We acquired or invested in the following net assets (in thousands):


	For the Six Months Ended June 30,
	2023			2022

Land and land improvements	$	28,916		$	34,204
Buildings		114,966			290,256
Intangible lease assets — subject to amortization (weighted-average useful life of 24.8 years for 2023 and 20.1 years for 2022)		16,305			16,949
Mortgage loans		—			100,000
Investments in unconsolidated real estate joint ventures		—			399,456
Investments in unconsolidated operating entities		50,000			131,105
Other loans		25,000			—
Liabilities assumed		—			(25,727	)
	$	235,187		$	946,243
Loans repaid(1)		(22,900	)		—
Total net assets acquired	$	212,287		$	946,243

(1)

The 2023 column includes a $23 million mortgage loan that was converted to fee simple ownership of one property as described under Lifepoint Transaction below.

In August 2019, we invested in a portfolio of 14 acute care hospitals in three states (California, Pennsylvania, and Connecticut) operated by and master leased to or mortgaged by Prospect Medical Holdings, Inc. ("Prospect") for a combined investment of approximately $1.5 billion. In addition, we originated a $112.9 million term loan cross-defaulted to the master lease and mortgage loan agreements and further secured by a parent guaranty. In the 2022 second quarter, we funded an additional $100 million towards the existing mortgage loan that was secured by a first lien on a California hospital. Prospect's operations were negatively impacted by the coronavirus ("COVID-19") global pandemic commencing in early 2020, but Prospect continued to remain current with respect to contractual rent and interest payments until the fourth quarter of 2022. Accordingly, and due further to the termination of certain refinancing negotiations between Prospect and certain third parties in early 2023, we recorded an approximate $280 million impairment charge in the 2022 fourth quarter. As part of this charge, we reduced the carrying value of the underperforming Pennsylvania properties by approximately $170 million (to approximately $250 million) and reserved all unbilled rent accruals for a total of $112 million.

However, Prospect continued to pursue a recapitalization plan; and, in late March 2023, Prospect received a binding commitment from several lenders to provide liquidity to pay down certain debt instruments. Along with these commitments from third-party lenders, we agreed to pursue certain transactions with Prospect as part of their recapitalization plan, including originating a $50 million convertible loan to PHP Holdings, the managed care business of Prospect, in the first quarter of 2023.

On May 23, 2023, Prospect completed its recapitalization plan, which included receiving $375 million in new financing from several lenders. Along with this new debt capital from third-party lenders, we agreed to the following restructuring of our $1.7 billion investment in Prospect including: a) maintaining the master lease covering six California hospitals with no changes in rental rates or escalator provisions, and with the expectation that Prospect will begin making cash payments for a substantial portion of the contractual monthly rent due on these California properties starting in September 2023, b) transition the Pennsylvania properties back to Prospect in return for a first lien mortgage on the facilities, c) provide up to $75 million in a loan secured by a first lien on Prospect's accounts receivable and certain other assets, of which we funded $25 million on May 23, 2023, d) complete the previously disclosed sale of the Connecticut properties to Yale New Haven ("Yale"), as more fully described in Note 9 to the condensed consolidated financial statements, and e) obtain a non-controlling ownership interest in PHP Holdings of approximately $654 million, after applying a discount for lack of marketability, consisting of an approximate $68 million equity investment and $586 million loan convertible into equity of PHP Holdings (collectively, the "Prospect Transaction"). This non-controlling ownership interest was received in exchange for unpaid rent and interest through December 2022, previously unrecorded rent and interest revenue in 2023 totaling approximately $68 million, our $151 million mortgage loan on a California property, our $112.9 million term loan, and other obligations at the time of such investment.

At June 30, 2023, we believe our remaining investment in the Prospect real estate and other assets are fully recoverable, but no assurances can be given that we will not have any further impairments in future periods.

On February 7, 2023, a subsidiary of Lifepoint Health, Inc. ("Lifepoint") acquired a majority interest in Springstone (now Lifepoint Behavioral Health, "Lifepoint Behavioral") (the "Lifepoint Transaction") based on an enterprise value of $250 million. As part of the transaction, we received approximately $205 million in full satisfaction of our initial acquisition loan, including accrued interest, and we retained our minority equity investment in the operations of Lifepoint Behavioral. Separately, we converted a mortgage loan (as part of our initial acquisition in 2021) into the fee simple ownership of a property in Washington, which will be leased, along with the other 18 behavioral health hospitals already leased to Lifepoint Behavioral, under the master lease agreement. In connection with the Lifepoint Transaction, Lifepoint extended its current lease with us on eight existing general acute care hospitals by five years to 2041.

In the second quarter of 2023, we acquired three inpatient rehabilitation facilities for a total of approximately €70 million. These hospitals are leased to Median Kliniken S.á.r.l ("MEDIAN") pursuant to a long-term master lease with annual inflation-based escalators.

On April 14, 2023, we acquired five behavioral health hospitals located in the United Kingdom for approximately £44 million. These hospitals are leased to Priory Group ("Priory") pursuant to five separate lease agreements with annual inflation-based escalators.

On March 14, 2022, we completed a transaction with Macquarie Asset Management (“MAM”), an unrelated party, to form a partnership (the “Macquarie Transaction”), pursuant to which we contributed eight Massachusetts-based general acute care hospitals that are leased to Steward Health Care System LLC ("Steward"), and a fund managed by MAM acquired, for cash consideration, a 50% interest in the partnership. The transaction valued the portfolio at approximately $1.7 billion, and we recognized a gain on sale of real estate of approximately $600 million from this transaction, partially offset by the write-off of unbilled straight-line rent receivables. The partnership raised nonrecourse secured debt of 55% of asset value, and we received proceeds, including from the secured debt, of approximately $1.3 billion. We obtained a 50% interest in the real estate partnership valued at approximately $400 million (included in the "Investments in unconsolidated real estate joint ventures" line of our condensed consolidated balance sheets), which is being accounted for under the equity method of accounting.

In connection with this transaction, we separated the eight Massachusetts-based facilities into a new master lease with terms generally identical to the other master lease, and the initial fixed lease term of both master leases was extended to 2041.

On March 11, 2022, we acquired four general acute care hospitals in Finland for €178 million ($194 million). These hospitals are leased to Pihlajalinna pursuant to a long-term lease with annual inflation-based escalators. We acquired these facilities by purchasing the shares of the real estate holding entities, which included deferred income tax and other liabilities of approximately $26 million.

On February 16, 2022, we agreed to participate in an existing syndicated term loan with a term of six years originated on behalf of Priory, of which we funded £96.5 million towards a £100 million participation level in the variable rate loan.

Other acquisitions in the first half of 2022 included five general acute care facilities. Three general acute care facilities, located throughout Spain, were acquired on April 29, 2022 for €27 million and are leased to GenesisCare pursuant to a long-term lease with annual inflation-based escalators. The other two general acute care facilities, one in Arizona and the other in Florida, were acquired on April 18 and 25, 2022, respectively, for approximately $80 million and are leased to Steward pursuant to an already existing master lease agreement with annual inflation-based escalators.

During the 2023 second quarter, we completed construction and began recording rental income on an inpatient rehabilitation facility located in Stockton, California. This facility commenced rent on May 1, 2023, and is being leased to Ernest pursuant to an existing long-term master lease.

We continue to fund the redevelopment of and defer rent on our Norwood facility in Massachusetts. Recovery receivables of approximately $130 million associated with the prior storm and flood damage to this facility are included in the "Other assets" line of our condensed consolidated balance sheets. In conjunction with the redevelopment of Steward's Norwood hospital, we advanced $50 million, in the first half of 2023, that is secured by, among other things, proceeds from insurance claims in excess of the advance.

During the 2022 first quarter, we completed construction and began recording rental income on an inpatient rehabilitation facility located in Bakersfield, California. This facility commenced rent on March 1, 2022 and is being leased to Ernest pursuant to an existing long-term master lease.

On March 30, 2023, we entered into a definitive agreement to sell our 11 general acute care facilities located in Australia and operated by Healthscope Ltd. ("Healthscope") (the "Australia Transaction") to affiliates of HMC Capital for cash proceeds of approximately A$1.2 billion. As a result, we designated the Australian portfolio as held for sale in the first quarter of 2023 and recorded an approximate $79 million net impairment charge, which included $37.4 million of straight-line rent receivables, an estimated $8 million in fees to sell the hospitals, and $13 million of accumulated other comprehensive loss related to foreign currency translation. This impairment charge was partially offset by approximately $29 million of deferred gains from our interest rate swap in accumulated other comprehensive income that was reclassified to earnings as part of this expected transaction. This transaction was set to close in two phases. The first phase closed on May 18, 2023, in which we sold seven of the 11 facilities for A$730 million, with the final phase currently expected to be complete by early fourth quarter of 2023. We used the A$730 million proceeds from the first phase of the sale to pay down the Australian term loan.

Although we currently expect the final phase of the Australia Transaction to occur as planned, no assurances can be given that the transaction will close as described above.

On March 8, 2023, we received notice that Prime Healthcare Services, Inc. ("Prime") planned to exercise its right to repurchase from us the real estate associated with one master lease for approximately $100 million. As such, we recorded an approximate $11 million non-cash impairment charge in the first quarter of 2023 related to unbilled rent on the three facilities that were sold. On July 11, 2023, Prime acquired the three facilities for $100 million.

On March 14, 2022, we completed the previously described partnership with MAM, in which we sold the real estate of eight Massachusetts-based general acute care hospitals, with a fair value of approximately $1.7 billion. See "New Investments" in this same Note 3 for further details on this transaction.

During the first half of 2022, we also completed the sale of four other facilities and two ancillary properties for approximately $154 million, resulting in a gain on real estate of approximately $31 million.

The properties expected to be sold during 2023 and sold during the first half of 2022 do not meet the definition of discontinued operations. However, the following represents the operating results from these properties for the periods presented (in thousands):


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023(1)			2022			2023(1)			2022
Revenues(2)	$	12,051		$	18,905		$	30,928		$	60,739
Real estate depreciation and amortization		—			(5,615	)		(4,991	)		(11,508	)
Property-related expenses		(436	)		(2,410	)		(1,855	)		(5,765	)
Real estate and other impairment charges(3)		—			—			(89,538	)		—
Other (expense) income(4)		(5,382	)		8,410			(10,974	)		452,678
Income (loss) from real estate dispositions, net	$	6,233		$	19,290		$	(76,430	)	$	496,144

(1)

The 2023 column consists of assets designated as held for sale in the first quarter of 2023 as a result of the transactions described in the "2023 Activity" subsection above.

(2)

Includes $1.8 million and $6.3 million of straight-line rent write-offs associated with the non-Macquarie disposal transactions for the three and six months ended June 30, 2022, respectively.

(3)

Includes an approximate $79 million net impairment charge (including $37.4 million of straight-line rent write-offs) associated with the Australia Transaction and an approximate $11 million non-cash impairment charge associated with the repurchase of three Prime facilities for the six months ended June 30, 2023.

(4)

Includes $16.4 million and $468.0 million of gains (net of $125 million write-off of straight-line rent receivables related to the Macquarie Transaction) for the three and six months ended June 30, 2022.

We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies. The initial fixed lease terms of these infrastructure-type assets are typically at least 15 years, and most include renewal options at the election of our tenants, generally in five year increments. Over 99% of our leases provide annual rent escalations based on increases in the Consumer Price Index ("CPI") (or similar indices outside the U.S.) and/or fixed minimum annual rent escalations. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total initial investment. Our leases typically require the tenant to handle and bear most of the costs associated with our properties including repair/maintenance, property taxes, and insurance.

For all of our properties subject to lease, we are the legal owner of the property, and the tenant's right to use and possess such property is guided by the terms of a lease. At June 30, 2023, we account for all of these leases as operating leases, except where GAAP requires alternative classification, including leases on 13 Ernest facilities that are accounted for as direct financing leases and leases on nine of our Prospect facilities and five of our Ernest facilities that are accounted for as a financing. The components of our total investment in financing leases consisted of the following (in thousands):

The decrease in our investment in financing leases since December 31, 2022, is the result of classifying three Prime facilities as held for sale in the first quarter of 2023, and the sale of four Pennsylvania properties as part of the Prospect Transaction.

At June 30, 2023, 99% of our properties are occupied by tenants, leaving five properties as vacant, representing approximately 0.2% of total assets. We are in various stages of either releasing or selling these vacant properties, for one of which we received and recorded a significant lease termination fee in 2019.

As more fully described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, our tenants’ financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders. Our tenants operate in the healthcare industry, which is highly regulated, and changes in regulation (or delays in enacting regulation) may temporarily impact our tenants’ operations until they are able to make the appropriate adjustments to their business. In addition, our tenants may experience operational challenges from time-to-time as a result of many factors, including those external to them, such as cybersecurity attacks or public health crises (like the COVID-19 pandemic), economic issues resulting in high inflation and spikes in labor costs, and adverse market and political conditions. We monitor our tenants' operating results and the potential impact from these challenges. We may elect to provide support to our tenants from time-to-time in the form of short-term rent deferrals to be paid back in full (like as described below under COVID-19 Rent Deferrals and Pipeline Health System), or in the form of temporary loans (like as described above in the Prospect Transaction).

Due to COVID-19 and its impact on our tenants' business, we agreed to defer collection of a certain amount of rent for certain tenants. Pursuant to our agreements with these tenants, we expect repayments of previously deferred rent to continue, with the remaining outstanding deferred rent balance of approximately $9.8 million as of June 30, 2023, to be paid over specified periods in the future with interest.

On October 2, 2022, Pipeline filed for reorganization relief under Chapter 11 protection of the United States Bankruptcy Code in the Southern District of Texas, while keeping its hospitals open to continue providing care to the communities served. On February 6, 2023, Pipeline emerged from bankruptcy. Per the bankruptcy settlement, Pipeline's current lease of our California assets remains in place, and we were repaid on February 7, 2023 for all rent that was outstanding at December 31, 2022, along with what was due for the first quarter of 2023. We have agreed to defer $5.6 million, or approximately 30%, of rent in 2023 to be paid in 2024 with interest. As of June 30, 2023, Pipeline was in compliance with all terms of the bankruptcy settlement and the lease.

On May 1, 2023, Catholic Health Initiatives Colorado ("CHIC"), a wholly owned subsidiary of CommonSpirit Health ("CommonSpirit"), acquired the Utah hospital operations of five general acute care facilities previously operated by Steward (the "Steward Transaction"). As a result of this transaction, we received $100 million on May 1, 2023, of the $150 million loan made in the 2022 second quarter. The new lease with CHIC for these Utah assets has an initial fixed term of 15 years with annual escalation provisions, along with early lessee purchase options at the greater of fair market value or our gross investment. As part of this transaction, we severed these facilities from the master lease with Steward, and accordingly accelerated the amortization of the associated in-place lease intangibles (approximately $286 million) and wrote-off approximately $95 million of straight-line rent receivables.

On June 16, 2023, Alecto Healthcare Services LLC ("Alecto") filed for Chapter 11 bankruptcy in Delaware. At the time, we leased one property to Alecto in Sherman, Texas with a net book value of approximately $12 million. As a result of this bankruptcy, we have entered into a restructuring agreement involving the Sherman facility and American Healthcare Systems, the new tenant of the facility. We believe this agreement will be finalized in the third quarter of 2023, but no assurances can be given that the transaction will close or any impairment will not be needed.

Our primary business strategy is to acquire real estate and lease to providers of healthcare services. Typically, we directly own 100% of such investment. However, from time-to-time, we will co-invest with other investors that share a similar view that hospital real estate is a necessary infrastructure-type asset in communities. In these types of investments, we will own undivided interests of less than 100% of the real estate and share control over the assets through unconsolidated real estate joint ventures. The underlying real estate and leases in these unconsolidated real estate joint ventures are structured similarly and carry a similar risk profile to the rest of our real estate portfolio.

Our investments in unconsolidated operating entities are noncontrolling investments that are typically made in conjunction with larger real estate transactions in which the operators are vetted as part of our overall underwriting process. In many cases, we would

not be able to acquire the larger real estate portfolio without such investments in operators. These investments also offer the opportunity to enhance our overall return and provide for certain minority rights and protections.

The following is a summary of our investments in unconsolidated operating entities (amounts in thousands):


Operator	As of June 30, 2023		As of December 31, 2022
PHP Holdings	$	654,520	$	—
Steward (loan investment)		362,586		362,831
International joint venture		230,153		231,402
Priory		163,619		156,575
Swiss Medical Network		162,194		157,145
Steward (equity investment)		125,862		125,862
Aevis Victoria SA ("Aevis")		79,121		72,904
Aspris Children's Services ("Aspris")		16,005		16,023
Lifepoint Behavioral		10,767		200,827
Caremax		7,323		8,526
Prospect		—		112,777
Total	$	1,812,150	$	1,444,872

The change since December 31, 2022 primarily relates to the payoff of the Lifepoint Behavioral loan in February 2023, partially offset by our investment in PHP Holdings, as more fully described above in the Prospect Transaction.

Pursuant to our approximate 5% stake in Aevis and other investments marked to fair value, we recorded approximately $4.3 million in unfavorable non-cash fair value adjustments during the first half of 2023 as shown in the "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income; whereas, this was a $9.0 million favorable non-cash fair value adjustment for the same period of 2022.

In the first half of 2023, we received repayment of the CHF 60 million mortgage loan from Infracore SA ("Infracore") that was originally made in the fourth quarter of 2022.

We apply a forward-looking "expected loss" model to all of our financing receivables, including financing leases and loans, based on historical credit losses of similar instruments.

We monitor concentration risk in several ways due to the nature of our real estate assets that are vital to the communities in which they are located and given our history of being able to replace inefficient operators of our facilities, if needed, with more effective operators. See below for our concentration details (dollars in thousands):

Total Assets by Operator


	As of June 30, 2023						As of December 31, 2022
Operators	Total Assets			Percentage of Total Assets			Total Assets		Percentage of Total Assets
Steward	$	3,656,046			19.0	%	$	4,762,673		24.2	%
Circle Health Ltd ("Circle")		2,141,517			11.2	%		2,062,474		10.5	%
Priory		1,401,106			7.3	%		1,290,213		6.6	%
Prospect		1,045,844			5.5	%		1,483,599		7.5	%
Lifepoint Behavioral		799,212			4.2	%		985,959		5.0	%
Other operators		7,746,083			40.2	%		7,461,923		38.0	%
Other assets		2,414,567	(1)		12.6	%		1,611,159		8.2	%
Total	$	19,204,375			100.0	%	$	19,658,000		100.0	%

(1)

Includes our investment in PHP Holdings of $655 million as part of the Prospect Transaction as further described above in this same Note 3.

Total Assets by U.S. State and Country


	As of June 30, 2023					As of December 31, 2022
U.S. States and Other Countries	Total Assets		Percentage of Total Assets			Total Assets		Percentage of Total Assets
Texas	$	1,940,872		10.1	%	$	1,967,948		10.0	%
Florida		1,366,453		7.1	%		1,324,555		6.8	%
California		1,211,932		6.3	%		1,450,112		7.4	%
Utah		834,773		4.4	%		1,224,484		6.2	%
Massachusetts		805,796		4.2	%		761,694		3.9	%
All other states		3,846,670		20.0	%		4,245,306		21.6	%
Other domestic assets		1,699,686		8.9	%		1,028,946		5.2	%
Total U.S.	$	11,706,182		61.0	%	$	12,003,045		61.1	%
United Kingdom	$	4,301,199		22.4	%	$	4,083,244		20.8	%
Germany		746,419		3.9	%		664,900		3.4	%
Switzerland		682,069		3.5	%		748,947		3.8	%
Australia		301,125		1.6	%		854,582		4.3	%
Spain		232,037		1.2	%		222,316		1.1	%
All other countries		520,463		2.7	%		498,753		2.5	%
Other international assets		714,881		3.7	%		582,213		3.0	%
Total international	$	7,498,193		39.0	%	$	7,654,955		38.9	%
Grand total	$	19,204,375		100.0	%	$	19,658,000		100.0	%

On an individual property basis, our largest investment in any single property was approximately 2% of our total assets as of June 30, 2023.

Total Revenues by Operator


	For the Three Months Ended June 30,
	2023							2022
Operators	Total Revenues				Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
Prospect	$	68,436				20.3	%	$	42,364		10.6	%
Circle		48,645				14.4	%		47,539		11.9	%
Priory		26,930				8.0	%		19,179		4.8	%
CommonSpirit		19,568				5.8	%		—		—
Lifepoint Behavioral		19,068				5.7	%		22,250		5.6	%
Steward		(301	)	(1)		-0.1	%		106,007		26.5	%
Other operators		155,049				45.9	%		162,887		40.6	%
Total	$	337,395				100.0	%	$	400,226		100.0	%

(1)

Includes $95 million straight-line rent write-off as a result of the Steward Transaction as further described above in this same Note 3.

Total Revenues by U.S. State and Country


	For the Three Months Ended June 30,
	2023						2022
U.S. States and Other Countries	Total Revenues			Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
California	$	57,367			17.0	%	$	48,109		12.0	%
Texas		47,444			14.1	%		39,716		9.9	%
Florida		35,508			10.5	%		26,051		6.5	%
Pennsylvania		22,930			6.8	%		19,942		5.0	%
Arizona		19,721			5.9	%		16,383		4.1	%
All other states		36,204	(1)		10.7	%		137,518		34.4	%
Total U.S.	$	219,174			65.0	%	$	287,719		71.9	%
United Kingdom	$	88,275			26.2	%	$	79,415		19.8	%
Germany		9,517			2.8	%		8,337		2.1	%
All other countries		20,429			6.0	%		24,755		6.2	%
Total international	$	118,221			35.0	%	$	112,507		28.1	%
Grand total	$	337,395			100.0	%	$	400,226		100.0	%

(1)

Includes $95 million straight-line rent write-off as a result of the Steward Transaction as further described above in this same Note 3.

Total Revenues by Facility Type


	For the Three Months Ended June 30,
	2023						2022
Facility Types	Total Revenues			Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
General acute care hospitals	$	234,917	(1)		69.6	%	$	305,468		76.3	%
Behavioral health facilities		56,378			16.7	%		51,763		12.9	%
Inpatient rehabilitation facilities		31,452			9.3	%		28,897		7.2	%
Long-term acute care hospitals		8,329			2.5	%		8,270		2.1	%
Freestanding ER/urgent care facilities		6,319			1.9	%		5,828		1.5	%
Total	$	337,395			100.0	%	$	400,226		100.0	%

(1)

Includes $95 million straight-line rent write-off as a result of the Steward Transaction as further described above in this same Note 3.

For geographic and facility type concentration metrics above, we allocate our investments in operating entities pro rata based on the gross book value of the real estate. Such pro rata allocations are subject to change from period to period.