XML 24 R13.htm IDEA: XBRL DOCUMENT v3.23.2
Leases
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Leases Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Fixed income from operating leases$311,663 $296,729 $606,179 $584,020 
Variable income from operating leases98,304 90,350 196,219 173,209 
Interest income from direct financing leases— — — 1,168 
Direct Financing Leases
2022 Direct Financing Lease Sale
During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at June 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL.
Straight-Line Rents
For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue.
During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of June 30, 2023.
Leases Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Fixed income from operating leases$311,663 $296,729 $606,179 $584,020 
Variable income from operating leases98,304 90,350 196,219 173,209 
Interest income from direct financing leases— — — 1,168 
Direct Financing Leases
2022 Direct Financing Lease Sale
During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at June 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL.
Straight-Line Rents
For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue.
During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of June 30, 2023.
Lessee Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2023202220232022
Fixed income from operating leases$311,663 $296,729 $606,179 $584,020 
Variable income from operating leases98,304 90,350 196,219 173,209 
Interest income from direct financing leases— — — 1,168 
Direct Financing Leases
2022 Direct Financing Lease Sale
During the first quarter of 2022, the Company sold its remaining hospital under a direct financing lease (“DFL”) for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at June 30, 2023 and December 31, 2022, the Company had no leases classified as a DFL.
Straight-Line Rents
For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue.
During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. During the second quarter of 2023, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease, resulting in termination of the lease. The Company filed a proof of claim for related damages, $2 million of which was received by the Company by drawing on Sorrento’s letter of credit during the three months ended June 30, 2023. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claim is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with this claim as of June 30, 2023.