We lease our operating properties to customers under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses, including common area maintenance, real estate taxes and insurance, are recovered from our customers. We record amounts reimbursed by customers in the period that the applicable expenses are incurred, which is generally ratably throughout the term of the lease. We have elected the package of practical expedients that allows lessors to not separate lease and non-lease components by class of underlying asset. This practical expedient allowed us to not separate expenses reimbursed by our customers (“tenant reimbursements”) from the associated rental revenue if certain criteria were met. We assessed these criteria and concluded that the timing and pattern of transfer for rental revenue and the associated tenant reimbursements are the same, and as our leases qualify as operating leases, we accounted for and presented rental revenue and tenant reimbursements as a single component under Lease revenue in our condensed consolidated statements of income for the three and nine months ended September 30, 2020 and 2019.

The components of the “Lease revenue – UHS facilities” and “Lease revenue – Non-related parties” captions for the three and nine month periods ended September 30, 2020 and 2019 are disaggregated below (in thousands). Base rents are primarily stated rent amounts provided for under the leases that are recognized on a straight-line basis over the lease term. Bonus rents and tenant reimbursements represent amounts where tenants are contractually obligated to pay an amount that is variable in nature.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
UHS facilities:
Base rents	$	4,402	$	4,159	$	12,940	$	12,448
Bonus rents		1,680		1,428		4,477		4,174
Tenant reimbursements		299		234		826		643
Lease revenue - UHS facilities	$	6,381	$	5,821	$	18,243	$	17,265



Non-related parties:
Base rents		10,390		10,979		31,155		31,999
Tenant reimbursements		2,451		2,576		7,371		7,465
Lease revenue - Non-related parties	$	12,841	$	13,555	$	38,526	$	39,464

A wholly-owned subsidiary of UHS has notified us that they are considering termination of the existing lease on Southwest Healthcare System, Inland Valley Campus prior to the scheduled expiration of the current term on December 31, 2021. As permitted pursuant to the terms of the lease, UHS has the right, subject to certain conditions, to propose substitution property with a fair market value substantially equal to that of the existing leased property. UHS is currently evaluating potential substitution properties and is expected to submit their proposal to us by December 31, 2020. Upon receipt, the proposal will be reviewed and evaluated by management of

the Trust as well as by our Board of Trustees. All transactions with UHS must be approved by a majority of our Independent Trustees. We can provide no assurance that we will ultimately agree on a property substitution with UHS in connection with the Inland Valley Campus property, in which case, UHS has the right to purchase the property for its fair market value. Pursuant to the terms of the lease on the Inland Valley Campus, we earned $3.3 million of lease revenue during the nine-month period ended September 30, 2020 ($2.0 million in base rental and $1.3 million in bonus rental) and $4.3 million during the year ended December 31, 2019 ($2.6 million in base rental and $1.7 million in bonus rental).

The leases on two hospital facilities, located in Evansville, Indiana, and Corpus Christi, Texas, expired on May 31, 2019 and June 1, 2019, respectively. The former tenant of the hospital located in Evansville, Indiana, entered into a short-term lease with us, which covered the period of June 1, 2019 through September 30, 2019, at a substantially increased lease rate as compared to the original lease rate.

The combined lease revenue generated at these facilities amounted to approximately $842,000 and $1.7 million during the three and nine-month periods ended September 30, 2019, respectively. The hospital located in Evansville, Indiana, has remained vacant since September 30, 2019 and the hospital located in Corpus Christi, Texas, has remained vacant since June 1, 2019.

We continue to market each property for lease to new tenants. However, should these properties continue to remain owned and vacant for an extended period of time, or should we experience decreased lease rates on future leases, as compared to prior/expired lease rates, or incur substantial renovation costs to make the properties suitable for other operators/tenants, our future results of operations could be materially unfavorably impacted.

The existing lease with Kindred Hospital Chicago Central is scheduled to expire on December 31, 2021. Pursuant to the terms of the lease, we earned approximately $1.2 million of lease revenue during the nine-month period ended September 30, 2020, and approximately $1.5 million during the year ended December 31, 2019. We can provide no assurance that the lease on this facility, which during the year ended December 31, 2019 did not generate sufficient operating income to cover its rent due to us, will be renewed, or renewed at existing lease rates, upon maturity.

We are the lessee with various third parties, including subsidiaries of UHS, in connection with ground leases for land at fourteen of our consolidated properties. Our right-of-use land assets represent our right to use the land for the lease term and our lease liabilities represent our obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities were recognized upon adoption of Topic 842 based on the present value of lease payments over the lease term. We utilized our estimated incremental borrowing rate, which was derived from information available as of January 1, 2019, in determining the present value of lease payments. A right-of-use asset and lease liability are not recognized for leases with an initial term of 12 months or less, as these short-term leases are accounted for similar to previous guidance for operating leases. We do not currently have any ground leases with an initial term of 12 months or less. As of September 30, 2020, our condensed consolidated balance sheet includes right-of-use land assets of approximately $8.9 million and ground lease liabilities of approximately $8.9 million. There were no newly leased assets for which a right-of-use asset was recorded in exchange for a new lease liability during the nine months ended September 30, 2020.