Leases

9 Months Ended

Sep. 30, 2023

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):

		Nine Months Ended
	Classification	September 30, 2023		September 30, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	16,663	$	16,767
Non-real estate investment lease expense	General and administrative expenses	5,392		4,174
Finance lease cost:
Amortization of leased assets	Property operating expenses	4,774		4,927
Interest on lease liabilities	Interest expense	3,008		4,584
Sublease income	Rental income	(3,933)		(8,537)
Total		$	25,904	$	21,915

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	September 30, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	284,903	$	287,984
Finance leases - real estate	Right of use assets, net	53,790		35,958
Real estate right of use assets, net		338,693		323,942
Operating leases - non-real estate investments	Receivables and other assets	7,528		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	—		116,453
Total right of use assets, net		$	346,221	$	450,514
Lease liabilities:
Operating leases		$	299,933	$	302,360
Financing leases		65,182		113,464
Total		$	365,115	$	415,824
(1) During the nine months ended September 30, 2023, we contributed finance leases at seven properties previously classified as held for sale into a newly formed unconsolidated joint venture, which recognized the purchase option within the leases. See Note 5 for further discussion.

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 nine months ended September 30, 2023, we wrote-off previously recognized straight-line rent receivable balances of $12,610,000 through a reduction of rental income, which relate 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 recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the nine months ended September 30, 2023, we recognized $1,152,005,000 of rental income related to operating leases, of which $163,980,000 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 nine months ended September 30, 2022, we recognized $1,079,784,000 of rental income related to operating leases, of which $145,541,000 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 ASC 606, "Revenue from Contracts with Customers." 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 $341,172,000 and $304,338,000 for the nine months ended September 30, 2023 and 2022, 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):

		Nine Months Ended
	Classification	September 30, 2023		September 30, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	16,663	$	16,767
Non-real estate investment lease expense	General and administrative expenses	5,392		4,174
Finance lease cost:
Amortization of leased assets	Property operating expenses	4,774		4,927
Interest on lease liabilities	Interest expense	3,008		4,584
Sublease income	Rental income	(3,933)		(8,537)
Total		$	25,904	$	21,915

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	September 30, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	284,903	$	287,984
Finance leases - real estate	Right of use assets, net	53,790		35,958
Real estate right of use assets, net		338,693		323,942
Operating leases - non-real estate investments	Receivables and other assets	7,528		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	—		116,453
Total right of use assets, net		$	346,221	$	450,514
Lease liabilities:
Operating leases		$	299,933	$	302,360
Financing leases		65,182		113,464
Total		$	365,115	$	415,824
(1) During the nine months ended September 30, 2023, we contributed finance leases at seven properties previously classified as held for sale into a newly formed unconsolidated joint venture, which recognized the purchase option within the leases. See Note 5 for further discussion.

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 nine months ended September 30, 2023, we wrote-off previously recognized straight-line rent receivable balances of $12,610,000 through a reduction of rental income, which relate 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 recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the nine months ended September 30, 2023, we recognized $1,152,005,000 of rental income related to operating leases, of which $163,980,000 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 nine months ended September 30, 2022, we recognized $1,079,784,000 of rental income related to operating leases, of which $145,541,000 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 ASC 606, "Revenue from Contracts with Customers." 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 $341,172,000 and $304,338,000 for the nine months ended September 30, 2023 and 2022, 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):

		Nine Months Ended
	Classification	September 30, 2023		September 30, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	16,663	$	16,767
Non-real estate investment lease expense	General and administrative expenses	5,392		4,174
Finance lease cost:
Amortization of leased assets	Property operating expenses	4,774		4,927
Interest on lease liabilities	Interest expense	3,008		4,584
Sublease income	Rental income	(3,933)		(8,537)
Total		$	25,904	$	21,915

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	September 30, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	284,903	$	287,984
Finance leases - real estate	Right of use assets, net	53,790		35,958
Real estate right of use assets, net		338,693		323,942
Operating leases - non-real estate investments	Receivables and other assets	7,528		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	—		116,453
Total right of use assets, net		$	346,221	$	450,514
Lease liabilities:
Operating leases		$	299,933	$	302,360
Financing leases		65,182		113,464
Total		$	365,115	$	415,824
(1) During the nine months ended September 30, 2023, we contributed finance leases at seven properties previously classified as held for sale into a newly formed unconsolidated joint venture, which recognized the purchase option within the leases. See Note 5 for further discussion.

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 nine months ended September 30, 2023, we wrote-off previously recognized straight-line rent receivable balances of $12,610,000 through a reduction of rental income, which relate 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 recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the nine months ended September 30, 2023, we recognized $1,152,005,000 of rental income related to operating leases, of which $163,980,000 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 nine months ended September 30, 2022, we recognized $1,079,784,000 of rental income related to operating leases, of which $145,541,000 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 ASC 606, "Revenue from Contracts with Customers." 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 $341,172,000 and $304,338,000 for the nine months ended September 30, 2023 and 2022, respectively.