3. Real Estate and Loans Receivable

Acquisitions

We acquired the following assets:


	2017			2016			2015
	(in thousands)
Assets Acquired
Land	$	229,091		$	91,071		$	120,746
Building		1,027,154			655,324			741,935
Intangible lease assets — subject to amortization (weighted average useful life of 28.0 years in 2017, 28.5 years in 2016 and 30.0 years in 2015)		150,971			94,167			176,383
Net investments in direct financing leases		40,450			178,000			174,801
Mortgage loans		700,000			600,000			380,000
Other loans		—			—			523,605
Equity investments and other assets		100,000			70,166			101,716
Liabilities assumed		(878	)		(6,319	)		(317	)

Total assets acquired	$	2,246,788		$	1,682,409		$	2,218,869
Loans repaid(1)		—			(193,262	)		(385,851	)

Total net assets acquired	$	2,246,788		$	1,489,147		$	1,833,018

(1)

The 2016 column includes $93.3 million of loans advanced to Capella in 2015 and repaid in 2016 as a part of the Capella transaction, along with $100.0 million loans advanced to Prime in 2015 and repaid in 2016 as part of the sale leaseback conversion of four properties in New Jersey. The 2015 column includes $385.9 million of loans advanced to MEDIAN in 2014 and repaid in 2015 as a part of the MEDIAN transaction.

Purchase price allocations attributable to certain acquisitions made during 2017 are preliminary. When all relevant information is obtained, resulting changes, if any, to our provisional purchase price allocation will be adjusted to reflect new information obtained about the facts and circumstances that existed as of the respective acquisition dates that, if known, would have affected the measurement of the amounts recognized as of those dates.

2017 Activity

Steward Transactions

On September 29, 2017, we acquired, from IASIS Healthcare LLC (“IASIS”), a portfolio of ten acute care hospitals and one behavioral health facility, along with ancillary land and buildings, that are located in Arizona, Utah, Texas, and Arkansas. The portfolio is now operated by Steward which separately completed its acquisition of the operations of IASIS on September 29, 2017. Our investment in the portfolio includes the acquisition of eight acute care hospitals and one behavioral health facility for approximately $700 million, the making of $700 million in mortgage loans on two acute care hospitals, and a $100 million minority equity contribution in Steward, for a combined investment of approximately $1.5 billion.

On May 1, 2017, we acquired eight hospitals previously affiliated with Community Health Systems, Inc. in Florida, Ohio, and Pennsylvania for an aggregate purchase price of $301.3 million.

See “2016 Activity — Acquisition of Steward Portfolio” below for details of the master lease and mortgage loan terms.

MEDIAN Transactions

On November 29, 2017, we acquired three rehabilitation hospitals in Germany for an aggregate purchase price of €80 million. The facilities are leased to affiliates of MEDIAN, pursuant to a new long-term master lease. The lease began on November 30, 2017, and the term is for 27 years (ending in November 2044). The lease provides for increases in rent at the greater of one percent or 70% of the change in German CPI.

During the third quarter of 2017, we acquired two rehabilitation hospitals in Germany for an aggregate purchase price of €39.2 million, in addition to 11 rehabilitation hospitals in Germany that we acquired in the second quarter of 2017 for an aggregate purchase price of €127 million. These 13 properties are leased to affiliates of MEDIAN, pursuant to a third master lease entered into in 2016. (See “2016 Activity” below for details of this master lease.) These acquisitions are the final properties of the portfolio of 20 properties in Germany that we agreed to acquire in July 2016 for €215.7 million, of which seven properties totaling €49.5 million closed in December 2016.

On June 22, 2017, we acquired an acute care hospital in Germany for a purchase price of €19.4 million, of which €18.6 million was paid upon closing with the remainder being paid over four years. This property is leased to affiliates of MEDIAN, pursuant to an existing master lease agreement that ends in December 2042 with annual escalators at the greater of one percent or 70% of the change in German CPI.

On January 30, 2017, we acquired an inpatient rehabilitation hospital in Germany for €8.4 million. This acquisition was the final property to close as part of the six hospital portfolio that we agreed to buy in September 2016 for an aggregate amount of €44.1 million. This property is leased to affiliates of MEDIAN pursuant to the original long-term master lease agreement reached with MEDIAN in 2015. (See “2015 Activity” below for further details of this master lease.)

Other Transactions

On June 1, 2017, we acquired the real estate assets of Ohio Valley Medical Center, a 218-bed acute care hospital located in Wheeling, West Virginia, and the East Ohio Regional Hospital, a 139-bed acute care hospital in Martins Ferry, Ohio, from Ohio Valley Health Services, a not-for-profit entity in West Virginia, for an aggregate purchase price of approximately $40 million. We simultaneously leased the facilities to Alecto Healthcare Services LLC (“Alecto”), pursuant to a lease with a 15-year initial term with 2% annual minimum rent increases and three 5-year extension options. The facilities are cross-defaulted and cross-collateralized with our other hospitals currently operated by Alecto. We also agreed to provide up to $20.0 million in capital improvement funding on these two facilities — none of which has been funded to date. With these acquisitions, we also obtained a 20% interest in the operator of these facilities.

On May 1, 2017, we acquired the real estate of St. Joseph Regional Medical Center, a 145-bed acute care hospital in Lewiston, Idaho for $87.5 million. This facility is leased to RCCH Healthcare Partners (“RCCH”), pursuant to the existing long-term master lease entered into with RCCH in April 2016.

From the respective acquisition dates in 2017 through year-end, the properties acquired during the year ended December 31, 2017, contributed $72.9 million and $57.8 million of revenue and income (excluding related acquisition expenses), respectively, for the year ended December 31, 2017. In addition, we incurred $24.4 million of acquisition-related costs on the 2017 acquisitions for the year ended December 31, 2017.

2016 Activity

Acquisition of Steward Portfolio

On October 3, 2016, we closed on a portfolio of nine acute care hospitals in Massachusetts operated by Steward. Our investment in the portfolio included the acquisition of five hospitals for $600 million, the making of $600 million in mortgage loans on four facilities, and a $50 million minority equity contribution in Steward, for a combined investment of $1.25 billion. The five facilities acquired are being leased to Steward under a master lease agreement that has a 15-year term (ending October 31, 2031) with three 5-year extension options, plus annual inflation-based escalators. The terms of the mortgage loan are substantially similar to the master lease.

Other Acquisitions

From October 27, 2016 to December 31, 2016, we acquired 12 rehabilitation hospitals in Germany for an aggregate purchase price to us of €85.2 million. Of these acquisitions, five properties (totaling €35.6 million) are leased to affiliates of MEDIAN, pursuant to a master lease agreement reached with MEDIAN in 2015. (See “2015 Activity” below for further details of this master lease). The remaining seven properties (totaling €49.5 million) are leased to affiliates of MEDIAN, pursuant to a third master lease that has terms similar to the original master lease in 2015 with a fixed 27-year lease term ending in August 2043.

On October 21, 2016, we acquired three general acute care hospitals and one free-standing emergency department and health center in New Jersey from Prime Healthcare Services, Inc. (“Prime”) (as originally contemplated in the agreements) by reducing the $100 million mortgage loan made in September 2015 and advancing an additional $15 million. We are leasing these properties to Prime pursuant to a fifth master lease, which has a 15-year initial term (ending in May 2031) with three five-year extension options, plus consumer-price indexed increases.

On July 22, 2016, we acquired an acute care facility in Olympia, Washington in exchange for a $93.3 million loan and an additional $7 million in cash, as contemplated in the initial Capella Healthcare Inc. (“Capella”) acquisition transaction in 2015. The terms of the Olympia lease are substantially similar to those of the master lease with Capella post lease amendment. See the Capella Disposal Transaction under the subheading “Disposals” below for further details on the terms of the Capella leases.

On June 22, 2016, we closed on the final property of the initial MEDIAN transaction that began in 2014 for a purchase price of € 41.6 million. See “2015 Activity” for a description of the initial MEDIAN Transaction and related master lease terms.

On May 2, 2016, we acquired an acute care hospital in Newark, New Jersey for an aggregate purchase price of $63 million leased to Prime pursuant to the fifth master lease. Furthermore, we committed to advance an additional $30 million to Prime over a three-year period to be used solely for capital additions to the real estate; any such addition will be added to the basis upon which the lessee will pay us rents. None of the additional $30 million has been funded to date.

From the respective acquisition dates through the 2016 year-end, the properties acquired during 2016, contributed $37.4 million and $31.7 million of revenue and income (excluding related acquisition expense), respectively, for the year ended December 31, 2016. In addition, we incurred $12.1 million of acquisition-related costs on the 2016 acquisitions for the year ended December 31, 2016.

2015 Activity

Acquisition of Capella Portfolio

In July 2015, we entered into definitive agreements to acquire a portfolio of seven acute care hospitals owned and operated by Capella for a combined purchase price and investment of approximately $900 million, adjusted for any cash on hand. The transaction included our investments in seven acute care hospitals (two of which were in the form of mortgage loans) for an aggregate investment of approximately $600 million, an acquisition loan for approximately $290 million and a 49% equity interest in the ongoing operator of the facilities.

On August 31, 2015, we closed on six of the seven Capella properties, two of which were in the form of mortgage loans. We closed on the seventh property on July 22, 2016 (as discussed above). We entered into a master lease, a stand-alone lease, and mortgage loans for the acquired properties providing for 15-year terms with four 5-yearextension options, plus consumer price-indexed increases, limited to a 2% floor and a 4% ceiling annually. The acquisition loan had a 15-year term and carried a fixed interest rate of 8%.

On October 30, 2015, we acquired an additional acute hospital in Camden, South Carolina for an aggregate purchase price of $25.8 million. We leased this hospital to Capella pursuant to the 2015 master lease. In connection with the transaction, we funded an additional acquisition loan to Capella of $9.2 million.

See the Capella Disposal Transaction under the subheading “Disposals” below for an update to this transaction.

MEDIAN Transaction

During early 2015, we made additional interim loans (as part of the initial MEDIAN transaction entered into in October 2014) of approximately €240 million on behalf of MEDIAN, to complete step one of a two-step process to acquire the healthcare real estate of MEDIAN. In addition, we entered into a series of definitive agreements with MEDIAN to complete step two, which involved the acquisition of the real estate assets of 32 hospitals owned by MEDIAN for an aggregate purchase price of approximately €688 million. Upon acquisition, each property became subject to a new master lease between us and MEDIAN providing for the leaseback of the property to MEDIAN. The master lease had an initial term of 27 years (ending in March 2042) and provided for annual escalations of rent at the greater of one percent or 70% of the change in German CPI.

At each closing, the purchase price for each facility was reduced and offset against the interim loans made to affiliates of MEDIAN and against the amount of any debt assumed or repaid by us in connection with the closing. As of December 31, 2015, we had closed on 31 of the 32 properties for an aggregate amount of € 646 million, and we had no loans outstanding to MEDIAN. The final property was acquired in June 2016 as noted above.

Other Acquisitions

On December 3, 2015, we acquired a 266-bed outpatient rehabilitation clinic located in Hannover, Germany from MEDIAN for €18.7 million. Upon acquisition, the facility was leased back under the initial master lease entered into with MEDIAN in 2013, that provided for an initial term of 27 years (ending in November 2040) and annual rent increases of 2.0% in 2017 and 0.5% thereafter. On December 31, 2020 and every three years thereafter, rent will be further increased, if needed, to reflect 70% of cumulative increases in the German CPI.

On November 18, 2015, we acquired seven acute care hospitals and a freestanding clinic in northern Italy for an aggregate purchase price to us of approximately €90 million. The acquisition was effected through a joint venture between us and affiliates of AXA Real Estate, in which we own a 50% interest. The facilities are leased to an Italian acute care hospital operator, pursuant to a long-term master lease. We are accounting for our 50% interest in this joint venture under the equity method.

On September 30, 2015, we provided a $100 million mortgage financing to Prime for three general acute care hospitals and one free-standing emergency department and health center in New Jersey. The loan had a five-year term and provided for consumer-priced indexed interest increases, subject to a floor. As previously noted above, we acquired these facilities in October 2016 by reducing the mortgage loan and advancing an additional $15 million.

On September 9, 2015, we acquired the real estate of a general acute care hospital under development located in Valencia, Spain. The acquisition was effected through a joint venture between us and clients of AXA Real Estate, in which we own a 50% interest. Our share of the aggregate purchase and development price was approximately €21 million. See IMED Group under the subheading “Development Activities” for an update on this transaction along with additional details.

On August 31, 2015, we closed on a $30 million mortgage loan transaction with Prime for the acquisition of Lake Huron Medical Center, a 144-bed general acute care hospital located in Port Huron, Michigan. The loan provided for consumer-priced indexed interest increases, subject to a floor. The mortgage loan had a five-year term with conversion rights to our standard sale leaseback agreement, which we exercised on December 31, 2015, when we acquired the real estate of Lake Huron Medical Center for $20 million, which reduced the mortgage loan accordingly. The facility is being leased to Prime under our master lease agreement.

On June 16, 2015, we acquired the real estate of two facilities in Lubbock, Texas, a 60-bed inpatient rehabilitation hospital and a 37-bed long-term acute care hospital (“LTACH”), for an aggregate purchase price of $31.5 million. We entered into a 20-year lease (ending in June 2035) with Ernest for the rehabilitation hospital, which provides for three five-year extension options, and separately entered into a lease with Ernest for the long-term acute care hospital that has a final term ending December 31, 2034. In connection with the transaction, we funded an acquisition loan to Ernest of approximately $12.0 million. Ernest operates the rehabilitation hospital in a joint venture with Covenant Health System. Effective July 18, 2016, we amended the lease of the rehabilitation hospital to include the long-term acute care hospital. Ernest converted the long-term acute care facility into a rehabilitation facility in the second quarter of 2017.

On February 27, 2015, we acquired an inpatient rehabilitation hospital in Weslaco, Texas for $10.7 million. We have leased this hospital to Ernest pursuant to the 2012 master lease, which had an initial 20-year fixed term (ending in February 2032) and three extension options of five years each. This lease provides for consumer-priced-indexed annual rent increases, subject to a floor and a cap. In addition, we funded an acquisition loan in the amount of $5 million.

On February 13, 2015, we acquired two general acute care hospitals in the Kansas City area for $110 million. Prime is the tenant and operator pursuant to a new master lease that has similar terms and security enhancements as the other master lease agreements entered into in 2013. This master lease has a 10-year initial fixed term (ending in February 2025) with two extension options of five years each. The lease provides for consumer-price-indexed annual rent increases, subject to a specified floor. In addition, we funded a mortgage loan in the amount of $40 million, which has a 10-year term.

From the respective acquisition dates in 2015 through that year end, the properties and mortgage loans acquired in 2015 contributed $102.7 million and $87.7 million of revenue and income (excluding related acquisition expenses), respectively, for the year ended December 31, 2015. In addition, we incurred $58 million of acquisition related costs on the 2015 acquisitions for the year ended December 31, 2015.

Pro Forma Information

The following unaudited supplemental pro forma operating data is presented below as if each acquisition was completed on January 1, 2016 and January 1, 2015 for the year ended December 31, 2017 and 2016, respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what actuals would have been assuming the transactions had been completed as set forth above, nor do they purport to represent our results of operations for future periods (in thousands, except per share/unit amounts).


	For the Year Ended December 31, (Unaudited)
	2017		2016
Total revenues	$	839,568	$	836,211
Net income		418,811		427,295
Net income per share/unit-diluted	$	1.14	$	1.17

Development Activities

2017 Activity

During 2017, we completed construction and began recording rental income on the following facilities:

•

Adeptus Health, Inc. (“Adeptus Health”) — We completed four acute care facilities for this tenant during 2017 totaling approximately $68 million in development costs. These facilities are leased pursuant to an existing long-term master lease.

•

IMED Group (“IMED”) — Our general acute facility located in Valencia, Spain opened on March 31, 2017, and is being leased to IMED pursuant to a 30-year lease that provides for quarterly fixed rent payments that started on October 1, 2017 with annual increases of 1% beginning April 1, 2020. Our ownership in this facility is effected through a joint venture between us and clients of AXA Real Estate, in which we own a 50% interest. Our share of the aggregate purchase and development cost of this facility is approximately €21 million.

In April 2017, we completed the acquisition of the long leasehold interest of a development site in Birmingham, England from the Circle Health Group (“Circle”) (the tenant of our existing site in Bath, England) for a purchase price of £2.7 million. Simultaneously with the acquisition, we entered into contracts with the property landlord and Circle committing us to construct an acute care hospital on the site. Our total development costs are anticipated to be approximately £30 million. Circle is contracted to enter into a lease of the hospital following completion of construction for an initial 15-year term with rent to be calculated based on our total development costs.

On December 19, 2017, we entered into an agreement to finance the development of and lease an acute care hospital in Idaho Falls, Idaho, for $113.5 million. This facility will be leased to Surgery Partners, Inc. (“Surgery Partners”) pursuant to a long-term lease and is expected to be completed in the first quarter of 2020.

2016 Activity

During 2016, we completed construction and began recording rental income on the following facilities:

•

Adeptus Health — We completed 19 acute care facilities for this tenant during 2016 totaling $136.6 million. These facilities are leased pursuant to an existing long-term master lease.

•

Ernest Toledo — This $18.4 million inpatient rehabilitation facility located in Toledo, Ohio opened on April 1, 2016 and is being leased to Ernest pursuant to the original 2012 master lease.

On August 23, 2016, we entered into an agreement to finance the development of and lease an inpatient rehabilitation facility in Flagstaff, Arizona, for $28.1 million, which will be leased to Ernest pursuant to a stand-alone lease, with terms generally similar to the original master lease.

2015 Activity

During 2015, we completed construction and began recording rental income on the following facilities:

•

Adeptus Health — We completed 17 acute care facilities for this tenant during 2015 totaling $102.6 million. These properties are leased pursuant to a master lease that generally has a 15-year initial term with three extension options of five years each that provide for annual rent increases based on changes in CPI with a 2% minimum.

•

UAB Medical West — This $8.6 million acute care facility and medical office building located in Birmingham, Alabama is leased to Medical West, an affiliate of The University of Alabama at Birmingham, for 15 years and contains four renewal options of five years each. The rent increases 2% annually.

See table below for a status summary of our current development projects (in thousands):


Property	Commitment		Costs Incurred as of December 31, 2017		Estimated Completion Date
Ernest (Flagstaff, Arizona)	$	28,067	$	21,794		1Q 2018
Circle (Birmingham, England)		43,592		14,694		1Q 2019
Surgery Partners (Idaho Falls, Idaho)		113,468		11,207		1Q 2020

	$	185,127	$	47,695

Disposals

2017 Activity

On March 31, 2017, we sold the EASTAR Health System real estate located in Muskogee, Oklahoma, which was leased to RCCH. Total proceeds from this transaction were approximately $64 million resulting in a gain of $7.4 million, partially offset by a $0.6 million non-cash charge to revenue to write-off related straight-line rent receivables on this property.

The sale of Muskogee facility was not a strategic shift in our operations and therefore the results of the Muskogee operations were not reclassified to discontinued operations.

2016 Activity

Capella Disposal Transaction

Effective April 30, 2016, our investment in the operator of Capella merged with RegionalCare Hospital Partners, Inc. (“RegionalCare”), an affiliate of certain funds managed by affiliates of Apollo Global Management, LLC (“Apollo”), to form RCCH. As part of the transaction, we received net proceeds of approximately $550 million including approximately $492 million for our equity investment and loans made as part of the original Capella acquisition that closed on August 31, 2015. In addition, we received $210 million in prepayment of two mortgage loans for hospitals in Russellville, Arkansas, and Lawton, Oklahoma that we made in connection with the original Capella transaction. We made a new $93.3 million loan for a hospital property in Olympia, Washington that was subsequently converted to real estate on July 22, 2016 as previously disclosed. Additionally, we and an Apollo affiliate invested $50 million each in unsecured senior notes issued by RegionalCare, which we sold to a large institution on June 20, 2016 at par. The proceeds from this transaction represented the recoverability of our investment in full, except for transaction costs incurred of $6.3 million.

We maintained our ownership of five hospitals in Hot Springs, Arkansas; Camden, South Carolina; Hartsville, South Carolina; Muskogee, Oklahoma; and McMinnville, Oregon. Pursuant to the transaction described above, the underlying leases, one of which is a master lease covering all but one property was amended to shorten the initial fixed lease term (to 13.5 years for the master lease and 11.5 years for the other stand-alone lease) , increase the security deposit, and eliminate the lessees’ purchase option provisions. Due to this lease amendment, we reclassified the lease of the properties under the master lease from a DFL to an operating lease. This reclassification resulted in a write-off of $2.6 million of unbilled DFL rent receivables in 2016.

Post Acute Transaction

On May 23, 2016, we sold five properties (three of which were in Texas and two in Louisiana) that were leased and operated by Post Acute Medical. As part of this transaction, our outstanding loans of $4 million were paid in full, and we recovered our investment in the operations. Total proceeds from this transaction were $71 million, resulting in a net gain of approximately $15 million.

Corinth Transaction

On June 17, 2016, we sold the Atrium Medical Center real estate located in Corinth, Texas, which was leased and operated by Corinth Investor Holdings. Total proceeds from the transaction were $28 million, resulting in a gain on the sale of real estate of approximately $8 million. This gain on real estate was offset by approximately $9 million of non-cash charges that included the write-off of our investment in the operations of the facility, straight-line rent receivables, and a lease intangible.

HealthSouth Transaction

On July 20, 2016, we sold three inpatient rehabilitation hospitals located in Texas and operated by HealthSouth Corporation for $111.5 million, resulting in a net gain of approximately $45 million.

Summary of Operations for Disposed Assets in 2016

The properties sold during 2016 did not meet the definition of discontinued operations. However, the following represents the operating results (excluding gain on sale, transaction costs, and impairment or other non-cash charges) from these properties (excluding loans repaid in the Capella Disposal Transaction) for the periods presented (in thousands):


	For the Year Ended December 31,
	2016			2015
Revenues	$	7,851		$	18,112
Real estate depreciation and amortization		(1,754	)		(3,795	)
Property-related expenses		(114	)		(121	)
Other income (expense)		(23	)		1,079

Income from real estate dispositions, net	$	5,960		$	15,275

2015 Activity

On July 30, 2015, we sold a long-term acute care facility in Luling, Texas for approximately $9.7 million, resulting in a gain of $1.5 million. Due to this sale, we wrote off $0.9 million of straight-line rent receivables. On August 5, 2015, we sold six wellness centers in the U.S. for total proceeds of approximately $9.5 million (of which $1.5 million was in the form of a promissory note), resulting in a gain of $1.7 million. Due to this sale, we wrote off $0.9 million of billed rent receivables. With these disposals, we accelerated the amortization of the related lease intangible assets resulting in approximately $0.7 million of additional expense.

The sale of the Luling facility and the six wellness centers were not strategic shifts in our operations, and therefore the results of operations related to these facilities were not reclassified as discontinued operations.

Intangible Assets

At December 31, 2017 and 2016, our intangible lease assets were $443 million ($394 million, net of accumulated amortization) and $296 million ($264 million, net of accumulated amortization), respectively.

We recorded amortization expense related to intangible lease assets of $15.8 million, $13.4 million, and $9.1 million in 2017, 2016, and 2015, respectively, and expect to recognize amortization expense from existing lease intangible assets as follows (amounts in thousands):


For the Year Ended December 31:
2018	$	17,707
2019		17,654
2020		17,440
2021		17,373
2022		17,359

As of December 31, 2017, capitalized lease intangibles have a weighted average remaining life of 24.3 years.

Leasing Operations

At December 31, 2017, leases on two Alecto facilities, 15 Ernest facilities and ten Prime facilities are accounted for as DFLs. The components of our net investment in DFLs consisted of the following (in thousands):


	As of December 31, 2017			As of December 31, 2016
Minimum lease payments receivable	$	2,294,081		$	2,207,625
Estimated residual values		448,339			407,647
Less unearned income		(2,043,693	)		(1,967,170	)

Net investment in direct financing leases	$	698,727		$	648,102

Minimum rental payments due to us in future periods under operating leases and DFLs, which have non-cancelable terms extending beyond one year at December 31, 2017, are as follows (amounts in thousands):


	Total Under Operating Leases		Total Under DFLs		Total
2018	$	496,379	$	67,436	$	563,815
2019		499,417		68,784		568,201
2020		502,309		70,160		572,469
2021		509,991		71,563		581,554
2022		503,679		72,994		576,673
Thereafter		10,472,481		1,734,085		12,206,566

	$	12,984,256	$	2,085,022	$	15,069,278

Adeptus Health

On April 4, 2017, we announced that we had agreed in principle with Deerfield Management Company, L.P. (“Deerfield”), a healthcare-only investment firm, to the restructuring in bankruptcy of Adeptus Health. In furtherance of the restructuring, Adeptus Health and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code on April 19, 2017. Funds advised by Deerfield acquired Adeptus Health’s outstanding bank debt, and Deerfield agreed to provide additional financing, along with operational and managerial support, to Adeptus Health as part of the restructuring.

On September 29, 2017, the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, entered an order confirming the Debtors’ Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Plan”). The Plan became effective on October 2, 2017 (the “Confirmation Effective Date”). In connection with the confirmation of the Plan, Deerfield agreed that it would assume all of the master leases and related agreements between us and Adeptus Health, cure all defaults that had arisen prior to the commencement of the bankruptcy proceedings with respect to all properties, and continue to pay rent with respect to all but 16 of the 56 Adeptus Health properties according to the terms of the master leases and related agreements. Rent will remain the same, and a previously disclosed rent concession was removed from the terms. We plan to re-lease or sell the remaining 16 properties, and Adeptus Health will continue to pay rent with respect to those 16 properties until the earlier of (a) transition to a new operator is complete, (b) two years following the Confirmation Effective Date (for one facility), (c) one year following the Confirmation Effective Date (for seven facilities), (d) six months following the Confirmation Effective Date (for three facilities), and (e) three months following the Confirmation Effective Date (for five facilities). As part of the Plan, our lease with Adeptus Health was amended to shorten the lease term of the 16 transition properties resulting in an acceleration of straight-line rent receivable amortization of $4.2 million in the 2017 fourth quarter. Although no assurances can be made that we will not recognize a loss in the future, we believe at December 31, 2017 that the sale or re-leasing of the assets related to these 16 transition facilities will not result in any material loss or impairment.

On December 7, 2017, we announced that UCHealth Partners LLC (“UCHealth”), an affiliate of University of Colorado Hospital, had acquired all of Adeptus Health’s Colorado joint venture interests, assuming the existing master lease of 11 of our free standing emergency facilities. The 11 facilities that are now master leased to UCHealth affiliates represent a gross investment of $58.6 million. The master lease was amended to provide a new 15-year initial term effective January 1, 2018 with three five-year renewal options, while retaining annual escalation provisions of the increase in the CPI with a 2% minimum.

On April 4, 2017, we announced that our Louisiana freestanding emergency facilities then-operated by Adeptus Health (with a total budgeted investment of approximately $24.5 million) had been re-leased to Ochsner Clinic Foundation (“Ochsner”), a health care system in the New Orleans area. We incurred a non-cash charge of $0.5 million to write-off the straight-line rent receivables associated with the previous Adeptus Health lease on these properties. On October 18, 2017, Ochsner agreed to an amended and restated lease that provided for initial terms of 15 years with a 9.2% average minimum lease rate based on our total development and construction cost, as well as the addition of three five-year renewal options.

Twelve Oaks Facility

In the third quarter of 2015, we sent notice of termination of the lease to the tenant at our Twelve Oaks facility. As a result of the lease terminating, we recorded a charge of $1.9 million to reserve against the straight-line rent receivables. In addition, we accelerated the amortization of the related lease intangible asset resulting in $0.5 million of additional expense during 2015. During the third quarter of 2016, the former tenant paid us approximately $2.5 million representing substantially all amounts owed to us at that time. The former tenant has continued to occupy the facility and is current on its obligations through December 31, 2017. However, we expect this tenant will vacate the facility by mid-year 2018, at which time we will re-lease the facility. Although no assurances can be made that we will not have any impairment charges in the future, we believe our real estate investment in Twelve Oaks at December 31, 2017 is fully recoverable.

Loans

The following is a summary of our loans ($ amounts in thousands):


	As of December 31, 2017					As of December 31, 2016
	Balance		Weighted Average Interest Rate			Balance		Weighted Average Interest Rate
Mortgage loans	$	1,778,316		8.3	%	$	1,060,400		8.8	%
Acquisition loans		118,448		13.8	%		121,464		13.7	%
Working capital and other loans		31,760		7.6	%		34,257		9.0	%

	$	1,928,524				$	1,216,121

Our mortgage loans cover 14 of our properties with four operators. The increase in mortgage loans relates to the loans made to Steward totaling $700 million for two properties on September 29, 2017, as part of the Steward Transaction.

Other loans typically consist of loans to our tenants for acquisitions and working capital purposes. At December 31, 2017, acquisition loans include $114 million loaned to Ernest.

Concentration of Credit Risks

Revenue by Operator

(Dollar amounts in thousands)


	For the Years Ended December 31,
	2017					2016
Operators	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Steward(1)	$	190,172		27.0	%	$	54,068		10.0	%
Prime		126,269		17.9	%		120,558		22.3	%
MEDIAN		100,531		14.3	%		93,425		17.3	%
Ernest		70,665		10.0	%		67,742		12.5	%
RCCH		41,890		5.9	%		52,720		9.7	%
Other operators		175,218		24.9	%		152,624		28.2	%

Total	$	704,745		100.0	%	$	541,137		100.0	%

(1)

Includes revenue from IASIS prior to being acquired by Steward on September 29, 2017.

Revenue by U.S. State and Country

(Dollar amounts in thousands)


	For the Years Ended December 31,
	2017					2016
U.S. States and Other Countries	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Massachusetts	$	107,195		15.2	%	$	26,098		4.8	%
Texas		102,926		14.6	%		96,992		17.9	%
California		66,241		9.4	%		66,197		12.2	%
Arizona		36,393		5.2	%		23,798		4.4	%
Utah		28,831		4.1	%		9,942		1.8	%
Other states		235,545		33.4	%		216,505		40.1	%

Total U.S.	$	577,131		81.9	%	$	439,532		81.2	%
Germany	$	123,453		17.5	%	$	97,382		18.0	%
United Kingdom, Italy, and Spain		4,161		0.6	%		4,223		0.8	%

Total International	$	127,614		18.1	%	$	101,605		18.8	%

Total	$	704,745		100.0	%	$	541,137		100.0	%

From an asset perspective, approximately 80% of our total assets are in the U.S., while 20% reside in Europe (primarily Germany) as of December 31, 2017, consistent with December 31, 2016.

Related Party Transactions

Lease and interest revenue earned from tenants in which we have an equity interest in were $422.4 million, $282.9 million and $215.4 million in 2017, 2016 and 2015, respectively.