Related Party Transactions

12 Months Ended

Dec. 31, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Effective August 4, 2015, Ventas acquired ownership of the Company’s real estate in exchange for a $1.4 billion payment from Ventas and the Company’s agreement to lease the acquired real estate back from Ventas (the "Ventas Master Lease"). The Ventas Master Lease is a 20-year master lease agreement (with a renewal option for an additional 10 years) with certain subsidiaries of Ventas, pursuant to which the Company currently leases 10 of the Company’s hospitals. The Ventas Master Lease includes an annual rent escalator equal to the lesser of four times the Consumer Price Index or 2.5%. In accordance with ASC 842, Leases, these rent escalations are considered variable lease payments because they are based on a change in an index or a rate. Variable lease payments are excluded from the Company’s minimum rental payments used to determine the right-of-use assets and lease obligations and are recognized as expense when incurred.

The Ventas Master Lease includes a number of operating and financial restrictions on the Company, including requirements that the Company maintain a minimum portfolio coverage ratio of 2.2x and a guarantor fixed charge ratio of 1.2x and does not exceed a

certain guarantor net leverage ratio of 6.75x. If the Company breaches its covenants under the terms of the Ventas Master Lease, and its related covenant agreements and amendments, the Company would be in default thereunder, and Ventas would have the right in certain circumstances to terminate the Ventas Master Lease and/or exercise a purchase option with respect to certain personal property located at the leased facilities. Management believes it was in compliance with all financial covenants as of December 31, 2024 and 2023.

For the years ended December 31, 2024, 2023, and 2022, the Company recorded rent expense of $149.2 million, $145.9 million, and $130.7 million, respectively, related to rent payments to Ventas. Additionally, during the year ended December 31, 2022, the Company recorded interest expense of $9.5 million related to the interest portion of lease payments to Ventas for a portfolio of medical office buildings sold to Ventas during the year. Refer to Note 5 for additional information on this transaction.