Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

8. Commitments and Contingencies

Commitments

On July 20, 2016, we entered into definitive agreements to acquire 20 rehabilitation hospitals in Germany for an aggregate purchase price to us of approximately €215.7 million. Upon closing, the facilities will be leased to affiliates of MEDIAN, pursuant to a new master lease with a term of approximately 27 years. Closing of the transaction, which began during the fourth quarter of 2016, is subject to customary real estate, regulatory and other closing conditions. As discussed in Note 3, we have closed seven of the 20 facilities in the amount of €49.5 million on December 31, 2016.

On September 9, 2016, we entered into definitive agreements to acquire six rehabilitation hospitals in Germany for an aggregate purchase price to us of approximately €44.1 million. Upon closing, the facilities will be leased to affiliates of MEDIAN, pursuant to the existing long-term master lease. Closing of the transaction, which began during the fourth quarter of 2016, is subject to customary real estate, regulatory and other closing conditions. As discussed in Note 3, we have closed on five of the six facilities in the amount of €35.7 million as of December 31, 2016. We closed on the final property on January 27, 2017, in the amount of €8.4 million.

On September 28, 2016, we entered into definitive agreements to acquire two acute care hospitals in Washington and Idaho for an aggregate purchase price to us of approximately $105 million. Upon closing, the facilities will be leased to RCCH, pursuant to the current master lease. Closing of the transaction, which is expected to be completed in the first half of 2017, is subject to customary real estate, regulatory and other closing conditions.

Operating leases, in which we are the lessee, primarily consist of ground leases on which certain of our facilities or other related property reside along with corporate office and equipment leases. The ground leases are long-term leases (almost all having terms of 30 years or more), some of which contain escalation provisions and one contains a purchase option. Properties subject to these ground leases are subleased to our tenants. Lease and rental expense (which is recorded on the straight-line method) for 2016, 2015 and 2014, respectively, were $6.8 million, $4.6 million, and $2.3 million, which was offset by sublease rental income of $4.2 million, $2.3 million, and $0.3 million for 2016, 2015, and 2014, respectively.

Fixed minimum payments due under operating leases with non-cancelable terms of more than one year and amounts to be received in the future from non-cancelable subleases at December 31, 2016 are as follows: (amounts in thousands)


	Fixed minimum payments		Amounts to be received from subleases			Net payments
2017	$	7,328	$	(4,725	)	$	2,603
2018		7,249		(4,731	)		2,518
2019		6,925		(4,755	)		2,170
2020		6,944		(4,860	)		2,084
2021		6,024		(4,966	)		1,058
Thereafter		251,981		(249,662	)		2,319

	$	286,451	$	(273,699	)	$	12,752

Contingencies

We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to these proceedings is not presently expected to materially affect our financial position, results of operations or cash flows.