Segment Disclosures

3 Months Ended

Mar. 31, 2020

The Company evaluates its business and allocates resources based on its reportable business segments: (i) senior housing triple-net, (ii) SHOP, (iii) CCRC, (iv) life science, and (v) medical office. The Company has non-reportable segments that are comprised primarily of the Company’s hospital properties and debt investments. The accounting policies of the segments are the same as those in Note 2 to the Consolidated Financial Statements in the Company’s 2019 Annual Report on Form 10-K filed with the SEC, as updated by Note 2 herein.

During the first quarter of 2020, primarily as a result of: (i) acquiring 100% ownership interest in 13 of 15 CCRCs previously held by a CCRC joint venture (see discussion of the 2019 MTCA with Brookdale in Note 3) and (ii) deconsolidating 19 SHOP assets into a new joint venture in December 2019, the Company's chief operating decision makers began reviewing operating results of CCRCs on a stand-alone basis and financial information for each respective segment inclusive of the Company’s share of unconsolidated joint ventures and exclusive of noncontrolling interests’ share on consolidated joint ventures. Therefore, during the first quarter of 2020, the Company began reporting CCRCs as a separate segment and began reporting segment measures inclusive of the Company’s share of unconsolidated joint ventures and exclusive of noncontrolling interests’ share of consolidated joint ventures. Accordingly, all prior period segment information has been recast to conform to the current period presentation.

During the three months ended March 31, 2020 and 2019, 7 and 18 senior housing triple-net facilities, respectively, were transferred to the Company’s SHOP segment as a result of terminating the triple-net leases and transitioning the assets to a RIDEA structure. When an asset is transferred from one segment to another, the results associated with that asset are included in the original segment until the date of transfer. Results generated after the transfer date are included in the new segment.

The Company evaluates performance based on property Adjusted NOI. NOI is defined as real estate revenues (inclusive of rental and related revenues, resident fees and services, and income from direct financing leases and exclusive of interest income), less property level operating expenses (which exclude transition costs); NOI excludes all other financial statement amounts included in net income (loss). Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense.

NOI and Adjusted NOI include the Company’s share of income (loss) from unconsolidated joint ventures and exclude noncontrolling interests’ share of income (loss) from consolidated joint ventures. Management believes Adjusted NOI is an important supplemental measure because it provides relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and presenting it on an unlevered basis.

Non-segment assets consist of assets in the Company's other non-reportable segments and corporate non-segment assets. Corporate non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities, and real estate assets and liabilities held for sale.

The following tables summarize information for the reportable segments (in thousands):

For the three months ended March 31, 2020:



	Senior Housing Triple-Net			SHOP			CCRC			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Total revenues	$	33,135		$	170,961		$	91,780		$	128,883		$	145,146		$	15,245		$	—		$	585,150
Less: Interest income	—			—			—			—			—			(3,688		)	—			(3,688		)
Healthpeak's share of unconsolidated joint venture real estate revenues	—			25,765			21,647			—			695			86			—			48,193
Noncontrolling interests' share of consolidated joint venture real estate revenues	—			(538		)	—			(52		)	(8,640		)	—			—			(9,230		)
Operating expenses	(506		)	(138,130		)	(156,482		)	(30,201		)	(50,687		)	(7		)	—			(376,013		)
Healthpeak's share of unconsolidated joint venture operating expenses	—			(17,956		)	(18,037		)	—			(275		)	2			—			(36,266		)
Noncontrolling interests' share of consolidated joint venture operating expenses	—			377			—			17			2,600			—			—			2,994
Adjustments to NOI⁽¹⁾	(3,374		)	531			91,561			(4,280		)	(1,457		)	461			—			83,442
Adjusted NOI	29,255			41,010			30,469			94,367			87,382			12,099			—			294,582
Plus: Adjustments to NOI⁽¹⁾	3,374			(531		)	(91,561		)	4,280			1,457			(461		)	—			(83,442		)
Interest income	—			—			—			—			—			3,688			—			3,688
Interest expense	(82		)	(2,855		)	(1,304		)	(63		)	(102		)	—			(53,970		)	(58,376		)
Depreciation and amortization	(7,160		)	(57,003		)	(20,229		)	(50,211		)	(53,148		)	(1,525		)	—			(189,276		)
General and administrative	—			—			—			—			—			—			(22,349		)	(22,349		)
Transaction costs	—			—			—			—			—			—			(14,848		)	(14,848		)
Impairments and loan loss reserves (recoveries), net	(4,670		)	(23,285		)	—			—			(2,706		)	(8,462		)	—			(39,123		)
Gain (loss) on sales of real estate, net	164,043			(1,243		)	—			—			2,109			(40		)	—			164,869
Loss on debt extinguishments	—			—			—			—			—			—			833			833
Other income (expense), net	—			—			170,332			—			—			41,707			(1,431		)	210,608
Income tax benefit (expense)⁽²⁾	—			—			—			—			—			—			33,044			33,044
Less: Healthpeak's share of unconsolidated joint venture NOI	—			(7,809		)	(3,610		)	—			(420		)	(88		)	—			(11,927		)
Plus: Noncontrolling interests' share of consolidated joint venture NOI	—			161			—			35			6,040			—			—			6,236
Equity income (loss) from unconsolidated joint ventures	—			(18,150		)	(1,880		)	—			196			7,855			—			(11,979		)
Net income (loss)	$	184,760		$	(69,705	)	$	82,217		$	48,408		$	40,808		$	54,773		$	(58,721	)	$	282,540

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(1)

Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.

(2)

Income tax benefit (expense) for the quarter ended March 31, 2020 includes: (i) a $52 million tax benefit recognized in conjunction with internal restructuring activities, which resulted in the transfer of assets subject to certain deferred tax liabilities from taxable REIT subsidiaries to the REIT in connection with the 2019 MTCA (see Note 3) and (ii) a $2.9 million net tax benefit recognized due to changes under the Coronavirus Aid, Relief, and Economic Security (“CARES”) act, which resulted in net operating losses being utilized at a higher income tax rate than previously available.

For the three months ended March 31, 2019:



	Senior Housing Triple-Net			SHOP			CCRC			Life Science			Medical Office			Other Non-reportable			Corporate Non-segment			Total
Total revenues	$	58,831		$	126,181		$	—		$	94,473		$	142,195		$	14,474		$	—		$	436,154
Less: Interest income	—			—			—			—			—			(1,713		)	—			(1,713		)
Healthpeak's share of unconsolidated joint venture real estate revenues	—			5,649			52,238			—			705			5,532			—			64,124
Noncontrolling interests' share of consolidated joint venture real estate revenues	(2		)	(472		)	—			(40		)	(8,303		)	—			—			(8,817		)
Operating expenses	(994		)	(96,947		)	—			(21,992		)	(48,987		)	(7		)	—			(168,927		)
Healthpeak's share of unconsolidated joint venture operating expenses	—			(4,161		)	(41,377		)	—			(275		)	(17		)	—			(45,830		)
Noncontrolling interests' share of consolidated joint venture operating expenses	—			350			—			13			2,424			—			—			2,787
Adjustments to NOI⁽¹⁾	566			1,182			3,452			(2,479		)	(1,748		)	(279		)	—			694
Adjusted NOI	58,401			31,782			14,313			69,975			86,011			17,990			—			278,472
Plus: Adjustments to NOI⁽¹⁾	(566		)	(1,182		)	(3,452		)	2,479			1,748			279			—			(694		)
Interest income	—			—			—			—			—			1,713			—			1,713
Interest expense	(589		)	(663		)	—			(73		)	(111		)	—			(47,891		)	(49,327		)
Depreciation and amortization	(16,677		)	(24,086		)	—			(36,248		)	(53,020		)	(1,920		)	—			(131,951		)
General and administrative	—			—			—			—			—			—			(21,355		)	(21,355		)
Transaction costs	—			—			—			—			—			—			(4,518		)	(4,518		)
Impairments and loan loss reserves (recoveries), net	—			—			—			—			(8,858		)	—			—			(8,858		)
Gain (loss) on sales of real estate, net	3,557			4,487			—			—			—			—			—			8,044
Other income (expense), net	—			—			—			—			—			—			3,133			3,133
Income tax benefit (expense)	—			—			—			—			—			—			3,458			3,458
Less: Healthpeak's share of unconsolidated joint venture NOI	—			(1,488		)	(10,861		)	—			(430		)	(5,515		)	—			(18,294		)
Plus: Noncontrolling interests' share of consolidated joint venture NOI	2			122			—			27			5,879			—			—			6,030
Equity income (loss) from unconsolidated joint ventures	—			(477		)	(2,096		)	—			211			1,499			—			(863		)
Net income (loss)	$	44,128		$	8,495		$	(2,096	)	$	36,160		$	31,430		$	14,046		$	(67,173	)	$	64,990

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(1)

The following table summarizes the Company’s revenues by segment (in thousands):



	Three Months Ended March 31,
Segment	2020		2019
Senior housing triple-net	$	33,135	$	58,831
SHOP	170,961		126,181
CCRC	91,780		—
Life science	128,883		94,473
Medical office	145,146		142,195
Other non-reportable segments	15,245		14,474
Total revenues	$	585,150	$	436,154

See Notes 3, 4, 5, 6, and 7 for significant transactions impacting the Company’s segment assets during the periods presented.