Real Estate Properties

At September 30, 2016, we owned 431 properties (457 buildings) located in 42 states and Washington, D.C. We have accounted for, or expect to account for, the following acquisitions as business combinations unless otherwise noted.

Acquisitions:

The allocation of the purchase prices of the acquisitions shown below are based upon preliminary estimates of the fair value of assets acquired and liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed may differ from the preliminary allocations presented in these condensed consolidated financial statements.

Triple Net Leased Senior Living Communities:

In June 2016, we acquired seven senior living communities located in four states with 545 living units from Five Star Quality Care, Inc., or, together with its subsidiaries, Five Star, for approximately $112,350, excluding closing costs, and simultaneously entered into a new long term master lease with Five Star for those communities. We funded this acquisition using cash on hand and borrowings under our revolving credit facility. See Note 10 for further information regarding this sale and leaseback transaction with Five Star. We accounted for this acquisition as an asset acquisition, and the preliminary allocation of the purchase price is as follows:

Cash Paid

Number

plus

Premium

Units /

Assumed

Buildings and

Assumed

on Assumed

Date

Location

Properties

Beds

Debt ⁽¹⁾

Land

Improvements

FF&E

Debt

Jun-16

4 states

545

112,493

11,085

94,940

6,468

—


(1)	This amount includes the cash we paid as well as various closing settlement adjustments and closing costs.

In September 2016, we entered into an agreement to acquire two senior living communities with a combined 126 living units located in Illinois for approximately $18,600, excluding closing costs. We expect to acquire these communities in the fourth quarter of 2016. If these communities are acquired, we expect to lease these communities to Five Star under one of our existing master leases with Five Star. These acquisitions are subject to various conditions; accordingly, we cannot be sure that we will complete these acquisitions and that we will lease them to Five Star, that the acquisitions and leasing arrangements will not be delayed or that the terms will not change. See Note 10 for further information regarding our leasing arrangements with Five Star.

Managed Senior Living Communities:

In May 2016, we acquired one senior living community located in Georgia with 38 living units for a purchase price of approximately $8,400, excluding closing costs. We acquired this community using a taxable REIT subsidiary, or TRS, structure and we have entered into a management agreement with Five Star to manage this community. We funded this acquisition using cash on hand and borrowings under our revolving credit facility. See Note 10 for further information regarding our management arrangements with Five Star. The preliminary allocation of the purchase price for this acquisition is as follows:

Cash Paid

Number

plus

Acquired

Premium

Units /

Assumed

Buildings and

Real Estate

Assumed

on Assumed

Date

Location

Properties

Beds

Debt ⁽¹⁾

Land

Improvements

FF&E

Leases

Debt

May-16

Georgia

8,400

327

6,195

478

1,400

—


(1)	This amount includes the cash we paid as well as various closing settlement adjustments and excludes closing costs.

MOBs:

In February 2016, we acquired one property (three buildings) leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, located in Minnesota with approximately 128,000 square feet for a purchase price of approximately $22,700, excluding closing costs. In May 2016, we acquired one MOB (one building) located in Florida with approximately 166,000 square feet for a purchase price of approximately $45,000, excluding closing costs. We accounted for the acquisition of the MOB located in Florida as an asset acquisition. We funded these acquisitions using cash on hand and borrowings under our revolving credit facility. The preliminary allocations of the purchase prices for these acquisitions are as follows:



					Cash Paid								Acquired
		Number	Number		plus						Acquired		Real Estate					Premium
		of	of	Square	Assumed				Buildings and		Real Estate		Lease			Assumed		on Assumed
Date	Location	Properties	Buildings	Feet (000’s)	Debt ⁽¹⁾		Land		Improvements		Leases ⁽²⁾		Obligations ⁽²⁾			Debt		Debt
Feb-16	Minnesota	1	3	128	$	22,700	$	4,074	$	15,223	$	5,163	$	(1,760	)	$	—	$	—
May-16	Florida	1	1	166	45,230		2,792		42,438		—		—			—		—
		2	4	294	$	67,930	$	6,866	$	57,661	$	5,163	$	(1,760	)	$	—	$	—


(1)	With respect to the property located in Minnesota, this amount includes the cash we paid as well as various closing settlement adjustments, and excludes closing costs. With respect to the property located in Florida that is being accounted for as an asset acquisition, this amount includes the cash we paid as well as various closing settlement adjustments and closing costs.


(2)	The weighted average amortization periods for acquired lease intangible assets and assumed real estate lease obligations at the time of these acquisitions was 6.4 years and 7.3 years, respectively.

In October 2016, we acquired one MOB (one building) located in Ohio with approximately 96,000 square feet for approximately $18,500, excluding closing costs.

Impairment:

We periodically evaluate our assets for impairments. Impairment indicators may include declining tenant or resident occupancy, weak or declining profitability from the property, decreasing tenant cash flows or liquidity, our decision to dispose of an asset before the end of its estimated useful life, and legislative, market or industry changes that could permanently reduce the value of an asset. If indicators of impairment are present, we evaluate the carrying value of the affected asset by comparing it to the expected future undiscounted net cash flows to be generated from that asset. If the sum of these expected future net cash flows is less than the carrying value, we reduce the net carrying value of the asset to its estimated fair value. During the nine months ended September 30, 2016, we recorded the following impairment charges:

•

$4,391 in the first quarter of 2016 to write off acquired lease intangible assets associated with lease defaults at two of our triple net leased senior living communities leased to two third party private operators. In April 2016, we reached an agreement with one of these tenants and its guarantor to settle past due amounts, terminate the lease and transfer operations. As part of this agreement, we received an amount of $2,365 and entered into a management agreement with Five Star to operate this community for our account under a TRS structure. In July 2016, we terminated the other lease and entered into a management agreement with Five Star to operate the community for our account under a TRS structure. See Note 10 for further information regarding our management arrangements with Five Star.


•	$2,999 in the first quarter of 2016 to reduce the carrying values of one MOB (one building) and one land parcel to their estimated sales prices less costs to sell. In March 2016, we sold the land parcel as described further below at “Dispositions”.

•

$4,961 in the second quarter of 2016 to reduce the carrying values of five MOBs (five buildings) to their estimated sales prices less costs to sell. In July 2016, we sold four of these MOBs as described further below at “Dispositions”. In the third quarter of 2016, we recorded a reversal of impairment charges previously recorded of $7 to adjust the carrying value of these MOBs to their sales prices less costs to sell.


•	$2,394 and $2,191 in the third quarter of 2016 to reduce the carrying value of one managed senior living community and one triple net leased skilled nursing facility, or SNF, respectively, to their estimated sales prices less costs to sell. In September 2016, we sold the triple net leased SNF as described further below at "Dispositions".

We have one MOB and one former memory care building at a managed senior living community classified as held for sale as of September 30, 2016.

Dispositions:

In March 2016, we sold a land parcel that was previously classified as held for sale for approximately $700, excluding closing costs. We did not recognize a gain or loss on sale from this sale.

In June 2016, we sold one triple net leased SNF that was previously classified as held for sale for approximately $9,100, excluding closing costs. We recognized a gain on sale of approximately $4,061 from this sale.

In July 2016, we sold four MOBs (four buildings) that were classified as held for sale at June 30, 2016 for approximately $20,150, excluding closing costs. In the third quarter of 2016, we recorded a reversal of impairment charges previously recorded of $7 to adjust the carrying values of these MOBs to their sales prices less costs to sell, and we did not recognize a gain or loss on sale from this sale.

In September 2016, we sold one SNF that was previously leased to Five Star for approximately $248, excluding closing costs. We recorded an impairment charge of approximately $2,191 to reduce the carrying value of this SNF to its sale price less cost to sell, and we did not recognize a gain or loss on this sale. As a result of this sale, Five Star's annual rent payable to us decreased by $25 in accordance with the terms of the applicable lease. See Note 10 for further information regarding our leasing arrangements with Five Star.

Results of operations for properties sold or held for sale are included in discontinued operations in our condensed consolidated statements of comprehensive income when the criteria for discontinued operations in Accounting Standards Codification 2015-20, Discontinued Operations, are met. The senior living communities and MOBs which we are or were offering for sale during the periods presented did not meet the criteria for discontinued operations and are included in continuing operations.