Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

Leases

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.

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

		Three Months Ended
	Classification	March 31, 2022		March 31, 2021
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,816	$	5,358
Non-real estate investment lease expense	General and administrative expenses	978		1,185
Finance lease cost:
Amortization of leased assets	Property operating expenses	1,156		2,035
Interest on lease liabilities	Interest expense	1,618		1,663
Sublease income	Rental income	(2,715)		(1,043)
Total		$	6,853	$	9,198

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

Supplemental balance sheet information related to leases is as follows (in thousands):

	Classification	March 31, 2022		December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	370,740	$	367,068
Finance leases - real estate	Right of use assets, net	33,949		155,728
Real estate right of use assets, net		404,689		522,796
Operating leases - non-real estate investments	Receivables and other assets	9,430		9,627
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	119,733		—
Total right of use assets, net		$	533,852	$	532,423
Lease liabilities:
Operating leases		$	438,175	$	434,261
Financing leases		110,824		111,683
Total		$	548,999	$	545,944
(1) At March 31, 2022 finance leases at seven properties were classified as held for sale.

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. During the three months ended March 31, 2021, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 through rental income relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2021, we recognized $302,843,000 of rental income related to operating leases, of which $46,026,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842, "Leases." The amount of revenue related to these leases was $94,827,000 and $15,771,000 for the three months ended March 31, 2022 and March 31, 2021, respectively.

Leases

Leases

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.

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

		Three Months Ended
	Classification	March 31, 2022		March 31, 2021
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,816	$	5,358
Non-real estate investment lease expense	General and administrative expenses	978		1,185
Finance lease cost:
Amortization of leased assets	Property operating expenses	1,156		2,035
Interest on lease liabilities	Interest expense	1,618		1,663
Sublease income	Rental income	(2,715)		(1,043)
Total		$	6,853	$	9,198

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

Supplemental balance sheet information related to leases is as follows (in thousands):

	Classification	March 31, 2022		December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	370,740	$	367,068
Finance leases - real estate	Right of use assets, net	33,949		155,728
Real estate right of use assets, net		404,689		522,796
Operating leases - non-real estate investments	Receivables and other assets	9,430		9,627
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	119,733		—
Total right of use assets, net		$	533,852	$	532,423
Lease liabilities:
Operating leases		$	438,175	$	434,261
Financing leases		110,824		111,683
Total		$	548,999	$	545,944
(1) At March 31, 2022 finance leases at seven properties were classified as held for sale.

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. During the three months ended March 31, 2021, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 through rental income relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2021, we recognized $302,843,000 of rental income related to operating leases, of which $46,026,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842, "Leases." The amount of revenue related to these leases was $94,827,000 and $15,771,000 for the three months ended March 31, 2022 and March 31, 2021, respectively.

Leases

Leases

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.

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

		Three Months Ended
	Classification	March 31, 2022		March 31, 2021
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,816	$	5,358
Non-real estate investment lease expense	General and administrative expenses	978		1,185
Finance lease cost:
Amortization of leased assets	Property operating expenses	1,156		2,035
Interest on lease liabilities	Interest expense	1,618		1,663
Sublease income	Rental income	(2,715)		(1,043)
Total		$	6,853	$	9,198

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

Supplemental balance sheet information related to leases is as follows (in thousands):

	Classification	March 31, 2022		December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	370,740	$	367,068
Finance leases - real estate	Right of use assets, net	33,949		155,728
Real estate right of use assets, net		404,689		522,796
Operating leases - non-real estate investments	Receivables and other assets	9,430		9,627
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	119,733		—
Total right of use assets, net		$	533,852	$	532,423
Lease liabilities:
Operating leases		$	438,175	$	434,261
Financing leases		110,824		111,683
Total		$	548,999	$	545,944
(1) At March 31, 2022 finance leases at seven properties were classified as held for sale.

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. During the three months ended March 31, 2021, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 through rental income relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2021, we recognized $302,843,000 of rental income related to operating leases, of which $46,026,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842, "Leases." The amount of revenue related to these leases was $94,827,000 and $15,771,000 for the three months ended March 31, 2022 and March 31, 2021, respectively.