Dispositions, Real Property Held for Sale and Impairment

6 Months Ended

Jun. 30, 2023

Discontinued Operations and Disposal Groups [Abstract]

Dispositions, Real Property Held for Sale and Impairment

We periodically sell properties for various reasons, including favorable market conditions, the exercise of tenant purchase options or reduction of concentrations (i.e., property type, relationship or geography). At June 30, 2023, 18 Seniors Housing Operating properties, one Triple-net property and one Outpatient Medical property with an aggregate real estate balance of $404,071,000 were classified as held for sale. In addition to the real property balances, secured debt balances of $171,711,000 and net other assets and (liabilities) of $26,950,000 are included in the Consolidated Balance Sheets related to the held for sale properties. Expected gross sales proceeds related to the held for sale properties are approximately $456,859,000.

During the six months ended June 30, 2023, we recorded $13,715,000 of impairment charges related to two Seniors Housing Operating properties and one Triple-net property classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell and one Seniors Housing Operating property classified as held for use for which the carrying value exceeded the estimated fair value. We did not record any impairment charges during the six months ended June 30, 2022.

Operating results attributable to properties sold or classified as held for sale which do not meet the definition of discontinued operations are not reclassified on our Consolidated Statements of Comprehensive Income. We recognized income (loss) from continuing operations before income taxes and other items from properties sold or classified as held for sale as of June 30, 2023 of $65,362,000 and $54,381,000 for the three and six months ended June 30, 2023 and $1,588,000 and $2,602,000 for the same periods in 2022, respectively.

The following is a summary of our real property disposition activity for the periods presented (in thousands):


	Six Months Ended
	June 30, 2023		June 30, 2022
Real estate dispositions:
Seniors Housing Operating	$	243,695	$	13,470
Triple-net	2,028		70,571

Total dispositions	245,723		84,041
Gain (loss) on real estate dispositions, net	(1,421)		19,402
Net other assets/(liabilities) disposed	(624)		461
Non-cash consideration	(241,728)		—
Cash proceeds from real estate dispositions	$	1,950	$	103,904

Strategic Dissolution of Revera Joint Ventures

During the three months ended June 30, 2023, we entered into definitive agreements to dissolve our existing Revera joint venture relationships across the U.S., U.K. and Canada. The transactions include acquiring the remaining interests in 110 properties from Revera while simultaneously selling interests in 31 properties to Revera.

During the second quarter, we closed the U.K. portfolio portion of the transaction through the acquisition of the remaining ownership interest in 29 properties previously held in two separate consolidated joint venture structures in which we owned 75% and 90% of the interests in exchange for the disposition to Revera of our interests in four properties. In addition, we received cash from Revera of $107,341,000 relating to the net settlement of loans previously made to the joint ventures. Operations for the 29 retained properties were transitioned to Avery Healthcare.

Total proceeds related to the four properties disposed were $222,521,000, which included non-cash consideration from Revera of $241,728,000, comprised of the fair value of interests received by us of $198,837,000 and an allocation of Revera's noncontrolling interests of $42,891,000, partially offset by $9,049,000 of transaction-related expenses as well as the $10,158,000 of cash paid to equalize the value exchanged between the parties. We disposed of net real property owned of $224,208,000, resulting in a loss of $1,687,000 recognized within gain (loss) on real estate dispositions, net within our Consolidated Statements of Comprehensive Income. Consideration transferred to acquire the additional interests in the 29 properties was comprised of the fair value of interests transferred by us of $198,837,000 and $5,776,000 of cash paid for transaction-related expenses. We derecognized $180,497,000 of noncontrolling interests and $22,270,000 of liabilities previously due to Revera with an adjustment of $1,846,000 recognized in capital in excess of par value. The non-cash investing activity with respect to the sale of the four properties and non-cash financing activity with respect to the acquisition of Revera's interests in the 29 properties has been excluded from our Consolidated Statement of Cash Flows.

In July, we closed transactions related primarily to our U.S portfolio through (i) the acquisition of ten properties currently under development or recently developed by Sunrise Senior Living, previously held 34% by us/66% by Revera within an equity method joint venture for an additional investment of approximately $286 million, (ii) the disposition of our minority interests in 12 U.S. properties and one Canadian development project for approximately $216 million, and (iii) the disposition of our 34% interest in the Sunrise Senior Living management company. During the three months ended June 30, 2023, we recognized an impairment charge of $27,708,000 in income from unconsolidated entities on our Consolidated Statements of Comprehensive Income based on estimated sales proceeds for the sale of the Sunrise Senior Living management company. Operations for two of the now wholly-owned properties, along with operations for 26 existing wholly-owned properties, transitioned to Oakmont Management Group.

We anticipate closing the remainder of the transaction related to our Canadian portfolio before December 31, 2023. The Canadian portfolio consists of 85 properties in a joint venture owned 75% by us and 25% by Revera. As a part of the transaction we intend to acquire Revera's interest in 71 properties and sell our interests in the remaining 14 properties.

Genesis HealthCare

As part of the substantial exit of the Genesis HealthCare operating relationship, which we disclosed on March 2, 2021, we transitioned the sublease of a portfolio of seven facilities from Genesis HealthCare to Complete Care Management in the second quarter of 2021. As part of the March 2021 transaction, we entered into a forward sale agreement for the seven properties valued at $182,618,000, which was expected to close when the Welltower-held purchase option became exercisable. As of March 31, 2023, the right of use assets related to the properties were $115,359,000 and were reflected as held for sale with the corresponding lease liabilities of $66,530,000 on our Consolidated Balance Sheet.

On May 1, 2023, we executed a series of transactions that included the assignment of the leasehold interest to a newly formed tri-party unconsolidated joint venture with Aurora Health Network, Peace Capital (an affiliate of Complete Care Management) and us, and culminated with the closing of the purchase option by the joint venture. The transactions resulted in net cash proceeds to us of $104,240,000 (excluded from the dispositions table above) after our retained interest of $11,571,000 in the joint venture and a gain from the loss of control and derecognition of the leasehold interest of $65,485,000, which we recorded in other income within our Consolidated Statements of Comprehensive Income.