5,926

Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)
 
10,683

 
(36,758
)
 

 
5,772

 
(22,819
)
 
(43,122
)
Equity in earnings (losses) of unconsolidated ventures
 

 

 
(7,666
)
 

 

 
(7,666
)
Income tax benefit (expense)
 

 
(38
)
 

 

 

 
(38
)
Net income (loss)
 
$
10,683

 
$
(36,796
)
 
$
(7,666
)
 
$
5,772

 
$
(22,819
)
 
$
(50,826
)
_______________________________________
(1)
Includes unallocated asset management fee-related party and general and administrative expenses.




 
 
Direct Investments
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
Net Lease
 
Operating
 
Unconsolidated Investments
 
Debt and Securities
 
Corporate(1)
 
Subtotal
 
Investing VIE(2)
 
Total
Rental and resident fee income
 
$
25,484

 
$
192,374

 
$

 
$

 
$

 
$
217,858

 
$

 
$
217,858

Net interest income on debt and securities
 

 

 

 
6,591

(3) 
(314
)
(3) 
6,277

 
811

 
7,088

Other revenue
 

 
2,228

 

 

 
464

 
2,692

 

 
2,692

Property operating expenses
 
(1,089
)
 
(140,421
)
 

 

 

 
(141,510
)
 

 
(141,510
)
Interest expense
 
(9,978
)
 
(42,237
)
 

 

 
(193
)
 
(52,408
)
 

 
(52,408
)
Other expenses related to securitization trust
 

 

 

 

 

 

 
(811
)
 
(811
)
Transaction costs
 

 
(762
)
 

 

 
(44
)
 
(806
)
 

 
(806
)
Asset management and other fees - related party
 

 

 

 

 
(17,845
)
 
(17,845
)
 

 
(17,845
)
General and administrative expenses
 
(70
)
 
(664
)
 

 
(34
)
 
(9,159
)
 
(9,927
)
 

 
(9,927
)
Depreciation and amortization
 
(10,187
)
 
(71,756
)
 

 

 

 
(81,943
)
 

 
(81,943
)
Impairment loss
 
(2,456
)
 
(2,783
)
 

 

 

 
(5,239
)
 

 
(5,239
)
Unrealized gain (loss) on senior housing mortgage loans and debt held in securitization trust, net
 

 

 

 
(314
)
 
314

 

 

 

Realized gain (loss) on investments and other
 

 
726

 

 
3,495

 

 
4,221

 

 
4,221

Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax benefit (expense)
 
1,704

 
(63,295
)
 

 
9,738

 
(26,777
)
 
(78,630
)
 

 
(78,630
)
Equity in earnings (losses) of unconsolidated ventures
 

 

 
3,907

 

 

 
3,907

 

 
3,907

Income tax benefit (expense)
 

 
(40
)
 

 

 

 
(40
)
 

 
(40
)
Net income (loss)
 
$
1,704

 
$
(63,335
)
 
$
3,907

 
$
9,738

 
$
(26,777
)
 
$
(74,763
)
 
$

 
$
(74,763
)
______________________________________
(1)
Includes unallocated asset management fee-related party and general and administrative expenses.
(2)
Investing VIEs are not considered to be a segment that the Company conducts its business through, however, U.S. GAAP requires the Company, as the primary beneficiary, to present the assets and liabilities of the securitization trust on its consolidated balance sheets and recognize the related interest income and interest expense, as net interest income on the consolidated statements of operations. Though U.S. GAAP requires this presentation, the Company views its investment in the securitization trust as a net investment in healthcare-related securities.
(3)
Represents income earned from the healthcare-related securities purchased at a discount, recognized using the effective interest method had the transaction been recorded as an available for sale security, at amortized cost. During the nine months ended September 30, 2018, $0.3 million was attributable to discount accretion income and was eliminated in consolidation in the corporate segment.
The following table presents total assets by segment as of September 30, 2019 and December 31, 2018 (dollars in thousands):
 
 
Direct Investments
 
 
 
 
 
 
 
 
Total Assets:
 
Net Lease
 
Operating
 
Unconsolidated Investments
 
Debt and Securities
 
Corporate(1)
 
Total
September 30, 2019
 
$
376,041

 
$
1,442,651

 
$
282,551

 
$
56,678

 
$
15,097

 
$
2,173,018

December 31, 2018
 
394,697

 
1,481,522

 
264,317

 
59,620

 
64,260

 
2,264,416

_______________________________________
(1)
Represents primarily corporate cash and cash equivalent balances.