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. |
|