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Leases

12 Months Ended

Dec. 31, 2019

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer-term market rates). For leases that commenced prior to January 1, 2019, we used the incremental borrowing rate on December 31, 2018.

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):



	Classification	Year Ended December 31, 2019
Operating lease cost: ⁽¹⁾
Real estate lease expense	Property operating expenses	$	25,166
Non-real estate investment lease expense	General and administrative expenses	1,654
Finance lease cost:
Amortization of leased assets	Property operating expenses	7,795
Interest on lease liabilities	Interest expense	4,748
Sublease income	Rental income	(4,173		)
Total		$	35,190

⁽¹⁾ Includes short-term leases which are immaterial.

Maturities of lease liabilities as of December 31, 2019 are as follows (in thousands):



	Operating Leases			Finance Leases
2020	$	23,356		$	9,121
2021	23,322			8,786
2022	22,147			8,149
2023	22,117			69,182
2024	21,294			1,419
Thereafter	1,073,396			89,678
Total lease payments	1,185,632			186,335
Less: Imputed interest	(820,829		)	(77,445		)
Total present value of lease liabilities	$	364,803		$	108,890

Supplemental balance sheet information related to leases was as follows as of December 31, 2019 (in thousands, except lease terms and discount rate):



	Classification	December 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	374,217
Finance leases - real estate	Right of use assets, net	162,216
Real estate right of use assets, net		536,433
Operating leases - non-real estate investments	Receivables and other assets	12,474
Total right of use assets, net		$	548,907

Lease liabilities:
Operating leases		$	364,803
Financing leases		108,890
Total lease liabilities		$	473,693

Weighted average remaining lease term (years):
Operating leases		46.0
Finance leases		15.9

Weighted average discount rate:
Operating leases		5.00		%
Finance leases		5.18		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):



	Classification	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	6,397
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,489		)
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	10,732
Financing cash flows from finance leases	Other financing activities	(3,401		)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our Outpatient Medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $1,588,400,000 of rental and other revenues related to operating leases, of which $200,564,000 was for variable lease payments, for the year ended December 31, 2019, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. The following table sets forth the future minimum lease payments receivable for leases in effect at December 31, 2019 (excluding properties in our Seniors Housing Operating portfolio and excluding any operating expense reimbursements) (in thousands):



2020	$	1,430,978
2021	1,384,721
2022	1,346,917
2023	1,302,601
2024	1,265,988
Thereafter	9,026,163
Totals	$	15,757,368

Leases

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):



	Classification	Year Ended December 31, 2019
Operating lease cost: ⁽¹⁾
Real estate lease expense	Property operating expenses	$	25,166
Non-real estate investment lease expense	General and administrative expenses	1,654
Finance lease cost:
Amortization of leased assets	Property operating expenses	7,795
Interest on lease liabilities	Interest expense	4,748
Sublease income	Rental income	(4,173		)
Total		$	35,190

⁽¹⁾ Includes short-term leases which are immaterial.

Maturities of lease liabilities as of December 31, 2019 are as follows (in thousands):



	Operating Leases			Finance Leases
2020	$	23,356		$	9,121
2021	23,322			8,786
2022	22,147			8,149
2023	22,117			69,182
2024	21,294			1,419
Thereafter	1,073,396			89,678
Total lease payments	1,185,632			186,335
Less: Imputed interest	(820,829		)	(77,445		)
Total present value of lease liabilities	$	364,803		$	108,890

Supplemental balance sheet information related to leases was as follows as of December 31, 2019 (in thousands, except lease terms and discount rate):



	Classification	December 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	374,217
Finance leases - real estate	Right of use assets, net	162,216
Real estate right of use assets, net		536,433
Operating leases - non-real estate investments	Receivables and other assets	12,474
Total right of use assets, net		$	548,907

Lease liabilities:
Operating leases		$	364,803
Financing leases		108,890
Total lease liabilities		$	473,693

Weighted average remaining lease term (years):
Operating leases		46.0
Finance leases		15.9

Weighted average discount rate:
Operating leases		5.00		%
Finance leases		5.18		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):



	Classification	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	6,397
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,489		)
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	10,732
Financing cash flows from finance leases	Other financing activities	(3,401		)



2020	$	1,430,978
2021	1,384,721
2022	1,346,917
2023	1,302,601
2024	1,265,988
Thereafter	9,026,163
Totals	$	15,757,368

Leases

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):



	Classification	Year Ended December 31, 2019
Operating lease cost: ⁽¹⁾
Real estate lease expense	Property operating expenses	$	25,166
Non-real estate investment lease expense	General and administrative expenses	1,654
Finance lease cost:
Amortization of leased assets	Property operating expenses	7,795
Interest on lease liabilities	Interest expense	4,748
Sublease income	Rental income	(4,173		)
Total		$	35,190

⁽¹⁾ Includes short-term leases which are immaterial.

Maturities of lease liabilities as of December 31, 2019 are as follows (in thousands):



	Operating Leases			Finance Leases
2020	$	23,356		$	9,121
2021	23,322			8,786
2022	22,147			8,149
2023	22,117			69,182
2024	21,294			1,419
Thereafter	1,073,396			89,678
Total lease payments	1,185,632			186,335
Less: Imputed interest	(820,829		)	(77,445		)
Total present value of lease liabilities	$	364,803		$	108,890

Supplemental balance sheet information related to leases was as follows as of December 31, 2019 (in thousands, except lease terms and discount rate):



	Classification	December 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	374,217
Finance leases - real estate	Right of use assets, net	162,216
Real estate right of use assets, net		536,433
Operating leases - non-real estate investments	Receivables and other assets	12,474
Total right of use assets, net		$	548,907

Lease liabilities:
Operating leases		$	364,803
Financing leases		108,890
Total lease liabilities		$	473,693

Weighted average remaining lease term (years):
Operating leases		46.0
Finance leases		15.9

Weighted average discount rate:
Operating leases		5.00		%
Finance leases		5.18		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):



	Classification	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	6,397
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,489		)
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	10,732
Financing cash flows from finance leases	Other financing activities	(3,401		)



2020	$	1,430,978
2021	1,384,721
2022	1,346,917
2023	1,302,601
2024	1,265,988
Thereafter	9,026,163
Totals	$	15,757,368