Leases

3 Months Ended

Mar. 31, 2023

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.

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

		Three Months Ended
	Classification	March 31, 2023		March 31, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,520	$	5,816
Non-real estate investment lease expense	General and administrative expenses	1,863		978
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,284		1,156
Interest on lease liabilities	Interest expense	1,427		1,618
Sublease income	Rental income	(2,950)		(2,715)
Total		$	8,144	$	6,853

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	March 31, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,275	$	287,984
Finance leases - real estate	Right of use assets, net	35,621		35,958
Real estate right of use assets, net		322,896		323,942
Operating leases - non-real estate investments	Receivables and other assets	9,281		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	115,359		116,453
Total right of use assets, net		$	447,536	$	450,514
Lease liabilities:
Operating leases		$	301,915	$	302,360
Financing leases		113,254		113,464
Total		$	415,169	$	415,824
(1) At March 31, 2023, finance leases at seven properties were classified as held for sale.

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 Triple-net and Outpatient Medical portfolios recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2023, we recognized $384,059,000 of rental income related to operating leases, of which $53,794,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASC 606, "Revenue from Contracts with Customers." Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $108,915,000 and $94,827,000 for the three months ended March 31, 2023 and 2022, respectively.

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.

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

		Three Months Ended
	Classification	March 31, 2023		March 31, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,520	$	5,816
Non-real estate investment lease expense	General and administrative expenses	1,863		978
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,284		1,156
Interest on lease liabilities	Interest expense	1,427		1,618
Sublease income	Rental income	(2,950)		(2,715)
Total		$	8,144	$	6,853

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	March 31, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,275	$	287,984
Finance leases - real estate	Right of use assets, net	35,621		35,958
Real estate right of use assets, net		322,896		323,942
Operating leases - non-real estate investments	Receivables and other assets	9,281		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	115,359		116,453
Total right of use assets, net		$	447,536	$	450,514
Lease liabilities:
Operating leases		$	301,915	$	302,360
Financing leases		113,254		113,464
Total		$	415,169	$	415,824
(1) At March 31, 2023, finance leases at seven properties were classified as held for sale.

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 Triple-net and Outpatient Medical portfolios recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2023, we recognized $384,059,000 of rental income related to operating leases, of which $53,794,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASC 606, "Revenue from Contracts with Customers." Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $108,915,000 and $94,827,000 for the three months ended March 31, 2023 and 2022, respectively.

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.

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

		Three Months Ended
	Classification	March 31, 2023		March 31, 2022
Operating lease cost: (1)
Real estate lease expense	Property operating expenses	$	5,520	$	5,816
Non-real estate investment lease expense	General and administrative expenses	1,863		978
Finance lease cost:
Amortization of leased assets	Property operating expenses	2,284		1,156
Interest on lease liabilities	Interest expense	1,427		1,618
Sublease income	Rental income	(2,950)		(2,715)
Total		$	8,144	$	6,853

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

Supplemental balance sheet information related to leases in which we are the lessee is as follows (in thousands):

	Classification	March 31, 2023		December 31, 2022
Right of use assets:
Operating leases - real estate	Right of use assets, net	$	287,275	$	287,984
Finance leases - real estate	Right of use assets, net	35,621		35,958
Real estate right of use assets, net		322,896		323,942
Operating leases - non-real estate investments	Receivables and other assets	9,281		10,119
Finance leases - held for sale (1)	Real property held for sale, net of accumulated depreciation	115,359		116,453
Total right of use assets, net		$	447,536	$	450,514
Lease liabilities:
Operating leases		$	301,915	$	302,360
Financing leases		113,254		113,464
Total		$	415,169	$	415,824
(1) At March 31, 2023, finance leases at seven properties were classified as held for sale.

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 Triple-net and Outpatient Medical portfolios recognized under ASC 842, "Leases" (ASC 842), typically include some form of operating expense reimbursement by the tenant. For the three months ended March 31, 2023, we recognized $384,059,000 of rental income related to operating leases, of which $53,794,000 was for variable lease payments that primarily represents the reimbursement of operating costs such as common area maintenance expenses, utilities, insurance and real estate taxes. For the three months ended March 31, 2022, we recognized $356,390,000 of rental income related to operating leases, of which $48,074,000 was for variable lease payments.

For the majority of our Seniors Housing Operating segment, revenue from resident fees and services is predominantly service-based, and as such, resident agreements are accounted for under ASC 606, "Revenue from Contracts with Customers." Within that reportable segment, we also recognize revenue from residential seniors apartment leases in accordance with ASC 842. The amount of revenue related to these leases was $108,915,000 and $94,827,000 for the three months ended March 31, 2023 and 2022, respectively.