Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer-term market rates). For leases that commenced prior to January 1, 2019, we used the incremental borrowing rate on December 31, 2018.

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):

	Classification	Three Months Ended March 31, 2019
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	7,412
Non-real estate lease expense	General and administrative expenses	362
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,092
Interest on lease liabilities	Interest expense	1,002
Sublease income	Rental income	(1,886		)
Total		$	8,982

(1) Includes short-term leases which are immaterial.

Maturities of lease liabilities as of March 31, 2019 are as follows (in thousands):

	Operating Leases			Finance Leases
2019	$	12,139		$	5,726
2020	16,186			7,444
2021	16,058			7,093
2022	15,111			6,454
2023	15,158			67,593
Thereafter	1,418,839			—
Total lease payments	1,493,491			94,310
Less: Imputed interest	(1,146,378		)	(14,784		)
Total present value of lease liabilities	$	347,113		$	79,526

Supplemental balance sheet information related to leases was as follows for the date indicated (in thousands, except lease terms and discount rate):

	Classification	March 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	358,325
Finance leases	Right of use assets, net	144,104
Real estate right of use assets, net		502,429
Operating leases - corporate	Receivables and other assets	3,642
Total right of use assets, net		$	506,071
Lease liabilities:
Operating leases		$	347,113
Financing leases		79,526
Total		$	426,639
Weighted average remaining lease term (years):
Operating leases		52.5
Finance leases		3.9
Weighted average discount rate:
Operating leases		5.24		%
Finance leases		5.21		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):

	Classification	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	1,805
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	1,932
Financing cash flows from finance leases	Other financing activities	(775		)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our outpatient medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $381,084,000 of rental and other revenues related to operating lease payments, of which $47,350,000 was for variable lease payments for the three months ended March 31, 2019, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance, and real estate taxes. The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at March 31, 2019 (excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):

2019	$	950,205
2020	1,240,401
2021	1,210,470
2022	1,187,277
2023	1,134,217
Thereafter	9,199,476
Totals	$	14,922,046

Leases

Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer-term market rates). For leases that commenced prior to January 1, 2019, we used the incremental borrowing rate on December 31, 2018.

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):

	Classification	Three Months Ended March 31, 2019
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	7,412
Non-real estate lease expense	General and administrative expenses	362
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,092
Interest on lease liabilities	Interest expense	1,002
Sublease income	Rental income	(1,886		)
Total		$	8,982

(1) Includes short-term leases which are immaterial.

Maturities of lease liabilities as of March 31, 2019 are as follows (in thousands):

	Operating Leases			Finance Leases
2019	$	12,139		$	5,726
2020	16,186			7,444
2021	16,058			7,093
2022	15,111			6,454
2023	15,158			67,593
Thereafter	1,418,839			—
Total lease payments	1,493,491			94,310
Less: Imputed interest	(1,146,378		)	(14,784		)
Total present value of lease liabilities	$	347,113		$	79,526

Supplemental balance sheet information related to leases was as follows for the date indicated (in thousands, except lease terms and discount rate):

	Classification	March 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	358,325
Finance leases	Right of use assets, net	144,104
Real estate right of use assets, net		502,429
Operating leases - corporate	Receivables and other assets	3,642
Total right of use assets, net		$	506,071
Lease liabilities:
Operating leases		$	347,113
Financing leases		79,526
Total		$	426,639
Weighted average remaining lease term (years):
Operating leases		52.5
Finance leases		3.9
Weighted average discount rate:
Operating leases		5.24		%
Finance leases		5.21		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):

	Classification	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	1,805
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	1,932
Financing cash flows from finance leases	Other financing activities	(775		)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our outpatient medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $381,084,000 of rental and other revenues related to operating lease payments, of which $47,350,000 was for variable lease payments for the three months ended March 31, 2019, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance, and real estate taxes. The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at March 31, 2019 (excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):

2019	$	950,205
2020	1,240,401
2021	1,210,470
2022	1,187,277
2023	1,134,217
Thereafter	9,199,476
Totals	$	14,922,046

Leases

Leases

We lease land, buildings, office space and certain equipment. Many of our leases include a renewal option to extend the term from one to 25 years or more. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide a rate implicit in the lease agreement, we use our incremental borrowing rate available at lease commencement to determine the present value of lease payments. The incremental borrowing rates were determined using our longer term borrowing rates (actual pricing through 30 years, as well as other longer-term market rates). For leases that commenced prior to January 1, 2019, we used the incremental borrowing rate on December 31, 2018.

We sublease certain real estate to a third party. Our sublease portfolio consists of a finance lease with Genesis HealthCare for seven buildings.

The components of lease expense were as follows for the period presented (in thousands):

	Classification	Three Months Ended March 31, 2019
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	7,412
Non-real estate lease expense	General and administrative expenses	362
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,092
Interest on lease liabilities	Interest expense	1,002
Sublease income	Rental income	(1,886		)
Total		$	8,982

(1) Includes short-term leases which are immaterial.

Maturities of lease liabilities as of March 31, 2019 are as follows (in thousands):

	Operating Leases			Finance Leases
2019	$	12,139		$	5,726
2020	16,186			7,444
2021	16,058			7,093
2022	15,111			6,454
2023	15,158			67,593
Thereafter	1,418,839			—
Total lease payments	1,493,491			94,310
Less: Imputed interest	(1,146,378		)	(14,784		)
Total present value of lease liabilities	$	347,113		$	79,526

Supplemental balance sheet information related to leases was as follows for the date indicated (in thousands, except lease terms and discount rate):

	Classification	March 31, 2019
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	358,325
Finance leases	Right of use assets, net	144,104
Real estate right of use assets, net		502,429
Operating leases - corporate	Receivables and other assets	3,642
Total right of use assets, net		$	506,071
Lease liabilities:
Operating leases		$	347,113
Financing leases		79,526
Total		$	426,639
Weighted average remaining lease term (years):
Operating leases		52.5
Finance leases		3.9
Weighted average discount rate:
Operating leases		5.24		%
Finance leases		5.21		%

Supplemental cash flow information related to leases was as follows for the date indicated (in thousands):

	Classification	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Decrease (increase) in receivables and other assets	$	1,805
Operating cash flows from finance leases	Decrease (increase) in receivables and other assets	1,932
Financing cash flows from finance leases	Other financing activities	(775		)

Substantially all of our operating leases in which we are the lessor contain escalating rent structures. Leases with fixed annual rental escalators are generally recognized on a straight-line basis over the initial lease period, subject to a collectability assessment. Rental income related to leases with contingent rental escalators is generally recorded based on the contractual cash rental payments due for the period. Leases in our outpatient medical portfolio typically include some form of operating expense reimbursement by the tenant. We recognized $381,084,000 of rental and other revenues related to operating lease payments, of which $47,350,000 was for variable lease payments for the three months ended March 31, 2019, which primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance, and real estate taxes. The following table sets forth the undiscounted cash flows for future minimum lease payments receivable for leases in effect at March 31, 2019 (excluding properties in our Seniors Housing Operating partnerships and excluding any operating expense reimbursements) (in thousands):

2019	$	950,205
2020	1,240,401
2021	1,210,470
2022	1,187,277
2023	1,134,217
Thereafter	9,199,476
Totals	$	14,922,046