Leases

12 Months Ended

Dec. 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. As most of our leases do not provide a rate implicit in the lease agreement, we generally use our incremental borrowing rate available at lease commencement, underlying collateral for the lease and the ability to borrow against that collateral on a secured basis 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).

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease for seven buildings which are subleased to a long-term/ post-acute care operator.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	22,150	$	22,642	$	23,472
Non-real estate investment lease expense	General and administrative expenses	5,794		4,596		4,745
Finance lease cost:
Amortization of leased assets	Property operating expenses	6,837		8,105		8,203
Interest on lease liabilities	Interest expense	6,164		6,574		6,411
Sublease income	Rental income	(11,487)		(8,687)		(4,173)
Total		$	29,458	$	33,230	$	38,658

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

Maturities of lease liabilities as of December 31, 2022 are as follows (in thousands):

	Operating Leases		Financing Leases
2023	$	20,279	$	72,218
2024	19,444		3,791
2025	16,112		1,800
2026	15,516		1,790
2027	15,834		1,748
Thereafter	876,054		125,142
Total lease payments	963,239		206,489
Less: Imputed interest	(660,879)		(93,025)
Total present value of lease liabilities	$	302,360	$	113,464

Supplemental balance sheet information related to leases was as follows for the periods presented (in thousands, except lease terms and discount rate):

	Classification	December 31, 2022			December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,984		$	367,068
Financing leases - real estate	Right of use assets, net	35,958			155,728
Real estate right of use assets, net		323,942			522,796
Operating leases - non-real estate investments	Receivables and other assets	10,119			9,627
Financing leases - held for sale(1)	Real property held for sale, net of accumulated depreciation	116,453			—
Total right of use assets, net		$	450,514		$	532,423
Lease liabilities:
Operating leases		$	302,360		$	434,261
Financing leases		113,464			111,683
Total lease liabilities		$	415,824		$	545,944
Weighted average remaining lease term (years):
Operating leases		46.0			36.6
Financing leases		19.8			19.8
Weighted average discount rate:
Operating leases		5.56		%	9.72		%
Financing leases		5.01		%	5.06		%

(1) At December 31, 2022, financing leases at seven properties were classified as held for sale.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	8,805	$	9,081	$	9,323
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,570)		(6,008)		(3,918)
Operating cash flows from financing leases	Decrease (increase) in receivables and other assets	8,672		8,336		8,263
Financing cash flows from financing leases	Other financing activities	(2,255)		(3,578)		(3,568)

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 years ended December 31, 2021 and 2020, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 and $146,508,000 through rental income, relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable. Included in the 2020 amount was $91,025,000 related to Genesis Healthcare ("Genesis") whom noted substantial doubt as to their ability to continue as a going concern.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. Rental income related to operating leases and the corresponding variable lease payments, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes for the periods indicated were as follows (in thousands):

	Year Ended December 31,
	2022		2021		2020
Fixed income from operating leases	$	1,258,238	$	1,193,837	$	1,240,012
Variable lease income	193,548		180,858		203,348

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 ASC 606. Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $410,749,000, $194,078,000 and $58,053,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table sets forth the future minimum lease payments receivable for leases in effect at December 31, 2022 (excluding properties in our Seniors Housing Operating portfolio and excluding any operating expense reimbursements) (in thousands):

2023	$	1,176,306
2024	1,150,604
2025	1,118,044
2026	1,074,809
2027	1,018,400
Thereafter	8,802,365
Totals	$	14,340,528

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. As most of our leases do not provide a rate implicit in the lease agreement, we generally use our incremental borrowing rate available at lease commencement, underlying collateral for the lease and the ability to borrow against that collateral on a secured basis 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).

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease for seven buildings which are subleased to a long-term/ post-acute care operator.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	22,150	$	22,642	$	23,472
Non-real estate investment lease expense	General and administrative expenses	5,794		4,596		4,745
Finance lease cost:
Amortization of leased assets	Property operating expenses	6,837		8,105		8,203
Interest on lease liabilities	Interest expense	6,164		6,574		6,411
Sublease income	Rental income	(11,487)		(8,687)		(4,173)
Total		$	29,458	$	33,230	$	38,658

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

Maturities of lease liabilities as of December 31, 2022 are as follows (in thousands):

	Operating Leases		Financing Leases
2023	$	20,279	$	72,218
2024	19,444		3,791
2025	16,112		1,800
2026	15,516		1,790
2027	15,834		1,748
Thereafter	876,054		125,142
Total lease payments	963,239		206,489
Less: Imputed interest	(660,879)		(93,025)
Total present value of lease liabilities	$	302,360	$	113,464

Supplemental balance sheet information related to leases was as follows for the periods presented (in thousands, except lease terms and discount rate):

	Classification	December 31, 2022			December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,984		$	367,068
Financing leases - real estate	Right of use assets, net	35,958			155,728
Real estate right of use assets, net		323,942			522,796
Operating leases - non-real estate investments	Receivables and other assets	10,119			9,627
Financing leases - held for sale(1)	Real property held for sale, net of accumulated depreciation	116,453			—
Total right of use assets, net		$	450,514		$	532,423
Lease liabilities:
Operating leases		$	302,360		$	434,261
Financing leases		113,464			111,683
Total lease liabilities		$	415,824		$	545,944
Weighted average remaining lease term (years):
Operating leases		46.0			36.6
Financing leases		19.8			19.8
Weighted average discount rate:
Operating leases		5.56		%	9.72		%
Financing leases		5.01		%	5.06		%

(1) At December 31, 2022, financing leases at seven properties were classified as held for sale.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	8,805	$	9,081	$	9,323
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,570)		(6,008)		(3,918)
Operating cash flows from financing leases	Decrease (increase) in receivables and other assets	8,672		8,336		8,263
Financing cash flows from financing leases	Other financing activities	(2,255)		(3,578)		(3,568)

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 years ended December 31, 2021 and 2020, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 and $146,508,000 through rental income, relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable. Included in the 2020 amount was $91,025,000 related to Genesis Healthcare ("Genesis") whom noted substantial doubt as to their ability to continue as a going concern.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. Rental income related to operating leases and the corresponding variable lease payments, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes for the periods indicated were as follows (in thousands):

	Year Ended December 31,
	2022		2021		2020
Fixed income from operating leases	$	1,258,238	$	1,193,837	$	1,240,012
Variable lease income	193,548		180,858		203,348

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 ASC 606. Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $410,749,000, $194,078,000 and $58,053,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table sets forth the future minimum lease payments receivable for leases in effect at December 31, 2022 (excluding properties in our Seniors Housing Operating portfolio and excluding any operating expense reimbursements) (in thousands):

2023	$	1,176,306
2024	1,150,604
2025	1,118,044
2026	1,074,809
2027	1,018,400
Thereafter	8,802,365
Totals	$	14,340,528

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. As most of our leases do not provide a rate implicit in the lease agreement, we generally use our incremental borrowing rate available at lease commencement, underlying collateral for the lease and the ability to borrow against that collateral on a secured basis 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).

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease for seven buildings which are subleased to a long-term/ post-acute care operator.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	22,150	$	22,642	$	23,472
Non-real estate investment lease expense	General and administrative expenses	5,794		4,596		4,745
Finance lease cost:
Amortization of leased assets	Property operating expenses	6,837		8,105		8,203
Interest on lease liabilities	Interest expense	6,164		6,574		6,411
Sublease income	Rental income	(11,487)		(8,687)		(4,173)
Total		$	29,458	$	33,230	$	38,658

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

Maturities of lease liabilities as of December 31, 2022 are as follows (in thousands):

	Operating Leases		Financing Leases
2023	$	20,279	$	72,218
2024	19,444		3,791
2025	16,112		1,800
2026	15,516		1,790
2027	15,834		1,748
Thereafter	876,054		125,142
Total lease payments	963,239		206,489
Less: Imputed interest	(660,879)		(93,025)
Total present value of lease liabilities	$	302,360	$	113,464

Supplemental balance sheet information related to leases was as follows for the periods presented (in thousands, except lease terms and discount rate):

	Classification	December 31, 2022			December 31, 2021
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,984		$	367,068
Financing leases - real estate	Right of use assets, net	35,958			155,728
Real estate right of use assets, net		323,942			522,796
Operating leases - non-real estate investments	Receivables and other assets	10,119			9,627
Financing leases - held for sale(1)	Real property held for sale, net of accumulated depreciation	116,453			—
Total right of use assets, net		$	450,514		$	532,423
Lease liabilities:
Operating leases		$	302,360		$	434,261
Financing leases		113,464			111,683
Total lease liabilities		$	415,824		$	545,944
Weighted average remaining lease term (years):
Operating leases		46.0			36.6
Financing leases		19.8			19.8
Weighted average discount rate:
Operating leases		5.56		%	9.72		%
Financing leases		5.01		%	5.06		%

(1) At December 31, 2022, financing leases at seven properties were classified as held for sale.

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

		Year Ended December 31,
	Classification	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	8,805	$	9,081	$	9,323
Operating cash flows from operating leases	Increase (decrease) in accrued expenses and other liabilities	(5,570)		(6,008)		(3,918)
Operating cash flows from financing leases	Decrease (increase) in receivables and other assets	8,672		8,336		8,263
Financing cash flows from financing leases	Other financing activities	(2,255)		(3,578)		(3,568)

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 years ended December 31, 2021 and 2020, we reserved for previously recognized straight-line rent receivable balances of $49,241,000 and $146,508,000 through rental income, relating to leases for which collection of substantially all contractual lease payments was no longer deemed probable. Included in the 2020 amount was $91,025,000 related to Genesis Healthcare ("Genesis") whom noted substantial doubt as to their ability to continue as a going concern.

Leases in our Triple-net and Outpatient Medical portfolios typically include some form of operating expense reimbursement by the tenant. Rental income related to operating leases and the corresponding variable lease payments, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes for the periods indicated were as follows (in thousands):

	Year Ended December 31,
	2022		2021		2020
Fixed income from operating leases	$	1,258,238	$	1,193,837	$	1,240,012
Variable lease income	193,548		180,858		203,348

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 ASC 606. Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $410,749,000, $194,078,000 and $58,053,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table sets forth the future minimum lease payments receivable for leases in effect at December 31, 2022 (excluding properties in our Seniors Housing Operating portfolio and excluding any operating expense reimbursements) (in thousands):

2023	$	1,176,306
2024	1,150,604
2025	1,118,044
2026	1,074,809
2027	1,018,400
Thereafter	8,802,365
Totals	$	14,340,528