Real Estate Properties

12 Months Ended

Dec. 31, 2019

Our real estate properties, excluding those classified as held for sale, consisted of land of $793,123 and buildings and improvements of $6,668,463 as of December 31, 2019, and land of $844,567 and buildings and improvements of $7,031,733 as of December 31, 2018. Accumulated depreciation was $1,428,850 and $141,951 for buildings and improvements, respectively, as of December 31, 2019; and $1,408,793 and $125,599 for buildings and improvements, respectively, as of December 31, 2018.

Our portfolio as of December 31, 2019 includes: 138 medical office and life science properties with approximately 11.9 million rentable square feet; 276 senior living communities, including independent living (including active adult), assisted living, memory care and skilled nursing facilities, or SNFs, with 31,618 living units; and 10 wellness centers with approximately 812,000 square feet of interior space plus outdoor developed facilities.

We have accounted for our 2019, 2018 and 2017 acquisitions as acquisitions of assets following our adoption of ASU No. 2017-01, Clarifying the Definition of a Business on January 1, 2017. We funded these acquisitions using cash on hand and borrowings under our $1,000,000 unsecured revolving credit facility, unless otherwise noted.

Acquisitions:

The table below represents the purchase price allocations (including net closing adjustments) of acquisitions for the years ended December 31, 2019, 2018 and 2017:



Date	Location	Type of Property	Number of Properties	Square Feet or Number of Units		Cash Paid plus Assumed Debt ⁽¹⁾		Land		Buildings and Improvements		FF&E		Acquired Real Estate Leases / Resident Agreements		Acquired Real Estate Lease Obligations			Assumed Debt			Premium on Assumed Debt
Acquisitions during the year ended December 31, 2019:
December 2019	Texas	IL	1	169	units	$	50,506	$	3,463	$	44,189	$	652	$	2,202	$	—		$	—		$	—

Acquisitions during the year ended December 31, 2018:
January 2018	3 States	Medical Office / Life Science	3	400,000	sq. ft.	$	91,698	$	16,873	$	54,605	$	—	$	20,220	$	—		$	—		$	—
January 2018 ⁽²⁾	Tennessee	AL	1	88	units	19,868		580		14,884		1,209		3,195		—			—			—
February 2018 ⁽²⁾	Arizona	IL	1	127	units	22,622		2,017		17,123		390		4,451		—			(16,748		)	(1,359		)
March 2018	Virginia	Medical Office	1	135,000	sq. ft.	23,275		2,863		11,105		—		9,307		—			(11,050		)	—
June 2018 ⁽²⁾	Tennessee	IL	2	151	units	23,860		965		17,910		1,628		3,843		—			(16,588		)	(486		)
			8			$	181,323	$	23,298	$	115,627	$	3,227	$	41,016	$	—		$	(44,386	)	$	(1,845	)

Acquisitions during the year ended December 31, 2017:
January 2017	Kansas	Medical Office	1	117,000	sq. ft.	$	15,106	$	1,522	$	7,246	$	—	$	6,338	$	—		$	—		$	—
July 2017	Maryland	Life Science	1	59,000	sq. ft.	16,601		6,138		6,526		—		3,937		—			—			—
October 2017	2 States	Medical Office / Life Science	2	255,000	sq. ft.	38,794		6,738		25,040		—		7,016		—			—			—
November 2017	California	Life Science	1	63,000	sq. ft.	26,823		7,957		13,430		—		5,436		—			—			—
December 2017	Virginia	Medical Office	1	136,000	sq. ft.	15,844		3,263		7,615		—		4,986		(20		)	—			—
December 2017 ⁽²⁾	2 States	IL / AL	2	229	units	39,457		4,055		26,424		1,204		7,774		—			—			—
			8			$	152,625	$	29,673	$	86,281	$	1,204	$	35,487	$	(20	)	$	—		$	—


(1)	Cash paid plus assumed debt, if any, includes closing costs.


(2)	Acquired from Five Star.

In August 2017, we acquired a land parcel from Five Star adjacent to a senior living community located in Delaware that we previously leased to Five Star.

In January 2020, we acquired a land parcel adjacent to a life science property we own located in Arizona for $2,600, excluding closing costs.

Pursuant to a transaction agreement we entered into with Five Star in April 2019, or the Transaction Agreement, to restructure our business arrangements with Five Star, or the Restructuring Transaction, effective January 1, 2020, the senior living communities which we own that were operated by Five Star pursuant to lease agreements are now operated by Five Star pursuant to new management agreements and a related omnibus agreement, or collectively, the New Management Agreements. See Notes 5 and 7 for further information regarding the Restructuring Transaction and the Transaction Agreement.

Impairment:

We regularly evaluate our assets for indications of impairment. 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 assets by comparing it to the expected future undiscounted net cash flows to be generated from those assets. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. 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. See Note 9 for further information on impairment.

During 2019, we recorded impairment charges of $72,166 to adjust the carrying values of 25 senior living communities to their aggregate estimated fair value. These 25 senior living communities included 15 SNFs which we sold in September 2019. Two of these senior living communities are classified as held for sale in our consolidated balance sheet as of December 31, 2019. During 2019, we also recorded impairment charges of $43,035 to adjust the carrying value of 20 medical office properties and one life science property to their estimated fair value. We sold five of these medical office properties, along with the life science property, in 2019. The remaining 15 medical office properties are classified as held for sale in our consolidated balance sheet as of December 31, 2019. These impairment charges, in aggregate, are included in impairment of assets in our consolidated statements of comprehensive income (loss).

During 2018, we recorded impairment charges of $46,797 to adjust the carrying values of 13 medical office properties to their aggregate estimated fair value. Two of these medical office properties were classified as held for sale as of December 31, 2018. We sold all 13 of these medical office properties during 2019. During 2018, we also recorded impairment charges of $19,549 to write off unamortized lease assets related to lease defaults at three of our triple net leased senior living communities located in California, Colorado and Oregon that were leased to third party private operators. As a result of these leases being terminated, or during the termination process, we concluded that there was no value to the unamortized lease assets and wrote them off completely during 2018. In June 2018, we reached an agreement with the tenant leasing the senior living community located in California and its guarantor to settle past due amounts, terminate the lease and transfer operations, and in connection with this agreement, we received $2,150 of settlement proceeds. In November 2018, we reached an agreement with the tenant leasing the senior living community in Colorado to terminate the lease and transfer operations. In April 2019, we reached an agreement with the tenant leasing the senior living community in Oregon to terminate the lease and transfer operations. We entered management agreements with Five Star to operate these communities for our account under TRS structures. These impairment charges, in aggregate, are included in impairment of assets in our consolidated statements of comprehensive income (loss).

No impairment charges were recorded on real estate properties during 2017.

Dispositions:

During the years ended December 31, 2019, 2018 and 2017, we sold 46, five, and one properties, respectively, for aggregate sales prices of $260,783, $334,865, and $55,000, respectively, excluding closing costs, as presented in the table below. The sales of these properties do not represent significant dispositions individually or in the aggregate, nor do we believe they represent a strategic shift in our business. As a result, the results of the operation for these properties are included in continuing operations through the date of sale of such properties in our consolidated statements of comprehensive income (loss).



Date of Sale	Location	Type of Property	Number of Properties	Square Feet or Number of Units		Sales Price ⁽¹⁾		Gain (loss) on Sale
Dispositions during the year ended December 31, 2019:
February 2019	Florida	Life Science	1	60,396	sq. ft.	$	2,900	$	(69	)
March 2019	Massachusetts	Medical Office	1	4,400	sq. ft.	75		(58		)
May 2019 ⁽²⁾	California	SNF	3	278	units	21,500		15,207
May 2019	Colorado	Medical Office	1	15,647	sq. ft.	2,590		1,029
June 2019	Massachusetts	Medical Office	7	164,121	sq. ft.	8,042		1,590
July 2019	Massachusetts	Medical Office	3	103,484	sq. ft.	4,955		2,332
August 2019	Massachusetts	Medical Office	1	49,357	sq. ft.	2,221		812
September 2019 ⁽²⁾	Various	SNF	15	964	units	8,000		—
September 2019	Massachusetts	Medical Office	1	41,065	sq. ft.	2,750		1,044
October 2019	South Dakota	SNF / IL	3	245	units	10,500		6,661
October 2019	New Jersey	Life Science	1	205,439	sq. ft.	47,500		—
December 2019	Georgia	Medical Office	1	95,010	sq. ft.	14,000		(63		)
December 2019	Washington	IL	1	150	units	32,500		7,618
December 2019	Various	AL	7	566	units	103,250		3,593
			46			$	260,783	$	39,696

Dispositions during the year ended December 31, 2018:
March 2018 ⁽³⁾	Various	IL	2	843	units	$	217,000	$	181,154
May 2018 ⁽³⁾	Maryland	IL	1	354	units	96,000		78,856
June 2018 ⁽²⁾	California	SNF	1	98	units	6,500		3,699
June 2018 ⁽⁴⁾	Oregon	AL	1	99	units	15,365		(1,793		)
			5			$	334,865	$	261,916

Dispositions during the year ended December 31, 2017:
December 2017⁽³⁾	Virginia	IL	1	422	units	$	55,000	$	45,901


(1)	Sales price excludes closing costs.


(2)	These senior living communities were previously leased to Five Star.


(3)	These senior living communities were leased to Sunrise Senior Living LLC.


(4)	This senior living community was leased to a private operator, where the tenant exercised its purchase option.

In December 2017, we recognized a gain on sale of $154 from an eminent domain taking of land at one of our wellness centers in Romeoville, Illinois.

We classify all properties as held for sale in our consolidated balance sheets that meet the applicable criteria for that treatment as set forth in the Property, Plant and Equipment Topic of the Codification. As of December 31, 2019, we had 21 medical office and life science properties with 875,617 square feet and 12 senior living communities with 1,670 units classified as held for sale. As of December 31, 2018, we had two medical office properties with 32,604 square feet classified as held for sale. As of December 31, 2017, we had four triple net leased senior living communities with 1,295 units classified as held for sale.

As of February 28, 2020, we had 52 properties under agreements to sell or in first or second round offer stages for an aggregate sales price of approximately $539,679, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result.

In January 2020, we sold six medical office buildings located in Louisiana for a sales price of approximately $5,925, excluding closing costs. In February 2020, we sold one medical office building located in Pennsylvania for a sales price of approximately $2,900, excluding closing costs.

Investments and Capital Expenditures:

During 2019 and 2018, pursuant to the terms of our existing leases, we invested $1,739 and $5,420, respectively, in revenue producing capital improvements at certain of our senior living communities leased to private operators. As a result of these investments, annualized rental income payable to us increased by approximately $90 and $383, respectively, pursuant to the

terms of the applicable leases. Under our previously existing leases with Five Star, Five Star could request that we purchase certain improvements to the leased communities and, until we entered into the Transaction Agreement, the annual rent payable to us by Five Star would increase in accordance with a formula specified in the applicable lease in return for such purchases. During the year ended December 31, 2018, we purchased $17,956 of such improvements and Five Star's annual rent payable to us increased by $1,433 in accordance with the terms of the applicable leases. Pursuant to the Transaction Agreement, the $111,603 of improvements to communities leased to Five Star, including $49,155 of fixed assets and improvements that were purchased pursuant to the Transaction Agreement, that we funded during the year ended December 31, 2019 did not result in increased rent payable by Five Star. See Note 5 for further information regarding the Restructuring Transaction and the Transaction Agreement.

During 2019, we committed $30,135 for capital expenditures related to 1.5 million square feet of leases executed at our medical office and life science properties. During 2018, we committed $17,212 for capital expenditures related to 881,502 square feet of leases executed at our medical office and life science properties.

Committed and unspent tenant related obligations based on executed leases as of December 31, 2019 and 2018 were $23,994 and $22,009, respectively.

For the years ended December 31, 2019 and 2018, we recorded capitalized interest of $1,124 and $124, respectively.

In July 2019, a tenant in our Office Portfolio segment vacated three buildings with an aggregate of 164,091 square feet in California. After evaluating our options, we determined to, and have begun, a full redevelopment of these buildings. The redevelopment of these buildings may take significant capital expenditures and time.