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LEASES
6 Months Ended
Jun. 30, 2024
Leases [Abstract]  
LEASES LEASES
The Company’s independent operating subsidiaries lease senior living communities and its administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 25 years. The Company’s independent operating subsidiaries also lease the administrative offices of home health and hospice agencies, which generally have lease terms that range from one to 11 years. Most of these leases contain renewal options, most involve rent increases and none contain purchase options. The lease term excludes lease renewals because the renewal rents are not at a bargain, there are no economic penalties for the Company to renew the lease, and it is not reasonably certain that the Company will exercise the extension options. The Company elected the accounting policy practical expedients in ASC 842 to: (i) combine associated lease and non-lease components into a single lease component; and (ii) exclude recording short-term leases as right-of-use assets and liabilities on the condensed consolidated balance sheets. Non-lease components, which are not significant overall, are combined with lease components.

As of June 30, 2024, the Company’s independent operating subsidiaries leased 29 senior living communities from subsidiaries of Ensign (“Ensign Leases”) under a master lease arrangement. The existing leases with subsidiaries of Ensign have initial terms of between 14 to 20 years. The total amount of rent expense included in rent - cost of services paid to subsidiaries of Ensign was $3,488 and $6,976 for the three and six months ended June 30, 2024, respectively, and $3,333 and $6,749 for the three and six months ended June 30, 2023, respectively. In addition to rent, each of the operating companies are required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all community maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties.

Fourteen of the Company’s affiliated senior living communities, excluding the communities that are operated under the Ensign Leases (as defined herein), are operated under three separate master lease arrangements. Under these master leases, a breach at a single community could subject one or more of the other communities covered by the same master lease to the same
default risk. Failure to comply with Medicare and Medicaid provider requirements is a default under several of the Company’s leases and master leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the master lease without the consent of the landlord.

The components of operating lease cost, are as follows:

Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Operating Lease Costs:
Community Rent—cost of services$8,860 $8,462 $17,515 $16,736 
Office Rent—cost of services1,664 1,374 3,393 2,697 
Rent—cost of services$10,524 $9,836 $20,908 $19,433 
General and administrative expense$116 $104 $203 $197 
Variable lease cost (a)
$2,239 $1,761 $4,269 $3,491 
(a)
Represents variable lease cost for operating leases, which costs include property taxes and insurance, common area maintenance, and consumer price index increases, incurred as part of the Company’s triple net lease, and which is included in cost of services for the three and six months ended June 30, 2024 and 2023.

The following table shows the lease maturity analysis for all leases as of June 30, 2024, for the years ended December 31:

YearAmount
2024 (Remainder)$19,680 
202538,276 
202636,728 
202735,616 
202834,832 
Thereafter260,683 
Total lease payments425,815 
Less: present value adjustments(155,729)
Present value of total lease liabilities270,086 
Less: current lease liabilities(18,473)
Long-term operating lease liabilities$251,613 

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at each lease’s commencement date to determine each lease's operating lease liability. As of June 30, 2024, the weighted average remaining lease term is 12.1 years and the weighted average discount rate is 8.1%.