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Net Investment in Direct Financing Leases
 6 Months Ended
Jun. 30, 2017
Leases, Capital [Abstract]  
Net Investment in Direct Financing Leases
Net Investment in Direct Financing Leases
Net investment in DFLs consisted of the following (dollars in thousands):
 
June 30,
2017
 
December 31,
2016
Minimum lease payments receivable
$
1,081,187

 
$
1,108,237

Estimated residual value
500,368

 
539,656

Less unearned income
(869,778
)
 
(895,304
)
Net investment in direct financing leases
$
711,777

 
$
752,589

Properties subject to direct financing leases
29

 
30


Certain DFLs contain provisions that allow the tenants to elect to purchase the properties during or at the end of the lease terms for the aggregate initial investment amount plus adjustments, if any, as defined in the lease agreements. Certain leases also permit the Company to require the tenants to purchase the properties at the end of the lease terms.
In February 2017, the Company sold a hospital within a DFL in Palm Beach Gardens, Florida for $43 million to the current tenant.
Direct Financing Lease Internal Ratings
The following table summarizes the Company’s internal ratings for DFLs at June 30, 2017 (dollars in thousands):
 
 
Carrying
Amount
 
Percentage of
DFL Portfolio
 
Internal Ratings
Segment
 
 
 
Performing DFLs
 
Watch List DFLs
 
Workout DFLs
Senior housing triple-net
 
$
627,173

 
88%
 
$
268,815

359,586,000

$
358,358

 
$
—

Other non-reportable segments
 
84,604

 
12
 
84,604

—

—

 
—

 
 
$
711,777

 
100%
 
$
353,419

 
$
358,358

 
$
—


Beginning September 30, 2013, the Company placed a 14 property senior housing triple-net DFL (the “DFL Watchlist Portfolio”) on nonaccrual status and “Watch List” status. The Company determined that the collection of all rental payments was and continues to be no longer reasonably assured; therefore, rental revenue for the DFL Watchlist Portfolio has been recognized on a cash basis. During both the three months ended June 30, 2017 and 2016, the Company recognized DFL income of $4 million and received cash payments of $5 million from the DFL Watchlist Portfolio. During the six months ended June 30, 2017 and 2016, the Company recognized DFL income of $7 million and $8 million, respectively, and received cash payments of $9 million and $10 million, respectively, from the DFL Watchlist Portfolio. The carrying value of the DFL Watchlist Portfolio was $358 million and $361 million at June 30, 2017 and December 31, 2016, respectively.