Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Leases

Lease Income

The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):

	Year Ended December 31,
	2023		2022		2021
Fixed income from operating leases	$	1,236,502	$	1,182,463	$	1,087,683
Variable income from operating leases	395,303		359,312		290,701
Interest income from direct financing leases	—		1,168		8,702

Direct Financing Leases

2022 Direct Financing Lease Sale

During the first quarter of 2022, the Company sold its remaining hospital under a DFL for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at December 31, 2023 and 2022, the Company had no leases classified as a DFL.

Operating Leases

Future Minimum Rents

The following table summarizes future minimum lease payments to be received from tenants under non-cancelable operating leases as of December 31, 2023 (in thousands):

Year	Amount
2024	$	1,135,628
2025	1,063,147
2026	975,246
2027	888,223
2028	788,742
Thereafter	2,818,655
	$	7,669,641

Tenant Purchase Options

Certain leases contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable are as follows (dollars in thousands):

Year	Annualized Base Rent(1)		Number of Properties
2024	$	14,199	12
2025	14,244		16
2026	16,422		8
2027	8,116		5
2028	1,252		1
Thereafter	16,212		5
	$	70,445	47

_______________________________________

(1)Represents the most recent month’s base rent including additional rent floors annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).

Lease Costs

The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to discontinued operations (dollars in thousands):

	Year Ended December 31,
Lease Expense Information:	2023		2022		2021
Total lease expense	$	17,010	$	16,689	$	14,442

Weighted Average Lease Term and Discount Rate:	December 31, 2023		December 31, 2022
Weighted average remaining lease term (years):
Operating leases(1)	51		51
Weighted average discount rate:
Operating leases	4.23	%	4.20	%

_______________________________________

(1)As of both December 31, 2023 and 2022, the weighted average remaining lease term including the Company’s options to extend its operating leases is 67 years.

The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability as of December 31, 2023 (in thousands):

Year	Amount
2024	$	16,950
2025	12,399
2026	12,326
2027	12,321
2028	12,351
Thereafter	475,584
Undiscounted minimum lease payments included in the lease liability	541,931
Less: imputed interest	(335,188)
Present value of lease liability	$	206,743

Depreciation Expense

While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s Consolidated Balance Sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s Consolidated Statements of Operations. Included within other assets, net as of both December 31, 2023 and 2022 is $10 million of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2023, 2022, and 2021 is $3 million, $3 million, and $2 million, respectively, of depreciation expense related to corporate assets.

Denver Corporate Headquarters

During the year ended December 31, 2022, the Company recognized $7 million of charges in connection with the downsizing of the Company’s corporate headquarters in Denver, Colorado which are included in general and administrative expenses on the Consolidated Statements of Operations.

Tenant Updates

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. Subsequent to the Filing, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease and three of the four operating leases, resulting in termination of these four leases during the year ended December 31, 2023. The Company filed proofs of claim for related damages during the year, $4 million of which was received by the Company by drawing on Sorrento’s related letters of credit and security deposits. These cash proceeds were recognized as rental revenue and 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 Company’s claims related to the rejected leases is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with these claims as of December 31, 2023.

On October 26, 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million, comprised of a $21 million termination fee and $16 million prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.

Leases

Leases

Lease Income

The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):

	Year Ended December 31,
	2023		2022		2021
Fixed income from operating leases	$	1,236,502	$	1,182,463	$	1,087,683
Variable income from operating leases	395,303		359,312		290,701
Interest income from direct financing leases	—		1,168		8,702

Direct Financing Leases

2022 Direct Financing Lease Sale

During the first quarter of 2022, the Company sold its remaining hospital under a DFL for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at December 31, 2023 and 2022, the Company had no leases classified as a DFL.

Operating Leases

Future Minimum Rents

The following table summarizes future minimum lease payments to be received from tenants under non-cancelable operating leases as of December 31, 2023 (in thousands):

Year	Amount
2024	$	1,135,628
2025	1,063,147
2026	975,246
2027	888,223
2028	788,742
Thereafter	2,818,655
	$	7,669,641

Tenant Purchase Options

Certain leases contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable are as follows (dollars in thousands):

Year	Annualized Base Rent(1)		Number of Properties
2024	$	14,199	12
2025	14,244		16
2026	16,422		8
2027	8,116		5
2028	1,252		1
Thereafter	16,212		5
	$	70,445	47

_______________________________________

(1)Represents the most recent month’s base rent including additional rent floors annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).

Lease Costs

The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to discontinued operations (dollars in thousands):

	Year Ended December 31,
Lease Expense Information:	2023		2022		2021
Total lease expense	$	17,010	$	16,689	$	14,442

Weighted Average Lease Term and Discount Rate:	December 31, 2023		December 31, 2022
Weighted average remaining lease term (years):
Operating leases(1)	51		51
Weighted average discount rate:
Operating leases	4.23	%	4.20	%

_______________________________________

(1)As of both December 31, 2023 and 2022, the weighted average remaining lease term including the Company’s options to extend its operating leases is 67 years.

The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability as of December 31, 2023 (in thousands):

Year	Amount
2024	$	16,950
2025	12,399
2026	12,326
2027	12,321
2028	12,351
Thereafter	475,584
Undiscounted minimum lease payments included in the lease liability	541,931
Less: imputed interest	(335,188)
Present value of lease liability	$	206,743

Depreciation Expense

While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s Consolidated Balance Sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s Consolidated Statements of Operations. Included within other assets, net as of both December 31, 2023 and 2022 is $10 million of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2023, 2022, and 2021 is $3 million, $3 million, and $2 million, respectively, of depreciation expense related to corporate assets.

Denver Corporate Headquarters

During the year ended December 31, 2022, the Company recognized $7 million of charges in connection with the downsizing of the Company’s corporate headquarters in Denver, Colorado which are included in general and administrative expenses on the Consolidated Statements of Operations.

Tenant Updates

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. Subsequent to the Filing, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease and three of the four operating leases, resulting in termination of these four leases during the year ended December 31, 2023. The Company filed proofs of claim for related damages during the year, $4 million of which was received by the Company by drawing on Sorrento’s related letters of credit and security deposits. These cash proceeds were recognized as rental revenue and 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 Company’s claims related to the rejected leases is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with these claims as of December 31, 2023.

On October 26, 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million, comprised of a $21 million termination fee and $16 million prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.

Leases

Leases

Lease Income

The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):

	Year Ended December 31,
	2023		2022		2021
Fixed income from operating leases	$	1,236,502	$	1,182,463	$	1,087,683
Variable income from operating leases	395,303		359,312		290,701
Interest income from direct financing leases	—		1,168		8,702

Direct Financing Leases

2022 Direct Financing Lease Sale

During the first quarter of 2022, the Company sold its remaining hospital under a DFL for $68 million and recognized a gain on sale of $23 million, which is included in other income (expense), net. Therefore, at December 31, 2023 and 2022, the Company had no leases classified as a DFL.

Operating Leases

Future Minimum Rents

The following table summarizes future minimum lease payments to be received from tenants under non-cancelable operating leases as of December 31, 2023 (in thousands):

Year	Amount
2024	$	1,135,628
2025	1,063,147
2026	975,246
2027	888,223
2028	788,742
Thereafter	2,818,655
	$	7,669,641

Tenant Purchase Options

Certain leases contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable are as follows (dollars in thousands):

Year	Annualized Base Rent(1)		Number of Properties
2024	$	14,199	12
2025	14,244		16
2026	16,422		8
2027	8,116		5
2028	1,252		1
Thereafter	16,212		5
	$	70,445	47

_______________________________________

(1)Represents the most recent month’s base rent including additional rent floors annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).

Lease Costs

The following tables provide information regarding the Company’s leases to which it is the lessee, such as corporate offices and ground leases, excluding lease costs related to discontinued operations (dollars in thousands):

	Year Ended December 31,
Lease Expense Information:	2023		2022		2021
Total lease expense	$	17,010	$	16,689	$	14,442

Weighted Average Lease Term and Discount Rate:	December 31, 2023		December 31, 2022
Weighted average remaining lease term (years):
Operating leases(1)	51		51
Weighted average discount rate:
Operating leases	4.23	%	4.20	%

_______________________________________

(1)As of both December 31, 2023 and 2022, the weighted average remaining lease term including the Company’s options to extend its operating leases is 67 years.

The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability as of December 31, 2023 (in thousands):

Year	Amount
2024	$	16,950
2025	12,399
2026	12,326
2027	12,321
2028	12,351
Thereafter	475,584
Undiscounted minimum lease payments included in the lease liability	541,931
Less: imputed interest	(335,188)
Present value of lease liability	$	206,743

Depreciation Expense

While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s Consolidated Balance Sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s Consolidated Statements of Operations. Included within other assets, net as of both December 31, 2023 and 2022 is $10 million of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2023, 2022, and 2021 is $3 million, $3 million, and $2 million, respectively, of depreciation expense related to corporate assets.

Denver Corporate Headquarters

During the year ended December 31, 2022, the Company recognized $7 million of charges in connection with the downsizing of the Company’s corporate headquarters in Denver, Colorado which are included in general and administrative expenses on the Consolidated Statements of Operations.

Tenant Updates

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. Subsequent to the Filing, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease and three of the four operating leases, resulting in termination of these four leases during the year ended December 31, 2023. The Company filed proofs of claim for related damages during the year, $4 million of which was received by the Company by drawing on Sorrento’s related letters of credit and security deposits. These cash proceeds were recognized as rental revenue and 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 Company’s claims related to the rejected leases is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with these claims as of December 31, 2023.

On October 26, 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million, comprised of a $21 million termination fee and $16 million prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.