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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 001-08895
 
HCP, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Maryland
 
33-0091377
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1920 Main Street, Suite 1200
Irvine, CA 92614
(Address of principal executive offices)
(949) 407-0700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common stock, $1.00 par value
HCP
The New York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).  Yes  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
 
 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes  No 
At July 30, 2019, there were 491,110,300 shares of the registrant’s $1.00 par value common stock outstanding.
 



HCP, INC.
INDEX


2


HCP, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 
June 30,
2019
 
December 31,
2018
ASSETS
 

 
 

Real estate:
 

 
 

Buildings and improvements
$
11,784,671

 
$
10,877,248

Development costs and construction in progress
496,662

 
537,643

Land
1,879,227

 
1,637,506

Accumulated depreciation and amortization
(2,926,656
)
 
(2,842,947
)
Net real estate
11,233,904

 
10,209,450

Net investment in direct financing leases
357,104

 
713,818

Loans receivable, net
124,559

 
62,998

Investments in and advances to unconsolidated joint ventures
518,033

 
540,088

Accounts receivable, net of allowance of $6,899 and $5,127
53,840

 
48,171

Cash and cash equivalents
130,521

 
110,790

Restricted cash
25,531

 
29,056

Intangible assets, net
317,960

 
305,079

Assets held for sale, net
160,999

 
108,086

Right-of-use asset, net
172,424

 

Other assets, net
618,218

 
591,017

Total assets
$
13,713,093

 
$
12,718,553

LIABILITIES AND EQUITY
 

 
 

Bank line of credit
$
530,004

 
$
80,103

Term loan
248,821

 

Senior unsecured notes
5,262,694

 
5,258,550

Mortgage debt
161,829

 
138,470

Other debt
87,211

 
90,785

Intangible liabilities, net
53,771

 
54,663

Liabilities of assets held for sale, net
30,093

 
1,125

Lease liability
154,877

 

Accounts payable and accrued liabilities
371,235

 
391,583

Deferred revenue
193,286

 
190,683

Total liabilities
7,093,821

 
6,205,962

Commitments and contingencies


 


Common stock, $1.00 par value: 750,000,000 shares authorized; 491,108,584 and 477,496,499 shares issued and outstanding
491,109

 
477,496

Additional paid-in capital
8,801,037

 
8,398,847

Cumulative dividends in excess of earnings
(3,233,283
)
 
(2,927,196
)
Accumulated other comprehensive income (loss)
(4,459
)
 
(4,708
)
Total stockholders' equity
6,054,404

 
5,944,439

Joint venture partners
388,617

 
391,401

Non-managing member unitholders
176,251

 
176,751

Total noncontrolling interests
564,868

 
568,152

Total equity
6,619,272

 
6,512,591

Total liabilities and equity
$
13,713,093

 
$
12,718,553


See accompanying Notes to the Unaudited Consolidated Financial Statements.


3


HCP, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 

 
 

 
 
 
 
Rental and related revenues
$
301,197

 
$
317,840

 
$
595,419

 
$
634,592

Resident fees and services
177,766

 
136,774

 
304,461

 
279,588

Income from direct financing leases
10,190

 
13,490

 
23,714

 
26,756

Interest income
2,414

 
1,447

 
4,127

 
7,812

Total revenues
491,567

 
469,551

 
927,721

 
948,748

Costs and expenses:
 

 
 

 
 
 
 
Interest expense
56,942

 
73,038

 
106,269

 
148,140

Depreciation and amortization
165,296

 
143,292

 
297,247

 
286,542

Operating
213,993

 
173,866

 
382,920

 
346,418

General and administrative
27,120

 
22,514

 
48,475

 
51,689

Transaction costs
1,337

 
2,404

 
5,855

 
4,599

Impairments (recoveries), net
68,538

 
13,912

 
77,396

 
13,912

Total costs and expenses
533,226

 
429,026

 
918,162

 
851,300

Other income (expense):
 

 
 

 
 
 
 
Gain (loss) on sales of real estate, net
11,448

 
46,064

 
19,492

 
66,879

Loss on debt extinguishments
(1,135
)
 

 
(1,135
)
 

Other income (expense), net
21,008

 
1,786

 
24,141

 
(38,621
)
Total other income (expense), net
31,321

 
47,850

 
42,498

 
28,258

Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures
(10,338
)
 
88,375

 
52,057

 
125,706

Income tax benefit (expense)
1,864

 
4,654

 
5,322

 
9,990

Equity income (loss) from unconsolidated joint ventures
(1,506
)
 
(101
)
 
(2,369
)
 
469

Net income (loss)
(9,980
)
 
92,928

 
55,010

 
136,165

Noncontrolling interests' share in earnings
(3,617
)
 
(2,986
)
 
(7,137
)
 
(5,991
)
Net income (loss) attributable to HCP, Inc.
(13,597
)
 
89,942

 
47,873

 
130,174

Participating securities' share in earnings
(394
)
 
(461
)
 
(837
)
 
(852
)
Net income (loss) applicable to common shares
$
(13,991
)
 
$
89,481

 
$
47,036

 
$
129,322

Earnings per common share:
 
 
 
 
 
 
 
Basic
$
(0.03
)
 
$
0.19

 
$
0.10

 
$
0.28

Diluted
$
(0.03
)
 
$
0.19

 
$
0.10

 
$
0.28

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
478,739

 
469,769

 
478,260

 
469,664

Diluted
478,739

 
469,941

 
479,885

 
469,799

See accompanying Notes to the Unaudited Consolidated Financial Statements.


4


HCP, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net income (loss)
$
(9,980
)
 
$
92,928

 
$
55,010

 
$
136,165

 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
Net unrealized gains (losses) on derivatives
101

 
10,793

 
195

 
5,629

Change in Supplemental Executive Retirement Plan obligation and other
68

 
78

 
137

 
182

Foreign currency translation adjustment
(745
)
 
(11,327
)
 
(83
)
 
(3,675
)
Reclassification adjustment realized in net income (loss)

 
17,683

 

 
17,808

Total other comprehensive income (loss)
(576
)
 
17,227

 
249

 
19,944

Total comprehensive income (loss)
(10,556
)
 
110,155

 
55,259

 
156,109

Total comprehensive income (loss) attributable to noncontrolling interests
(3,617
)
 
(2,986
)
 
(7,137
)
 
(5,991
)
Total comprehensive income (loss) attributable to HCP, Inc.
$
(14,173
)
 
$
107,169

 
$
48,122

 
$
150,118

See accompanying Notes to the Unaudited Consolidated Financial Statements.


5


HCP, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share data)
(Unaudited)

For the three months ended June 30, 2019:
 
Common Stock
 
Additional Paid-In Capital
 
Cumulative Dividends In Excess Of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Total Noncontrolling Interests
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
April 1, 2019
477,929

 
$
477,929

 
$
8,405,258

 
$
(3,042,422
)
 
$
(3,883
)
 
$
5,836,882

 
$
562,183

 
$
6,399,065

Net income (loss)

 

 

 
(13,597
)
 

 
(13,597
)
 
3,617

 
(9,980
)
Other comprehensive income (loss)

 

 

 

 
(576
)
 
(576
)
 

 
(576
)
Issuance of common stock, net
13,227

 
13,227

 
392,054

 

 

 
405,281

 

 
405,281

Repurchase of common stock
(54
)
 
(54
)
 
(1,609
)
 

 

 
(1,663
)
 

 
(1,663
)
Exercise of stock options
7

 
7

 
166

 

 

 
173

 

 
173

Amortization of deferred compensation

 

 
6,247

 

 

 
6,247

 

 
6,247

Common dividends ($0.37 per share)

 

 

 
(177,264
)
 

 
(177,264
)
 

 
(177,264
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(4,408
)
 
(4,408
)
Issuances of noncontrolling interests

 

 

 

 

 

 
3,615

 
3,615

Purchase of noncontrolling interests

 

 
(1,079
)
 

 

 
(1,079
)
 
(139
)
 
(1,218
)
June 30, 2019
491,109

 
$
491,109

 
$
8,801,037

 
$
(3,233,283
)
 
$
(4,459
)
 
$
6,054,404

 
$
564,868

 
$
6,619,272


For the three months ended June 30, 2018:
 
Common Stock
 
Additional Paid-In Capital
 
Cumulative Dividends In Excess Of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Total Noncontrolling Interests
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
April 1, 2018
469,725

 
$
469,725

 
$
8,183,166

 
$
(3,425,293
)
 
$
(21,307
)
 
$
5,206,291

 
$
274,632

 
$
5,480,923

Net income (loss)

 

 

 
89,942

 

 
89,942

 
2,986

 
92,928

Other comprehensive income (loss)

 

 

 

 
17,227

 
17,227

 

 
17,227

Issuance of common stock, net
129

 
129

 
530

 

 

 
659

 

 
659

Repurchase of common stock
(24
)
 
(24
)
 
(610
)
 

 

 
(634
)
 

 
(634
)
Amortization of deferred compensation

 

 
4,299

 

 

 
4,299

 

 
4,299

Common dividends ($0.37 per share)

 

 

 
(174,290
)
 

 
(174,290
)
 

 
(174,290
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(4,389
)
 
(4,389
)
June 30, 2018
$
469,830

 
$
469,830

 
$
8,187,385

 
$
(3,509,641
)
 
$
(4,080
)
 
$
5,143,494

 
$
273,229

 
$
5,416,723



6


For the six months ended June 30, 2019:
 
Common Stock
 
Additional Paid-In Capital
 
Cumulative Dividends In Excess Of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Total Noncontrolling Interests
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
December 31, 2018
477,496

 
$
477,496

 
$
8,398,847

 
$
(2,927,196
)
 
$
(4,708
)
 
$
5,944,439

 
$
568,152

 
$
6,512,591

Impact of adoption of ASU No. 2016-02(1)

 

 

 
590

 

 
590

 

 
590

January 1, 2019
477,496

 
477,496

 
8,398,847

 
(2,926,606
)
 
(4,708
)
 
5,945,029

 
568,152

 
6,513,181

Net income (loss)

 

 

 
47,873

 

 
47,873

 
7,137

 
55,010

Other comprehensive income (loss)

 

 

 

 
249

 
249

 

 
249

Issuance of common stock, net
13,569

 
13,569

 
393,244

 

 

 
406,813

 

 
406,813

Conversion of DownREIT units to common stock
184

 
184

 
3,890

 

 

 
4,074

 
(4,074
)
 

Repurchase of common stock
(149
)
 
(149
)
 
(4,433
)
 

 

 
(4,582
)
 

 
(4,582
)
Exercise of stock options
9

 
9

 
210

 

 

 
219

 

 
219

Amortization of deferred compensation

 

 
10,358

 

 

 
10,358

 

 
10,358

Common dividends ($0.74 per share)

 

 

 
(354,550
)
 

 
(354,550
)
 

 
(354,550
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(9,823
)
 
(9,823
)
Issuances of noncontrolling interests

 

 

 

 

 

 
3,615

 
3,615

Purchase of noncontrolling interests

 

 
(1,079
)
 

 

 
(1,079
)
 
(139
)
 
(1,218
)
June 30, 2019
491,109

 
$
491,109

 
$
8,801,037

 
$
(3,233,283
)
 
$
(4,459
)
 
$
6,054,404

 
$
564,868

 
$
6,619,272


For the six months ended June 30, 2018:
 
Common Stock
 
Additional Paid-In Capital
 
Cumulative Dividends In Excess Of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Total Noncontrolling Interests
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
December 31, 2017
469,436

 
$
469,436

 
$
8,226,113

 
$
(3,370,520
)
 
$
(24,024
)
 
$
5,301,005

 
$
293,933

 
$
5,594,938

Impact of adoption of ASU No. 2017-05(2)

 

 

 
79,144

 

 
79,144

 

 
79,144

January 1, 2018
469,436

 
$
469,436

 
$
8,226,113

 
$
(3,291,376
)
 
$
(24,024
)
 
$
5,380,149

 
$
293,933

 
$
5,674,082

Net income (loss)

 

 

 
130,174

 

 
130,174

 
5,991

 
136,165

Other comprehensive income (loss)

 

 

 

 
19,944

 
19,944

 

 
19,944

Issuance of common stock, net
511

 
511

 
2,922

 

 

 
3,433

 

 
3,433

Repurchase of common stock
(117
)
 
(117
)
 
(2,661
)
 

 

 
(2,778
)
 

 
(2,778
)
Amortization of deferred compensation

 

 
10,218

 

 

 
10,218

 

 
10,218

Common dividends ($0.74 per share)

 

 

 
(348,439
)
 

 
(348,439
)
 

 
(348,439
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(9,466
)
 
(9,466
)
Issuances of noncontrolling interests

 

 

 

 

 

 
995

 
995

Purchase of noncontrolling interests

 

 
(49,207
)
 

 

 
(49,207
)
 
(18,224
)
 
(67,431
)
June 30, 2018
469,830

 
$
469,830

 
$
8,187,385

 
$
(3,509,641
)
 
$
(4,080
)
 
$
5,143,494

 
$
273,229

 
$
5,416,723

_______________________________________
(1)
On January 1, 2019, the Company adopted a series of Accounting Standards Updates (“ASUs”) related to accounting for leases, and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.
(2)
On January 1, 2018, the Company adopted ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.
See accompanying Notes to the Unaudited Consolidated Financial Statements.

7


HCP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended
June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
55,010

 
$
136,165

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization of real estate, in-place lease and other intangibles
297,247

 
286,542

Amortization of deferred compensation
10,358

 
10,218

Amortization of deferred financing costs
5,440

 
6,690

Straight-line rents
(5,968
)
 
(16,479
)
Equity loss (income) from unconsolidated joint ventures
2,369

 
(469
)
Distributions of earnings from unconsolidated joint ventures
9,050

 
13,911

Deferred income tax expense (benefit)
(7,486
)
 
(7,388
)
Impairments (recoveries), net
77,396

 
13,912

Loss on extinguishment of debt
1,135

 

Loss (gain) on sales of real estate, net
(19,492
)
 
(66,879
)
Loss (gain) on consolidation, net
(11,501
)
 
41,017

Casualty-related loss (recoveries), net
(6,579
)
 

Other non-cash items
(161
)
 
(3,367
)
Decrease (increase) in accounts receivable and other assets, net
(15,473
)
 
(8,444
)
Increase (decrease) in accounts payable, accrued liabilities and deferred revenue
(10,785
)
 
34,245

Net cash provided by (used in) operating activities
380,560

 
439,674

Cash flows from investing activities:
 
 
 
Acquisitions of real estate
(870,148
)
 
(23,087
)
Development and redevelopment of real estate
(289,885
)
 
(229,831
)
Leasing costs, tenant improvements, and recurring capital expenditures
(38,733
)
 
(45,591
)
Proceeds from sales of real estate, net
157,198

 
319,224

Contributions to unconsolidated joint ventures
(8,541
)
 
(6,053
)
Distributions in excess of earnings from unconsolidated joint ventures
11,612

 
15,344

Proceeds from insurance recovery
9,359

 

Proceeds from the RIDEA II transaction, net

 
335,709

Proceeds from sales/principal repayments on debt investments and direct financing leases
841

 
132,429

Investments in loans receivable, direct financing leases and other
(60,680
)
 
(6,376
)
Net cash provided by (used in) investing activities
(1,088,977
)
 
491,768

Cash flows from financing activities:
 
 
 
Borrowings under bank line of credit
1,340,000

 
453,000

Repayments under bank line of credit
(890,000
)
 
(923,164
)
Repayments and repurchase of debt, excluding bank line of credit
(5,334
)
 
(2,856
)
Borrowings under term loan
250,000

 

Payments for debt extinguishment and deferred financing costs
(10,482
)
 

Issuance of common stock and exercise of options
407,032

 
3,433

Repurchase of common stock
(4,582
)
 
(2,778
)
Dividends paid on common stock
(354,550
)
 
(348,439
)
Issuance of noncontrolling interests
3,615

 
995

Distributions to and purchase of noncontrolling interests
(11,041
)
 
(71,931
)
Net cash provided by (used in) financing activities
724,658

 
(891,740
)
Effect of foreign exchanges on cash, cash equivalents and restricted cash
(35
)
 
24

Net increase (decrease) in cash, cash equivalents and restricted cash
16,206

 
39,726

Cash, cash equivalents and restricted cash, beginning of period
139,846

 
82,203

Cash, cash equivalents and restricted cash, end of period
$
156,052

 
$
121,929

See accompanying Notes to the Unaudited Consolidated Financial Statements.

8


HCP, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 
NOTE 1.  Business

Overview
HCP, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “HCP” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). The Company acquires, develops, leases, owns, and manages healthcare real estate. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) senior housing triple-net; (ii) senior housing operating portfolio (“SHOP”); (iii) life science; and (iv) medical office.
NOTE 2.  Summary of Significant Accounting Policies

Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.
The consolidated financial statements include the accounts of HCP, Inc., its wholly-owned subsidiaries, joint ventures (“JVs”) and variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).
Recent Accounting Pronouncements
Adopted
Revenue Recognition. Between May 2014 and February 2017, the Financial Accounting Standards Board (“FASB”) issued four ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), and (iv) ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. ASU 2017-05 clarifies the scope of the FASB’s guidance on nonfinancial asset derecognition and aligns the accounting for partial sales of nonfinancial assets and in-substance nonfinancial assets with the guidance in ASU 2014-09. The Company adopted the Revenue ASUs effective January 1, 2018 and utilized a modified retrospective adoption approach, resulting in a cumulative-effect adjustment to equity of $79 million as of January 1, 2018. Under the Revenue ASUs, the Company also elected to utilize a practical expedient which allows the Company to only reassess contracts that were not completed as of the adoption date, rather than all historical contracts.

9


As the timing and recognition of the majority of the Company’s revenue is the same whether accounted for under the Revenue ASUs or lease accounting guidance (see discussion below), the impact of the Revenue ASUs, upon and subsequent to adoption, is generally limited to the following:
Prior to the adoption of the Revenue ASUs, the Company recognized a gain on sale of real estate using the full accrual method when collectibility of the sales price was reasonably assured, the Company was not obligated to perform additional activities that may be considered significant, the initial investment from the buyer was sufficient and other profit recognition criteria had been satisfied. The Company deferred all or a portion of a gain on sale of real estate if the requirements for gain recognition were not met at the time of sale. Subsequent to adopting the Revenue ASUs on January 1, 2018, the Company began recognizing a gain on sale of real estate upon transferring control of the asset to the purchaser, which is generally satisfied at the time of sale. In conjunction with its adoption of the Revenue ASUs, the Company reassessed its historical partial sale of real estate transactions to determine which transactions, if any, were not completed contracts (i.e., the transaction did not qualify for sale treatment under previous guidance). The Company concluded that it had one such material transaction, its part