ITEM 1A. Risk Factors |
The section below discusses the most significant risk factors that may materially adversely affect our business, results of operations, and financial condition. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business.
As set forth below, we believe that the risks we face generally fall into the following categories:
•risks related to our business and operations;
•risks related to our capital structure and market conditions;
•risks related to other events; andthe regulatory environment;
•risks related to tax, including REIT-related risks.risks, and related to our jurisdiction of incorporation and our structure as an UPREIT;
•risks relating to the Mergers;
•risks relating to the Combined Company following the Mergers;
•risks relating to the status of Physicians Realty Trust as a REIT; and
•risks relating to an investment in the Combined Company’s common stock following the Mergers and the transactions contemplated by the Merger Agreement.
Risks Related to Our Business and Operations
We dependmay be negatively impacted by macroeconomic trends, including rising inflation and interest rates, increased construction and labor costs, and historically low unemployment.
Many of our costs, including labor costs, construction costs, utilities, and other operating and administrative costs, have been, and may continue to be, affected by inflation and price volatility. These macroeconomic trends have been, and may continue to be, exacerbated by responses to the Covid pandemic, supply chain disruptions, the conflicts between Russia and Ukraine and in the Middle East, federal government deficits, and other international and domestic events impacting the macroeconomic environment.
In addition, interest rates rose substantially in 2022 and 2023 and may continue to rise and remain elevated for the foreseeable future. U.S. government policies implemented to address inflation, including actions by the Federal Reserve System’s Federal Open Market Committee (the “FOMC”) to increase short-term interest rates, have led to increases in interest rates in the credit markets and other impacts on one tenant and operator, Brookdale,the macroeconomic environment. The FOMC may continue to raise the federal funds rate or maintain a higher federal funds rate for a significant percentagelonger period of time, either of which would likely lead to higher short-term interest rates and the possibility of lower asset values, slowing economic growth and increasing the possibility of a recession. Increased interest rates have caused, and may continue to cause, unfavorable financing terms and increased interest costs for variable rate debt and new debt. Further, actions by the FMOC to decrease short-term interest rates could lead to inflationary pressures. We may not be able to offset additional costs caused by inflation, increased interest rates, or other macroeconomic trends by passing them through, or increasing the rates we charge, to tenants and residents. These increased costs may hinder our ability to execute on accretive acquisitions or otherwise adversely affect our business, results of operations, and financial condition. Increased interest rates could also negatively impact consumer spending and our tenants’, operators’, and borrowers’ businesses and future demand for our properties.
Furthermore, rising labor costs and personnel shortages have increased, and may continue to increase, the cost of our, revenuesor our tenants’, operators’, and net operating income. Continuing adverse developments,borrowers’, workforce. Competitive pressures, including operational challenges, in Brookdale’s business and affairs or financial condition would likely have a materially adverse effect on us.
Additionally, changing technologies and cultural trends could negatively impact future demand for our properties, represent a substantial portion of our portfolio, revenues and operating income.
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Life scienceindustry changes could have a material adverse effect on our business, results of operations, and financial condition.
If economic, financial, regulatory, or industry conditions continue to adversely affect the life science industry, we may be unable to lease or re-lease our lab properties in a timely manner or at profitable rates or with favorable terms. In addition, because lab property infrastructure improvements are typically significantly more costly than improvements to other property types due to their highly specialized nature, and lab tenants typically require greater lease square footage relative to outpatient medical tenants, repositioning efforts would have a disproportionate adverse effect on our lab segment performance. Further, our lab investments could face decreased demand from biotech and life science companies relative to supply, and life science industry consolidation could reduce the rentable square footage requirements of our client tenants and prospective client tenants, which may adversely impact our revenues from lease payments. Finally, our lab investments could also relies on reimbursementsbe adversely affected if the life science industry migrates from governmental programsthe U.S. to other countries or to areas outside of our primary lab markets in the greater South San Francisco, San Diego, and Boston areas.
Our lab tenants face significant regulation, funding requirements, and uncertainty.
Our lab tenants face substantial requirements for, a portionand risks related to, the research, development, clinical testing, manufacture, and commercialization of its revenues. Changes intheir products and technologies, including:
•significant funding requirements, including for rent payments due to us;
•federal, state, and foreign regulatory approvals that may be costly or difficult to obtain, may take several years and be subject to delay, may not be obtained at all, require validation through clinical trials that may face delays or difficulties, or ultimately be unsuccessful;
•product and technology efficacy risks;
•acceptance risks among doctors and patients;
•significant regulatory and liability risks, including the possible later discovery of safety concerns and other defects and potential loss of approvals, competition from new products, and the expiration of patent protection;
•healthcare reforms and reimbursement policies of government or private healthcare payors, including pricing controls for prescription drug prices;
•intellectual property and technology risks under patent, copyright, and trade secret laws; and
•economic conditions restricting growth opportunities.
Our lab tenants’ ability to raise capital depends on the actual or perceived viability of their products and technologies, their financial and operating condition and outlook, and the overall financial, banking, and economic environment. If venture capital firms, private investors, the public markets, companies in the life science industry, the government, or other governmental regulation, suchsources of funding are difficult to obtain or unavailable to support our tenants’ activities, including as potential changesa result of general economic conditions or adverse market conditions that negatively impact our tenants’ ability to raise capital, our tenants’ business would be adversely affected or repealcould fail. If our lab tenants’ businesses are adversely affected, they may fail to make their rent payments to us, which could have a material adverse effect on our business, results of the Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), that may result from actions by Congress or executive orders, may result in reductions in Brookdale’s revenues, operations, and cash flows and affect its ability to meet its obligations to us. For a further discussion of the legislation and regulation that are applicable to us and our tenants, operators and borrowers, see “The requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid, may adversely affectfinancial condition.
Decreases in our tenants’, operators’ and, or borrowers’ revenues, or increases in their expenses, or other factors adversely affecting their ability to borrow money, could affect their ability to meet their financial and other contractual obligations to us.” While Brookdale generally has
Occupancy levels at, and rental income from, our outpatient medical and senior housing properties depend on our ability and the ability of our tenants, operators, and borrowers to compete with respect to (i) the quality of care provided, (ii) reputation, (iii) price, (iv) the range of services offered, (v) the physical appearance of a property, (vi) family preference, (vii) referral sources, and (viii) location.
In addition, our outpatient medical and senior housing tenants, operators, and borrowers compete with certain companies that have superior resources and attributes and/or provide similar healthcare services or alternatives such as home health agencies, telemedicine, life care at home, community-based service programs, retirement communities, and convalescent centers.
Furthermore, these tenants, operators, and borrowers face a competitive labor market. A shortage of care givers or other trained personnel, union activities (including strikes, labor slowdowns, or contract negotiations), wage laws, or general inflationary pressures on wages may require our tenants, operators, and borrowers to enhance pay and benefits packages, or to use more expensive contract personnel, and they may be unable to offset these added costs by increasing the rates charged to residents or patients. An inability to attract and retain qualified personnel, including personnel possessing the expertise needed to operate in the life science, outpatient medical, and senior housing sectors, could negatively impact the ability of our tenants, operators, and borrowers to meet their obligations to us.
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Our tenants, operators, and borrowers could also agreed to indemnify us for various claims, litigation and liabilities arisingbe adversely impacted by a bank failure or other event affecting financial institutions, including through disruptions in connection with its business, it may have insufficient assets, income, access to financing and/bank deposits or insurance coverageborrowing capacity, including access to enable them to satisfy its indemnification obligations.
Although we generally have arrangements and other agreements that give us the right under specified circumstances to terminate a lease, evict a tenant or terminate an operator, or demand immediate repayment of outstanding loan amounts or other obligations to us, or draw on a letter of credit, we may be unable to enforce these rights or we may determine not to do so if we believe that enforcement of our rightsdoing so would be more detrimental than alternative approaches. If widespread default or nonpayment of outstanding obligations from our tenants, operators, or borrowers occurs at a time when terminating our agreements with them and replacing them would be difficult or impossible, we could elect instead to amend our agreements on materially less favorable terms to us. The failure of our tenants, operators, or borrowers to meet their financial and other contractual obligations to us could have a material adverse effect on our business, than seeking alternative approaches.results of operations, and financial condition.
We may be negatively impacted by the insolvency or bankruptcy of one or more of our major tenants, operators, or borrowers.
A downturn in any of our tenants’, operators’, or borrowers’ businesses has led, and could ultimatelyin the future lead, to voluntary or involuntary bankruptcy if it is unable to timely resolveor similar insolvency proceedings, including assignment for the underlying causes, which may be largely outsidebenefit of its control.creditors, liquidation, or winding-up. Bankruptcy and insolvency laws afford certain rights to a partydefaulting tenant, operator, or borrower that has filed for bankruptcy or reorganization that has, and in the future may, render certain of theseour remedies unenforceable or, at the least, delay our ability to pursue such remedies and realize any recoveries in connection therewith. For example, we cannot evict a tenant or operator solely because of its bankruptcy filing.related recoveries.
A debtor has the right to assume, or to assume and assign to a third party, or to reject its executory contracts and unexpired leases in a bankruptcy proceeding. IfWe have been subject to rejection of our leases in the past and may experience such rejection in the future. When a debtor were to rejectrejects its leases with us, obligations under such rejected leases would cease. The claim against the rejecting debtor would befor remaining rental payments due under the lease is an unsecured claim which would be limited by the statutory cap set forth in the U.S. Bankruptcy Code. This statutory cap may be substantially less than the remaining rent actually owed under the lease. In addition, a debtor may also assert in bankruptcy proceedings that certain leases should be re-characterized as financing agreements, which could result in our being deemed a lender instead of a landlord. A lender’s rights and remedies, as compared to a landlord’s, generally are materially less favorable, and our rights as a lender may be subordinatedsubject to other creditors’ rights.lower priority for payment under the U.S. Bankruptcy Code.
Furthermore, the automatic stay provisions of the U.S. Bankruptcy Code would preclude us from enforcing our remedies unless we first obtain relief from the court having jurisdiction over the bankruptcy case. This would effectively limitlimits or delaydelays our ability to collect unpaid rent or interest payments, and we may ultimately not receive any payment at all. In addition, we would likelyhave been, and may again be, required to fund certain expenses and obligations (e.g., real estate taxes, insurance, debt costs, and maintenance expenses) to preserve the value of our properties, avoid the imposition of liens on our properties, or transition our properties to a new tenant operator or manager. Additionally, we lease many of our facilities to healthcare providers who provide long-term custodial care to the elderly. Evicting these operators for failure to pay rent while the facility is occupied may involve specific procedural or regulatory requirements and may not be successful. Even if eviction is possible, we may determine not to do so due to reputational or other risks. operator.
We concentrate our investments in the healthcare property sector. A downturn or slowdown in this sector would have a greater adverse consequences.
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The illiquidity of our real estate investments may prevent us from timely responding to economic or investment performance changes.
Our real estate investments can be relatively illiquid due to: (i) restrictions on our ability to sell properties under applicable REIT tax laws, (ii) other trained personnel or general inflationary pressures on wagestax-related considerations, (iii) regulatory hurdles, and (iv) market conditions. As a result, we may force tenants, operators and borrowers to enhance pay and benefits packages to compete effectively for skilled personnel, or to use more expensive contract personnel, but they be unable to offset these added costs by increasing the rates chargedrecognize full value for any property that we seek to residents. Any increase in labor costs and other property operating expensessell. Our inability to timely respond to economic or any failure by our tenants, operators or borrowers to attract and retain qualified personnelinvestment performance changes could adversely affect our cash flow and have a materiallymaterial adverse effect on our business, results of operations, and financial condition.
Identifying and securing new or replacement tenants or operators can be time consuming and costly.
Healthcare properties can be highly customized, and the improvements generally required to conform a property to healthcare use are costly, sometimes tenant-specific, and may be subject to regulatory requirements. A new or replacement tenant or operator may require different features in a property, depending on that tenant’s or operator’s particular business. In addition, infrastructure improvements for lab properties typically are significantly more expensive than improvements to other property types due to the highly specialized nature of the properties and the greater lease square footage often required by lab tenants. Therefore, we may incur substantial expenditures to modify a lab property and experience delays before we are able to secure a new or replacement tenant or operator or to accommodate multiple tenants or operators, which may have a material adverse effect on our business, results of operations, and financial condition.
In addition, we may fail to identify suitable replacements or enter into leases, management agreements, or other arrangements with new tenants or operators on a timely basis or on terms as favorable to us as our current leases, if at all. We also may be required to fund certain expenses and obligations, such as real estate taxes, debt costs, insurance costs, and maintenance expenses, to preserve the value of, and avoid the imposition of liens on, our properties while they are being repositioned. In addition, we may incur certain obligations and liabilities, including obligations to indemnify the replacement tenant or operator. Identifying and securing new or replacement tenants or operators can be time consuming and costly, which could have a material adverse effect on our business, results of operations, and financial condition.
Property development, redevelopment, and tenant improvement risks can render a project less profitable or unprofitable and delay or prevent its undertaking or completion.
Our property development, redevelopment, and tenant improvement projects could be canceled, abandoned, delayed or, if completed, fail to perform in accordance with expectations due to, among other things:
•the inability to obtain financing on favorable terms or at all, or the lack of liquidity we deem necessary or appropriate for the project;
•legal and regulatory hurdles, including moratoriums on development and redevelopment activities;
•the failure to obtain, or costs associated with obtaining, necessary zoning, entitlements, and permits;
•cost increases; and
•other factors over which we have limited or no control, including: (i) changes in market and economic conditions; (ii) natural disasters and other catastrophic events or physical climate risks, such as wildfires, earthquakes, and wind storms; (iii) pandemics or other health crises; (iv) labor conditions, including a labor shortage or work stoppage; (v) shortages of construction materials; (vi) environmental conditions; or (vii) civil unrest and acts of war or terrorism.
Project costs may materially exceed original estimates due to, among other things:
•increased interest rates;
•increased costs for materials, transportation, environmental remediation, labor, or other inputs, including those caused by a shortage of construction materials or labor;
•negligent construction or construction defects;
•damage, vandalism, or accidents; and
•increased operating costs, including insurance premiums, utilities, real estate taxes, and costs of complying with changes in government regulations or increases in tariffs.
Delays in project completion also delay the commencement of related rental payments, including increases in rental payments following tenant improvement projects, and may provide tenants operatorsthe right to terminate leases or cause us to incur additional costs, including through rent abatement.
Demand for a project may decrease prior to a project’s completion, and borrowers also compete with numerousresulting lease-up rates, rental rates, lease commencement dates, and occupancy levels may fail to meet expectations. Tenants that have pre-leased at a project may file for bankruptcy or become insolvent, or elect to terminate their lease prior to delivery if they are acquired or for other companies providing similarreasons.
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Finally, a project may have defects that we do not discover through the inspection processes, including latent defects not discovered until after we put a property in service.
The foregoing risks could result in not achieving anticipated returns on investment and could have a material adverse effect on our business, results of operations, and financial condition.
The hospitals on whose campuses our outpatient medical buildings are located and their affiliated healthcare systems could fail to remain competitive or financially viable, which could adversely impact their ability to attract physicians and physician groups to our outpatient medical buildings and our other properties that serve the healthcare industry.
The viability of hospitals depends on factors such as: (i) the quality and mix of healthcare services provided, (ii) competition for patients and physicians, (iii) demographic trends in the surrounding community, (iv) market position, (v) growth potential, and (vi) changes to the reimbursement system, as well as the ability of the affiliated healthcare systems to provide economies of scale and access to capital. In addition, hospitals could be negatively affected by widespread cancellations of elective procedures due to health and safety measures or alternatives such as home health agencies, life care at home, community-based service programs, retirement communitiesotherwise. If a hospital whose campus is located near one of our outpatient medical buildings is unable to meet its financial obligations, and convalescent centers. This competition, whichif an affiliated healthcare system is due, in part,unable to over-development in some segments in which we invest, has causedsupport that hospital or goes bankrupt, the occupancy rate of newly constructed buildings to slow and the monthly rate that many newly built and previously existing facilities were able to obtain for their services to decrease. Our tenants, operators and borrowershospital may be unable to achieve occupancysuccessfully compete or could be forced to close or relocate, which could adversely impact its ability to attract physicians and rate levels,other healthcare-related users. Because we rely on our proximity to, and affiliations with, these hospitals to managecreate tenant demand for space in our outpatient medical buildings, their expenses,inability to remain competitive or financially viable, or to attract physicians and physician groups, could adversely affect our outpatient medical building operations and have a material adverse effect on us.
We may be unable to develop, maintain, or expand hospital and health system client relationships.
We invest significant time in developing, maintaining, and expanding relationships with both new and existing hospital and health system clients. If we fail to maintain these relationships, including through a lack of responsiveness, failure to adapt to the current market, or employment of individuals with inadequate experience, our reputation and relationships will be harmed and we may lose business to competitors, which could have a material adverse effect on us.
We assume operational risks with respect to our senior housing properties managed in RIDEA structures that could have a material adverse effect on our business, results of operations, and financial condition.
Although the RIDEA structure gives us certain oversight approval rights (e.g., budgets and material contracts) and the right to review operational and financial reporting information, our operators are ultimately in control of the day-to-day business of the property. As a result, we have limited rights to direct or influence the business or operations of our CCRCs and in the properties owned by our SWF SH JV, all of which are under RIDEA structures, and we depend on our operators to operate these properties in a waymanner that will enable themcomplies with applicable law, minimizes legal risk, and maximizes the value of our investment.
Under a RIDEA structure, our TRS is ultimately responsible for all operational risks and other liabilities of the properties, other than those arising out of certain actions by our operator, such as gross negligence or willful misconduct. Operational risks include, and our resulting revenues therefore depend on, among other things: (i) occupancy rates; (ii) the entrance fees and rental rates charged to meet allresidents; (iii) the requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid, to the extent applicable, including changes to reimbursement rates; (iv) our operators’ reputations and ability to attract and retain residents; (v) general economic conditions and market factors that impact seniors, including general inflationary pressures; (vi) competition from other senior housing providers; (vii) compliance with federal, state, local, and industry-regulated licensure, certification and inspection laws, regulations and standards; (viii) litigation involving our properties or residents/patients; (ix) the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles; and (x) the ability to control operating expenses.
Operators of our CCRCs and the SWF SH JV properties primarily depend on private sources for their revenues and the ability of their obligationspatients and residents to us. Further,pay fees. Costs associated with independent and assisted living services are not generally reimbursable under governmental reimbursement programs such as Medicare and Medicaid. Accordingly, our operators of these properties depend on attracting seniors with appropriate levels of income and assets, which may be affected by many competing companies may have resourcesfactors, including: (i) prevailing economic and attributes that are superior to those of our tenants, operatorsmarket trends, including general inflationary pressures; (ii) consumer confidence; (iii) demographics; (iv) property condition and borrowers. Our tenants, operatorssafety; (v) public perception about such properties; and borrowers may encounter increased competition that could limit their ability to maintain or attract residents or expand their businesses or to manage their expenses, either of which could materially adversely affect their ability to meet their financial(vi) social and other contractual obligations to us, potentially decreasing our revenues and impairing our assets and/or increasing collection and dispute costs.environmental factors.
In addition, our operators’ revenues are determined by a number of factors, including licensed bed capacity, occupancy, the healthcare needs of residents, the rate of reimbursement,epidemics, pandemics, and the income and assets of seniors in the regions in which we operate. For example, due to generally increased vulnerability to illness, a severe flu season, an epidemicseasons or any other widespread illness could result in early move-outs or delayed move-ins during quarantine periods which wouldor during periods when actual or perceived risks of such illnesses are heightened, and have reduced, and could continue to reduce, our operators’ revenues. Additionally, new
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If our operators fail to effectively conduct operations on our behalf, or to maintain and evolving payorimprove our properties, it could adversely affect our business reputation as the owner of the properties, as well as the business reputation of our operators and provider programstheir ability to attract and retain patients and residents in our properties, which could have a material adverse effect on our and our operators’ business, results of operations, and financial condition.
Economic conditions, natural disasters, weather, and other events or conditions that negatively affect geographic areas where we have concentrated investments could have a material adverse effect on our business, results of operations, and financial condition.
We are subject to increased exposure to adverse conditions affecting the geographies in which our properties are located, including: (i) downturns in local economies and increases in unemployment rates; (ii) changes in local real estate conditions, including increases in real estate taxes and property insurance premiums; (iii) increased competition; (iv) decreased demand; (v) changes in state and local legislation, including changes affecting business or property taxes; (vi) local climate events and natural disasters and other catastrophic events, such as pandemics, earthquakes, hurricanes, windstorms, flooding, wildfires, and mudslides and other physical climate risks, including water stress and heat stress; and (vii) failures of regional banks. These risks could significantly disrupt our businesses in the United States, including but not limited to Medicare Advantage, Dual Eligible, Accountable Care Organizations, and Bundled Payments, have resulted in reduced reimbursement rates, average length of stay and average daily census, particularly for higher acuity patients.
In addition, significant climate changes in areas where we own property could result in extreme weather and changes in precipitation, temperature, and other weather patterns, all of which could result in physical damage to or changes to, governmental reimbursement programsa decrease in demand for properties located in these areas or affected by these conditions or delays in construction. Moreover, an increase in volatility and difficulty predicting adverse weather events, such as Medicarefreeze events in warmer climates in recent years, as well as increased hurricane intensity, may result in additional losses. Intensifying natural disasters including climate change and extreme weather events, coupled with the current economic climate have directly affected the availability of insurance, premiums, deductibles, and capacity that insurers are willing to underwrite. As a result, we may determine to self-insure more of our exposures, absorb more below deductible losses, and look for alternative means of risk transfer in order to avoid spiraling insurance costs. These events also have indirect effects on our business by increasing the costs of energy, maintenance, and snow removal at our properties. If changes in the climate have material effects, such as property destruction, or Medicaid,occur for extended periods, this could have a material adverse effect on business, results of operations, and financial condition.
Uninsured or underinsured losses could result in a significant loss of capital invested in a property, lower than expected future revenues, and unanticipated expense.
A large number of our properties are located in areas exposed to earthquakes, hurricanes, windstorms, flooding, water stress, heat stress, and other common natural disasters and physical climate risks. In particular, (i) a significant portion of our lab development projects and approximately 67% of our lab portfolio (based on gross asset value as of December 31, 2023) was concentrated in California, which is known to be subject to earthquakes, wildfires, and other natural disasters, and (ii) approximately 69% of our CCRC portfolio (based on gross asset value as of December 31, 2023) was concentrated in Florida, which is known to be subject to hurricanes. While we maintain insurance coverage for earthquakes, fires, hurricanes, windstorms, floods, and other natural disasters and physical climate risks, we may adversely affectbe unable to purchase the limits and terms we desire on a commercially reasonable basis due to increased insurance costs or the unavailability of insurance for certain exposures in other regions. We maintain additional earthquake insurance for our tenants’properties that are located in the vicinity of active earthquake zones in amounts and with deductibles we believe are commercially reasonable. Because of our significant concentration in the seismically active regions of South San Francisco, California, and San Diego, California, an earthquake in these areas could damage a significant portion of our lab portfolio. Similarly, a hurricane in Florida could damage a significant portion of our CCRC portfolio. As a result, aggregate deductible amounts may be material, and our insurance coverage may be materially insufficient to cover our losses. Furthermore, there are certain exposures for which we do not purchase insurance because we do not believe it is economically feasible to do so or there is no viable insurance market.
If one of our properties experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose our investment in the damaged property as well as the anticipated future cash flows from such property. If the damaged property is subject to recourse indebtedness, we could continue to be liable for the indebtedness even if the property is irreparably damaged. In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty event may result in loss of revenues for us. Any business interruption insurance may not fully compensate the lender or us for such loss of revenue. Our insurance coverage does not include damages as a result of a pandemic (such as Covid), operators’including business interruption, loss of revenue or earnings, or any related effects (e.g., increased costs related to personal protective equipment, sanitization/sterilization of surfaces and borrowers’equipment, and additional staffing). Insurance coverage for pandemics is not generally available; if it does become available again, it may not be on commercially reasonable terms and we may be unable to receive insurance proceeds that would compensate us fully for our liabilities, costs, and expenses in the event of a pandemic.
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Our CCRC and senior housing operators also face various forms of class-action lawsuits from time to time, such as wage and hour and consumer rights actions, which generally are not covered by insurance. These class actions could result in significant defense costs, as well as settlements or verdicts that materially decrease anticipated revenues from a property and can result in the loss of a portion or all of our invested capital. We may also incur significant out-of-pocket costs associated with legal proceedings or other claims from residents and patients at our properties. Any of the foregoing risks could have a material adverse effect on our business, results of operations, and financial condition.
In addition, the rise in outsized jury verdicts and/or intensifying natural disasters could threaten policy limits and/or sublimits, which may result in the exhaustion of available insurance coverage for the remainder of the policy year. These events could also have a material adverse effect on our business, results of operations, and financial condition.
Our use of joint ventures may limit our returns on and our flexibility with jointly owned investments.
From time to time, we develop, acquire, and/or recapitalize properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to risks that may not be present with other methods of ownership, including:
•our joint venture partners could have investment and financing goals that are inconsistent with our objectives, including the timing, terms, and strategies for any investments, and what levels of debt to incur or carry;
•because we lack sole decision-making authority, we could experience impasses or disputes relating to certain decisions, including those related to budget approvals, entitlements, construction and development, acquisitions, sales of assets, debt financing, execution of lease agreements, and vendor approvals, which could result in delayed decisions and missed opportunities and could require us to expend additional resources on litigation or arbitration to resolve;
•our joint venture partners may have competing interests that create conflicts of interest in our markets;
•our ability to meettransfer our interest in a joint venture to a third party may be restricted;
•the market for our interest may be limited and/or valued lower than fair market value;
•our joint venture partners may be structured differently than us for tax purposes, and this could create conflicts of interest and risks to our REIT status or could restrict the ways in which we are able to exit investments;
•our joint venture partners might become insolvent, fail to fund their share of required capital contributions or fail to fulfill their obligations as a joint venture partner, which may require us to infuse our own capital into the venture on behalf of the partner despite other competing uses for such capital;
•our joint venture agreements may contain anti-competitive restrictions that impact certain of our non-joint venture assets and require us to manage the non-joint venture assets in a manner we otherwise would not;
•our joint venture agreements may in certain circumstances grant our partners a right of first refusal to acquire certain of our non-joint venture assets;
•our joint venture agreements may give our partners management rights that allow them to make operational or other decisions with which we disagree or that we would manage differently; and
•our joint venture agreements may impose limitations or caps on the property management fees that we otherwise would have been entitled to receive if the underlying property were wholly owned.
In addition, in some instances, our joint venture partner will have the right to cause us to sell our interest, or acquire their interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest will be limited if we lack sufficient capital resources. This could require us to sell our interest in the joint venture when we might otherwise prefer to retain it. Any of the foregoing risks could have a material adverse effect on our business, results of operations, and financial condition.
Rent escalators or contingent rent provisions in our leases could hinder our profitability and growth.
We derive a significant portion of our revenues from leasing properties pursuant to leases that generally provide for fixed rental rates, subject to annual escalations. If inflation exceeds our annual escalations, as it often recently has, our growth and profitability may be limited.
Under certain leases, a portion of the tenant’s rental payment to us is based on the property’s revenues (i.e., contingent rent). If a tenant’s revenue at a rental property with contingent rent declines, our rental revenues would decrease.
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Additionally, some of our leases provide that annual rent is modified based on changes in the Consumer Price Index or other contractual obligationsthresholds (i.e., contingent rent escalators). If the Consumer Price Index does not increase or other applicable thresholds are not met, rental rates may not increase as anticipated or at all, which could hinder our profitability and growth. Furthermore, if economic conditions result in significant increases in the Consumer Price Index, but the escalations under our leases with contingent rent escalators are capped or the increase in the Consumer Price Index exceeds our tenants’ ability to us.” pay, our growth and profitability also may be limited.
Competition may make it difficult to identify and purchase, or develop, suitable healthcare facilitiesproperties to grow our investment portfolio, to finance acquisitions on favorable terms, or to retain or attract tenants and operators.
We face significant competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, healthcare operators, lenders, developers, and other institutional investors, some of whom may have greater resources and lower costs of capital than we do. Increased competition makesand resulting capitalization rate compression make it more challenging for us to identify and successfully capitalize on opportunities that meet our business goals and could improve the bargaining power of property owners seeking to sell, thereby impeding our investment, acquisition, and development activities. Similarly, our properties face competition for tenants and operators from other properties in the same market, which may affect our ability to attract and retain tenants and operators, or may reduce the rents we are able to charge. If we cannotThe failure to capitalize on our development pipeline, identify and purchase a sufficient
quantity of healthcare facilitiesproperties at favorable prices, finance acquisitions on commercially favorable terms, or attract and retain profitable tenants and operators, our business, results of operations and financial condition may be materially adversely affected.
We face additional risks associated with property developmentmay be unable to successfully foreclose or exercise rights on the collateral securing our real estate-related loans and, redevelopment that can rendereven if we are successful in our foreclosure or realization efforts, we may be unable to successfully operate, occupy, or reposition the underlying real estate.
If a project less profitable or not profitable at all and,borrower defaults under certain circumstances, prevent completion of development activities once undertaken.
We may be required to recognize reserves, allowances, credit losses, or impairment charges.
Declines in the value of our properties or other assets or loan collateral, financial deterioration of our tenants, borrowers, or other obligors, or other factors may result in the recognition of reserves, allowances, credit losses, or impairment charges. Our determination of such reserves, allowances, or credit losses relies on estimates regarding the fair value of any loan collateral, which is a complex and
relevant assets. Any such impairment, reserve, allowance, or credit loss, or any change in any of the foregoing, risks could materially adversely affecthave an adverse impact on our business, results of operations and financial condition.
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We havemay invest substantial resources and may continue to develop and/or acquire propertiestime in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to risks that may not be present with other methods of ownership, including:
We regularly review potential transactions in order to maximize stockholder value. Our review process may require significant management attention, and a potential transaction could be abandoned or rejected by us or the other parties involved after we expend significant resources and time. In addition, future acquisitions may requireFor additional information on risks related to the issuanceconsummation of securities, the incurrence of debt, assumption of contingent liabilities or incurrence of significant expenditures, each of which could materially adversely impact our business, financial condition or results of operations. In addition,Mergers, see “—Risks Relating to the financing required for acquisitionsMergers” below.
We may not be available on commercially favorable terms or at all.
•liabilities relating to the cleanup or remediation of undisclosed environmental conditions;
•unasserted claims of vendors, residents, patients, or other persons dealing with the seller;
•liabilities, claims, and litigation, whether or not incurred in the ordinary course of business, relating to periods prior to our acquisition;
•claims for indemnification by general partners, directors, officers, and others indemnified by the seller;
•claims for return of government reimbursement payments; and
•liabilities for taxes relating to periods prior to our acquisition.
In addition, the acquired companies and their properties may fail to perform as expected, including inwith respect ofto estimated cost savings. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. Similarly, we may underestimate future operating expenses or the costs necessary to bring properties up to standards established for their intended use or for property improvements.
If we have difficulties with any of these areas, or if we later discover additional liabilities or experience unforeseen costs relating to our acquired companies, we mightmay not achieve the anticipated economic benefits we expect from our acquisitions, and this may materially adversely affecthave a material adverse effect on our business, results of operations, and financial condition.
Furthermore, with respect to our CCRC properties and the properties in our SWF SH JV, all of which are operated in RIDEA structures, we generally have agreeddirectly bear the costs of any such increases in litigation, monitoring, reporting, and insurance due to indemnify usour direct exposure to the cash flows of such properties. We are responsible for variousthese claims, litigation,
and liabilities, arising in connection with their operation oflimited indemnification rights against our properties, they may have insufficient assets, income, access to financing and/operators, which are typically based on the gross negligence or insurance coverage to enable them to satisfy their indemnification obligations, in which case we would incur unanticipated expenditures. Furthermore, althoughwillful misconduct by the operator. Although our leases and agreements provide us with certain information rights with respect to our tenants, and operators, one or more of our tenants may be or become party to pending litigation or investigation toof which we are unaware or in which we do not have a right to participate or evaluate. In such cases, we would be unable to determine the potential impact of such litigation or investigation on our tenants or our business or results. Moreover, negative publicity of any of our operators’, property managers’, or tenants’ litigation, other legal proceedings or investigations may also negatively impact their and our reputation, resulting in lower customer demand and revenues, which could have a material adverse effect on our financial condition, results of operations, and cash flow.flows.
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We through our subsidiaries, enter into management contracts with third party eligible independent contractors to manage somemay also be named as defendants in lawsuits arising out of our facilities whereby we assume additional operational risks and are subject to additional regulation and liability.
Even when a tenant or operator is obligated to indemnify us for liability incurred as a result of a lawsuit pursuant to lease healthcare facilitiesthe terms of its agreement with us, the tenant may fail to satisfy those obligations and, in such event, we would have to incur the costs that should have been covered by the tenant, operator, or property manager and to determine whether to expend additional resources to seek the contractually owed indemnity from that tenant, operator, or property manager, including potentially through litigation or arbitration. In some instances, we may decide not to enforce our indemnification rights if we believe that enforcement of such rights would be more detrimental to our business than alternative approaches. Regardless, such an event would divert management attention and may result in a disruption to our normal business operations, any or all of which could have an adverse effect on our business, results of operations, and financial condition.
Environmental compliance costs and liabilities associated with our real estate-related investments may be substantial and may materially impair the value of those investments.
Federal, state and local laws, ordinances, and regulations may require us, as a current or previous owner of real estate, to investigate and clean up certain hazardous or toxic substances released at a property. We may be held liable to a governmental entity or to third parties for injury or property damage and for investigation and cleanup costs incurred in connection with the contamination. The costs of cleanup and remediation could be substantial. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs it incurs in connection with the contamination, and/or impose fines and penalties on the property owner with respect to such contamination.
Although we currently carry environmental insurance on our properties in an amount that we ownbelieve is commercially reasonable and generally require our tenants and operators to indemnify us for environmental liabilities they cause, such liabilities could exceed the amount of our insurance, the financial ability of the tenant or partially ownoperator to a TRS, provided that our TRS hires an independent qualifying management company to operateindemnify us, or the facility. Undervalue of the RIDEA lease structure, the independent qualifying management company receives a management fee from our TRS for operating the facility as an independent contractor.contaminated property. As the owner of a site, we may also be held liable to third parties for damages and injuries resulting from environmental contamination emanating from the facility contracting out operational responsibility, we assume mostsite. We may also experience environmental costs and liabilities arising from conditions not known to us or disrupted during development. The cost of defending against these claims, complying with environmental regulatory requirements, conducting remediation of any contaminated property, or paying personal injury or other claims or fines could be substantial and could have a material adverse effect on our business, results of operations, and financial condition. In addition, the operational risk relativepresence of contamination or the failure to other structures because we leaseremediate contamination may materially adversely affect our facility to our own partially- or wholly-owned subsidiary rather than a third party operator. Our resulting revenues therefore depend most on occupancy rates, the rates charged to residents and the ability to control operating expenses. Our TRS,use, develop, sell, or lease the property or to borrow using the property as collateral.
ESG and hence we,sustainability commitments and requirements, as well as stakeholder expectations, may impose additional costs and expose us to new risks.
Investors, tenants, business partners and other stakeholders, as well as regulators and other groups, are responsibleincreasingly focusing on ESG and sustainability commitments and performance. Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us if our ESG commitment and performance do not satisfy their criteria. Similarly, some business partners or tenants may use ESG factors to guide their business decisions and choose not to do business with us if they believe our ESG or sustainability policies are inadequate. Third-party providers of ESG ratings have increased in number, resulting in varied and, in some cases, inconsistent standards. In addition, the criteria by which companies’ ESG and sustainability practices are assessed are evolving, which could result in greater expectations for any operating deficits incurred by the facility.
In addition, changes in federal, state, and local legislation and regulation relating to climate change could require (i) increased capital expenditures to improve the energy efficiency or resiliency of our TRS,existing properties and increase the costs of new developments and (ii) increased compliance costs for us and our tenants, in each case without a corresponding increase in revenue. In addition, our reputation may be adversely affected if it holdswe do not meet stakeholder expectations to mitigate climate risk in a transition to a low-carbon economy.
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We may be impacted by epidemics, pandemics, or other infectious diseases, including Covid, and health and safety measures intended to reduce their spread.
Epidemics, pandemics, or other infectious diseases, including future outbreaks of Covid and its variants, as well as both future widespread and localized outbreaks of infectious diseases and other health concerns, and the healthcare licensehealth and issafety measures taken to reduce the entity enrolledspread or lessen the impact, could cause a material disruption to our industry or deteriorate the economy as a whole. The impacts of such events could be severe and far-reaching, and may impact our operations in government health care programs, wouldseveral ways, including: (i) tenants could experience deteriorating financial condition and be subjectunable or unwilling to penaltiespay rent on time and in full; (ii) we may have to restructure tenants' obligations and may not be able to do so on terms that are favorable to us; (iii) inquiries and tours at our properties could decrease; (iv) move-ins, new tenanting efforts, and re-letting efforts could slow or stop altogether; (v) move-outs and potential early termination of leases thereunder could increase; (vi) operating expenses, including the costs of certain essential services or supplies, including payments to third-party contractors, service providers, and employees essential to ensure continuity in our building operations, may increase; (vii) procedures normally conducted on our properties may be disrupted, adversely affecting the economic viability of our tenants; and (viii) costs of development, including expenditures for materials utilized in construction and labor essential to complete existing developments in progress, may increase substantially.
Human capital risks, including the loss or suspensionlimited availability of license, certificationour key personnel, could disrupt or accreditation, exclusionimpair our operations.
We face rising labor costs and increased competition for talent. Insufficient employee development, inadequate succession planning or an inability to successfully implement a hybrid work model could negatively impact our business and operations. We also depend on the efforts of our executive officers for the success of our business. Although they are covered by our Executive Severance Plan and Change in Control Plan, which provide many of the benefits typically found in executive employment agreements, none of our executive officers have employment agreements with us. The loss or limited availability of the services of any of our executive officers, or our inability to recruit and retain qualified personnel, could, at least temporarily, disrupt, or impair our operations.
We rely on information technology in our operations, and any material failure, inadequacy, interruption, or security failure of that technology could harm our business.
We rely on information technology networks, enterprise applications, and other information systems to process, transmit, and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, to maintain personal identifying information and tenant and lease data, and to operate building management systems. We utilize software and cloud-based technology from government healthcare programs (i.e., Medicare, Medicaid), administrative sanctions, civil monetary penalties,third-party service providers, on whom our information systems depend. We rely on commercially available systems, software, tools, and in certain instances, criminal penalties. Additionally, when we receivemonitoring to provide security for the processing, transmission, and storage of confidential tenant and customer data, including individually identifiable health information relating to residentsfinancial accounts, as well as building access, security, and operations. Although we have taken steps to protect the security of our TRS-operated healthcare facilities, we are subject to federalinformation systems, with multiple layers of controls around the data maintained in those systems, it is possible that our safety and state data privacy and confidentiality laws and rules, and could be subject to liabilitysecurity measures will not prevent the systems’ improper functioning or damage, or the improper access of systems or disclosure of personally identifiable information such as in the event of an audit, complaint,cyber-attacks or other cybersecurity incidents.
Furthermore, because our operators as well as other third-party service providers with whom we and they do business (including vendors, software creators and cloud solution and cybersecurity providers) also rely on the Internet, information technology networks, enterprise applications, systems, and software, some of our data breach. Furthermore, ifmay be vulnerable to cybersecurity incidents or cybersecurity threats involving our TRS holdsoperators and third parties with whom we or they do business. We do not control the healthcare license,cybersecurity systems and protocols put in place by our operators or other third parties, and such parties may have limited indemnification obligations to us, which could cause us to be negatively impacted as a result.
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Cybersecurity incidents and cybersecurity threats affecting our or our operators’ or other third party providers’ information systems, including those caused by physical or electronic break-ins, computer viruses, malware, worms, attacks by hackers or foreign governments, ransomware attacks, disruptions from unauthorized access and tampering, including through social engineering such as phishing or vishing attacks, coordinated denial-of-service attacks, and similar breaches, could result in, among other things: (i) system disruptions; (ii) shutdowns; (iii) unauthorized access to or disclosure of confidential information, including as a result of impersonation of authorized users or manipulated communications; (iv) misappropriation of our or our business partners’ proprietary or confidential information; (v) breach of our legal, regulatory, or contractual obligations; (vi) inability to access or rely upon critical business records or systems; or (vii) other delays in our operations. In some cases, it may be difficult to anticipate or immediately detect such cybersecurity threats and cybersecurity incidents and the damage they cause. The risk of cybersecurity incidents and cybersecurity threats has generally increased as the number, intensity, and sophistication of attacks and intrusions affecting companies generally have increased, and we have seen a significant increase in cyber phishing attacks. The risk of security breaches has also increased under our hybrid work model. We may be required to expend significant financial resources to detect, protect against or remediate such cybersecurity incidents or cybersecurity threats. In addition, our technology infrastructure and information systems are vulnerable to damage or interruption from natural disasters, power loss, and telecommunications failures. Any failure to adequately train employees or to maintain proper function, security, and availability of our and our operators’ information systems and the data maintained in those systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties, harm our business relationships, or increase our security and insurance costs, which could have exposurea material adverse effect on our business, financial condition, and results of operations.
Our tenants and borrowers may also from time to professionaltime experience cybersecurity incidents or cybersecurity threats that compromise, damage or disrupt their information systems or result in the loss or misuse of confidential information, intellectual property or sensitive or personal information. Any resulting financial impact to our tenants or borrowers, including liability claims arising outor regulatory penalties, increased security and insurance costs as well as business impacts resulting from any damage to their reputation or harm to their business relationships, could negatively impact the ability of an alleged breach of the applicable standard of care rules.
Risks Related to Our Capital Structure and Market Conditions
Increased or prolonged market disruption, volatility, or uncertainty could have a material adverse effect on our ability to raise capital, obtain new financing or refinance our existing obligations as they mature, and fund acquisition and development activities. Our lenders and other financial institutions could also require us to agree to more restrictive covenants, grant liens on our assets as collateral, and/or accept other terms that are not commercially beneficial to us in order to obtain financing. One or more of our lenders under our credit facility could refuse or fail to fund their financing commitment to us as a result of lender liquidity and/or viability challenges, which financing commitments we may not be able to replace on favorable terms, or at all. In addition, the failure of a bank, or events involving limited liquidity, defaults, non-performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or concerns or rumors about such events, could lead to disruptions in access to our bank deposits, our inability to access our bank deposits in excess of the Federal Deposit Insurance Corporation (FDIC) limits, or otherwise adversely impact our liquidity and financial performance, and our tenants, operators, and borrowers could be similarly adversely affected. Market volatility could also lead to significant uncertainty in the valuation of our investments and those of our joint ventures, which may result in a substantial decrease in the value of our stock priceproperties and increased interestthose of our joint ventures. As a result, we may be unable to recover the carrying amount of such investments and the associated goodwill, if any, which may require us to recognize impairment charges in earnings.
Increased borrowing costs on new debt and existing variable rate debt, which could materially adversely impact our ability to refinance existing debt, sell assetsproperties, and conduct acquisition, investment and development activities.
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Rising borrowing costs could limit our ability to refinance existing debt when it matures, or cause us to pay higher interest rates upon refinancing and increaseincreased interest expense on refinanced indebtedness. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities and through the use of derivative instruments, primarily interest rate cap and swap agreements. However, no amount of hedging activity can fully insulate us from the risks associated with changes in interest rates. SwapThese agreements involve risk, including that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, that the amount of income we earn from hedging transactions may be limited by federal tax provisions governing REITs, and that these arrangements may cause us to payincur higher interest rates on our debt obligationsservice costs than would otherwise be the case. Failure to hedge effectively against interest rate risk could adversely affect our results of operations and financial condition.
Cash available for distribution to stockholders may be insufficient to make dividend distributions at expected levels and are made at the discretion of our Board of Directors.
Decreases in cash available for distributions may result in us being unable to make dividend distributions at expected levels. Our failure to make distributions commensurate with market expectations would likely result in a decrease in the market price of our common stock. Further, all distributions are made at the discretion of our Board of Directors in accordance with Maryland law and depend on: (i) our earnings; (ii) our financial condition; (iii) debt and equity capital available to fundus; (iv) our expectations for future capital needs,requirements and ifoperating performance; (v) covenants in our financial or other contractual arrangements, including those in our credit facility agreement; (vi) maintenance of our REIT qualification; and (vii) other factors as our Board of Directors may deem relevant from time to time.
If access to suchexternal capital is unavailable on acceptable terms or at all, it could have a materiallymaterial adverse effect on our ability to meet commitments as they become due or make future investments necessary to grow our business.
We may not be able to fund all future capital needs, including capital expenditures, debt maturities and other commitments, from cash retained from operations and dispositions. If we are unable to obtain enough internal capital, we may need toperiodically rely on external sources of capital (including debt and equity financing) to fulfill our capital requirements. Our access toThe availability of external capital sources depends upon a number ofseveral factors, some of which we have little or no control over, including but not limited to:including:
•general availability of capital, including less favorable terms, rising interest rates, and increased borrowing costs;
•the market price of the shares of our equity securities and the credit ratings of our debt and any preferred securities we may issue;
•the market’s perception of our growth potential and our current and potential future earnings and cash distributions;
•our degree of financial leverage and operational flexibility;
•the financial integrity of our lenders, which might impair their ability to meet their commitments to us or their willingness to make additional loans to us, and our inability to replace the financing commitment of any such lender on favorable terms, or at all;
•bank failures or other events affecting financial institutions, which could adversely affect our or our tenants’, operators’, and borrowers’ liquidity and financial performance;
•the stability of the market value of our properties;
•the financial performance and general market perception of our tenants and operators;
•changes in the credit ratings on U.S. government debt securities or default or delay in payment by the United StatesU.S. of its obligations;
•issues facing the healthcare industry, including but not limited to, healthcare reform and changes in government reimbursement policies; and
•the performance of the national and global economies generally.generally, including any economic downturn and volatility in the financial markets.
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Our level of indebtedness may increase and materially adversely affect our future operations.
Our outstanding indebtedness as of December 31, 2017,2023 was approximately $7.9$6.9 billion. We may incur additional indebtedness, including in connection with the development or acquisition of assets, which may be substantial. Any significant additional indebtedness would likely negatively affect the credit ratings of our debt and require us to dedicate a substantialgrowing portion of our cash flow to interest and principal payments due on our indebtedness.payments. Greater demands on our cash resources may reduce funds available to us to pay dividends, conduct development activities, make capital expenditures and acquisitions, or carry out other aspects of our business strategy. Increased indebtedness can also make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relativelycomparatively lower debt levels. Increased future debt service obligations may limit our operational flexibility, including our ability to finance or refinance our properties, contribute properties to joint ventures, or sell properties as needed. In addition, any changes to benchmark rates, or uncertainty as to the nature of such potential changes, may increase the cost of our variable rate debt or cost of funds, adversely affect the trading market for our securities, have an unpredictable impact on the financial markets or otherwise affect our financial condition and results of operations.
Covenants in our debt instruments limit our operational flexibility, and breaches of these covenants could materially adversely affectresult in adverse actions by our business, results of operations and financial condition.creditors.
The terms of our current secured and unsecured debt instruments and other indebtedness that we may incur, require or will require us to comply with a number of customary financial and other covenants, such as maintaining leverage ratios, minimum tangible net worth requirements, REIT status, and certain levels of debt service coverage. Our continued ability to incur additional debt and to conduct business in general is subject to compliance with these financial and other covenants, which limitlimits our operational flexibility. For example, mortgages on our properties contain customary covenants such as those that limit or restrict our ability, without the consent of the lender, to further encumber or sell the applicable properties, or to replace the applicable tenant or operator. Breaches of certain covenants may result in defaults under the mortgages on our properties and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee.Covenants that limit our operational flexibility, as well as defaults resulting from the breach of any of these covenants, could materially adversely affect our business, results of operations and financial condition.
The market price and trading volume of our common stock may be volatile.
The market price of our common stock has been, and may in the future be, highly volatile and subject to wide fluctuations. In addition, the presencetrading volume in our common stock may fluctuate and cause significant price variations to occur. The stock market has experienced extreme price and volume fluctuations that have affected the market price of contaminationmany companies in industries similar or related to ours and that have been unrelated to these companies’ operating performances. If the market price of our common stock declines significantly, you may be unable to resell your shares at a gain. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:
•actual or anticipated variations in our quarterly operating results, guidance, or distributions;
•changes in market valuations of similar companies;
•adverse market reaction to any increased indebtedness we may incur in the future;
•issuance of additional equity securities;
•actions by institutional stockholders;
•the publication of research reports and articles (or false or misleading information) about us, our tenants, the real estate industry, or the industries in which our tenants operate;
•speculation in the press or investment community and investor sentiment regarding commercial real estate generally, our industry sectors or other real estate sectors, the industries in which our tenants operate, and the regions in which our properties are located;
•short selling of our common stock or related derivative securities; and
•general market and economic conditions.
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Adverse changes in our credit ratings could impair our ability to obtain additional debt and equity financing on favorable terms.
Our credit ratings affect the amount and type of capital, as well as the terms of any financing we may obtain. The credit ratings of our senior unsecured debt are based on, among other things, our operating performance, liquidity and leverage ratios, geographic and tenant concentration, and pending or future changes in the regulatory framework applicable to our operators and our industry. If we are unable to maintain our current credit ratings, we would likely incur higher borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments. An adverse change in our outlook may ultimately lead to a downgrade in our credit ratings, which would trigger additional borrowing costs or other potentially negative consequences under our current credit facilities and debt instruments. Also, if our credit ratings are downgraded, or general market conditions were to ascribe higher risk to our ratings, our industry, or us, our access to capital and the cost of any future debt financing will be further negatively impacted. In addition, the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or be unavailable due to our covenant restrictions then in effect. There is no guarantee that debt or equity financings will be available in the future to fund future acquisitions, developments, or general operating expenses, or that such financing will be available on terms consistent with our historical agreements or expectations.
Risks Related to the Regulatory Environment
Tenants, operators, and borrowers that fail to comply with federal, state, local, and international laws and regulations, including resident health and safety requirements, as well as licensure, certification, and inspection requirements, may cease to operate or be unable to meet their financial and other contractual obligations to us.
Our tenants, operators, and borrowers across our segments are subject to or impacted by extensive, frequently changing federal, state, and local laws and regulations. See “Item 1, Business—Government Regulation, Licensing and Enforcement—Healthcare Licensure and Certificate of Need” for a discussion of certain of these laws and regulations. Unannounced surveys, inspections, or audits occur frequently, including following a regulator’s receipt of a complaint about a facility, and these surveys, inspections, and audits can result in deficiencies and further adverse action. Our tenants’, operators’, or borrowers’ failure to remediate contaminationcomply with any of the laws, regulations, or requirements applicable to them could result in: (i) loss of accreditation; (ii) denial of reimbursement; (iii) imposition of fines; (iv) suspension or decertification from government healthcare programs; (v) civil liability; and (vi) in certain instances, suspension, or denial of admissions, criminal penalties, loss of license, or closure of the property and/or the incurrence of considerable costs arising from an investigation or regulatory action, which may have an adverse effect on properties that we own and lease to a third party tenant in our lab and outpatient medical segments, that we own and operate through a RIDEA structure in our CCRC segment or our SWF SH JV, or on which we hold a mortgage, and therefore may materially adversely affect our abilityimpact us.
Furthermore, we are required under RIDEA to use, sell or lease the property or to borrow using the property as collateral.
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Required regulatory approvals can delay or interruption from natural disasters, power loss and telecommunications failures. Any failure to maintain proper function, security and availabilityprohibit transfers of our information systemssenior housing properties.
Transfers of senior housing properties, including in connection with the foreclosure of a real-estate secured loan, to successor owners or operators are typically subject to regulatory approvals or ratifications, including change of ownership approvals for licensure and Medicare / Medicaid (if applicable) that are not required for transfers of other types of commercial operations and other types of real estate. The sale of, or replacement of any operator at, our senior housing facilities, or the data maintained in those systemsforeclosure of a loan secured by senior housing real estate, could interruptbe delayed by the regulatory approval process of any federal, state, or local government agency necessary for the transfer of the property or the replacement of the operator licensed to manage the property, during which time the property may experience performance declines. We may also elect to use an interim licensing structure to facilitate such transfers, which structure expedites the transfer by allowing a third party to operate under our operations, damage our reputation,license until the required regulatory approvals are obtained, but could subject us to liability claimsfines or regulatory penalties if the third party fails to comply with applicable laws and regulations and fails to indemnify us for such fines or penalties pursuant to the terms of its agreement with us.
Compliance with the Americans with Disabilities Act and fire, safety, and other regulations may require us to make expenditures that adversely affect our cash flows.
Our properties must comply with applicable ADA and any similar state and local laws. These laws may require removal of barriers to access by persons with disabilities in public areas of our properties. Noncompliance could result in the incurrence of additional costs associated with bringing the properties into compliance, the imposition of fines or an award of damages to private litigants in individual lawsuits or as part of a class action. We could also be required to expend funds to comply with the provisions of the ADA and similar state and local laws on behalf of tenants, which could adversely affect our results of operations and financial condition.
In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations. New and revised regulations and codes may be adopted by governmental agencies and bodies and become applicable to our properties. For example, new safety laws for senior housing properties were adopted following the particularly damaging 2018 hurricane season. Compliance could require substantial capital expenditures, both for significant upgrades and for tenant relocations that may be necessary depending on the scope and duration of upgrades, and may restrict our ability to renovate our properties. These expenditures and restrictions could have a materiallymaterial adverse effect on our financial condition and cash flows.
Laws or regulations prohibiting eviction of our tenants, even on a temporary basis, could have a material adverse effect on our revenues if our tenants fail to make their contractual rent payments to us.
Various federal, state, and local governments previously enacted, and may again enact, laws, regulations, and moratoriums or take other actions that could limit our ability to evict tenants until such laws, regulations, or moratoriums are reversed or lifted. In particular, several state and local governments implemented eviction moratoriums as a result of the Covid pandemic that applied to both residential and commercial tenants. Although these moratoriums have generally terminated or expired, federal, state, and local governments could enact moratoriums under similar circumstances in the future. While we generally have arrangements and other agreements that give us the right under specified circumstances to terminate a lease or evict a tenant for nonpayment of contractual rent, such laws, regulations, and moratoriums may restrict our ability to begin eviction proceedings even where no rent or only partial rent is being paid. Further, under current laws and regulations, eviction proceedings for delinquent tenants are already costly and time-consuming, and, if there are existing backlogs or backlogs develop in courts due to higher than normal eviction proceedings, we may incur significant costs and it may take a significant amount of time to ultimately evict any tenant who is not meeting their contractual rent obligations. If we are restricted, delayed, or prohibited from evicting tenants for failing to make contractual rent payments, it may have a material adverse effect on our business, results of operations, and financial condition.
The requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid may adversely affect our tenants’, operators’, and borrowers’ ability to meet their financial and other contractual obligations to us.
Certain of our tenants, operators, and borrowers, as well as our owned assets in the CCRC segment and SWF SH JV, are affected, directly or indirectly, by a complex set of federal, state, and local laws and regulations pertaining to governmental reimbursement programs, including the CARES Act and other similar relief legislation enacted as a result of the Covid pandemic. These laws and regulations are subject to frequent and substantial changes that are sometimes applied retroactively. See “Item 1, Business—Government Regulation, Licensing and Enforcement.” For example, to the extent that our tenants, operators, or borrowers, or assets owned in our CCRC segment or through the SFW SH JV, receive a significant portion of their revenues from governmental payors, primarily Medicare and Medicaid, they are generally subject to, among other things:
•statutory and regulatory changes, including changes that impact state reimbursement programs, particularly Medicaid reimbursement and managed care payments;
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•retroactive rate adjustments and recoupment efforts;
•recovery of program overpayments or set-offs;
•federal, state, and local litigation and enforcement actions, including those relating to Covid and the failure to satisfy the terms and conditions of financial relief;
•administrative proceedings;
•policy interpretations;
•payment or other delays by fiscal intermediaries or carriers;
•government funding restrictions (at a program level or with respect to specific properties);
•reduced reimbursement rates under managed care contracts;
•changes in reimbursement rates, methods, or timing under governmental reimbursement programs, including changes that impact state reimbursement programs, particularly Medicaid reimbursement and managed care payments;
•interruption or delays in payments due to any ongoing governmental investigations and audits at such properties or due to a partial or total federal or state government shutdown for a prolonged period of time; and
•reputational harm of publicly disclosed enforcement actions, audits, or investigations related to billing and reimbursements.
We are unable to predict future changes to or interpretations of, or the intensity of enforcement efforts with respect to, these laws and regulations, including those that pertain to the Medicare and Medicaid programs. The failure to comply with the extensive laws, regulations, and other requirements applicable to their business and the operation of our properties could result in, among other challenges: (i) becoming ineligible to receive reimbursement from governmental reimbursement programs or being compelled to repay amounts received, including under the CARES Act; (ii) becoming subject to prepayment reviews or claims for overpayments; (iii) bans on admissions of new patients or residents; (iv) civil or criminal penalties; and (v) significant operational changes, including requirements to increase staffing or the scope of care given to residents. These laws and regulations are enforced by a variety of federal, state, and local agencies and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. Any changes in the regulatory framework or the intensity or extent of governmental or private enforcement actions could have a material adverse effect on our tenants, operators, borrowers, and/or assets.
The status of the Patient Protection and Affordable Care Act, along with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) and related regulations may be subject to change, and other health reform measures could be implemented as a result of political, legislative, regulatory, and administrative developments and judicial proceedings, including those with far reaching implications and effecting fundamental changes in the healthcare system. Federal and state authorities may continue to implement new or modified reimbursement methodologies that may negatively impact health care property operations. There can be no assurance that adequate reimbursements will be available for services provided by our operators and tenants. Additionally, the patient driven payment model utilized by the Centers for Medicare and Medicaid Services to calculate reimbursement rates for patients in skilled nursing properties (which is among the unit types in our CCRCs) could result in decreases in payments to our operators and tenants or increase our operators’ and tenants’ costs. We cannot make any assessment as to the ultimate timing or the effect that any future changes may have on our tenants’, operators’, and borrowers’ costs of doing business, or the cost of doing business for or the assets owned in our CCRC segment or through the SFW SH JV, and on the amount of reimbursement by government and other third-party payors. Any significant limits on the scope of services reimbursed, reductions in reimbursement rates and fees, or increases in provider or similar types of taxes, could materially adversely affect their ability to meet their financial and contractual obligations to us.
We could be negatively impacted by legislation to address federal government operations and administrative decisions affecting the Centers for Medicare and Medicaid Services.
Congressional consideration of legislation pertaining to the federal debt ceiling, the Affordable Care Act, tax reform, and entitlement programs, including reimbursement rates for physicians, could have a material adverse effect on our tenants’, operators’, and borrowers’ liquidity, financial condition, andor results of operations. In particular, reduced funding for entitlement programs such as Medicare and Medicaid would result in increased costs and fees for programs such as Medicare Advantage Plans and additional reductions in reimbursements to providers. Amendments to the Affordable Care Act in whole or in part and decisions by the Centers for Medicare and Medicaid Services could impact the delivery of services and benefits under Medicare, Medicaid, or Medicare Advantage Plans and could affect our tenants and operators and the manner in which they are reimbursed by such programs. Any shutdown of the federal government that delays or disrupts payments or any other material adverse effect on payments to our tenants, operators, or borrowers could adversely affect their ability to satisfy their obligations to us and could have a material adverse effect on us.
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Our participation in the CARES Act Provider Relief Fund and other Covid-related stimulus and relief programs could subject us or our operators to disruptive government and financial audits, enforcement actions, and recovery activity.
Under the CARES Act and subsequent Covid relief legislation, Congress allocated more than $178 billion to eligible health care providers through the Public Health and Social Services Emergency Fund (the “Provider Relief Fund” or “PRF”). The U.S. Department of Health and Human Services (“HHS”) distributed PRF awards through various general and targeted distributions. We and our senior housing operators (including operators of senior housing facilities that we have subsequently disposed of) received relief funds through several distributions.
PRF funds are intended to reimburse eligible providers for unreimbursed health care-related expenses and lost revenues attributable to Covid and must be used only to prevent, prepare for, or respond to Covid. PRF funds received under certain targeted distributions are further limited to specific uses. Additionally, the PRF program imposes certain distribution-specific eligibility criteria and requires recipients to comply with various terms and conditions. PRF program terms and conditions include limitations and requirements governing use of PRF funds, implementation of controls, retention of records, audit and reporting to governmental authorities, and other PRF program requirements. Failure to comply with program requirements may result in payment recovery or other enforcement actions. HHS interpretation of applicable terms and requirements has evolved over time, and may continue to evolve. The interpretation and implementation of PRF requirements and related guidance remains uncertain, and there can be no assurance that we or our operators are or will remain in compliance with all PRF and Covid relief program requirements and interpretative guidance. PRF guidance or interpretations could change in ways that adversely impact the PRF funding we or our operators received, recognized, or are able to retain. We also may be subject to or incur costs related to PRF compliance activities, reporting, and financial audits, as well as government oversight and enforcement, including post-payment recovery and recoupment and government investigations, audits, enforcement activity, and penalties. Our current and former operators may similarly be impacted. Differences in operators’ PRF policies and protocols may adversely impact availability of data and our related reports and financial audits.
Risks Related to Tax, includingIncluding REIT-Related Risks, and Related to Our Jurisdiction of Incorporation and Our Structure as an UPREIT
Loss of our tax status as a REIT would substantially reduce our available funds and would have materially adverse consequences for us and the value of our common stock.
Qualification as a REIT involves the application of numerous highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), for which there are only limited judicial and administrative interpretations, as well as the determination of various factual matters and circumstances not entirely within our control. We intend to continue to operate in a manner that enables us to qualify as a REIT. However, our qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Code, through actual annual operating results, asset diversification, distribution levels, and diversity of stock ownership, the various qualification tests imposed under the Code. ownership.
For example, to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources, and we must make distributions to our stockholders aggregating annually to at least 90% of our REIT taxable income, excluding net capital gains. In addition,Rents we receive from a TRS in a RIDEA structure are treated as qualifying rents from real property for REIT tax purposes only if (i) they are paid pursuant to a lease of a “qualified healthcare property” and (ii) the operator qualifies as an “eligible independent contractor,” as each term is defined in the Code. If either of these requirements is not satisfied, then the rents we receive from the TRS will not be qualifying rents and we may not satisfy the REIT gross income requirements. Furthermore, new legislation, regulations, administrative interpretations, or court decisions could change the tax laws or interpretations of the tax laws regarding qualification as a REIT, or the federal income tax consequences of that qualification, in a manner that is materially adverse to our stockholders. Accordingly, there is no assurancewe cannot assure you that we have operated or will continue to operate in a manner so as to qualify or remain qualified as a REIT.
If we lose our REIT status, we will face serious tax consequences that will substantially reduce the funds available to make payments of principal and interest on the debt securities we issue and to make distributions to stockholders. If we fail to qualify as a REIT:
•we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
•we will be subject to corporate-level income tax, including any applicable alternative minimum tax on our taxable income at regular corporate rates;
•we couldwill be subject to increased state and local income taxes; and
•unless we are entitled to relief under relevant statutory provisions, we will be disqualified from taxation as a REIT for the four taxable years following the year during which we fail to qualify as a REIT.
As a result of all these factors, our failure to qualify as a REIT could also impair our ability to expand our business and raise capital and could materially adversely affect the value of our common stock.
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Our taxable REIT subsidiaries (TRSs) may be subject to corporate level tax.
Certain of our subsidiaries have elected or will elect with us to be treated as TRSs. Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT that the parent REIT could not provide directly. TRSs are taxed as regular C corporations, and are thus generally required to pay regular corporate income tax, and potentially the alternative minimum tax, on their earnings. Any taxes paid by our TRSs will reduce the amounts that our TRSs could otherwise distribute to us.
The tax imposed on any net income from “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for federal income tax purposes.
We will be required to pay a 100% tax on any net income from prohibited transactions. Prohibited transactions are, in general, sales or other taxable dispositions of property, other than foreclosure property, held as inventory or primarily for sale to customers in the ordinary course of business. A sale will not be considered a prohibited transaction, however, if it meets certain safe harbor requirements. Although we do not intend to hold any properties that would be characterized as held for sale to customers in the ordinary course of our business (other than through a TRS), such characterization is a factual determination and no guarantee can be given that the U.S. Internal Revenue Service (the “IRS”) would agree with our characterization of our properties or that we will always be able to take advantage of available safe harbors.
Further changes to U.S. federal income tax laws could materially and adversely affect us and our stockholders.
The present federal income tax treatment of REITs and various transactional structures that we utilize may be modified, possibly with retroactive effect, by legislative, judicial, or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules dealing with U.S. federal income taxation and REITs are constantly are under review by persons involved in the legislative process, the U.S. Internal Revenue Service (the “IRS”)IRS, and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. We cannot predict how changes in the tax laws might affect our investors or us. Revisions in federal tax laws and interpretations thereof could significantly and negatively affect our ability to qualify as a REIT, as well as the tax considerations relevant to an investment in us, or could cause us to change our investments and commitments and affect the tax considerations of an investment in us.commitments.
If, during the five-year period beginning on the date we acquire certain assets or companies in certain tax deferred transactions, we recognize a gain on the disposition of any property acquired, then, to the extent of the excess of (i) the fair market value of such property as of the acquisition date, over (ii) our adjusted income tax basis in such property as of that date, we will be required to pay a corporate-level federal income tax on this gain at the highest regular corporate rate. There can be no assurance that these triggering dispositions will not occur, and these requirementsThese potential tax effects could limit or delay or impede future sales of our properties.
property sales. In addition, the IRS may assert liabilities against us for corporate income taxes of certain entities we acquire for taxable years prior to the time that we acquire certain companies,such entities, in which case we will owe these taxes plus interest and penalties, if any.
There are uncertainties relating to the calculation of non-REIT tax earnings and profits (“E&P”) in certain acquisitions, which may require us to distribute E&P.
In order to remain qualified as a REIT, we are required to distribute to our stockholders all of the accumulated non-REIT E&P of certain companiesC corporations that we acquire, prior to the close of the first taxable year in which the acquisition occurs. Failure to make such E&P distributions wouldcould result in our disqualification as a REIT. The determination of the amount to be distributed in such E&P distributions is a complex factual and legal determination. We may have less than complete information at the time we undertake our analysis, or we may interpret the applicable law differently from the IRS. We currently believe that we have satisfied the requirements relating to such E&P distributions. There are, however, substantial uncertainties relating to the determination of E&P, including the possibility that the IRS could successfully assert that the taxable income of the companies acquired should be increased, which wouldcould increase our non-REIT E&P. Moreover, an audit of the acquired company following our acquisition could result in an increase in accumulated non-REIT E&P, which could require us to pay an additional taxable distribution to our then-existing stockholders, if we qualify under rules for curing this type of default, or could result in our disqualification as a REIT.
Thus, we might fail to satisfy the requirement that we distribute all of our non-REIT E&P by the close of the first taxable year in which the acquisition occurs. Moreover, althoughAlthough there are procedures available to cure a failure to distribute all of our E&P, we cannot now determine whether we will be able to take advantage of these procedures or the economic impact on us of doing so.
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Tax protection agreements may limit our ability to U.S. federal income tax laws could materiallysell or otherwise dispose of certain properties and adversely affectmay require us andto maintain certain debt levels that otherwise would not be required to operate our stockholders.business.
Our charter contains ownership limits with respect to our common stock and other classes of capital stock.
Our charter contains restrictions on the ownership and transfer of our common stock and preferred stock that are intended to assist us in preserving our qualification as a REIT. Under our charter, subject to certain exceptions, no person or entity may own, actually or constructively, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock or any class or series of our preferred stock.
Additionally, our charter has a 9.9% ownership limitation on the direct or indirect ownership of our voting shares, which may include common stock or other classes of capital stock. Our Board of Directors, in its sole discretion, may exempt a proposed transferee from either ownership limit. The ownership limits may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.
We are subject to certain provisions of Maryland law and our charter relating to business combinations that may prevent a transaction that may otherwise be in the interest of our stockholders.
We are subject to the Maryland Business Combination Act (the “MBCA”), which provides that unless exempted, a Maryland corporation may not engage in certain business combinations with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. In addition to the restrictions on business combinations contained in the MBCA, our charter also requires that, except in certain circumstances, “business combinations” with a “related person” must be approved by the affirmative vote of the holders of at least 90% of our outstanding voting stock. These restrictions on business combinations may delay, defer, or prevent a change of control or other transaction even if such transaction involves a premium price for our common stock or our stockholders believe that such transaction is otherwise in their best interests.
Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of Healthpeak OP common units, which may impede business decisions that could benefit our stockholders.
Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and Healthpeak OP or any member thereof, on the other. Our directors and officers have duties to our company under Maryland law in connection with their management of our company. At the same time, we, as the managing member of Healthpeak OP, have certain fiduciary duties and obligations to Healthpeak OP and its members under Maryland law and the operating agreement of Healthpeak OP in connection with the management of Healthpeak OP. Our fiduciary duties and obligations as the managing member of Healthpeak OP may come into conflict with the duties of our directors and officers to our company.
Under Maryland law, a managing member of a Maryland limited liability company has fiduciary duties of loyalty and care to the limited liability company and its members and must discharge its duties and exercise its rights as managing member under the operating agreement or Maryland law consistent with the obligation of good faith and fair dealing. The operating agreement provides that, to the maximum extent permitted under the Maryland Limited Liability Company Act, the only duties that the managing member owes to Healthpeak OP, any member, or any other person, fiduciary or otherwise, are to perform its contractual obligations as expressly set forth in the operating agreement consistently with the implied contractual covenant of good faith and fair dealing. The operating agreement further provides that, in the event of a conflict between the interests of Healthpeak OP or any member, on the one hand, and the separate interests of our company or our stockholders, on the other hand, we, in our capacity as the managing member of Healthpeak OP, may give priority to the separate interests of our company or our stockholders (including with respect to tax consequences to members, assignees, or our stockholders), and, in the event of such a conflict, any action or failure to act on our part or on the part of our directors or officers that gives priority to the separate interests of our company or our stockholders that does not result in a violation of the contract rights of the members of Healthpeak OP under its operating agreement does not violate the duty of loyalty or any other duty that we, in our capacity as the managing member of Healthpeak OP, owe to Healthpeak OP and its members.
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Additionally, the operating agreement provides that we generally will not be liable to Healthpeak OP or any member for any action or omission taken in our capacity as managing member, for the debts or liabilities of Healthpeak OP or for the obligations of Healthpeak OP under the operating agreement, except for liability for our fraud, willful misconduct, or gross negligence, pursuant to any express indemnity we may give to Healthpeak OP, or in connection with a redemption. Healthpeak OP generally must indemnify us, our directors and officers, officers of Healthpeak OP, and our designees from and against any and all claims that relate to the operations of Healthpeak OP, unless (i) an act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (ii) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful, or (iii) the person actually received an improper personal benefit in money, property, or services. Healthpeak OP must also pay or reimburse the reasonable expenses of any such person in advance of a final disposition of the proceeding upon its receipt of a written affirmation of the person’s good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification. Healthpeak OP is not required to indemnify or advance funds to any person with respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought to enforce such person’s right to indemnification under the operating agreement) or in respect of any proceeding in which the person is found to be liable to Healthpeak OP if the proceeding was one by or in the right of Healthpeak OP.
No reported decision of a Maryland appellate court has interpreted provisions similar to the provisions of the operating agreement of Healthpeak OP that modify and reduce our fiduciary duties or obligations as the managing member or reduce or eliminate our liability to Healthpeak OP and its members, and we have not obtained an opinion of counsel as to the enforceability of the provisions set forth in the operating agreement that purport to modify or reduce the fiduciary duties and obligations that would be in effect were it not for the operating agreement.
Certain provisions in the operating agreement of Healthpeak OP or other agreements may delay or prevent unsolicited acquisitions of us or certain other transactions.
Provisions of the operating agreement of Healthpeak OP may delay or make more difficult unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some of our stockholders or members of Healthpeak OP might consider such proposals, if made, desirable. These provisions include, among others:
•redemption rights of qualifying parties;
•a requirement that we may not be removed as the managing member of Healthpeak OP without our consent;
•transfer restrictions on common units;
•our ability, as managing member, in some cases, to amend the operating agreement and to cause Healthpeak OP to issue additional membership interests with terms that could delay, defer, or prevent a merger or other change of control of us or Healthpeak OP without the consent of our stockholders or the members of Healthpeak OP; and
•the right of the non-managing members of Healthpeak OP to consent to certain transfers of our managing membership interest (whether by sale, disposition, statutory merger or consolidation, liquidation, or otherwise).
Our charter and bylaws, the operating agreement of Healthpeak OP, and Maryland law also contain other provisions that may delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
In addition, provisions of certain agreements with our partners may delay or make more difficult certain other transactions, including involving issuances of common units.
We are a holding company with no direct operations and, as such, we will rely on funds received from Healthpeak OP to pay liabilities, and the interests of our stockholders will be structurally subordinated to all liabilities and obligations of Healthpeak OP and its subsidiaries.
We are a holding company and conduct substantially all of our operations through Healthpeak OP. We do not have, apart from an interest in Healthpeak OP, any independent operations. As a result, we rely on distributions from Healthpeak OP to continue to pay any dividends we might declare on shares of our common stock. We also rely on distributions from Healthpeak OP to meet any of our obligations, including any tax liability on taxable income allocated to us from Healthpeak OP. In addition, because we are a holding company, stockholder claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of Healthpeak OP and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation, or reorganization, our assets and those of Healthpeak OP and its subsidiaries will be available to satisfy the claims of our stockholders only after all of our and Healthpeak OP’s and its subsidiaries’ liabilities and obligations have been paid in full.
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Risks Relating to the Mergers
An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement, or the transactions contemplated thereby, could have a material adverse impact on our business and our ability to consummate the transactions contemplated by the Merger Agreement.
On October 29, 2023, the Company and Physicians Realty Trust entered into the Merger Agreement with DOC DR Holdco, LLC (formerly known as Alpine Sub, LLC), a Maryland limited liability company and a wholly owned subsidiary of the Company (“DOC DR Holdco”), DOC DR, LLC (formerly known as Alpine OP Sub, LLC), a Maryland limited liability company and a wholly owned subsidiary of Healthpeak OP (“DOC DR OP Sub”), and Physicians Realty L.P. (the “Physicians Partnership”). The Merger Agreement provides for (a) the merger of Physicians Realty Trust with and into DOC DR Holdco (the “Company Merger”), with DOC DR Holdco surviving as a wholly owned subsidiary of the Company (the “Company Surviving Entity”); (b) immediately following the effectiveness of the Company Merger, the contribution by the Company to Healthpeak OP, a Maryland limited liability company, of all of the outstanding equity interests in the Company Surviving Entity (the “Contribution”); and (c) immediately following the Contribution, the merger of the Physicians Partnership with and into DOC DR OP Sub (the “Partnership Merger”), with DOC DR OP Sub surviving as a wholly owned subsidiary of Healthpeak OP (the “Partnership Surviving Entity”).
Transactions like the Mergers are frequently the subject of litigation or other legal proceedings, including actions alleging that either our Board of Directors or Physicians Realty Trust’s board of trustees, as applicable, breached its respective duties to its stockholders or shareholders, respectively, or other equity holders by entering into the Merger Agreement; by failing to obtain a greater value in the transaction for the Company’s stockholders or Physicians Realty Trust’s shareholders or other equity holders; by failing to make adequate disclosures; or by otherwise failing to fulfill their fiduciary duties or statutory obligations. As discussed in Note 11 to the Consolidated Financial Statements, three purported stockholders of the Company and four purported shareholders of Physicians Realty Trust have filed (and additional shareholders or stockholders, as applicable, of Physicians Realty Trust and/or the Company may file) complaints relating to the Mergers, and Physicians Realty Trust has received correspondence from multiple purported shareholders of Physicians Realty Trust relating to the Mergers. With respect to such litigation, and if additional litigation or other legal proceedings are brought against us or against our Board of Directors in connection with the Merger Agreement, or the transactions contemplated thereby, we will defend against it, but we might not be successful in doing so. An adverse outcome in such matters, as well as the costs, time, and effort of a defense, even if successful, could have a material adverse effect on our ability to consummate the Mergers or on our business, results of operations, or financial position, including through the delay of the Mergers with consequent direct and indirect costs, the possible diversion of either company’s resources, or the distraction of key personnel.
The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock or share prices, respectively, of either us or Physicians Realty Trust.
As a result of the Mergers, and through a series of transactions, (i) each outstanding common share of Physicians Realty Trust (other than Physicians Realty Trust common shares to be canceled in accordance with the Merger Agreement) will be converted into the right to receive 0.674 shares of Company common stock (the “Merger Consideration”), without interest, plus cash in lieu of consideration for fractional shares, but subject to any withholding required under applicable tax laws, and (ii) each Partnership OP Unit (as defined in the Merger Agreement) will be converted into common units in the Partnership Surviving Entity equal to the 0.674 Exchange Ratio. The Exchange Ratio will not be adjusted for changes in the market prices of either shares of our common stock or Physicians Realty Trust’s common shares. Changes in the market price of Physicians Realty Trust common shares prior to the effective time of the Mergers will affect the market value of the Merger Consideration that Physicians Realty Trust shareholders will receive on the closing date of the Mergers. Share price changes may result from a variety of factors (many of which are beyond our or Physicians Realty Trust’s control), including the following factors:
•market reaction to the prospects of Healthpeak and its subsidiaries after the Company Merger (the “Combined Company”);
•changes in the respective businesses, operations, assets, liabilities, and prospects of the Company and Physicians Realty Trust;
•changes in market assessments of the business, operations, financial position, and prospects of any of the Company, Physicians Realty Trust, or the Combined Company;
•market assessments of the likelihood that the Mergers will be completed;
•interest rates, general market and economic conditions, and other factors generally affecting the market prices of our common stock and Physicians Realty Trust’s common shares;
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•federal, state and local legislation, governmental regulation, and legal developments in the businesses in which we and Physicians Realty Trust operate; and
•other factors beyond the control of the Company and Physicians Realty Trust, including those described or referred to in this “Risk Factors” section.
The market price of Company common stock at the closing of the Mergers may vary from its price on the date the Merger Agreement was executed, on the date of the joint proxy statement/prospectus, and on the date of our special meeting. As a result, the market value of the Merger Consideration represented by the Exchange Ratio will also vary.
If the market price of shares of Company common stock increases between the date the Merger Agreement was signed or the date of the special meeting and the closing of the Mergers, Physicians Realty Trust’s shareholders will receive shares of Company common stock that have a market value upon completion of the Company Merger that is greater than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the special meeting, respectively. Alternatively, if the market price of shares of Company common stock declines between the date the Merger Agreement was signed or the date of the special meeting and the closing of the Mergers, including for any of the reasons described above, Physicians Realty Trust’s shareholders will receive shares of Company common stock that have a market value upon completion of the Company Merger that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the special meeting, respectively.
Our stockholders will be significantly diluted by the Mergers.
The Mergers will significantly dilute the ownership position of our stockholders. Upon completion of the Mergers, based on the number of shares of Company common stock and Physicians Realty Trust common shares outstanding as of December 31, 2023, it is estimated that legacy Company common stockholders will own approximately 77% of the common stock of the Combined Company, and legacy Physicians Realty Trust common shareholders will own approximately 23% of the common stock of the Combined Company. Additionally, because the Company will be issuing shares of Company common stock to certain holders of Partnership OP Unit in the Partnership Merger, each outstanding share of Company common stock after the completion of the Mergers will represent a smaller percentage of the voting power of the Company than if such shares of common stock had not been issued in the Partnership Merger. The Company may also issue additional shares of common stock or preferred stock in the future, which would create further dilution. Consequently, our stockholders, as a general matter, will have less influence over the management and policies of the Combined Company after the effective time of the Mergers than they currently exercise over the management and policies of the Company.
Risks Relating to the Combined Company Following the Mergers
The Combined Company expects to incur substantial expenses related to the Mergers.
The Combined Company expects to incur substantial expenses in connection with completing the Mergers and integrating the operations and systems of the Company with those of Physicians Realty Trust. While the Company has assumed that a certain level of expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of the Combined Company’s expenses relating to the completion of the Mergers and the integration of the Combined Company’s operations. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the expenses associated with the Mergers could, particularly in the near term, reduce the savings that the Combined Company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the operations of the Company and Physicians Realty Trust following the completion of the Mergers.
Following the Mergers, the Combined Company may be unable to integrate the operations of the Company and Physicians Realty Trust successfully and realize the anticipated synergies and other benefits of the Mergers or do so within the anticipated time frame.
The Mergers involve the combination of two companies that currently operate as independent public companies and their respective operating partnerships. The Combined Company is expected to benefit from the elimination of duplicative costs associated with supporting a public company platform and the leveraging of state-of-the-art technology and systems. However, the Combined Company will be required to devote significant management attention and resources to integrating the operations of the Company and Physicians Realty Trust. Potential difficulties the Combined Company may encounter in the integration process include the following:
•the inability to successfully combine the operations of the Company and Physicians Realty Trust, including the integration of employees, customer records and maintaining cybersecurity protections, in a manner that permits the Combined Company to achieve the cost savings anticipated to result from the Mergers, which would result in the anticipated benefits of the Mergers not being realized in the time frame currently anticipated or at all;
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•the inability to dispose of assets or operations that the Combined Company desires to dispose of;
•the complexities associated with managing the combined businesses out of different locations and integrating personnel from the two companies;
•the failure to retain key employees of either of the two companies;
•potential unknown liabilities and unforeseen increased expenses, delays, or regulatory conditions associated with the Mergers; and
•performance shortfalls as a result of the diversion of management’s attention caused by completing the Mergers and integrating the companies’ operations.
For all these reasons, it is possible that the integration process could result in the distraction of the Combined Company’s management, the disruption of the Combined Company’s ongoing business, or inconsistencies in the Combined Company’s operations, services, standards, controls, procedures, and policies, any of which could adversely affect the ability of the Combined Company to maintain relationships with tenants, property managers, and employees or to achieve the anticipated benefits of the Mergers, or could otherwise adversely affect the business and financial results of the Combined Company.
Following the Mergers and the transactions contemplated by the Merger Agreement, the Combined Company may be unable to retain key employees.
The success of the Combined Company will depend in part upon its ability to retain key Company and Physicians Realty Trust employees. Key employees may depart either before or after the Mergers because of issues relating to the uncertainty and difficulty of integration or separation, a desire not to remain with the Combined Company following the Mergers, or due to compensation arrangements that differ from Physicians Realty Trust employees’ current compensation arrangements with Physicians Realty Trust. Accordingly, no assurance can be given that the Company, Physicians Realty Trust or, following the Mergers and the transactions contemplated by the Merger Agreement, the Combined Company will be able to retain key employees to the same extent as in the past.
The Mergers will result in changes to the board of directors of the Combined Company that may affect the strategy of the Combined Company as compared to that of the Company and Physicians Realty Trust individually.
Following the Mergers, the composition of the board of directors of the Combined Company will change from the current boards of the Company and Physicians Realty Trust individually. Pursuant to the Merger Agreement, at the date and time the Company Merger becomes effective (the “Company Merger Effective Time”), John T. Thomas, Physicians Realty Trust’s President and Chief Executive Officer, will be appointed to, and become the Vice Chair of, the Combined Company’s board of directors and will have an active role in the Combined Company’s strategy, relationships and business development. In addition, at the Company Merger Effective Time, Governor Tommy G. Thompson, Physicians Realty Trust’s Chair of the board of trustees, and Pamela J. Kessler, Ava E. Lias-Booker and Richard A. Weiss will also be appointed to the Combined Company’s board of directors. Following the consummation of the Mergers, pursuant to an amendment to our Bylaws, our Board of Directors is expected to be increased to 13 members, with Katherine M. Sandstrom continuing as the Chair of our Board of Directors and all then-current directors of our Board of Directors continuing as members. The senior management team of the Combined Company will be comprised primarily of the current senior management team of the Company.
This new composition of the board of directors, together with the management team, of the Combined Company may affect the business strategy and operating decisions of the Combined Company upon the completion of the Mergers.
The future results of the Combined Company will suffer if the Combined Company does not effectively manage its operations following the Mergers and the transactions contemplated by the Merger Agreement.
Following the Mergers, the Combined Company may continue to expand or materially alter its operations through additional acquisitions, development opportunities, dispositions, joint ventures, and other strategic or tactical transactions, some of which involve complex challenges. The future success of the Combined Company will depend, in part, upon the ability of the Combined Company to manage its expansion opportunities and operational changes, which pose substantial challenges for the Combined Company to execute in an efficient and timely manner, to successfully monitor its operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls. No assurance can be given that the Combined Company’s expansion, acquisition, disposition, or operational opportunities will be successful, or that it will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies, or other benefits.
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The trading price of shares of the Combined Company common stock following the Mergers may be affected by factors different from those affecting the price of shares of our common stock before the Mergers.
The results of operations of the Combined Company, as well as the trading price of the Combined Company common stock, after the Mergers may be affected by factors different from those currently affecting our results of operations or the trading prices of our common stock. These different factors include:
•a greater number of shares of the Combined Company common stock outstanding, as compared to the number of shares of our common stock currently outstanding;
•different stockholders in the Combined Company;
•the Combined Company managing a different portfolio of assets, including owning new assets and/or a different mix or concentration of assets; and
•the Combined Company’s combined debt profile and capitalization.
Accordingly, the historical trading prices and financial results of the Company and Physicians Realty Trust may not be indicative of these matters for the Combined Company after the Mergers.
Counterparties to certain significant agreements with Physicians Realty Trust may exercise contractual rights under such agreements in connection with the Mergers, including in certain cases the right to acquire properties owned by Physicians Realty Trust.
Physicians Realty Trust is party to certain agreements that give the counterparty certain rights following a change of control or similar event, including in some cases the right to terminate the agreement. Under some such agreements, the Mergers may constitute a change of control or cause certain other triggering events and therefore the counterparty may exercise certain rights under its agreement with Physicians Realty Trust upon the closing of the Mergers, which may include termination rights, consent or notice obligations, fees or penalties, pre-payment obligations, and/or rights of first refusal, or similar arrangements pursuant to debt arrangements, leases, management and servicing contracts, and other arrangements. Specifically, Physicians Realty Trust is party to certain ground leases with certain hospitals, health systems or other ground lessors, whereby such hospitals, health systems or other ground lessors could exercise purchase rights and rights of first offer and first refusal with respect to sales of the property subject to such ground leases. Any such counterparty may request modifications of its agreement as a condition to granting a waiver or consent under its agreement, it may exercise or seek to exercise its rights triggered by such event, including to terminate or seek to terminate its agreement with Physicians Realty Trust as a result of such change of control (if permitted to do so by the applicable agreement). There is no assurance that such counterparties will grant their consent to the Mergers under such agreements, that such counterparties will elect not to exercise their rights under such agreements, including termination rights where available, that the exercise of any such rights will not result in a material adverse effect, or that any modifications of such agreements will not result in a material adverse effect.
The Combined Company’s anticipated level of indebtedness will increase upon completion of the Mergers and may increase the related risks Healthpeak currently faces.
Upon completion of the Mergers, the Combined Company intends to assume and/or refinance certain indebtedness of Physicians Realty Trust and the Physicians Partnership and, assuming that occurs, the Combined Company’s consolidated indebtedness will increase substantially and it will be subject to increased risks associated with debt financing, including an increased risk that the Combined Company’s cash flow could be insufficient to meet required payments on its debt securities or other indebtedness or to pay dividends on its common stock or any preferred stock it may issue.
The Combined Company’s increased indebtedness could have important consequences to holders of its common stock and its debt securities including:
•increasing the Combined Company’s vulnerability to general adverse economic and industry conditions;
•limiting the Combined Company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;
•requiring the use of a substantial portion of the Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures, and general corporate requirements;
•limiting the Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry; and
•putting the Combined Company at a disadvantage compared to its competitors with less indebtedness.
If the Combined Company defaults under a debt instrument, it will be in default under any other debt instrument that has cross-default provisions, the holders of all such indebtedness may be entitled to demand its immediate repayment and, in the case of secured indebtedness, the Combined Company may lose any property securing that indebtedness.
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Risks Relating to the Status of Physicians Realty Trust as a REIT
We may incur adverse tax consequences if Physicians Realty Trust has failed to qualify as a REIT for U.S. federal income tax purposes.
The closing of the Mergers is conditioned on the receipt by the Company of an opinion of Physicians Realty Trust’s counsel to the effect that, commencing with Physicians Realty Trust’s taxable year ended December 31, 2015 and through the Company Merger Effective Time, Physicians Realty Trust has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code. The foregoing REIT opinion, however, is limited to the factual representations provided by Physicians Realty Trust to its counsel and the assumptions set forth therein, and is not a guarantee that Physicians Realty Trust has, in fact, qualified as a REIT. Moreover, such opinion is not binding on the IRS, and neither the Company nor Physicians Realty Trust has requested or plans to request a ruling from the IRS that Physicians Realty Trust qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable regulations (as in effect from time to time) of the U.S. Department of the Treasury under the Code is greater in the case of a REIT, like Physicians Realty Trust, that holds assets through a partnership.
If Physicians Realty Trust is determined to have lost its REIT status for a taxable year ending on or before the Company Merger, Physicians Realty Trust would be subject to adverse tax consequences similar to those described above in “Risks Related to Tax, Including REIT-Related Risks, and Related to Our Jurisdiction of Incorporation and Our Structure as an UPREIT—Loss of our tax status as a REIT would substantially reduce our available funds and would have materially adverse consequences for us and the value of our common stock” with respect to the failure of the Company to maintain its REIT status. This could substantially reduce the Combined Company’s cash available for distribution, including cash available to pay dividends to its stockholders, because, assuming that the Combined Company otherwise maintains its REIT qualification:
•the Combined Company generally would be subject to corporate level federal income tax with respect to the built-in gain on each asset of Physicians Realty Trust existing at the time of the Company Merger if the Combined Company were to dispose of Physicians Realty Trust assets during the five-year period following the Company Merger, and may also be subject to corporate level state income tax on such built-in gains if the assets are disposed of during the applicable period prescribed by state law;
•the Combined Company would succeed to any earnings and profits accumulated by Physicians Realty Trust for taxable periods that it did not qualify as a REIT, and the Combined Company would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits (or if the Combined Company does not timely distribute those earnings and profits, the Combined Company could fail to qualify as a REIT); and
•if Physicians Realty Trust incurred any unpaid tax liabilities prior to the Company Merger, those tax liabilities would be transferred to the Combined Company as a result of the Company Merger.
If there is an adjustment to Physicians Realty Trust’s taxable income or dividends paid deductions, the Combined Company could elect to use the deficiency dividend procedure in order to maintain Physicians Realty Trust’s REIT status. That deficiency dividend procedure could require the Combined Company to make significant distributions to its stockholders and to pay significant interest to the IRS.
As a result of all these factors, Physicians Realty Trust’s failure to qualify as a REIT could impair the Combined Company’s ability to expand its business and raise capital, and would materially adversely affect the value of its capital stock.
Risks Relating to an Investment in the Combined Company’s Common Stock following the Mergers and the Transactions Contemplated by the Merger Agreement
The market price of shares of the Combined Company common stock may decline as a result of the Mergers and the transactions contemplated by the Merger Agreement.
The market price of shares of the Combined Company common stock may decline as a result of the Mergers and the transactions contemplated by the Merger Agreement if, among other things, the Combined Company does not achieve the perceived benefits of the Mergers as rapidly or to the extent anticipated by financial or industry analysts, or the effect of the Mergers on the Combined Company’s results of operations or financial condition is not consistent with the expectations of financial or industry analysts or stockholders more generally.
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In addition, upon consummation of the Mergers and the transactions contemplated by the Merger Agreement, Company stockholders and Physicians Realty Trust shareholders will own interests in the Combined Company, which will operate an expanded business with a different mix of properties, risks and liabilities. Current stockholders of the Company and shareholders of Physicians Realty Trust may not wish to continue to invest in income-producing healthcare-related facilities.the Combined Company, or may wish to dispose of some or all of their shares of the Combined Company common stock. If, following the Company Merger Effective Time or while the Mergers are pending, large amounts of the Combined Company common stock or Company common stock, as applicable, are sold, the market price of the Combined Company common stock or Company common stock, as applicable, could decline, perhaps substantially.
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ITEM 1B. Unresolved Staff Comments
None.
ITEM 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
In our business operations, we use information technology, enterprise applications, communications tools, cloud network solutions, and related systems to manage our operations, including to manage our building systems, tenant and vendor relationships, accounting and recordkeeping, and communications, among other aspects of our business.
We have developed and implemented a cybersecurity risk management program intended to protect our properties, confidential and proprietary data, and information technology and systems, from cybersecurity threats, including unauthorized access or attack. We leverage the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework as a guide to help us identify, assess, and manage cybersecurity risks relevant to the business. This does not imply that we meet any particular technical standards, specifications, or requirements.
Our processes for assessing, identifying, and managing risks from cybersecurity threats, including operational risks, financial reporting risks, reputational risks, personal data theft, fraud, and other potential risks, are integrated into our overall enterprise risk management process, and share common methodologies, reporting channels, and governance processes that apply across the enterprise risk management process to other legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes the following:
•a multidisciplinary team comprised of personnel from information technology (“IT”), internal audit, accounting, and legal, as well as third-party cybersecurity experts principally responsible for directing (i) our cybersecurity risk assessment processes, (ii) our security processes, and (iii) our response to cybersecurity incidents;
•risk assessments designed to help identify material cybersecurity risks to our critical systems, information, services, and our broader enterprise IT environment;
•internal and third-party security tools to monitor our systems, identify cybersecurity risks, and test our IT environment;
•the use of third-party cybersecurity experts, where appropriate, to assess, test or otherwise assist with aspects of our security processes;
•a cybersecurity incident response plan and business continuity plan;
•cybersecurity training for employees and key business partners with access to our systems;
•a third-party cybersecurity risk management process for service providers and vendors who access our systems;
•requiring employees, as well as third parties who have access to our systems, to treat confidential and private information and data with care, including performing controls relating to such data; and
•cybersecurity risk insurance.
We also seek to engage reputable service providers that maintain cybersecurity programs or controls.
We have not identified risks from known cybersecurity threats within the prior fiscal year, including as a result of any prior cybersecurity incident, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. Please refer to “Item 1A, Risk Factors” in this report for additional information about certain ongoing risks related to our information technology that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Cybersecurity Governance
Cybersecurity is an important part of our overall risk management processes and an area of focus for our Board of Directors and management.
The Board, in coordination with the Audit Committee, oversees the Company’s enterprise risk management process, including the management of material risks arising from cybersecurity threats. The Audit Committee regularly receives updates from management and third-party cybersecurity experts about major cybersecurity risks, their potential impact on our business operations, and management’s processes to identify, monitor, and mitigate such risks, including, as relevant, the results of assessments or audits of our processes. The Audit Committee periodically provides updates on these matters to the Board of Directors.
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Our enterprise risk team consists of cross-functional professionals who collaborate with subject matter specialists, as necessary, including an independent third-party expert we have retained to functionally serve as a virtual chief information security officer (“CISO”), to identify and assess material risks from cybersecurity threats, their severity, and potential mitigation steps. The CISO is primarily responsible for leading our cybersecurity risk assessment and management processes. This expert has experience having served as the chief information security officer for an international commercial real estate services company and currently serves as chief executive officer of a cybersecurity firm focused on commercial real estate. He is supported by an internal cross-functional management team of IT and internal audit personnel who regularly review and assess cybersecurity initiatives, including our incident response plan, as well as cybersecurity compliance, training and risk management efforts.
ITEM 2. Properties
Our strategy is to invest in and manage real estate focused on healthcare discovery and delivery. In evaluating potential investments, we consider a multitude of factors, including:
•location, construction quality, age, condition, and design of the property;
•geographic area, proximity to other healthcare facilities, type of property, and demographic profile, including new competitive supply;
•whether the expected risk-adjusted return exceeds the incremental cost of capital;
•whether the rent or operating income provides a competitive market return to our investors;
•duration, rental rates, tenant and operator quality, and other attributes of in-place leases, including master lease structures and coverage;
•current and anticipated cash flow and its adequacy to meet our operational needs;
•availability of security such as letters of credit, security deposits, and guarantees;
•potential for capital appreciation;
•expertise and reputation of the tenant or operator;
•occupancy and demand for similar healthcare facilities in the same or nearby communities;
•availability of qualified operators or property managers and whether we can manage the property;
•potential for environmentally sustainable and/or resilient features of the property;
•potential alternative uses of the facilities;
•the regulatory and reimbursement environment in which the properties operate;
•tax laws related to REITs;
•prospects for liquidity through financing or refinancing; and
•our access to and cost of capital.
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Properties
The following table summarizes our consolidated property and direct financing leases ("DFL") investments as of and for the year ended December 31, 20172023 (square feet and dollars in thousands):
| Facility Location | Number of Facilities | Capacity(1) | Gross Asset Value(2) | Real Estate Revenues(3) | Operating Expenses(4) | |||||||||||||||||||||||||||
| Lab: | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| California | 115 | 8,094 | $ | 5,869,665 | $ | 629,657 | $ | (157,795) | ||||||||||||||||||||||||
| Massachusetts | 19 | 2,613 | 2,795,913 | 240,029 | (70,259) | |||||||||||||||||||||||||||
| Other (1 State) | 4 | 240 | 54,236 | 8,640 | (1,576) | |||||||||||||||||||||||||||
| Total lab | 138 | 10,947 | $ | 8,719,814 | $ | 878,326 | $ | (229,630) | ||||||||||||||||||||||||
| Outpatient medical: | (Sq. Ft.) | |||||||||||||||||||||||||||||||
| Texas | 75 | 7,638 | $ | 1,549,757 | $ | 220,805 | $ | (75,159) | ||||||||||||||||||||||||
| Pennsylvania | 4 | 1,270 | 367,434 | 34,321 | (15,603) | |||||||||||||||||||||||||||
| Colorado | 19 | 1,311 | 362,822 | 47,697 | (18,366) | |||||||||||||||||||||||||||
| California | 15 | 862 | 355,026 | 40,057 | (17,206) | |||||||||||||||||||||||||||
| South Carolina | 18 | 1,105 | 340,073 | 27,851 | (5,315) | |||||||||||||||||||||||||||
| Florida | 25 | 1,438 | 309,246 | 41,609 | (14,994) | |||||||||||||||||||||||||||
| Other (29 States) | 139 | 9,977 | 2,586,334 | 341,139 | (116,489) | |||||||||||||||||||||||||||
| Total outpatient medical | 295 | 23,601 | $ | 5,870,692 | $ | 753,479 | $ | (263,132) | ||||||||||||||||||||||||
| CCRC: | (Units) | |||||||||||||||||||||||||||||||
| Florida | 9 | 4,783 | $ | 1,398,609 | $ | 343,971 | $ | (275,781) | ||||||||||||||||||||||||
| Other (5 States) | 6 | 2,314 | 631,199 | 183,630 | (137,691) | |||||||||||||||||||||||||||
| Total CCRC | 15 | 7,097 | $ | 2,029,808 | $ | 527,601 | $ | (413,472) | ||||||||||||||||||||||||
| Total properties | 448 | $ | 16,620,314 | $ | 2,159,406 | $ | (906,234) | |||||||||||||||||||||||||
| Facility Location | Number of Facilities | Capacity | Gross Asset Value(1) | Rental Revenues(2) | Operating Expenses | |||||||||||||
| Senior housing triple-net—real estate: | (Units) | |||||||||||||||||
| California | 17 | 1,727 | $ | 416,949 | $ | 53,589 | $ | (3,139 | ) | |||||||||
| Virginia | 10 | 1,227 | 273,045 | 20,409 | — | |||||||||||||
| Florida | 13 | 1,683 | 258,538 | 25,691 | — | |||||||||||||
| Texas | 16 | 1,762 | 218,137 | 5,058 | — | |||||||||||||
| Washington | 14 | 953 | 190,674 | 16,361 | — | |||||||||||||
| Oregon | 13 | 1,118 | 162,628 | 17,082 | (243 | ) | ||||||||||||
| New Jersey | 7 | 680 | 144,574 | 100 | 3 | |||||||||||||
| Other (25 States) | 64 | 6,063 | 1,082,775 | 138,144 | (392 | ) | ||||||||||||
| 154 | 15,213 | 2,747,320 | 276,434 | (3,771 | ) | |||||||||||||
Senior housing—DFLs(3): | ||||||||||||||||||
| Other (12 States) | 27 | 3,118 | 629,748 | 37,113 | (48 | ) | ||||||||||||
| Total Senior Housing Triple-Net | 181 | 18,331 | $ | 3,377,068 | $ | 313,547 | $ | (3,819 | ) | |||||||||
| SHOP: | (Units) | |||||||||||||||||
| Texas | 21 | 3,640 | $ | 518,021 | $ | 135,763 | $ | (98,929 | ) | |||||||||
| Florida | 23 | 3,234 | 436,429 | 135,751 | (108,063 | ) | ||||||||||||
| Colorado | 6 | 952 | 203,717 | 46,755 | (27,042 | ) | ||||||||||||
| Illinois | 5 | 1,063 | 203,644 | 42,126 | (32,189 | ) | ||||||||||||
| Maryland | 6 | 590 | 176,702 | 33,292 | (24,341 | ) | ||||||||||||
| Other (16 States) | 41 | 4,265 | 680,298 | 131,786 | (105,927 | ) | ||||||||||||
| Total SHOP | 102 | 13,744 | $ | 2,218,811 | $ | 525,473 | $ | (396,491 | ) | |||||||||
(3)Represents the combined amount of rental and related revenues, resident fees and services, and government grant income.
(4)Excludes operating expenses related to corporate non-segment assets (see Note 15 to the Consolidated Financial Statements).
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| Facility Location | Number of Facilities | Capacity | Gross Asset Value(1) | Rental Revenues(2) | Operating Expenses | |||||||||||||
| Life science: | (Sq. Ft.) | |||||||||||||||||
| California | 121 | 6,818 | $ | 3,618,619 | $ | 338,668 | $ | (74,066 | ) | |||||||||
| Other (3 States) | 10 | 909 | 359,157 | 20,148 | (3,935 | ) | ||||||||||||
| Total life science | 131 | 7,727 | $ | 3,977,776 | $ | 358,816 | $ | (78,001 | ) | |||||||||
| Medical office: | (Sq. Ft.) | |||||||||||||||||
| Texas | 67 | 5,867 | $ | 1,078,259 | $ | 135,349 | $ | (55,733 | ) | |||||||||
| California | 18 | 1,031 | 324,021 | 35,418 | (18,532 | ) | ||||||||||||
| Pennsylvania | 4 | 1,059 | 309,085 | 31,326 | (12,523 | ) | ||||||||||||
| Florida | 23 | 1,329 | 235,550 | 31,227 | (12,317 | ) | ||||||||||||
| Other (29 States) | 142 | 9,169 | 1,783,694 | 244,139 | (84,092 | ) | ||||||||||||
| Total medical office | 254 | 18,455 | $ | 3,730,609 | $ | 477,459 | $ | (183,197 | ) | |||||||||
Other(4): | (Beds) | |||||||||||||||||
| Texas | 4 | 1,035 | $ | 231,645 | $ | 35,650 | $ | (4,489 | ) | |||||||||
| California | 2 | 111 | 143,500 | 19,350 | (172 | ) | ||||||||||||
| Other (7 States) | 8 | 988 | 154,558 | 28,813 | (82 | ) | ||||||||||||
| 14 | 2,134 | $ | 529,703 | $ | 83,813 | $ | (4,743 | ) | ||||||||||
| Other—U.K.: | (Units) | |||||||||||||||||
| Other (U.K.) | 61 | 3,183 | 337,179 | 31,798 | — | |||||||||||||
| Other—Post-acute/skilled nursing.: | (Beds) | |||||||||||||||||
| Virginia | 1 | 120 | 16,596 | 1,235 | — | |||||||||||||
| Total other non-reportable segments | 76 | $ | 883,478 | $ | 116,846 | $ | (4,743 | ) | ||||||||||
| Total properties | 744 | $ | 14,187,742 | $ | 1,792,141 | $ | (666,251 | ) | ||||||||||
Occupancy and Annual Rent Trends
The following table summarizes occupancy and average annual rent trends for our consolidated property and DFL investments held under a direct financing lease (“DFL”) for the years ended December 31 (average occupied square feet in thousands). Average annual rent is presented:
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| Lab: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 98 | % | 98 | % | 97 | % | |||||||||||||||||||||||
Average annual rent per square foot(1) | $ | 82 | $ | 71 | $ | 66 | |||||||||||||||||||||||
| Average occupied square feet | 10,334 | 10,610 | 10,143 | ||||||||||||||||||||||||||
Outpatient medical(2): | |||||||||||||||||||||||||||||
| Average occupancy percentage | 90 | % | 90 | % | 90 | % | |||||||||||||||||||||||
Average annual rent per square foot(1) | $ | 35 | $ | 33 | $ | 31 | |||||||||||||||||||||||
| Average occupied square feet | 21,337 | 21,472 | 21,046 | ||||||||||||||||||||||||||
| CCRC: | |||||||||||||||||||||||||||||
| Average occupancy percentage | 84 | % | 82 | % | 79 | % | |||||||||||||||||||||||
Average annual rent per occupied unit(3) | $ | 88,524 | $ | 84,664 | $ | 80,391 | |||||||||||||||||||||||
| Average occupied units | 5,960 | 5,926 | 5,881 | ||||||||||||||||||||||||||
(1)Presented as a ratio of revenues comprised of rental and related revenues tenant recoveries and income from DFLs divided by the average capacity or average occupied square feet of the facilities and annualized for mergers and acquisitions for the year in which they occurred. Average annual rent for leased properties (including DFLs) excludes termination fees and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and DFL non-cash interest).
(2)During the first quarter of 2022, we sold our remaining hospital under a DFL.
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Senior Housing Triple-Net: | |||||||||||||||||||
| Average annual rent per unit | $ | 15,352 | $ | 14,604 | $ | 14,544 | $ | 13,907 | $ | 13,361 | |||||||||
| Average capacity (available units) | 21,536 | 28,455 | 28,777 | 33,917 | 35,932 | ||||||||||||||
| SHOP: | |||||||||||||||||||
| Average annual rent per unit | $ | 41,133 | $ | 42,851 | $ | 41,435 | $ | 38,017 | $ | 32,070 | |||||||||
| Average capacity (available units) | 12,758 | 16,028 | 12,704 | 6,408 | 4,620 | ||||||||||||||
| Life science: | |||||||||||||||||||
| Average occupancy percentage | 96 | % | 98 | % | 97 | % | 93 | % | 92 | % | |||||||||
| Average annual rent per square foot | $ | 52 | $ | 48 | $ | 46 | $ | 46 | $ | 44 | |||||||||
| Average occupied square feet | 6,841 | 7,332 | 7,179 | 6,637 | 6,480 | ||||||||||||||
| Medical office: | |||||||||||||||||||
| Average occupancy percentage | 92 | % | 91 | % | 91 | % | 91 | % | 91 | % | |||||||||
| Average annual rent per square foot | $ | 28 | $ | 28 | $ | 28 | $ | 28 | $ | 27 | |||||||||
| Average occupied square feet | 16,674 | 15,697 | 14,677 | 13,136 | 12,767 | ||||||||||||||
| Other non-reportable segments: | |||||||||||||||||||
| Average annual rent per bed - Hospital | $ | 38,017 | $ | 39,076 | $ | 39,834 | $ | 38,756 | $ | 38,089 | |||||||||
| Average capacity (available beds) - Hospital | 2,161 | 2,271 | 2,187 | 2,184 | 2,138 | ||||||||||||||
| Average annual rent per unit - U.K. | 9,097 | 9,200 | 10,048 | 11,240 | — | ||||||||||||||
| Average capacity (available units) - U.K. | 3,188 | 3,190 | 2,515 | 501 | — | ||||||||||||||
| Average annual rent per bed - SNF | 10,298 | 10,803 | 8,292 | 8,062 | 7,537 | ||||||||||||||
| Average capacity (available beds) - SNF | 120 | 426 | 1,047 | 1,022 | 974 | ||||||||||||||
(3)Presented as a ratio of revenues comprised of resident fees and services and government grant income divided by average occupied units of the facilities. Average annual rent excludes termination fees and non-cash revenue adjustments (i.e., the impact of deferred community fee income).
Tenant Lease Expirations
The following table shows tenant lease expirations including those related to DFLs, for the next 10 years and thereafter at our consolidated properties, assuming that none of the tenants exercise any of their renewal or purchase options, unless otherwise noted belowand excludes properties in our CCRC segment and assets held for sale as of December 31, 2023 (dollars and square feet in thousands):
| Expiration Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Total | 2024(1) | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | Thereafter | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lab: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 10,303 | 537 | 1,065 | 618 | 1,407 | 681 | 806 | 1,334 | 1,393 | 866 | 531 | 1,065 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 608,770 | $ | 36,709 | $ | 50,557 | $ | 30,694 | $ | 66,918 | $ | 36,728 | $ | 50,104 | $ | 94,051 | $ | 84,727 | $ | 55,504 | $ | 36,642 | $ | 66,136 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 6 | 8 | 5 | 11 | 6 | 8 | 16 | 14 | 9 | 6 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outpatient medical: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 21,414 | 2,848 | 2,830 | 2,049 | 1,870 | 2,539 | 1,419 | 1,310 | 1,637 | 1,357 | 918 | 2,637 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 546,589 | $ | 85,359 | $ | 68,994 | $ | 57,376 | $ | 51,438 | $ | 56,996 | $ | 38,197 | $ | 36,069 | $ | 40,803 | $ | 28,096 | $ | 27,376 | $ | 55,885 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of segment base rent | 100 | 16 | 13 | 11 | 9 | 10 | 7 | 7 | 7 | 5 | 5 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 1,155,359 | $ | 122,068 | $ | 119,551 | $ | 88,070 | $ | 118,356 | $ | 93,724 | $ | 88,301 | $ | 130,120 | $ | 125,530 | $ | 83,600 | $ | 64,018 | $ | 122,021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| % of total base rent | 100 | 11 | 10 | 8 | 10 | 8 | 8 | 11 | 11 | 7 | 5 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Includes month-to-month leases.
(2)The most recent month’s (or subsequent month’s, if acquired in the most recent month) base rent, including additional rent floors, annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and excludes properties in our SHOP segment and assets held for sale. See “Tenant Purchase Options” section of Note 11 to the Consolidated Financial Statements for additional information on leases subject to purchase options.deferred revenues).
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| Expiration Year | ||||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Total | 2018(1) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | ||||||||||||||||||||||||||||||||||||
| Senior housing triple-net: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Properties | 179 | 5 | 2 | 22 | 6 | 1 | 24 | 11 | 5 | 7 | 4 | 92 | ||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 304,452 | $ | 6,191 | $ | 2,238 | $ | 39,646 | $ | 10,191 | $ | 1,513 | $ | 44,926 | $ | 18,052 | $ | 9,618 | $ | 5,746 | $ | 12,090 | $ | 154,241 | ||||||||||||||||||||||||
| % of segment base rent | 100 | 2 | 1 | 13 | 3 | — | 15 | 6 | 3 | 2 | 4 | 51 | ||||||||||||||||||||||||||||||||||||
Life science: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 6,900 | 457 | 832 | 556 | 948 | 631 | 1,035 | 83 | 845 | 203 | 373 | 937 | ||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 291,683 | $ | 15,081 | $ | 31,693 | $ | 19,598 | $ | 50,307 | $ | 22,656 | $ | 60,929 | $ | 4,618 | $ | 34,653 | $ | 8,991 | $ | 15,328 | $ | 27,829 | ||||||||||||||||||||||||
| % of segment base rent | 100 | 5 | 11 | 7 | 17 | 8 | 21 | 2 | 12 | 3 | 5 | 9 | ||||||||||||||||||||||||||||||||||||
| Medical office: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Square feet | 16,945 | 2,939 | 2,172 | 2,280 | 1,548 | 1,670 | 719 | 809 | 1,926 | 758 | 722 | 1,402 | ||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 389,497 | $ | 70,049 | $ | 53,422 | $ | 58,461 | $ | 39,115 | $ | 41,392 | $ | 17,213 | $ | 21,240 | $ | 31,625 | $ | 18,541 | $ | 14,387 | $ | 24,052 | ||||||||||||||||||||||||
| % of segment base rent | 100 | 18 | 14 | 15 | 10 | 11 | 4 | 5 | 8 | 5 | 4 | 6 | ||||||||||||||||||||||||||||||||||||
Other non-reportable segments: | ||||||||||||||||||||||||||||||||||||||||||||||||
| Properties | 76 | — | 5 | 1 | 1 | 4 | — | 2 | 1 | — | — | 62 | ||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 105,051 | $ | — | $ | 7,594 | $ | 7,977 | $ | 1,572 | $ | 13,179 | $ | — | $ | 15,375 | $ | 20,619 | $ | — | $ | — | $ | 38,735 | ||||||||||||||||||||||||
| % of segment base rent | 100 | — | 7 | 8 | 1 | 13 | — | 15 | 20 | — | — | 36 | ||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||
Base rent(2) | $ | 1,090,683 | $ | 91,321 | $ | 94,947 | $ | 125,682 | $ | 101,185 | $ | 78,740 | $ | 123,068 | $ | 59,285 | $ | 96,515 | $ | 33,278 | $ | 41,805 | $ | 244,857 | ||||||||||||||||||||||||
| % of total base rent | 100 | 8 | 9 | 12 | 9 | 7 | 11 | 5 | 9 | 3 | 4 | 23 | ||||||||||||||||||||||||||||||||||||
ITEM 3. Legal Proceedings
See Schedule III: Real Estate and Accumulated Depreciation, included in this report, which information is incorporated by reference in this Item 2.
ITEM 4. Mine Safety Disclosures
None.
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PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange ("NYSE"). under the symbol “PEAK.”
As of February 5, 2024, we had6,797stockholders of record, and there were 283,417 beneficial holders of our common stock.
Dividends (Distributions)
It has been our policy to declare quarterly dividends to common stockholders so as to comply with applicable provisions of the Code governing REITs. ForAll distributions are made at the fiscal quarters indicated below are the reported high and low sales prices per sharediscretion of our common stock on the NYSE and the cash dividends paid per common share:
| High | Low | Per Share Distribution | |||||||||
| 2017 | |||||||||||
| Fourth Quarter | $ | 27.62 | $ | 25.09 | $ | 0.370 | |||||
| Third Quarter | 32.65 | 27.47 | 0.370 | ||||||||
| Second Quarter | 33.67 | 29.55 | 0.370 | ||||||||
| First Quarter | 32.97 | 29.36 | 0.370 | ||||||||
2016(1) | |||||||||||
| Fourth Quarter | $ | 38.09 | $ | 27.61 | $ | 0.370 | |||||
| Third Quarter | 40.43 | 34.56 | 0.575 | ||||||||
| Second Quarter | 36.90 | 31.91 | 0.575 | ||||||||
| First Quarter | 39.25 | 25.11 | 0.575 | ||||||||
Directors in accordance with Maryland law. Distributions with respect to our common stock can be characterized for federal income tax purposes as taxable ordinary dividends, capital gain dividends,gains, nondividend distributions, or a combination thereof. Following isThe following table shows the characterization of our annual common stock distributions per share:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
Ordinary dividends(1) | $ | 0.909692 | $ | 0.872948 | $ | 0.152336 | |||||||||||
Capital gains(2)(3) | 0.116992 | 0.183208 | 0.379960 | ||||||||||||||
| Nondividend distributions | 0.173316 | 0.143844 | 0.667704 | ||||||||||||||
| $ | 1.200000 | $ | 1.200000 | $ | 1.200000 | ||||||||||||
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Ordinary dividends | $ | 1.4800 | $ | 1.5561 | $ | 2.1184 | |||||
| Capital gain dividends | — | — | 0.0316 | ||||||||
| Nondividend distributions | — | 6.7089 | 0.1100 | ||||||||
| $ | 1.4800 | $ | 8.2650 | (1) | $ | 2.2600 | |||||
(2)For the years ended December 31, 2023, 2022, and 2021, the amount includes $0.036256, $0.017760, and $0.379960, respectively, of unrecaptured Code Section 1250 gain. Pursuant to Treasury Regulation Section 1.1061-6(c), received uponwe are disclosing additional information related to the Spin-Off on October 31, 2016 one sharecapital gain dividends for purposes of QCP common stock for every five shares of HCP common stock they held (the “Distributed Shares”) and cash in lieu of fractional shares of QCP. For U.S. federal income tax purposes, HCP reported the fair market valueSection 1061 of the QCP common stock distributed perCode. Code Section 1061 is generally applicable to direct and indirect holders of “applicable partnership interests.” For the year ended December 31, 2023, the “One Year Amounts” and “Three Year Amounts” are each sharezero, since all capital gains relate to Code Section 1231 gains. For the year ended December 31, 2022, the “One Year Amounts” and “Three Year Amounts” are each 89.6708% of HCP common stock outstanding on the Record Date was $6.17, or $30.85total capital gain distributions and the remaining capital gain distributions are attributable to Code Section 1231 gains, which are not subject to Code Section 1061. For the year ended December 31, 2021, the “One Year Amounts” and “Three Year Amounts” are each zero, since all capital gains relate to Code Section 1231 gains.
(3)For the years ended December 31, 2023, 2022, and 2021, 100%, 10.3292%, and 100%, respectively, of the capital gain distributions represent gains from dispositions of U.S. real property interests pursuant to Code Section 897 for each share of QCP common stock. Accordingly, every HCP common stockholder who received a Distributed Share has a tax cost basis of $30.85 per Distributed Share.foreign shareholders.
On February 1, 2018,January 31, 2024, we announced that our Board of Directors declared a quarterly common stock cash dividend of $0.37$0.30 per share. The common stock dividend will be paid on March 2, 2018February 26, 2024 to stockholders of record as of the close of business on February 15, 2018.14, 2024.
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Issuer Purchases of Equity Securities
The following table below sets forth the information with respect to purchases of our common stock made by or on our behalf during the quarterthree months ended December 31, 2017.2023.
| Period Covered | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs | |||||||||
| October 1-31, 2017 | 12,220 | $ | 25.37 | — | — | ||||||||
| November 1-30, 2017 | — | — | — | — | |||||||||
| December 1-31, 2017 | 590 | 26.10 | — | — | |||||||||
| Total | 12,810 | $ | 25.41 | — | — | ||||||||
| Period Covered | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs(1) | ||||||||||||||||||||||
| — | $ | — | — | $ | 444,018,701 | |||||||||||||||||||||
| November 1-30, 2023 | — | — | — | 444,018,701 | ||||||||||||||||||||||
| December 1-31, 2023 | — | — | — | 444,018,701 | ||||||||||||||||||||||
| — | $ | — | — | $ | 444,018,701 | |||||||||||||||||||||
(1)On August 1, 2022, our Board of Directors approved a share repurchase program under which we may acquire shares of our common stock in the open market up to an aggregate purchase price of $500 million (the “Share Repurchase Program”). Purchases of common stock under the Share Repurchase Program may be exercised at our discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements, and other corporate liquidity requirements and priorities. The Share Repurchase Program expires in August 2024 and may be suspended or terminated at any time without prior notice. During the year ended December 31, 2022, we repurchased 2.1 million shares of our common stock at a weighted average price of $27.16 per share. During the year ended December 31, 2023, there were no repurchases; therefore, at December 31, 2023, $444 millionof our common stock remained available for repurchase under the Share Repurchase Program. Amounts do not include the shares of our common stock withheld under our equity incentive plans to offset tax withholding obligations as discussed in footnote 1.
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Performance Graph
The graph and table below compare the cumulative total return of HCP,Healthpeak, the S&P 500 Index, and the Equity REIT Index of NAREIT,Nareit, from January 1, 20132019 to December 31, 2017.2023. Total cumulative return is based on a $100 investment in HCPHealthpeak common stock and in each of the indices at the close of trading on December 31, 20122018 and assumes quarterly reinvestment of dividends before consideration of income taxes. Stockholder returns over the indicated periods should not be considered indicative of future stock prices or stockholder returns.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG S&P 500, EQUITY REITS AND HCP,HEALTHPEAK PROPERTIES, INC.
RATE OF RETURN TREND COMPARISON
JANUARY 1, 2013–2019–DECEMBER 31, 20172023
(JANUARY 1, 20132019 = $100)
Performance Graph Total Stockholder Return
| December 31, | |||||||||||||||||||||||||||||
| 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||||||||
| FTSE Nareit Equity REIT Index | $ | 128.66 | $ | 122.07 | $ | 172.49 | $ | 129.45 | $ | 144.16 | |||||||||||||||||||
| S&P 500 | 131.47 | 155.65 | 200.29 | 163.98 | 207.04 | ||||||||||||||||||||||||
| Healthpeak Properties, Inc. | 129.11 | 119.21 | 147.52 | 106.94 | 89.40 | ||||||||||||||||||||||||
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| December 31, | |||||||||||||||||||
| 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||||||
| FTSE NAREIT Equity REIT Index | $ | 102.88 | $ | 131.68 | $ | 135.42 | $ | 147.35 | $ | 160.11 | |||||||||
| S&P 500 | 132.36 | 150.43 | 152.51 | 170.70 | 207.92 | ||||||||||||||
| HCP, Inc. | 84.35 | 107.66 | 99.15 | 90.20 | 83.15 | ||||||||||||||
Contents
| Year Ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Statement of operations data: | |||||||||||||||||||
| Total revenues | $ | 1,848,378 | $ | 2,129,294 | $ | 1,940,489 | $ | 1,636,833 | $ | 1,488,786 | |||||||||
| Income (loss) from continuing operations | 422,634 | 374,171 | 152,668 | 271,315 | 253,526 | ||||||||||||||
| Net income (loss) applicable to common shares | 413,013 | 626,549 | (560,552 | ) | 919,796 | 969,103 | |||||||||||||
| Basic earnings per common share | |||||||||||||||||||
| Continuing operations | 0.88 | 0.77 | 0.30 | 0.56 | 0.52 | ||||||||||||||
| Discontinued operations | — | 0.57 | (1.51 | ) | 1.45 | 1.61 | |||||||||||||
| Net income (loss) attributable to common stockholders | 0.88 | 1.34 | (1.21 | ) | 2.01 | 2.13 | |||||||||||||
| Diluted earnings per common share | |||||||||||||||||||
| Continuing operations | 0.88 | 0.77 | 0.30 | 0.56 | 0.52 | ||||||||||||||
| Discontinued operations | — | 0.57 | (1.51 | ) | 1.44 | 1.61 | |||||||||||||
| Net income (loss) attributable to common stockholders | 0.88 | 1.34 | (1.21 | ) | 2.00 | 2.13 | |||||||||||||
| Balance sheet data: | |||||||||||||||||||
| Total assets | 14,088,461 | 15,759,265 | 21,449,849 | 21,331,436 | 20,040,310 | ||||||||||||||
Debt obligations(1) | 7,880,466 | 9,189,495 | 11,069,003 | 9,721,269 | 8,626,067 | ||||||||||||||
| Total equity | 5,594,938 | 5,941,308 | 9,746,317 | 10,997,099 | 10,931,134 | ||||||||||||||
| Other data: | |||||||||||||||||||
| Dividends paid | 694,955 | 979,542 | 1,046,638 | 1,001,559 | 956,685 | ||||||||||||||
Dividends paid per common share(2) | 1.480 | 2.095 | 2.260 | 2.180 | 2.100 | ||||||||||||||
Funds from operations (“FFO”)(3) | 661,113 | 1,119,153 | (10,841 | ) | 1,381,634 | 1,349,264 | |||||||||||||
Diluted FFO per common share(3) | 1.41 | 2.39 | (0.02 | ) | 3.00 | 2.95 | |||||||||||||
FFO as adjusted(3) | 918,402 | 1,282,390 | 1,470,167 | 1,398,691 | 1,382,699 | ||||||||||||||
Diluted FFO as adjusted per common share(3) | 1.95 | 2.74 | 3.16 | 3.04 | 3.02 | ||||||||||||||
Funds available for distribution (“FAD”)(3) | 803,720 | 1,215,696 | 1,261,849 | 1,178,822 | 1,158,082 | ||||||||||||||
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 8, 2023.
We will discuss and provide our analysis in the following order:
•Company Highlights
•Dividends
•Results of Operations
•Liquidity and Capital Resources
•Non-GAAP Financial Measures Reconciliations
•Critical Accounting Estimates
•Recent Accounting Pronouncements
Market Trends and Uncertainties
Our operating results have been and will continue to be impacted by global and national economic and market conditions generally and by the local economic conditions where our properties are located.
Rising interest rates, high inflation, supply chain disruptions, ongoing geopolitical tensions, and increased volatility in public and private equity and fixed income markets have led to increased costs and limited the availability of capital. In addition, increased interest rates have negatively affected our borrowing costs, the fair value of our fixed rate instruments. and real estate values generally, including our real estate.
Our tenants and operators have also experienced increased costs, liquidity constraints, and financing difficulties due to the foregoing macroeconomic and market conditions, which could cause them to be unable or unwilling to make payments or perform their obligations when due.
We have also been affected by significant inflation in construction costs over the past few years, which, together with rising costs of capital, have negatively affected the expected yields on our development and redevelopment projects.
We continuously monitor the effects of domestic and global events, including but not limited to inflation, labor shortages, supply chain matters, rising interest rates, and challenges in the financial markets, on our operations and financial position, as well as on the operations and financial position of our tenants, operators, and borrowers, to ensure that we remain responsive and adaptable to the dynamic changes in our operating environment.
See “Item 1A, Risk Factors” in this report for additional discussion of the risks posed by macroeconomic conditions, as well as the uncertainties we and our tenants, operators, and borrowers may face as a result.
Company Highlights
As of February 10, 2023, we are structured as an UPREIT. This structure provides prospective sellers an alternative for disposing of property that has appreciated in value in a tax-deferred manner to Healthpeak OP and aligns our corporate structure with other publicly traded U.S. real estate investment trusts. Following the Reorganization, Healthpeak OP is the borrower under, and we are the guarantor of, all of the unsecured debt, which includes the Revolving Facility, Term Loan Facilities (each as defined below), commercial paper program, and senior unsecured notes. Our guarantee of the senior unsecured notes is full and unconditional and applicable to existing and future senior unsecured notes. The Reorganization did not have a material impact on our financial position, consolidated financial statements, outstanding debt securities, material debt facilities, or business operations.
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On October 29, 2023, we entered into a Merger Agreement with Physicians Realty Trust, the Physicians Partnership, and certain of our subsidiaries, pursuant to which, among other things, and through a series of transactions (the “Mergers”), (i) each outstanding common share of Physicians Realty Trust (other than Physicians Realty Trust common shares to be canceled in accordance with the Merger Agreement) will be converted into the right to receive 0.674 (the “Exchange Ratio”) shares of our common stock, and (ii) each outstanding common unit of the Physicians Partnership will be converted into common units in the successor entity to the Physicians Partnership equal to the Exchange Ratio. In connection with the Mergers, we filed a Registration Statement on Form S-4 with the SEC on December 15, 2023, as amended on January 9, 2024, and a definitive joint proxy statement/prospectus for the Company and Physicians Realty Trust on January 11, 2024 in connection with our respective special meetings of stockholders and shareholders, as applicable, which will be held on February 21, 2024. We expect the Mergers to closeon March 1, 2024. Following the transactions contemplated in the Merger Agreement, the successor entities to Physicians Realty Trust and the Physicians Partnership will be direct and indirect subsidiaries of Healthpeak OP, respectively. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions, including the approval of our stockholders and the shareholders of Physicians Realty Trust.
Real Estate Transactions
•In January 2023, we sold two lab buildings in Durham, North Carolina for $113 million.
•In January 2023, we acquired a lab land parcel in Cambridge, Massachusetts for $9 million.
•In March 2023, we sold two outpatient medical buildings for $32 million.
•In April 2023, we acquired the remaining 80% interest in one of the outpatient medical buildings in the Ventures IV unconsolidated joint venture for $4 million.
•In January 2024, we sold a 65% interest in two lab buildings in San Diego, California to a third-party for net proceeds of $128 million.
Development and Redevelopment Activities
•During the yearended December 31, 2023, the following projects were placed in service: (i) portions of two lab development projects with aggregate costs of $233 million, (ii) one lab development project with total costs of $171 million, (iii) a portion of one lab redevelopment project with total costs of $43 million, (iv) four outpatient medical redevelopment projects with aggregate costs of $42 million, (v) a portion of one lab redevelopment building held in one of our unconsolidated South San Francisco JVs of which our share of total project costs was $32 million, (vi) one lab redevelopment building held in one of our unconsolidated South San Francisco JVs of which our share of total project costs was $15 million, (vii) one lab redevelopment project with total costs of $14 million, and (viii) one CCRC redevelopment project with total costs of $7 million.
Financing Activities
•In January 2023, we completed a public offering of $400 million aggregate principal amount of 5.25% senior unsecured notes due 2032.
•In May 2023, we completed a public offering of $350 million aggregate principal amount of 5.25% senior unsecured notes due 2032, which constituted an additional issuance of, and are treated as a single series with, the $400 million of senior unsecured notes due 2032 issued in January 2023.
•In December 2023, a mortgage loan secured by one CCRC with a principal balance of $85 millionmatured and was repaid.
•We have secured commitments for a $750 million five-year unsecured term loan (the “2024 Term Loan”), to be incurred as an incremental facility under our existing term loan agreement. In January 2024, we entered into forward-starting interest rate swap instruments that are designated as cash flow hedges that will effectively establish a fixed interest rate forthe 2024 Term Loan at a blended contractual rate of 4.5%.
Other Activities
•In February 2023, we received a partial principal repayment of $102 million on one secured loan.
•In February 2023, we received full repayment of the outstanding balance of one $35 million secured loan.
•In April 2023, we received full repayment of the outstanding balance of one $14 million secured loan.
•In May 2023, we received full repayment of two outstanding secured loans with an aggregate balance of $12 million.
•In October 2023, we received full repayment of the outstanding balance of one $21 million secured loan.
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Dividends
Quarterly cash dividends paid during 2023 aggregated to $1.20 per share. On January 31, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 per common share. The dividend will be paid on February 26, 2024 to stockholders of record as of the close of business on February 14, 2024.
Results of Operations
We evaluate our business and allocate resources among our reportable business segments: (i) lab, (ii) outpatient medical, and (iii) CCRC. Under the lab and outpatient medical segments, we invest through the acquisition, development, and management of lab buildings, outpatient medical buildings, and hospitals. Our CCRCs are operated through RIDEA structures. We have other non-reportable segments that are comprised primarily of: (i) an interest in our unconsolidated SWF SH JV and (ii) loans receivable. These non-reportable segments have been presented on an aggregate basis herein. We evaluate performance based upon property adjusted net operating income (“Adjusted NOI” or “Cash NOI”) in each segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2 to the Consolidated Financial Statements.
Non-GAAP Financial Measures
Net Operating Income
NOI and Adjusted NOI are non-U.S. generally accepted accounting principles (“GAAP”) supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as real estate revenues (inclusive of rental and related revenues, resident fees and services, income from direct financing leases, and government grant income and exclusive of interest income), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 15 to the Consolidated Financial Statements. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense. NOI and Adjusted NOI are calculated as NOI and Adjusted NOI from consolidated properties, plus our share of NOI and Adjusted NOI from unconsolidated joint ventures (calculated by applying our actual ownership percentage for the period), less noncontrolling interests’ share of NOI and Adjusted NOI from consolidated joint ventures (calculated by applying our actual ownership percentage for the period). Management utilizes its share of NOI and Adjusted NOI in assessing its performance as we have various joint ventures that contribute to its performance. We do not control our unconsolidated joint ventures, and our share of amounts from unconsolidated joint ventures do not represent our legal claim to such items. Our share of NOI and Adjusted NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, our financial information presented in accordance with GAAP.
Adjusted NOI is oftentimes referred to as “Cash NOI.” Management believes NOI and Adjusted NOI are important supplemental measures because they provide relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and present them on an unlevered basis. We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and compare property level performance, and to evaluate our Same-Store (“SS”) performance, as described below. We believe that net income (loss) is the most directly comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items. Further, our definitions of NOI and Adjusted NOI may not be comparable to the definitions used by other REITs or real estate companies, as they may use different methodologies for calculating NOI and Adjusted NOI. For a reconciliation of NOI and Adjusted NOI to net income (loss) by segment, refer to Note 15 to the Consolidated Financial Statements.
Operating expenses generally relate to leased outpatient medical and lab buildings, as well as CCRC facilities. We generally recover all or a portion of our leased outpatient medical and lab property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense.
Same-Store
Same-Store NOI and Adjusted (Cash) NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our portfolio of properties, excluding properties within the other non-reportable segments. We include properties from our consolidated portfolio, as well as properties owned by our unconsolidated joint ventures in Same-Store NOI and Adjusted NOI (see NOI definition above for further discussion regarding our use of pro-rata share information and its limitations). Same-Store NOI and Adjusted NOI exclude government grant income under the CARES Act. Same-Store Adjusted NOI also excludes amortization of deferred revenue from tenant-funded improvements and certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.
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Properties are included in Same-Store once they are stabilized for the full period in both comparison periods. Newly acquired operating assets are generally considered stabilized at the earlier of lease-up (typically when the tenant(s) control(s) the physical use of at least 80% of the space and rental payments have commenced) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service. Properties that experience a change in reporting structure are considered stabilized after 12 months in operations under a consistent reporting structure. A property is removed from Same-Store when it is classified as held for sale, sold, placed into redevelopment, experiences a casualty event that significantly impacts operations, a change in reporting structure or operator transition has been agreed to, or a significant tenant relocates from a Same-Store property to a non Same-Store property and that change results in a corresponding increase in revenue. We do not report Same-Store metrics for our other non-reportable segments. For a reconciliation of Same-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.
Funds From Operations (“FFO”)
FFO encompasses Nareit FFO and FFO as Adjusted, each of which is described in detail below. We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.
Nareit FFO. FFO, as defined by the National Association of Real Estate Investment Trusts (“Nareit”), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any current and deferred taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real estate, plus real estate and other real estate-related depreciation and amortization, and adjustments to compute our share of Nareit FFO and FFO as Adjusted (see below) from joint ventures. Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of Nareit FFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. For consolidated joint ventures in which we do not own 100%, we reflect our share of the equity by adjusting our Nareit FFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods. Our pro rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control the unconsolidated joint ventures, and the pro rata presentations of reconciling items included in Nareit FFO do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital.
The presentation of pro rata information has limitations, which include, but are not limited to, the following: (i) the amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses and (ii) other companies in our industry may calculate their pro rata interest differently, limiting the usefulness as a comparative measure. Because of these limitations, the pro rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro rata financial information as a supplement.
Nareit FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss). We compute Nareit FFO in accordance with the current Nareit definition; however, other REITs may report Nareit FFO differently or have a different interpretation of the current Nareit definition from ours.
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FFO as Adjusted. In addition, we present Nareit FFO on an adjusted basis before the impact of non-comparable items including, but not limited to, transaction and merger-related items, other impairments (recoveries) and other losses (gains), restructuring and severance-related charges, prepayment costs (benefits) associated with early retirement or payment of debt, litigation costs (recoveries), casualty-related charges (recoveries), deferred tax asset valuation allowances, and changes in tax legislation (“FFO as Adjusted”). These adjustments are net of tax, when applicable. Transaction and merger-related items include transaction expenses and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Prepayment costs (benefits) associated with early retirement of debt include the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of debt. Other impairments (recoveries) and other losses (gains) include interest income associated with early and partial repayments of loans receivable and other losses or gains associated with non-depreciable assets including goodwill, DFLs, undeveloped land parcels, and loans receivable. Management believes that FFO as Adjusted provides a meaningful supplemental measurement of our FFO run-rate and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. At the same time that Nareit created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors, and financial analysts who review our operating performance are best served by an FFO run-rate earnings measure that includes certain other adjustments to net income (loss), in addition to adjustments made to arrive at the Nareit defined measure of FFO. FFO as Adjusted is used by management in analyzing our business and the performance of our properties and we believe it is important that stockholders, potential investors, and financial analysts understand this measure used by management. We use FFO as Adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions, (ii) evaluate the performance of our management, (iii) budget and forecast future results to assist in the allocation of resources, (iv) assess our performance as compared with similar real estate companies and the industry in general, and (v) evaluate how a specific potential investment will impact our future results. Other REITs or real estate companies may use different methodologies for calculating an adjusted FFO measure, and accordingly, our FFO as Adjusted may not be comparable to those reported by other REITs. For a reconciliation of net income (loss) to Nareit FFO and FFO as Adjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.
Adjusted FFO (“AFFO”). AFFO is defined as FFO as Adjusted after excluding the impact of the following: (i) stock-based compensation amortization expense, (ii) amortization of deferred financing costs, net, (iii) straight-line rents, (iv) deferred income taxes, (v) amortization of above (below) market lease intangibles, net, and (vi) other AFFO adjustments, which include: (a) non-cash interest related to DFLs and lease incentive amortization (reduction of straight-line rents), (b) actuarial reserves for insurance claims that have been incurred but not reported, and (c) amortization of deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash payments made by tenants to reduce their contractual rents. Also, AFFO is computed after deducting recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements, and includes adjustments to compute our share of AFFO from our unconsolidated joint ventures. More specifically, recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements (“AFFO capital expenditures”) excludes our share from unconsolidated joint ventures (reported in “other AFFO adjustments”). Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of AFFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated joint ventures in which we do not own 100% of the equity by adjusting our AFFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods (reported in “other AFFO adjustments”). See FFO for further disclosure regarding our use of pro rata share information and its limitations. We believe AFFO is an alternative run-rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with: (i) expected results, (ii) results of previous periods, and (iii) results among REITs more meaningful. AFFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period, (ii) transaction-related costs, (iii) litigation settlement expenses, and (iv) restructuring and severance-related charges. Furthermore, AFFO is adjusted for recurring capital expenditures, which are generally not considered when determining cash flows from operations or liquidity. Other REITs or real estate companies may use different methodologies for calculating AFFO, and accordingly, our AFFO may not be comparable to those reported by other REITs. Management believes AFFO provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT, and by presenting AFFO, we are assisting these parties in their evaluation. AFFO is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP. For a reconciliation of net income (loss) to AFFO and other relevant disclosures, refer to “Non-GAAP Financial Measures Reconciliations” below.
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Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
Overview
2023 and 2022(1)
The following table summarizes results for the years ended December 31, 2023 and 2022 (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | (193,508) | ||||||||||||||||||||||||||
| Nareit FFO | 985,180 | 895,166 | 90,014 | |||||||||||||||||||||||||||||
| FFO as Adjusted | 978,306 | 940,933 | 37,373 | |||||||||||||||||||||||||||||
| AFFO | 840,777 | 783,702 | 57,075 | |||||||||||||||||||||||||||||
(1)For the reconciliation of non-GAAP financial measures, see “Non-GAAP Financial Measure Reconciliations” below.
Net income (loss) applicable to common shares decreased primarily as a result of the following:
•a gain upon change of control related to the sale of a 30% interest and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022;
•an increase in depreciation, primarily as a result of development and redevelopment projects placed in service during 2022 and 2023;
•an increase in interest expense, primarily as a result of: (i) senior unsecured notes issued during the first half of 2023, (ii) borrowings under the Term Loan Facilities, which were drawn during the fourth quarter of 2022, and (iii) higher interest rates on the commercial paper program, partially offset by lower borrowings on the commercial paper program;
•a gain on sale associated with the disposition of a hospital under a DFL during the first quarter of 2022;
•an increase in transaction and merger-related costs, primarily as a result of costs related to the Mergers, which are primarily comprised of legal, accounting, tax, and other costs that were incurred during the fourth quarter of 2023; and
•a decrease in government grant income received under the CARES Act in 2023.
The decrease in net income (loss) applicable to common shares was partially offset by:
•an increase in NOI generated from our lab and outpatient medical segments related to: (i) development and redevelopment projects placed in service during 2022 and 2023, (ii) new leasing activity during 2022 and 2023 (including the impact to straight-line rents), and (iii) 2022 acquisitions of real estate;
•an increase in gains on sale of depreciable real estate related to lab and outpatient medical building sales during 2023 as compared to 2022;
•a decrease in general and administrative expenses, primarily as a result of: (i) severance-related charges associated with the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel in the fourth quarter of 2022 and (ii) charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado in the fourth quarter of 2022;
•a decrease in depreciation related to the deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022;
•a decrease in other expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building, which were incurred in the first quarter of 2022;
•an increase in income tax benefit primarily as a result of a $14 million tax benefit recognized in connection with the reversal of a deferred tax asset valuation allowance during the fourth quarter of 2023;
•a decrease in loan loss reserves primarily as a result of principal repayments on seller financing;
•an increase in equity income from unconsolidated joint ventures; and
•a decrease in casualty-related charges from a hurricane during the third quarter of 2022.
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Nareit FFO increased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:
•gain upon change of control;
•gain on sales of depreciable real estate; and
•depreciation and amortization expense.
FFO as Adjusted increased primarily as a result of the aforementioned events impacting Nareit FFO, except for the following, which are excluded from FFO as Adjusted:
•severance-related charges;
•gain on sale of a hospital under a DFL;
•reversal of a valuation allowance on deferred tax assets;
•expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building;
•loan loss reserves;
•transaction and merger-related costs;
•casualty-related charges; and
•the charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado.
AFFO increased primarily as a result of the aforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO and higherAFFO capital expenditures during the period.
Segment Analysis
The following tables provide selected operating information for our Same-Store and total property portfolio for each of our reportable segments. For the year ended December 31, 2023, our Same-Store consists of 403 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2022 and that remained in operations through December 31, 2023. Our total property portfolio consisted of 477 and 480 properties at December 31, 2023 and 2022, respectively. Included in our total property portfolio at each of December 31, 2023 and 2022 are 19 senior housing assets in our SWF SH JV.
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Lab
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars and square feet in thousands, except per square foot data):
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 663,859 | $ | 649,238 | $ | 14,621 | $ | 878,326 | $ | 817,573 | $ | 60,753 | |||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 6,589 | 9,613 | (3,024) | 9,924 | 9,921 | 3 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (133) | (129) | (4) | (619) | (268) | (351) | |||||||||||||||||||||||||||||
| Operating expenses | (182,602) | (166,433) | (16,169) | (229,630) | (209,143) | (20,487) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (2,651) | (2,305) | (346) | (4,092) | (2,883) | (1,209) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 46 | 43 | 3 | 156 | 87 | 69 | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (23,979) | (45,496) | 21,517 | (36,524) | (62,754) | 26,230 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | 617,541 | 552,533 | 65,008 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (156,412) | (108,002) | (48,410) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.7 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 116 | 116 | 146 | 149 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 96.5 | % | 98.7 | % | 96.9 | % | 98.9 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 97.5 | % | 98.5 | % | 97.8 | % | 98.7 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 8,786 | 8,856 | 10,524 | 10,727 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 74 | $ | 69 | $ | 81 | $ | 72 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 56 | $ | 53 | $ | 63 | $ | 55 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, we added: (i) five stabilized acquisitions, (ii) three stabilized buildings that previously experienced a significant tenant relocation, (iii) two stabilized redevelopments placed in service, and (iv) one stabilized development placed in service, and we removed: (i) six buildings that were placed into redevelopment, (ii) one asset that was placed into land held for development, and (iii) one building that experienced a significant tenant relocation.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•annual rent escalations; and
•new leasing activity; partially offset by
•lower occupancy; and
•higher operating expenses.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts:
•increased NOI from developments and redevelopments placed in service in 2022 and 2023; partially offset by
•decreased NOI from our 2022 and 2023 dispositions.
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Outpatient Medical
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars and square feet in thousands, except per square foot data):
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 678,967 | $ | 656,588 | $ | 22,379 | $ | 753,479 | $ | 724,202 | $ | 29,277 | |||||||||||||||||||||||
| Income from direct financing leases | — | — | — | — | 1,168 | (1,168) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 2,893 | 2,795 | 98 | 3,033 | 2,999 | 34 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (34,053) | (33,429) | (624) | (35,073) | (35,717) | 644 | |||||||||||||||||||||||||||||
| Operating expenses | (229,310) | (218,716) | (10,594) | (263,132) | (253,309) | (9,823) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (1,183) | (1,147) | (36) | (1,189) | (1,178) | (11) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 9,738 | 9,492 | 246 | 9,921 | 10,317 | (396) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (11,685) | (13,763) | 2,078 | (14,314) | (15,513) | 1,199 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | 452,725 | 432,969 | 19,756 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (37,358) | (31,149) | (6,209) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.4 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 272 | 272 | 297 | 297 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 91.9 | % | 91.7 | % | 90.7 | % | 90.2 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 91.5 | % | 91.6 | % | 90.1 | % | 89.9 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 20,218 | 20,233 | 21,531 | 21,685 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 34 | $ | 33 | $ | 35 | $ | 34 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 28 | $ | 27 | $ | 29 | $ | 27 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, we added: (i) 25 stabilized acquisitions and (ii) 2 stabilized developments placed in service, and we removed: (i) 2 assets that were sold and (ii) 1 asset that was classified as held for sale.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•mark-to-market lease renewals; and
•annual rent escalations; partially offset by
•higher operating expenses.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store and the following Non-Same-Store impacts:
•increased NOI from our 2022 acquisitions;
•business interruption proceeds related to a demolished asset; and
•increased occupancy in former redevelopment and development properties that have been placed in service; partially offset by
•decreased NOI from our 2022 and 2023 dispositions.
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Continuing Care Retirement Community
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars in thousands, except per unit data):
| SS | Total Portfolio | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Resident fees and services | $ | 526,769 | $ | 494,935 | $ | 31,834 | $ | 527,417 | $ | 494,935 | $ | 32,482 | |||||||||||||||||||||||
Government grant income(1) | — | — | — | 184 | 6,765 | (6,581) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | — | — | 380 | (380) | |||||||||||||||||||||||||||||
| Operating expenses | (411,539) | (398,915) | (12,624) | (413,472) | (400,539) | (12,933) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (1,618) | 2,300 | (3,918) | (1,618) | 2,300 | (3,918) | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | 112,511 | 103,841 | 8,670 | ||||||||||||||||||||||||||
| Plus (less): non-SS adjustments | 1,101 | (5,521) | 6,622 | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 15.6 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 15 | 15 | 15 | 15 | |||||||||||||||||||||||||||||||
Average occupancy(4) | 83.8 | % | 81.6 | % | 83.9 | % | 81.6 | % | |||||||||||||||||||||||||||
Average occupied units(5) | 5,952 | 5,926 | 5,960 | 5,926 | |||||||||||||||||||||||||||||||
| Average annual rent per occupied unit | $ | 88,503 | $ | 83,519 | $ | 88,524 | $ | 84,725 | |||||||||||||||||||||||||||
(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, no properties were added or removed.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Represents average occupied units as reported by the operators for the twelve-month period.
Same-Store Adjusted NOI increased primarily as a result of the following:
•increased rates for resident fees; and
•higher occupancy; partially offset by
•higher costs of labor, management fees, insurance, real estate taxes, utilities, and food; and
•lower business interruption insurance proceeds.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store, partially offset by decreased government grant income received under the CARES Act.
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Other Income and Expense Items
The following table summarizes the results of our other income and expense items for the years ended December 31, 2023 and 2022 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Interest income | $ | 21,781 | $ | 23,300 | $ | (1,519) | |||||||||||
| Interest expense | 200,331 | 172,944 | 27,387 | ||||||||||||||
| Depreciation and amortization | 749,901 | 710,569 | 39,332 | ||||||||||||||
| General and administrative | 95,132 | 131,033 | (35,901) | ||||||||||||||
| Transaction and merger-related costs | 17,515 | 4,853 | 12,662 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | (12,605) | ||||||||||||||
| Gain (loss) on sales of real estate, net | 86,463 | 9,078 | 77,385 | ||||||||||||||
| Other income (expense), net | 6,808 | 326,268 | (319,460) | ||||||||||||||
| Income tax benefit (expense) | 9,617 | 4,425 | 5,192 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,204 | 1,985 | 8,219 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | (2,884) | ||||||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (12,773) | ||||||||||||||
Interest income
Interest income decreased for the year ended December 31, 2023 primarily as a result of principal repayments on loans receivable in 2022 and 2023, partially offset by higher interest rates.
Interest expense
Interest expense increased for the year ended December 31, 2023 primarily as a result of: (i) senior unsecured notes issued during the first half of 2023, (ii) borrowings under the Term Loan Facilities, which were drawn during the fourth quarter of 2022, and (iii) higher interest rates on the commercial paper program, partially offset by lower borrowings on the commercial paper program.
Depreciation and amortization
Depreciation and amortization expense increased for the year ended December 31, 2023 primarily as a result of development and redevelopment projects placed in service during 2022 and 2023, partially offset by: (i) assets placed into redevelopment in 2023, (ii) dispositions of real estate in 2022 and 2023, and (iii) lower depreciation related to the deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022.
General and administrative
General and administrative expenses decreased for the year ended December 31, 2023 primarily as a result of: (i) severance-related charges associated with the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel in the fourth quarter of 2022 and (ii) charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado in the fourth quarter of 2022.
Transaction and merger-related costs
Transaction and merger-related costs increased for the year ended December 31, 2023 primarily as a result of costs related to the Mergers, which are primarily comprised of legal, accounting, tax, and other costs that were incurred during the fourth quarter of 2023 (see Note 1 to the Consolidated Financial Statements).
Impairments and loan loss reserves (recoveries), net
Impairments and loan loss reserves (recoveries), net decreased for the year ended December 31, 2023 as a result of a decrease in loan loss reserves under the current expected credit losses model. The change in loan loss reserves for the year ended December 31, 2023 is primarily a result of: (i) principal repayments on seller financing, (ii) increased interest rates on variable rate loans, and (iii) macroeconomic conditions.
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Gain (loss) on sales of real estate, net
Gain on sales of real estate, net increased during the year ended December 31, 2023 primarily as a result of: (i) the $60 million gain on sales of two lab buildings in Durham, North Carolina, which were sold during the three months ended March 31, 2023 and (ii) the $21 million gain on sales of two outpatient medical buildings, which were sold during the three months ended March 31, 2023, partially offset by: (i) the $4 million gain on sale of one lab building, which was sold during the three months ended March 31, 2022, (ii) the $10 million gain on sales of three outpatient medical buildings and one outpatient medical land parcel, which were sold during the three months ended June 30, 2022, and (iii) the $1 million gain on sales of two outpatient medical buildings, which were sold during the three months ended September 30, 2022.Refer to Note 4 to the Consolidated Financial Statements for additional information regarding dispositions of real estate and the associated gain (loss) on sales recognized.
Other income (expense), net
Other income, net decreased for the year ended December 31, 2023 primarily as a result of: (i) a gain upon change of control related to the sale of a 30% interest and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022, (ii) a gain on sale associated with the disposition of a hospital under a DFL during the first quarter of 2022, and (iii) a decrease in government grant income received under the CARES Act in 2023. The decrease in other income, net during the year ended December 31, 2023 was partially offset by: (i) other expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building, which were incurred in the first quarter of 2022 and (ii) casualty losses from a hurricane in the third quarter of 2022.
Income tax benefit (expense)
Income tax benefit increased for the year ended December 31, 2023 primarily as a result of a $14 million tax benefit recognized in connection with the reversal of a deferred tax asset valuation allowance during the fourth quarter of 2023 (see Note 16 to the Consolidated Financial Statements), partially offset by an increase in operating income associated with our CCRCs.
Equity income (loss) from unconsolidated joint ventures
Equity income from unconsolidated joint ventures increased for the year ended December 31, 2023 primarily as a result of increased income from the South San Francisco JVs and the SWF SH JV.
Income (loss) from discontinued operations
Income from discontinued operations decreased for the year ended December 31, 2023 a result of the completion of dispositions of our senior housing portfolios.
Noncontrolling interests’ share in continuing operations
Noncontrolling interests’ share in continuing operations increased for the year ended December 31, 2023 primarily as a result of a gain on sale of an outpatient medical building in a consolidated joint venture that was sold during the second quarter of 2023.
•In January 2023, we completed a public offering of $400 million aggregate principal amount of 5.25% senior unsecured notes due 2032.
•In May 2023, we completed a public offering of $350 million aggregate principal amount of 5.25% senior unsecured notes due 2032, which constituted an additional issuance of, and Capital Resourcesare treated as a single series with, the $400 million of senior unsecured notes due 2032 issued in January 2023.
•In February 2023, we received a partial principal repayment of $102 million on one secured loan.
•In February 2023, we received full repayment of the outstanding balance of one $35 million secured loan.
•In April 2023, we received full repayment of the outstanding balance of one $14 million secured loan.
•In May 2023, we received full repayment of two outstanding secured loans with an aggregate balance of $12 million.
•In October 2023, we received full repayment of the outstanding balance of one $21 million secured loan.
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Dividends
Quarterly cash dividends paid during 2023 aggregated to $1.20 per share. On January 31, 2024, our Board of Directors declared a quarterly cash dividend of $0.30 per common share. The dividend will be paid on February 26, 2024 to stockholders of record as of the close of business on February 14, 2024.
Results of Operations
We evaluate our business and allocate resources among our reportable business segments: (i) lab, (ii) outpatient medical, and (iii) CCRC. Under the lab and outpatient medical segments, we invest through the acquisition, development, and management of lab buildings, outpatient medical buildings, and hospitals. Our CCRCs are operated through RIDEA structures. We have other non-reportable segments that are comprised primarily of: (i) an interest in our unconsolidated SWF SH JV and (ii) loans receivable. These non-reportable segments have been presented on an aggregate basis herein. We evaluate performance based upon property adjusted net operating income (“Adjusted NOI” or “Cash NOI”) in each segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2 to the Consolidated Financial Statements.
Non-GAAP Financial Measure ReconciliationsMeasures
Adjusted NOI is oftentimes referred to as “Cash NOI.” Management believes NOI and Adjusted NOI are important supplemental measures because they provide relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and present them on an unlevered basis. We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and compare property level performance, and to evaluate our Same-Store (“SS”) entered into an Amendedperformance, as described below. We believe that net income (loss) is the most directly comparable GAAP measure to NOI and Restated Master LeaseAdjusted NOI. NOI and Security Agreement (the “Amended Master Lease”), which amendedAdjusted NOI should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items. Further, our definitions of NOI and restated the then-existing triple-net leases between the parties for 78 assets (before giving effectAdjusted NOI may not be comparable to the contemplated saledefinitions used by other REITs or transitionreal estate companies, as they may use different methodologies for calculating NOI and Adjusted NOI. For a reconciliation of 34 assets discussed below), which account for primarilyNOI and Adjusted NOI to net income (loss) by segment, refer to Note 15 to the Consolidated Financial Statements.
Operating expenses generally relate to leased outpatient medical and lab buildings, as well as CCRC facilities. We generally recover all or a portion of our leased outpatient medical and lab property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense.
Same-Store
Same-Store NOI and Adjusted (Cash) NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our portfolio of properties, excluding properties within the other non-reportable segments. We include properties from our consolidated portfolio, as well as properties owned by our unconsolidated joint ventures in Same-Store NOI and Adjusted NOI (see NOI definition above for further discussion regarding our use of pro-rata share information and its limitations). Same-Store NOI and Adjusted NOI exclude government grant income under the CARES Act. Same-Store Adjusted NOI also excludes amortization of deferred revenue from tenant-funded improvements and certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis.
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Properties are included in Same-Store once they are stabilized for the full period in both comparison periods. Newly acquired operating assets subject to triple-net leases between HCP andare generally considered stabilized at the Lessee. Underearlier of lease-up (typically when the Amended Master Lease, we havetenant(s) control(s) the benefitphysical use of a guaranty from Brookdaleat least 80% of the Lessee’s obligationsspace and uponrental payments have commenced) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service. Properties that experience a change in reporting structure are considered stabilized after 12 months in operations under a consistent reporting structure. A property is removed from Same-Store when it is classified as held for sale, sold, placed into redevelopment, experiences a casualty event that significantly impacts operations, a change in reporting structure or operator transition has been agreed to, or a significant tenant relocates from a Same-Store property to a non Same-Store property and that change results in a corresponding increase in revenue. We do not report Same-Store metrics for our other non-reportable segments. For a reconciliation of Same-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.
Funds From Operations (“FFO”)
FFO encompasses Nareit FFO and FFO as Adjusted, each of which is described in detail below. We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.
Nareit FFO. FFO, as defined by the National Association of Real Estate Investment Trusts (“Nareit”), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any current and deferred taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real estate, plus real estate and other real estate-related depreciation and amortization, and adjustments to compute our share of Nareit FFO and FFO as Adjusted (see below) from joint ventures. Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of Nareit FFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. For consolidated joint ventures in which we do not own 100%, we reflect our share of the equity by adjusting our Nareit FFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods. Our pro rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control will have various additional protections under the MTCAunconsolidated joint ventures, and the Amended Master Lease.pro rata presentations of reconciling items included in Nareit FFO do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital.
The Amended Master Lease preserves the renewal terms and, with certain exceptions, the rents under the previously existing triple-net leases. In addition, HCP and Brookdale agreedpresentation of pro rata information has limitations, which include, but are not limited to, the following: (i) the amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses and (ii) other companies in our industry may calculate their pro rata interest differently, limiting the usefulness as a comparative measure. Because of these limitations, the pro rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro rata financial information as a supplement.
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FFO as Adjusted. In addition, we present Nareit FFO on an adjusted basis before the impact of non-comparable items including, but not limited to, transaction and merger-related items, other impairments (recoveries) and other losses (gains), restructuring and severance-related charges, prepayment costs (benefits) associated with early retirement or payment of debt, litigation costs (recoveries), casualty-related charges (recoveries), deferred tax asset valuation allowances, and changes in tax legislation (“FFO as Adjusted”). These adjustments are net of tax, when applicable. Transaction and merger-related items include transaction expenses and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Prepayment costs (benefits) associated with respectearly retirement of debt include the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of debt. Other impairments (recoveries) and other losses (gains) include interest income associated with early and partial repayments of loans receivable and other losses or gains associated with non-depreciable assets including goodwill, DFLs, undeveloped land parcels, and loans receivable. Management believes that FFO as Adjusted provides a meaningful supplemental measurement of our FFO run-rate and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. At the same time that Nareit created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to such assetspublish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors, and financial analysts who review our operating performance are best served by an FFO run-rate earnings measure that includes certain other adjustments to net income (loss), in addition to adjustments made to arrive at the Nareit defined measure of FFO. FFO as Adjusted is used by management in analyzing our business and the performance of our properties and we believe it is important that stockholders, potential investors, and financial analysts understand this measure used by management. We use FFO as Adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions, (ii) evaluate the performance of our management, (iii) budget and forecast future results to assist in the allocation of resources, (iv) assess our performance as compared with similar real estate companies and the industry in general, and (v) evaluate how a specific potential investment will convertimpact our future results. Other REITs or real estate companies may use different methodologies for calculating an adjusted FFO measure, and accordingly, our FFO as Adjusted may not be comparable to those reported by other REITs. For a reconciliation of net income (loss) to Nareit FFO and FFO as Adjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.
Adjusted FFO (“AFFO”). AFFO is defined as FFO as Adjusted after excluding the impact of the following: (i) stock-based compensation amortization expense, (ii) amortization of deferred financing costs, net, (iii) straight-line rents, (iv) deferred income taxes, (v) amortization of above (below) market lease intangibles, net, and (vi) other AFFO adjustments, which include: (a) non-cash interest related to DFLs and lease incentive amortization (reduction of straight-line rents), (b) actuarial reserves for insurance claims that have been incurred but not reported, and (c) amortization of deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash flow lease (underpayments made by tenants to reduce their contractual rents. Also, AFFO is computed after deducting recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements, and includes adjustments to compute our share of AFFO from our unconsolidated joint ventures. More specifically, recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements (“AFFO capital expenditures”) excludes our share from unconsolidated joint ventures (reported in “other AFFO adjustments”). Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of AFFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated joint ventures in which we will beardo not own 100% of the risksequity by adjusting our AFFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods (reported in “other AFFO adjustments”). See FFO for further disclosure regarding our use of pro rata share information and rewardsits limitations. We believe AFFO is an alternative run-rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with: (i) expected results, (ii) results of previous periods, and (iii) results among REITs more meaningful. AFFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the assets)following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period, (ii) transaction-related costs, (iii) litigation settlement expenses, and (iv) restructuring and severance-related charges. Furthermore, AFFO is adjusted for recurring capital expenditures, which are generally not considered when determining cash flows from operations or liquidity. Other REITs or real estate companies may use different methodologies for calculating AFFO, and accordingly, our AFFO may not be comparable to those reported by other REITs. Management believes AFFO provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT, and by presenting AFFO, we are assisting these parties in their evaluation. AFFO is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP and should only be considered together with and as a termsupplement to our financial information prepared in accordance with GAAP. For a reconciliation of twonet income (loss) to AFFO and other relevant disclosures, refer to “Non-GAAP Financial Measures Reconciliations” below.
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Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
Overview
2023 and 2022(1)
The following table summarizes results for the years provided that we haveended December 31, 2023 and 2022 (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | (193,508) | ||||||||||||||||||||||||||
| Nareit FFO | 985,180 | 895,166 | 90,014 | |||||||||||||||||||||||||||||
| FFO as Adjusted | 978,306 | 940,933 | 37,373 | |||||||||||||||||||||||||||||
| AFFO | 840,777 | 783,702 | 57,075 | |||||||||||||||||||||||||||||
(1)For the rightreconciliation of non-GAAP financial measures, see “Non-GAAP Financial Measure Reconciliations” below.
Net income (loss) applicable to terminatecommon shares decreased primarily as a result of the cash flow lease at any timefollowing:
•a gain upon change of control related to the sale of a 30% interest and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the term without penalty;third quarter of 2022;
•a gain on sale associated with the disposition of a hospital under a DFL during the first quarter of 2022;
•a decrease in government grant income received under the CARES Act in 2023.
The decrease in net income (loss) applicable to common shares was partially offset by:
•an increase in NOI generated from our lab and outpatient medical segments related to: (i) development and redevelopment projects placed in service during 2022 and 2023, (ii) new leasing activity during 2022 and 2023 (including the impact to straight-line rents), and (iii) 2022 acquisitions of real estate;
•an increase in gains on sale of depreciable real estate related to lab and outpatient medical building sales during 2023 as compared to 2022;
•a decrease in general and administrative expenses, primarily as a result of: (i) severance-related charges associated with the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel in the fourth quarter of 2022 and (ii) charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado in the fourth quarter of 2022;
•a decrease in depreciation related to the following:deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022;
•an increase in income tax benefit primarily as a result of a $14 million tax benefit recognized in connection with the reversal of a deferred tax asset valuation allowance during the fourth quarter of 2023;
•a decrease in loan loss reserves primarily as a result of principal repayments on seller financing;
•an increase in equity income from unconsolidated joint ventures; and
•a decrease in casualty-related charges from a hurricane during the third quarter of 2022.
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Nareit FFO increased primarily as a result of the interests in its RIDEA Iaforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:
•gain upon change of control;
•gain on sales of depreciable real estate; and RIDEA III joint ventures with Brookdale at the time the MTCA was executed, agreed to purchase Brookdale’s 10% noncontrolling interest in each joint venture for an aggregate purchase price of $95 million. These joint ventures collectively own
•depreciation and operate 58 independent living, assisted living, memory care and/or skilled nursing facilities (the “RIDEA Facilities”). We completed our acquisitionamortization expense.
FFO as Adjusted increased primarily as a result of the RIDEA III noncontrolling interestaforementioned events impacting Nareit FFO, except for the following, which are excluded from FFO as Adjusted:
•severance-related charges;
•gain on sale of a hospital under a DFL;
•reversal of a valuation allowance on deferred tax assets;
•expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building;
•loan loss reserves;
•transaction and merger-related costs;
•casualty-related charges; and
•the charges incurred in December 2017 and anticipate completingconnection with the downsizing of our acquisitioncorporate headquarters in Denver, Colorado.
AFFO increased primarily as a result of the RIDEA I noncontrollingaforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO and higherAFFO capital expenditures during the period.
Segment Analysis
The following tables provide selected operating information for our Same-Store and total property portfolio for each of our reportable segments. For the year ended December 31, 2023, our Same-Store consists of 403 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 2022 and that remained in operations through December 31, 2023. Our total property portfolio consisted of 477 and 480 properties at December 31, 2023 and 2022, respectively. Included in our total property portfolio at each of December 31, 2023 and 2022 are 19 senior housing assets in our SWF SH JV.
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Lab
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars and square feet in thousands, except per square foot data):
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 663,859 | $ | 649,238 | $ | 14,621 | $ | 878,326 | $ | 817,573 | $ | 60,753 | |||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 6,589 | 9,613 | (3,024) | 9,924 | 9,921 | 3 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (133) | (129) | (4) | (619) | (268) | (351) | |||||||||||||||||||||||||||||
| Operating expenses | (182,602) | (166,433) | (16,169) | (229,630) | (209,143) | (20,487) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (2,651) | (2,305) | (346) | (4,092) | (2,883) | (1,209) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 46 | 43 | 3 | 156 | 87 | 69 | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (23,979) | (45,496) | 21,517 | (36,524) | (62,754) | 26,230 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | 617,541 | 552,533 | 65,008 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (156,412) | (108,002) | (48,410) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.7 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 116 | 116 | 146 | 149 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 96.5 | % | 98.7 | % | 96.9 | % | 98.9 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 97.5 | % | 98.5 | % | 97.8 | % | 98.7 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 8,786 | 8,856 | 10,524 | 10,727 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 74 | $ | 69 | $ | 81 | $ | 72 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 56 | $ | 53 | $ | 63 | $ | 55 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, we added: (i) five stabilized acquisitions, (ii) three stabilized buildings that previously experienced a significant tenant relocation, (iii) two stabilized redevelopments placed in service, and (iv) one stabilized development placed in service, and we removed: (i) six buildings that were placed into redevelopment, (ii) one asset that was placed into land held for development, and (iii) one building that experienced a significant tenant relocation.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•annual rent escalations; and
•new leasing activity; partially offset by
•lower occupancy; and
•higher operating expenses.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts:
•increased NOI from developments and redevelopments placed in service in 2022 and 2023; partially offset by
•decreased NOI from our 2022 and 2023 dispositions.
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Outpatient Medical
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars and square feet in thousands, except per square foot data):
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 678,967 | $ | 656,588 | $ | 22,379 | $ | 753,479 | $ | 724,202 | $ | 29,277 | |||||||||||||||||||||||
| Income from direct financing leases | — | — | — | — | 1,168 | (1,168) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 2,893 | 2,795 | 98 | 3,033 | 2,999 | 34 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (34,053) | (33,429) | (624) | (35,073) | (35,717) | 644 | |||||||||||||||||||||||||||||
| Operating expenses | (229,310) | (218,716) | (10,594) | (263,132) | (253,309) | (9,823) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (1,183) | (1,147) | (36) | (1,189) | (1,178) | (11) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 9,738 | 9,492 | 246 | 9,921 | 10,317 | (396) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (11,685) | (13,763) | 2,078 | (14,314) | (15,513) | 1,199 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | 452,725 | 432,969 | 19,756 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (37,358) | (31,149) | (6,209) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.4 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 272 | 272 | 297 | 297 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 91.9 | % | 91.7 | % | 90.7 | % | 90.2 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 91.5 | % | 91.6 | % | 90.1 | % | 89.9 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 20,218 | 20,233 | 21,531 | 21,685 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 34 | $ | 33 | $ | 35 | $ | 34 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 28 | $ | 27 | $ | 29 | $ | 27 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, we added: (i) 25 stabilized acquisitions and (ii) 2 stabilized developments placed in service, and we removed: (i) 2 assets that were sold and (ii) 1 asset that was classified as held for sale.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•mark-to-market lease renewals; and
•annual rent escalations; partially offset by
•higher operating expenses.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store and the following Non-Same-Store impacts:
•increased NOI from our 2022 acquisitions;
•business interruption proceeds related to a demolished asset; and
•increased occupancy in former redevelopment and development properties that have been placed in service; partially offset by
•decreased NOI from our 2022 and 2023 dispositions.
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Continuing Care Retirement Community
The following table summarizes results at and for the years ended December 31, 2023 and 2022 (dollars in thousands, except per unit data):
| SS | Total Portfolio | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Resident fees and services | $ | 526,769 | $ | 494,935 | $ | 31,834 | $ | 527,417 | $ | 494,935 | $ | 32,482 | |||||||||||||||||||||||
Government grant income(1) | — | — | — | 184 | 6,765 | (6,581) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | — | — | 380 | (380) | |||||||||||||||||||||||||||||
| Operating expenses | (411,539) | (398,915) | (12,624) | (413,472) | (400,539) | (12,933) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (1,618) | 2,300 | (3,918) | (1,618) | 2,300 | (3,918) | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | 112,511 | 103,841 | 8,670 | ||||||||||||||||||||||||||
| Plus (less): non-SS adjustments | 1,101 | (5,521) | 6,622 | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 15.6 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 15 | 15 | 15 | 15 | |||||||||||||||||||||||||||||||
Average occupancy(4) | 83.8 | % | 81.6 | % | 83.9 | % | 81.6 | % | |||||||||||||||||||||||||||
Average occupied units(5) | 5,952 | 5,926 | 5,960 | 5,926 | |||||||||||||||||||||||||||||||
| Average annual rent per occupied unit | $ | 88,503 | $ | 83,519 | $ | 88,524 | $ | 84,725 | |||||||||||||||||||||||||||
(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations.
(2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to “Non-GAAP Financial Measures” above for the definitions of NOI and Adjusted NOI. See Note 15 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
(3)From our 2022 presentation of Same-Store, no properties were added or removed.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Represents average occupied units as reported by the operators for the twelve-month period.
Same-Store Adjusted NOI increased primarily as a result of the following:
•increased rates for resident fees; and
•higher occupancy; partially offset by
•higher costs of labor, management fees, insurance, real estate taxes, utilities, and food; and
•lower business interruption insurance proceeds.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store, partially offset by decreased government grant income received under the CARES Act.
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Other Income and Expense Items
The following table summarizes the results of our other income and expense items for the years ended December 31, 2023 and 2022 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Interest income | $ | 21,781 | $ | 23,300 | $ | (1,519) | |||||||||||
| Interest expense | 200,331 | 172,944 | 27,387 | ||||||||||||||
| Depreciation and amortization | 749,901 | 710,569 | 39,332 | ||||||||||||||
| General and administrative | 95,132 | 131,033 | (35,901) | ||||||||||||||
| Transaction and merger-related costs | 17,515 | 4,853 | 12,662 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | (12,605) | ||||||||||||||
| Gain (loss) on sales of real estate, net | 86,463 | 9,078 | 77,385 | ||||||||||||||
| Other income (expense), net | 6,808 | 326,268 | (319,460) | ||||||||||||||
| Income tax benefit (expense) | 9,617 | 4,425 | 5,192 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,204 | 1,985 | 8,219 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | (2,884) | ||||||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (12,773) | ||||||||||||||
Interest income
Interest income decreased for the year ended December 31, 2023 primarily as a result of principal repayments on loans receivable in 2022 and 2023, partially offset by higher interest rates.
Interest expense
Interest expense increased for the year ended December 31, 2023 primarily as a result of: (i) senior unsecured notes issued during the first half of 2018;2023, (ii) borrowings under the Term Loan Facilities, which were drawn during the fourth quarter of 2022, and (iii) higher interest rates on the commercial paper program, partially offset by lower borrowings on the commercial paper program.
Depreciation and amortization expense increased for the rightyear ended December 31, 2023 primarily as a result of development and redevelopment projects placed in service during 2022 and 2023, partially offset by: (i) assets placed into redevelopment in 2023, (ii) dispositions of real estate in 2022 and 2023, and (iii) lower depreciation related to sell, or transitionthe deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022.
General and administrative
General and administrative expenses decreased for the year ended December 31, 2023 primarily as a result of: (i) severance-related charges associated with the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel in the fourth quarter of 2022 and (ii) charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado in the fourth quarter of 2022.
Transaction and merger-related costs
Transaction and merger-related costs increased for the year ended December 31, 2023 primarily as a result of costs related to the Mergers, which are primarily comprised of legal, accounting, tax, and other managers, 36costs that were incurred during the fourth quarter of 2023 (see Note 1 to the RIDEA FacilitiesConsolidated Financial Statements).
Impairments and terminate related management agreements with an affiliateloan loss reserves (recoveries), net
Impairments and loan loss reserves (recoveries), net decreased for the year ended December 31, 2023 as a result of Brookdale without penalty. Ifa decrease in loan loss reserves under the related management agreements are not terminated withincurrent expected credit losses model. The change in loan loss reserves for the year ended December 31, 2023 is primarily a result of: (i) principal repayments on seller financing, (ii) increased interest rates on variable rate loans, and (iii) macroeconomic conditions.
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Gain (loss) on sales of real estate, net
Gain on sales of real estate, net increased during the year ended December 31, 2023 primarily as a result of: (i) the $60 million gain on sales of two lab buildings in Durham, North Carolina, which were sold during the three months ended March 31, 2023 and (ii) the $21 million gain on sales of two outpatient medical buildings, which were sold during the three months ended March 31, 2023, partially offset by: (i) the $4 million gain on sale of one year, the base management fee (5% of gross revenues) increases by 1% of gross revenues per year over the following two years to a maximum of 7% of gross revenues;
Income tax benefit (expense)
Income from discontinued operations decreased for the year ended December 2017, we acquired31, 2023 a portfolioresult of 11 MOBs located throughout the United States, totaling approximately 378,000 square feet, for $151 million.
Noncontrolling interests’ share in continuing operations
Noncontrolling interests’ share in continuing operations increased for the year ended December 31, 2023 primarily as a mixresult of independent-living, assisted-living and memory care units. We will provide up to $115 million of financing and earn 6.5% interest on the outstanding loan balance. Upon sale or refinancing, we will receive 20% of fair market value in excess of the total development cost.
Financing Activities
•In January 2023, we completed a public offering of $400 million aggregate principal amount of 5.25% senior unsecured notes due 2032.
•In December 31, 2017,2023, a mortgage loan secured by one CCRC with a principal balance of $85 millionmatured and was repaid.
•We have secured commitments for a $750 million five-year unsecured term loan (the “2024 Term Loan”), to be incurred as an incremental facility under our existing term loan agreement. In January 2024, we had net debt repaymentsentered into forward-starting interest rate swap instruments that are designated as cash flow hedges that will effectively establish a fixed interest rate forthe 2024 Term Loan at a blended contractual rate of $1.4 billion primarily using proceeds from the dispositions of real estate (primarily the sale of 64 senior housing triple-net assets), the4.5%.
Other Activities
•In February 2023, we received a partial sale of RIDEA II, the sale of our Four Seasons Notes and theprincipal repayment of our HC-One Facility. Debt repayments during the year ended December 31, 2017 consisted$102 million on one secured loan.
•In February 2023, we received full repayment of the following:outstanding balance of one $35 million secured loan.
•In April 2023, we received full repayment of |
•In May 2023, we terminated our then existing bank linereceived full repayment of credit facility (the "Facility") and entered into a new $2.0 billion unsecured revolving line of credit facility (the “New Facility”) maturing on October 19, 2021. Borrowings under the New Facility accrue interest at LIBOR plus a margin that depends on our credit ratings (1.00% initially). We pay a facility fee on the entire revolving commitment that depends on our credit ratings (0.20% initially and as of December 31, 2017). The New Facility contains two six-month extension options and includes a feature that allows us to increase the borrowing capacity byoutstanding secured loans with an aggregate amountbalance of up to $750 million, subject to securing additional commitments.$12 million.
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Dividends
Quarterly cash dividends paid during 20172023 aggregated to $1.48$1.20 per share. On February 1, 2018,January 31, 2024, our Board of Directors declared a quarterly cash dividend of $0.37$0.30 per common share. The dividend will be paid on March 2, 2018February 26, 2024 to stockholders of record as of the close of business on February 15, 2018.14, 2024.
Results of Operations
We evaluate our business and allocate resources among our reportable business segments: (i) senior housing triple-net,lab, (ii) senior housing operating portfolio (SHOP),outpatient medical, and (iii) life science and (iv) medical office.CCRC. Under the medical officelab and life scienceoutpatient medical segments, we invest through the acquisition, development, and developmentmanagement of MOBslab buildings, outpatient medical buildings, and life science facilities, which generally require a greater level of property management.hospitals. Our senior housing facilitiesCCRCs are managed utilizing triple-net leases andoperated through RIDEA structures. We have other non-reportable segments that are comprised primarily ofof: (i) an interest in our U.K. care homes, debt investments, unconsolidated joint venturesSWF SH JV and hospitals.(ii) loans receivable. These non-reportable segments have been presented on an aggregate basis herein. We evaluate performance based upon: (i)upon property adjusted net operating income from continuing operations (“Adjusted NOI” or “Cash NOI”) and (ii) adjusted NOI (cash NOI) in each segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (seein Note 2 to the Consolidated Financial Statements).Statements.
Non-GAAP Financial Measures
Net Operating Income
NOI and Adjusted NOI are non-U.S. generally accepted accounting principles (“GAAP”) supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as real estate revenues (inclusive of rental and related revenues, including tenant recoveries,
resident fees and services, and income from DFLs,direct financing leases, and government grant income and exclusive of interest income), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 1315 to the Consolidated Financial Statements. Management believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense. The adjustments to NOI and resulting Adjusted NOI are calculated as NOI and Adjusted NOI from consolidated properties, plus our share of NOI and Adjusted NOI from unconsolidated joint ventures (calculated by applying our actual ownership percentage for SHOPthe period), less noncontrolling interests’ share of NOI and Adjusted NOI from consolidated joint ventures (calculated by applying our actual ownership percentage for the period). Management utilizes its share of NOI and Adjusted NOI in assessing its performance as we have been recastvarious joint ventures that contribute to its performance. We do not control our unconsolidated joint ventures, and our share of amounts from unconsolidated joint ventures do not represent our legal claim to such items. Our share of NOI and Adjusted NOI should not be considered a substitute for, prior periodsand should only be considered together with and as a supplement to, our financial information presented to conform to the current period presentation which excludes the impact of deferred community fee income and expense, resulting in recognition as cash is received and expenses are paid. accordance with GAAP.
Adjusted NOI is oftentimes referred to as “cash“Cash NOI.” During the fourth quarter of 2017, as a result of a change in how operating results are reported to our chief operating decision makers for the purpose of evaluating performance and allocating resources, we began excluding unconsolidated joint ventures from the evaluation of our segments' operating results. Unconsolidated joint ventures are now reflected in other non-reportable segments, and as a result, excluded from NOI and Adjusted NOI. Prior periodManagement believes NOI and Adjusted NOI have also been recast to conform to current period presentation which excludes unconsolidated joint ventures.are important supplemental measures because they provide relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and present them on an unlevered basis. We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and compare property level performance, and to evaluate our same property portfolioSame-Store (“SPP”SS”), performance, as described below. We believe that net income (loss) is the most directly comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not be viewed as an alternative measuremeasures of operating performance to net income (loss) as defined by GAAP since it doesthey do not reflect various excluded items. Further, our definitiondefinitions of NOI and Adjusted NOI may not be comparable to the definitiondefinitions used by other REITs or real estate companies, as they may use different methodologies for calculating NOI and Adjusted NOI. For a reconciliation of NOI and Adjusted NOI to net income (loss) by segment, refer to Note 1315 to the Consolidated Financial Statements.
Operating expenses generally relate to leased outpatient medical office and life science properties and SHOPlab buildings, as well as CCRC facilities. We generally recover all or a portion of our leased outpatient medical office and life sciencelab property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense.
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Properties are included in SPPSame-Store once they are stabilized for the full period in both comparison periods. Newly acquired operating assets are generally considered stabilized at the earlier of lease-up (typically when the tenant(s) control(s) the physical use of at least 80% of the space)space and rental payments have commenced) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service. Properties that experience a change in reporting structure such as a transition from a triple-net lease to a RIDEA reporting structure, are considered stabilized after 12 months in operations under a consistent reporting structure. A property is removed from SPPSame-Store when it is classified as held for sale, sold, placed into redevelopment, experiences a casualty event that significantly impacts operations, or changes itsa change in reporting structure (such as triple-netor operator transition has been agreed to, SHOP).
or a significant tenant relocates from a Same-Store property to a non Same-Store property and that change results in a corresponding increase in revenue. We do not report Same-Store metrics for our other non-reportable segments. For a reconciliation of SPPSame-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.
Funds From Operations (“FFO”)
FFO encompasses Nareit FFO and FFO as Adjusted, each of which is described in detail below. We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.
Nareit FFO. FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”Nareit”), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any current and deferred taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real estate, plus real estate and other real estate-related depreciation and amortization, and adjustments to compute our share of Nareit FFO and FFO as adjustedAdjusted (see below) from joint ventures. Adjustments for joint ventures are calculated to reflect our pro-ratapro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of Nareit FFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. For consolidated joint ventures in which we do not own 100%, we reflect our share of the equity by adjusting our Nareit FFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods. Our pro-ratapro rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate
economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control the unconsolidated joint ventures, and the pro-ratapro rata presentations of reconciling items included in Nareit FFO do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital.
The presentation of pro-ratapro rata information has limitations, which include, but are not limited to, the following: (i) the amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses and (ii) other companies in our industry may calculate their pro-ratapro rata interest differently, limiting the usefulness as a comparative measure. Because of these limitations, the pro-ratapro rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro-ratapro rata financial information as a supplement.
Nareit FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss). We compute Nareit FFO in accordance with the current NAREITNareit definition; however, other REITs may report Nareit FFO differently or have a different interpretation of the current NAREITNareit definition from ours.
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FFO as Adjusted. In addition, we present Nareit FFO on an adjusted basis before the impact of non-comparable items including, but not limited to, transaction-relatedtransaction and merger-related items, other impairments (recoveries) of non-depreciable assets, severance and relatedother losses (gains), restructuring and severance-related charges, prepayment costs (benefits) associated with early retirement or payment of debt, litigation costs (recoveries), casualty-related charges (recoveries), foreign currency remeasurement losses (gains)deferred tax asset valuation allowances, and changes in tax legislation (“FFO as adjusted”Adjusted”). Transaction-relatedThese adjustments are net of tax, when applicable. Transaction and merger-related items include transaction expenses and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Prepayment costs (benefits) associated with early retirement of debt include the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of debt. Other impairments (recoveries) and other losses (gains) include interest income associated with early and partial repayments of loans receivable and other losses or gains associated with non-depreciable assets including goodwill, DFLs, undeveloped land parcels, and loans receivable. Management believes that FFO as adjustedAdjusted provides a meaningful supplemental measurement of our FFO run-rate and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. At the same time that NAREITNareit created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors, and financial analysts who review our operating performance are best served by an FFO run-rate earnings measure that includes certain other adjustments to net income (loss), in addition to adjustments made to arrive at the NAREITNareit defined measure of FFO. FFO as adjustedAdjusted is used by management in analyzing our business and the performance of our properties and we believe it is important that stockholders, potential investors, and financial analysts understand this measure used by management. We use FFO as adjustedAdjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions, (ii) evaluate the performance of our management, (iii) budget and forecast future results to assist in the allocation of resources, (iv) assess our performance as compared with similar real estate companies and the industry in general, and (v) evaluate how a specific potential investment will impact our future results. Other REITs or real estate companies may use different methodologies for calculating an adjusted FFO measure, and accordingly, our FFO as adjustedAdjusted may not be comparable to those reported by other REITs. For a reconciliation of net income (loss) to Nareit FFO and FFO as adjustedAdjusted and other relevant disclosure, refer to “Non-GAAP Financial Measures Reconciliations” below.
ownership percentage for the applicable periods (see(reported in “other AFFO adjustments”). See FFO above for further disclosure regarding our use of pro-ratapro rata share information and its limitations). Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, our FAD may not be comparable to those reported by other REITs. Although our FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT.limitations. We believe FADAFFO is an alternative run-rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with: (i) expected results, (ii) results of previous periods, and (iii) results among REITSREITs more meaningful. FADAFFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period, (ii) transaction-related costs, (iii) litigation settlement expenses, and (iv) restructuring and severance-related expenses and (v) actual cash receipts from interest income recognized on loans receivable (in contrast to our FAD adjustment to exclude non-cash interest and depreciation related to our investments in direct financing leases).charges. Furthermore, FADAFFO is adjusted for recurring capital expenditures, which are generally not considered when determining cash flows from operations or liquidity. FADOther REITs or real estate companies may use different methodologies for calculating AFFO, and accordingly, our AFFO may not be comparable to those reported by other REITs. Management believes AFFO provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT, and by presenting AFFO, we are assisting these parties in their evaluation. AFFO is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP and should only be considered together with and as a supplement to our financial information prepared in accordance with GAAP. For a reconciliation of net income (loss) to FADAFFO and other relevant disclosure,disclosures, refer to “Non-GAAP Financial Measures Reconciliations” below.
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Comparison of the Year Ended December 31, 20172023 to the Year Ended December 31, 20162022
Overview
2023 and the Year Ended December 31, 2016 to the Year Ended December 31, 2015
The following table summarizes results for the years ended December 31, 20172023 and 2016 (dollars in thousands except per share data)2022 (in thousands):
| Year Ended | Year Ended | |||||||||||||||||||
| December 31, 2017 | December 31, 2016 | |||||||||||||||||||
| Amount | Per Diluted Share | Amount | Per Diluted Share | Per Share Change | ||||||||||||||||
| Net income (loss) applicable to common shares | $ | 413,013 | $ | 0.88 | $ | 626,549 | $ | 1.34 | $ | (0.46 | ) | |||||||||
| FFO | 661,113 | 1.41 | 1,119,153 | 2.39 | (0.98 | ) | ||||||||||||||
| FFO as adjusted | 918,402 | 1.95 | 1,282,390 | 2.74 | (0.79 | ) | ||||||||||||||
| FAD | 803,720 | 1,215,696 | ||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | (193,508) | ||||||||||||||||||||||||||
| Nareit FFO | 985,180 | 895,166 | 90,014 | |||||||||||||||||||||||||||||
| FFO as Adjusted | 978,306 | 940,933 | 37,373 | |||||||||||||||||||||||||||||
| AFFO | 840,777 | 783,702 | 57,075 | |||||||||||||||||||||||||||||
(1)For the reconciliation of non-GAAP financial measures, see “Non-GAAP Financial Measure Reconciliations” below.
Net income (loss) applicable to common shares (“EPS”) decreased primarily as a result of the following:
•a reduction in net income from discontinued operations duegain upon change of control related to the Spin-Offsale of QCP on October 31, 2016;a 30% interest and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022;
•an increase in interest expense, primarily as a result of: (i) senior unsecured notes issued during the first half of 2023, (ii) borrowings under the Term Loan Facilities, which were drawn during the fourth quarter of 2022, and (iii) higher interest rates on the commercial paper program, partially offset by lower borrowings on the commercial paper program;
•a gain on sale associated with the disposition of a hospital under a DFL during the first quarter of 2022;
•an increase in transaction and merger-related costs, primarily as a result of costs related to the Mergers, which are primarily comprised of legal, accounting, tax, and other costs that were incurred during the fourth quarter of 2023; and
•a decrease in government grant income received under the CARES Act in 2023.
The decrease in net income (loss) applicable to common shares was partially offset by:
•an increase in NOI generated from our lab and outpatient medical segments related to: (i) development and redevelopment projects placed in service during 2022 and 2023, (ii) new leasing activity during 2022 and 2023 (including the impact to straight-line rents), and (iii) 2022 acquisitions of real estate;
•an increase in gains on sale of 64 senior housing triple-net assetsdepreciable real estate related to lab and outpatient medical building sales during 2023 as compared to 2022;
•a decrease in general and administrative expenses, primarily as a result of: (i) severance-related charges associated with the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel in the fourth quarter of 2022 and (ii) charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado in the fourth quarter of 2022;
•a decrease in depreciation related to the deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022;
•a decrease in other expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building, which were incurred in the first quarter of 2017;2022;
•an increase in income tax benefit primarily from real estate dispositions during 2017, partially offset by an incomeas a result of a $14 million tax expense related tobenefit recognized in connection with the impactreversal of a deferred tax rate legislationasset valuation allowance during the fourth quarter of 2017; and2023;
•a decrease in loan loss reserves primarily as a result of principal repayments on seller financing;
•an increase in otherequity income net primarily related tofrom unconsolidated joint ventures; and
•a decrease in casualty-related charges from a hurricane during the gain on salethird quarter of our Four Seasons investments during 2017.2022.
54
Nareit FFO decreasedincreased primarily as a result of the aforementioned events impacting EPS,net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:
•gain upon change of control;
•gain on sales of depreciable real estateestate; and impairments of real estate, which are excluded from FFO.
•depreciation and amortization expense.
FFO as adjusted decreasedAdjusted increased primarily as a result of the following:aforementioned events impacting Nareit FFO, except for the following, which are excluded from FFO as Adjusted:
•gain on October 31, 2016;
•reversal of a valuation allowance on deferred tax assets;
•loan loss reserves;
•transaction and merger-related costs;
•casualty-related charges; and
•the charges incurred in earnings due toconnection with the partial sale and deconsolidation of RIDEA II during the first quarter of 2017; and
| Year Ended | Year Ended | |||||||||||||||||||
| December 31, 2016 | December 31, 2015 | |||||||||||||||||||
| Amount | Per Diluted Share | Amount | Per Diluted Share | Per Share Change | ||||||||||||||||
| Net income (loss) applicable to common shares | $ | 626,549 | $ | 1.34 | $ | (560,552 | ) | $ | (1.21 | ) | $ | 2.55 | ||||||||
| FFO | 1,119,153 | 2.39 | (10,841 | ) | (0.02 | ) | 2.41 | |||||||||||||
| FFO as adjusted | 1,282,390 | 2.74 | 1,470,167 | 3.16 | (0.42 | ) | ||||||||||||||
| FAD | 1,215,696 | 1,261,849 | ||||||||||||||||||
Segment Analysis
The following tables below provide selected operating information for our SPPSame-Store and total property portfolio for each of our reportable segments. For the year ended December 31, 2017,2023, our SPPSame-Store consists of 617403 properties representing properties acquired or placed in service and stabilized on or prior to January 1, 20162022 and that remained in operations under a consistent reporting structure through December 31, 2017. For the year ended December 31, 2016, our SPP2023. Our total property portfolio consisted of 621 properties acquired or placed in service477 and stabilized on or prior to January 1, 2015 and that remained in operations under a consistent reporting structure through December 31, 2017. Our total consolidated property portfolio consists of 744, 851 and 869480 properties at December 31, 2017, 20162023 and 2015, respectively, excluding properties2022, respectively. Included in the Spin-Off.our total property portfolio at each of December 31, 2023 and 2022 are 19 senior housing assets in our SWF SH JV.
Lab
The following table summarizes results at and for the years ended December 31, 20172023 and 20162022 (dollars and square feet in thousands, except per unitsquare foot data):
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 249,347 | $ | 273,984 | $ | (24,637 | ) | $ | 313,547 | $ | 423,118 | $ | (109,571 | ) | |||||||||
| Operating expenses | (495 | ) | (197 | ) | (298 | ) | (3,819 | ) | (6,710 | ) | 2,891 | ||||||||||||
| NOI | 248,852 | 273,787 | (24,935 | ) | 309,728 | 416,408 | (106,680 | ) | |||||||||||||||
| Adjustments to NOI | 38,760 | (1,374 | ) | 40,134 | 17,098 | (7,566 | ) | 24,664 | |||||||||||||||
| Adjusted NOI | $ | 287,612 | $ | 272,413 | $ | 15,199 | 326,826 | 408,842 | (82,016 | ) | |||||||||||||
| Non-SPP adjusted NOI | (39,214 | ) | (136,429 | ) | 97,215 | ||||||||||||||||||
| SPP adjusted NOI | $ | 287,612 | $ | 272,413 | $ | 15,199 | |||||||||||||||||
| SPP Adjusted NOI % change | 5.6 | % | |||||||||||||||||||||
Property count(2) | 174 | 174 | 181 | 274 | |||||||||||||||||||
Average capacity (units)(3) | 17,724 | 17,741 | 21,536 | 28,455 | |||||||||||||||||||
| Average annual rent per unit | $ | 16,255 | $ | 15,366 | $ | 15,352 | $ | 14,604 | |||||||||||||||
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 663,859 | $ | 649,238 | $ | 14,621 | $ | 878,326 | $ | 817,573 | $ | 60,753 | |||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 6,589 | 9,613 | (3,024) | 9,924 | 9,921 | 3 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (133) | (129) | (4) | (619) | (268) | (351) | |||||||||||||||||||||||||||||
| Operating expenses | (182,602) | (166,433) | (16,169) | (229,630) | (209,143) | (20,487) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (2,651) | (2,305) | (346) | (4,092) | (2,883) | (1,209) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 46 | 43 | 3 | 156 | 87 | 69 | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (23,979) | (45,496) | 21,517 | (36,524) | (62,754) | 26,230 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | 617,541 | 552,533 | 65,008 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (156,412) | (108,002) | (48,410) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 461,129 | $ | 444,531 | $ | 16,598 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.7 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 116 | 116 | 146 | 149 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 96.5 | % | 98.7 | % | 96.9 | % | 98.9 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 97.5 | % | 98.5 | % | 97.8 | % | 98.7 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 8,786 | 8,856 | 10,524 | 10,727 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 74 | $ | 69 | $ | 81 | $ | 72 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 56 | $ | 53 | $ | 63 | $ | 55 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date. (2)Represents adjustments to |
(3)From our 2022 presentation of Same-Store, we added: (i) five stabilized acquisitions, (ii) three stabilized buildings that previously experienced a significant tenant relocation, (iii) two stabilized redevelopments placed in service, and (iv) one stabilized development placed in service, and we removed: (i) six buildings that were placed into redevelopment, (ii) one asset that was placed into land held for development, and (iii) one building that experienced a significant tenant relocation.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of Same-Store. Total Portfolio occupancy excludes any of the net impactfollowing: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of triple-netmarket lease terminations from the Brookdale Transaction during the fourth quarterintangibles, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in excess of 2017.floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
•annual rent escalations; and
•new leasing activity; partially offset by
•lower occupancy; and
•higher cash rent received from our portfolio of assets leased to Sunrise Senior Living.operating expenses.
•decreased NOI from five senior housing triple-net facilities acquired in the first quarterour 2022 and 2023 dispositions.
56
Outpatient Medical
The following table summarizes results at and for the years ended December 31, 20162023 and 20152022 (dollars and square feet in thousands, except per unitsquare foot data):
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 302,976 | $ | 304,442 | $ | (1,466 | ) | $ | 423,118 | $ | 428,269 | $ | (5,151 | ) | |||||||||
| Operating expenses | (237 | ) | (637 | ) | 400 | (6,710 | ) | (3,427 | ) | (3,283 | ) | ||||||||||||
| NOI | 302,739 | 303,805 | (1,066 | ) | 416,408 | 424,842 | (8,434 | ) | |||||||||||||||
| Non-cash adjustments to NOI | (5,282 | ) | (7,550 | ) | 2,268 | (7,566 | ) | (9,716 | ) | 2,150 | |||||||||||||
| Adjusted NOI | $ | 297,457 | $ | 296,255 | $ | 1,202 | 408,842 | 415,126 | (6,284 | ) | |||||||||||||
| Non-SPP adjusted NOI | (111,385 | ) | (118,871 | ) | 7,486 | ||||||||||||||||||
| SPP adjusted NOI | $ | 297,457 | $ | 296,255 | $ | 1,202 | |||||||||||||||||
| Adjusted NOI % change | 0.4 | % | |||||||||||||||||||||
Property count(2) | 205 | 205 | 274 | 295 | |||||||||||||||||||
Average capacity (units)(3) | 20,269 | 20,268 | 28,455 | 28,777 | |||||||||||||||||||
| Average annual rent per unit | $ | 14,684 | $ | 14,645 | $ | 14,604 | $ | 14,544 | |||||||||||||||
| SS | Total Portfolio(1) | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 678,967 | $ | 656,588 | $ | 22,379 | $ | 753,479 | $ | 724,202 | $ | 29,277 | |||||||||||||||||||||||
| Income from direct financing leases | — | — | — | — | 1,168 | (1,168) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 2,893 | 2,795 | 98 | 3,033 | 2,999 | 34 | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (34,053) | (33,429) | (624) | (35,073) | (35,717) | 644 | |||||||||||||||||||||||||||||
| Operating expenses | (229,310) | (218,716) | (10,594) | (263,132) | (253,309) | (9,823) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (1,183) | (1,147) | (36) | (1,189) | (1,178) | (11) | |||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 9,738 | 9,492 | 246 | 9,921 | 10,317 | (396) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (11,685) | (13,763) | 2,078 | (14,314) | (15,513) | 1,199 | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | 452,725 | 432,969 | 19,756 | ||||||||||||||||||||||||||
| Less: non-SS Adjusted NOI | (37,358) | (31,149) | (6,209) | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 415,367 | $ | 401,820 | $ | 13,547 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 3.4 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 272 | 272 | 297 | 297 | |||||||||||||||||||||||||||||||
End of period occupancy(4) | 91.9 | % | 91.7 | % | 90.7 | % | 90.2 | % | |||||||||||||||||||||||||||
Average occupancy(4) | 91.5 | % | 91.6 | % | 90.1 | % | 89.9 | % | |||||||||||||||||||||||||||
| Average occupied square feet | 20,218 | 20,233 | 21,531 | 21,685 | |||||||||||||||||||||||||||||||
Average annual total revenues per occupied square foot(5) | $ | 34 | $ | 33 | $ | 35 | $ | 34 | |||||||||||||||||||||||||||
Average annual base rent per occupied square foot(6) | $ | 28 | $ | 27 | $ | 29 | $ | 27 | |||||||||||||||||||||||||||
(1)Total Portfolio includes results of operations from disposed properties through the disposition date. (2)Represents adjustments to |
(3)From our 2022 presentation of Same-Store, we added: (i) 25 stabilized acquisitions and (ii) 2 stabilized developments placed in service, and we removed: (i) 2 assets that were sold and (ii) 1 asset that was classified as a resultheld for sale.
(4)Refer to “Non-GAAP Financial Measures” above for the definition of lowerSame-Store. Total Portfolio occupancy excludes any of the following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
(5)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
(6)Base rent does not include tenant recoveries, additional rents in our portfolioexcess of assets leased to Sunrise Senior Living (the “Sunrise Portfolio”)floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues). SPP adjusted
Same-Store Adjusted NOI increased primarily as a result of the following:
•mark-to-market lease renewals; and
•annual rent escalations,escalations; partially offset by lower cash rent received from our Sunrise portfolio.
Total Portfolio Adjusted NOI and adjusted NOI decreasedincreased primarily as a result of the aforementioned increases to Same-Store and the following Non-SPPNon-Same-Store impacts:
•increased occupancy in our SHOP segment);former redevelopment and development properties that have been placed in service; partially offset by
57
Continuing Care Retirement Community
The following table summarizes results at and for the years ended December 31, 20172023 and 20162022 (dollars in thousands, except per unit data):
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
| Resident fees and services | $ | 321,209 | $ | 317,361 | $ | 3,848 | $ | 525,473 | $ | 686,822 | $ | (161,349 | ) | ||||||||||
| Operating expenses | (239,702 | ) | (202,624 | ) | (37,078 | ) | (396,491 | ) | (480,870 | ) | 84,379 | ||||||||||||
| NOI | 81,507 | 114,737 | (33,230 | ) | 128,982 | 205,952 | (76,970 | ) | |||||||||||||||
| Adjustments to NOI | 32,863 | (1,297 | ) | 34,160 | 33,227 | (2,686 | ) | 35,913 | |||||||||||||||
| Adjusted NOI | $ | 114,370 | $ | 113,440 | $ | 930 | 162,209 | 203,266 | (41,057 | ) | |||||||||||||
| Non-SPP adjusted NOI | (47,839 | ) | (89,826 | ) | 41,987 | ||||||||||||||||||
| SPP adjusted NOI | $ | 114,370 | $ | 113,440 | $ | 930 | |||||||||||||||||
| SPP Adjusted NOI % change | 0.8 | % | |||||||||||||||||||||
Property count(1) | 48 | 48 | 102 | 130 | |||||||||||||||||||
Average capacity (units)(2) | 8,128 | 8,136 | 12,758 | 16,028 | |||||||||||||||||||
| Average annual rent per unit | $ | 44,378 | $ | 43,842 | $ | 41,133 | $ | 42,851 | |||||||||||||||
| SS | Total Portfolio | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
| Resident fees and services | $ | 526,769 | $ | 494,935 | $ | 31,834 | $ | 527,417 | $ | 494,935 | $ | 32,482 | |||||||||||||||||||||||
Government grant income(1) | — | — | — | 184 | 6,765 | (6,581) | |||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | — | — | 380 | (380) | |||||||||||||||||||||||||||||
| Operating expenses | (411,539) | (398,915) | (12,624) | (413,472) | (400,539) | (12,933) | |||||||||||||||||||||||||||||
Adjustments to NOI(2) | (1,618) | 2,300 | (3,918) | (1,618) | 2,300 | (3,918) | |||||||||||||||||||||||||||||
| Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | 112,511 | 103,841 | 8,670 | ||||||||||||||||||||||||||
| Plus (less): non-SS adjustments | 1,101 | (5,521) | 6,622 | ||||||||||||||||||||||||||||||||
| SS Adjusted NOI | $ | 113,612 | $ | 98,320 | $ | 15,292 | |||||||||||||||||||||||||||||
| Adjusted NOI % change | 15.6 | % | |||||||||||||||||||||||||||||||||
Property count(3) | 15 | 15 | 15 | 15 | |||||||||||||||||||||||||||||||
Average occupancy(4) | 83.8 | % | 81.6 | % | 83.9 | % | 81.6 | % | |||||||||||||||||||||||||||
Average occupied units(5) | 5,952 | 5,926 | 5,960 | 5,926 | |||||||||||||||||||||||||||||||
| Average annual rent per occupied unit | $ | 88,503 | $ | 83,519 | $ | 88,524 | $ | 84,725 | |||||||||||||||||||||||||||
(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations. (2)Represents adjustments to |
(3)From our 2022 presentation of Same-Store, no properties were added or removed.
(4)Refer to “Non-GAAP Financial Measures” above for the Brookdale Transaction duringdefinition of Same-Store. Total Portfolio occupancy excludes any of the fourth quarter of 2017.following: (i) developments, (ii) significant redevelopments, (iii) newly completed properties under lease-up, and (iv) properties held for sale.
Same-Store Adjusted NOI increased primarily as a result of the following:
•increased rates for resident feesfees; and services;
•higher occupancy; partially offset by
•higher expense growthcosts of labor, management fees, insurance, real estate taxes, utilities, and a decline in occupancy.food; and
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
| Resident fees and services | $ | 439,607 | $ | 419,217 | $ | 20,390 | $ | 686,822 | $ | 518,264 | $ | 168,558 | |||||||||||
| Operating expenses | (311,278 | ) | (298,648 | ) | (12,630 | ) | (480,870 | ) | (371,016 | ) | (109,854 | ) | |||||||||||
| NOI | 128,329 | 120,569 | 7,760 | 205,952 | 147,248 | 58,704 | |||||||||||||||||
| Adjustments to NOI | — | — | — | (2,686 | ) | 8,145 | (10,831 | ) | |||||||||||||||
| Adjusted NOI | $ | 128,329 | $ | 120,569 | $ | 7,760 | 203,266 | 155,393 | 47,873 | ||||||||||||||
| Non-SPP adjusted NOI | (74,937 | ) | (34,824 | ) | (40,113 | ) | |||||||||||||||||
| SPP adjusted NOI | $ | 128,329 | $ | 120,569 | $ | 7,760 | |||||||||||||||||
| SPP Adjusted NOI % change | 6.4 | % | |||||||||||||||||||||
Property count(1) | 69 | 69 | 130 | 130 | |||||||||||||||||||
Average capacity (units)(2) | 9,944 | 9,962 | 16,028 | 12,704 | |||||||||||||||||||
| Average annual rent per unit | $ | 44,209 | $ | 42,081 | $ | 42,851 | $ | 41,435 | |||||||||||||||
Total Portfolio NOI and adjusted NOI increased primarily as a result of the aforementioned increases to SPP along with 2015 acquisitions, primarily our RIDEA III acquisition. The increase in Total Portfolio NOI was partially offset by a termination fee related to our RIDEA III acquisition, which was not repeated in 2016.
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 304,858 | $ | 292,147 | $ | 12,711 | $ | 358,816 | $ | 358,537 | $ | 279 | |||||||||||
| Operating expenses | (63,612 | ) | (58,363 | ) | (5,249 | ) | (78,001 | ) | (72,478 | ) | (5,523 | ) | |||||||||||
| NOI | 241,246 | 233,784 | 7,462 | 280,815 | 286,059 | (5,244 | ) | ||||||||||||||||
| Adjustments to NOI | 2,427 | 339 | 2,088 | (4,517 | ) | (2,954 | ) | (1,563 | ) | ||||||||||||||
| Adjusted NOI | $ | 243,673 | $ | 234,123 | $ | 9,550 | 276,298 | 283,105 | (6,807 | ) | |||||||||||||
| Non-SPP adjusted NOI | (32,625 | ) | (48,982 | ) | 16,357 | ||||||||||||||||||
| SPP adjusted NOI | $ | 243,673 | $ | 234,123 | $ | 9,550 | |||||||||||||||||
| SPP Adjusted NOI % change | 4.1 | % | |||||||||||||||||||||
Property count(2) | 108 | 108 | 131 | 128 | |||||||||||||||||||
| Average occupancy | 96.3 | % | 97.7 | % | 96.2 | % | 97.5 | % | |||||||||||||||
| Average occupied square feet | 6,105 | 6,193 | 6,841 | 7,332 | |||||||||||||||||||
| Average annual total revenues per occupied square foot | $ | 50 | $ | 47 | $ | 52 | $ | 48 | |||||||||||||||
| Average annual base rent per occupied square foot | $ | 41 | $ | 39 | $ | 42 | $ | 40 | |||||||||||||||
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 306,317 | $ | 295,515 | $ | 10,802 | $ | 358,537 | $ | 342,984 | $ | 15,553 | |||||||||||
| Operating expenses | (58,812 | ) | (58,779 | ) | (33 | ) | (72,478 | ) | (70,217 | ) | (2,261 | ) | |||||||||||
| NOI | 247,505 | 236,736 | 10,769 | 286,059 | 272,767 | 13,292 | |||||||||||||||||
| Adjustments to NOI | 554 | (6,366 | ) | 6,920 | (2,954 | ) | (10,128 | ) | 7,174 | ||||||||||||||
| Adjusted NOI | $ | 248,059 | $ | 230,370 | $ | 17,689 | 283,105 | 262,639 | 20,466 | ||||||||||||||
| Non-SPP adjusted NOI | (35,046 | ) | (32,269 | ) | (2,777 | ) | |||||||||||||||||
| SPP adjusted NOI | $ | 248,059 | $ | 230,370 | $ | 17,689 | |||||||||||||||||
| SPP Adjusted NOI % change | 7.7 | % | |||||||||||||||||||||
Property count(2) | 107 | 107 | 128 | 120 | |||||||||||||||||||
| Average occupancy | 97.8 | % | 96.8 | % | 97.5 | % | 97.1 | % | |||||||||||||||
| Average occupied square feet | 6,378 | 6,314 | 7,332 | 7,179 | |||||||||||||||||||
| Average annual total revenues per occupied square foot | $ | 48 | $ | 46 | $ | 48 | $ | 46 | |||||||||||||||
| Average annual base rent per occupied square foot | $ | 40 | $ | 37 | $ | 40 | $ | 38 | |||||||||||||||
| SPP | Total Portfolio | ||||||||||||||||||||||
| 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 400,747 | $ | 392,166 | $ | 8,581 | $ | 477,459 | $ | 446,280 | $ | 31,179 | |||||||||||
| Operating expenses | (150,329 | ) | (146,300 | ) | (4,029 | ) | (183,197 | ) | (173,687 | ) | (9,510 | ) | |||||||||||
| NOI | 250,418 | 245,866 | 4,552 | 294,262 | 272,593 | 21,669 | |||||||||||||||||
| Adjustments to NOI | 2,183 | (523 | ) | 2,706 | (2,952 | ) | (3,536 | ) | 584 | ||||||||||||||
| Adjusted NOI | $ | 252,601 | $ | 245,343 | $ | 7,258 | 291,310 | 269,057 | 22,253 | ||||||||||||||
| Non-SPP adjusted NOI | (38,709 | ) | (23,714 | ) | (14,995 | ) | |||||||||||||||||
| SPP adjusted NOI | $ | 252,601 | $ | 245,343 | $ | 7,258 | |||||||||||||||||
| SPP Adjusted NOI % change | 3.0 | % | |||||||||||||||||||||
Property count(2) | 212 | 212 | 254 | 242 | |||||||||||||||||||
| Average occupancy | 91.9 | % | 92.2 | % | 91.8 | % | 91.5 | % | |||||||||||||||
| Average occupied square feet | 14,224 | 14,303 | 16,674 | 15,697 | |||||||||||||||||||
| Average annual total revenues per occupied square foot | $ | 28 | $ | 27 | $ | 28 | $ | 28 | |||||||||||||||
| Average annual base rent per occupied square foot | $ | 24 | $ | 23 | $ | 24 | $ | 24 | |||||||||||||||
decreased government grant income fromreceived under the sale of seven MOBs during 2016 and 2017 and the placement of a MOB into redevelopment.
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| SPP | Total Portfolio | ||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||||
Rental revenues(1) | $ | 376,346 | $ | 367,804 | $ | 8,542 | $ | 446,280 | $ | 415,351 | $ | 30,929 | |||||||||||
| Operating expenses | (141,897 | ) | (138,130 | ) | (3,767 | ) | (173,687 | ) | (162,054 | ) | (11,633 | ) | |||||||||||
| NOI | 234,449 | 229,674 | 4,775 | 272,593 | 253,297 | 19,296 | |||||||||||||||||
| Adjustments to NOI | (443 | ) | (2,379 | ) | 1,936 | (3,536 | ) | (4,933 | ) | 1,397 | |||||||||||||
| Adjusted NOI | $ | 234,006 | $ | 227,295 | $ | 6,711 | 269,057 | 248,364 | 20,693 | ||||||||||||||
| Non-SPP adjusted NOI | (35,051 | ) | (21,069 | ) | (13,982 | ) | |||||||||||||||||
| SPP adjusted NOI | $ | 234,006 | $ | 227,295 | $ | 6,711 | |||||||||||||||||
| SPP Adjusted NOI % change | 3.0 | % | |||||||||||||||||||||
Property count(2) | 202 | 202 | 242 | 231 | |||||||||||||||||||
| Average occupancy | 91.8 | % | 91.5 | % | 91.5 | % | 90.7 | % | |||||||||||||||
| Average occupied square feet | 12,976 | 12,905 | 15,697 | 14,677 | |||||||||||||||||||
| Average annual total revenues per occupied square foot | $ | 29 | $ | 28 | $ | 28 | $ | 28 | |||||||||||||||
| Average annual base rent per occupied square foot | $ | 24 | $ | 24 | $ | 24 | $ | 23 | |||||||||||||||
Other Income and Expense Items
The following table summarizes the results of our other income and expense items for the years ended December 31, 2017, 20162023 and 20152022 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Interest income | $ | 21,781 | $ | 23,300 | $ | (1,519) | |||||||||||
| Interest expense | 200,331 | 172,944 | 27,387 | ||||||||||||||
| Depreciation and amortization | 749,901 | 710,569 | 39,332 | ||||||||||||||
| General and administrative | 95,132 | 131,033 | (35,901) | ||||||||||||||
| Transaction and merger-related costs | 17,515 | 4,853 | 12,662 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | (12,605) | ||||||||||||||
| Gain (loss) on sales of real estate, net | 86,463 | 9,078 | 77,385 | ||||||||||||||
| Other income (expense), net | 6,808 | 326,268 | (319,460) | ||||||||||||||
| Income tax benefit (expense) | 9,617 | 4,425 | 5,192 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,204 | 1,985 | 8,219 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | (2,884) | ||||||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (12,773) | ||||||||||||||
| Year Ended December 31, | 2017 vs. | 2016 vs. | |||||||||||||||||
| 2017 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Interest income | $ | 56,237 | $ | 88,808 | $ | 112,184 | $ | (32,571 | ) | $ | (23,376 | ) | |||||||
| Interest expense | 307,716 | 464,403 | 479,596 | (156,687 | ) | (15,193 | ) | ||||||||||||
| Depreciation and amortization | 534,726 | 568,108 | 504,905 | (33,382 | ) | 63,203 | |||||||||||||
| General and administrative | 88,772 | 103,611 | 95,965 | (14,839 | ) | 7,646 | |||||||||||||
| Transaction costs | 7,963 | 9,821 | 27,309 | (1,858 | ) | (17,488 | ) | ||||||||||||
| Impairments (recoveries), net | 166,384 | — | 108,349 | 166,384 | (108,349 | ) | |||||||||||||
| Gain (loss) on sales of real estate, net | 356,641 | 164,698 | 6,377 | 191,943 | 158,321 | ||||||||||||||
| Loss on debt extinguishments | (54,227 | ) | (46,020 | ) | — | (8,207 | ) | (46,020 | ) | ||||||||||
| Other income (expense), net | 31,420 | 3,654 | 16,208 | 27,766 | (12,554 | ) | |||||||||||||
| Income tax benefit (expense) | 1,333 | (4,473 | ) | 9,807 | 5,806 | (14,280 | ) | ||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,901 | 11,360 | 6,590 | (459 | ) | 4,770 | |||||||||||||
| Total discontinued operations | — | 265,755 | (699,086 | ) | (265,755 | ) | 964,841 | ||||||||||||
| Noncontrolling interests’ share in earnings | (8,465 | ) | (12,179 | ) | (12,817 | ) | 3,714 | 638 | |||||||||||
Interest income. The decrease in interest income decreased for the year ended December 31, 2017 was2023 primarily theas a result of: (i) the payoff of our HC-One Facilityprincipal repayments on loans receivable in June 2017, (ii) incremental interest income received during the second quarter of 2016 due to the payoff of three participating development loans,2022 and (iii) decreased interest received from our Tandem Mezzanine Loan during the fourth quarter of 2017,2023, partially offset by additionalhigher interest income in 2017 from our $131 million loan to Maria Mallaband in November 2016.rates.
Interest expense increased for the year ended December 31, 2016 was2023 primarily theas a result of: (i) placing our Four Seasons Notes on cost recovery status insenior unsecured notes issued during the third quarterfirst half of 2015 and2023, (ii) paydowns in our loan portfolio. The decrease in interest income was partially offset by additional interest income from: (i)borrowings under the Four Seasons senior secured term loan purchased inTerm Loan Facilities, which were drawn during the fourth quarter of 20152022, and (ii) additional fundings in our loan portfolio, including our £105 million ($131 million) loan to Maria Mallaband in November 2016.(iii) higher interest rates on the commercial paper program, partially offset by lower borrowings on the commercial paper program.
Depreciation and amortization expense increased for the year ended December 31, 2017 was2023 primarily theas a result of senior unsecured notesdevelopment and mortgage debt repayments, which occurred primarilyredevelopment projects placed in service during 2022 and 2023, partially offset by: (i) assets placed into redevelopment in 2023, (ii) dispositions of real estate in 2022 and 2023, and (iii) lower depreciation related to the second halfdeconsolidation of 2016seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022.
General and throughout 2017.administrative
Transaction and $71 million of variable rate debt swapped to fixed through interest rate swaps, was fixed rate debt as of December 31, 2017, 2016merger-related costs
Transaction and 2015, respectively. At December 31, 2017, our fixed rate debt and variable rate debt had weighted average interest rates of 4.19% and 2.56%, respectively. At December 31, 2016, our fixed rate debt and variable rate debt had weighted average interest rates of 4.26% and 2.23%, respectively. At December 31, 2015, our fixed rate debt and variable rate debt had weighted average interest rates of 4.68% and 1.72%, respectively. For a more detailed discussion of our interest rate risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 3 below.
Impairments and amortization of assets acquiredloan loss reserves (recoveries), net
Impairments and placed in service during 2016 and 2017.
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Gain (loss) on sales of real estate, net.During the year ended December 31, 2017, we sold 68 senior housing triple-net assets for $1.152 billion, five life science facilities for $81 million, five SHOP facilities for $43 million, four MOBs for $15 million and a 40% interest in RIDEA II and recognized total net gain
Gain on sales of real estate, of $357 million.
Other income recognition to a cash basis method beginning in January 2016, (ii) transaction costs of $87 million related to the Spin-Off and (iii) increased(expense), net
Other income, tax expense related to our estimated exposure to state built-in gain tax. During the year ended December 31, 2015, we recognized impairments of $1.3 billion related to our HCRMC portfolio. There were no discontinued operationsnet decreased for the year ended December 31, 2017.2023 primarily as a result of: (i) a gain upon change of control related to the sale of a 30% interest and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California during the third quarter of 2022, (ii) a gain on sale associated with the disposition of a hospital under a DFL during the first quarter of 2022, and (iii) a decrease in government grant income received under the CARES Act in 2023. The decrease in other income, net during the year ended December 31, 2023 was partially offset by: (i) other expenses for tenant relocation and other costs associated with the demolition of an outpatient medical building, which were incurred in the first quarter of 2022 and (ii) casualty losses from a hurricane in the third quarter of 2022.
Income tax benefit increased for the year ended December 31, 2023 primarily as a result of a $14 million tax benefit recognized in connection with the reversal of a deferred tax asset valuation allowance during the fourth quarter of 2023 (see Note 16 to the Consolidated Financial Statements), partially offset by an increase in operating income associated with our CCRCs.
Equity income (loss) from unconsolidated joint ventures
Equity income from unconsolidated joint ventures increased for the year ended December 31, 2023 primarily as a result of increased income from the South San Francisco JVs and the SWF SH JV.
Income (loss) from discontinued operations
Income from discontinued operations decreased for the year ended December 31, 2023 a result of the completion of dispositions of our senior housing portfolios.
Noncontrolling interests’ share in continuing operations
Noncontrolling interests’ share in continuing operations increased for the year ended December 31, 2023 primarily as a result of a gain on sale of an outpatient medical building in a consolidated joint venture that was sold during the second quarter of 2023.
Liquidity and Capital Resources
We anticipate that our cash flow from operations, available cash balances, and cash from our various financing activities will be adequate for at least the next 12 months and for the foreseeable future for purposes of: (i) costs incurred to consummate the Mergers and the other transactions contemplated in the Merger Agreement; (ii) funding recurring operating expenses; (ii)(iii) meeting debt service requirements, including principal paymentsrequirements; and maturities; and (iii)(iv) satisfying ourfunding of distributions to our stockholders and non-controlling interest members.Distributions are made using a combination of cash flows from operations, funds available under our bank line of credit (the “Revolving Facility”) and commercial paper program, proceeds from the sale of properties, and other sources of cash available to us.
•fund capital expenditures, including tenant improvements and leasing costs; and
•fund future acquisition, transactional, and development and redevelopment activities.
Our longer term liquidity needs include the items listed above as well as meeting debt service requirements.
We anticipate satisfying these future investing needs using one or more of the following:
•sale of, common or preferred stock;exchange of ownership interests in, properties or other investments;
•borrowings under our Revolving Facility and commercial paper program;
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•issuance of additional debt, including unsecured notes, term loans, and mortgage debt; and/or
A downgrade in credit ratings by Moody’s or S&P Global may have a negative impact on the interest rates of our Revolving Facility and Term Loan Facilities and facility fees for our Revolving Facility, and may negatively impact the pricing of notes issued under our commercial paper program and senior unsecured notes. While a downgrade in our credit ratings would adversely impact our cost of borrowing, we believe we would continue to have access to the unsecured debt markets, and we could also seek to enter into one or more secured debt financings, issue additional securities, including under our ATM Program, or dispose of certain assets to fund future operating costs, capital expenditures, or acquisitions, although no assurances can be made in this regard. Refer to “Market Trends and Uncertainties” above for a more comprehensive discussion of the potential impact of economic and market conditions on our business.
Material Cash Requirements
Our material cash requirements include the below contractual and other obligations.
Debt. As of December 31, 2023, we had total debt of $6.9 billion, including borrowings under our Revolving Facility and commercial paper program, senior unsecured notes, term loans, and mortgage debt. Of our total debt, securities.
Development and redevelopment commitments. Our development and redevelopment commitments represent construction and other commitments for development and redevelopment projects in progress and includes certain allowances for Company-owned tenant improvements that we have provided as a lessor. As of December 31, 2023, we had $152 million of development and redevelopment commitments, $135 million of which we expect to spend within the next twelve months.
Lease and other contractual commitments. Our lease and other contractual commitments represent our commitments, as lessor, under signed leases and contracts for operating properties and include allowances for Company-owned tenant improvements and leasing commissions. These commitments exclude allowances for Company-owned tenant improvements related to developments and redevelopments in progress for which we have executed an agreement with a general contractor to complete the tenant improvements, which are recognized as development and redevelopment commitments and are discussed further above. As of December 31, 2023, we had total lease and other contractual commitments of $28 million, $26 million of which we expect to spend within the next twelve months.
Construction loan commitments. Due to the terms of our SHOP seller financing notes receivable, as of December 31, 2023, we are obligated to provide additional loans up to $29 millionto fund senior housing redevelopment capital expenditure projects, which extend through 2024. See Note 7 to the Consolidated Financial Statements for additional information.
Ground and other operating lease commitments. Our ground and other operating lease commitments represent our commitments as lessee under signed operating leases. As of December 31, 2023, we had total ground and other operating lease commitments of $542 million, $17 million of which are payable within twelve months. See Note 6 to the Consolidated Financial Statements for additional information.
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Redeemable noncontrolling interests.Certain of our noncontrolling interest holders have the ability to put their equity interests to us upon specified events or after the passage of a predetermined period of time. Each put option is subject to changes in redemption value in the event that the underlying property generates specified returns for us and meets certain promote thresholds pursuant to the respective agreements. As of December 31, 2023, three of the redeemable noncontrolling interests have met the conditions for redemption, but were not yet exercised. As of December 31, 2023, the redemption value of our redeemable noncontrolling interests was $49 million. See Note 12 to the Consolidated Financial Statements for additional information.
Success-Based Fees. We have engaged service providers, including investment banks and advisors, to help us negotiate the terms of the Mergers and to advise us on other merger-related matters. In connection with these services, we expect to be required to pay success-based fees to the extent that certain conditions, including the closing of the Mergers, are met. As of December 31, 2023, we expect to incur approximately $22 million of such success fees upon closing of the Mergers during the first quarter of 2024. As closing of the Mergers has not occurred, no such amounts have been paid or accrued through December 31, 2023. See Note 1 to the Consolidated Financial Statements for additional information.
Distribution and Dividend Requirements. Our dividend policy on our common stock is to distribute a percentage of our cash flow to ensure that we meet the dividend requirements of the Code, relative to maintaining our REIT status, while still allowing us to retain cash to fund capital improvements and other investment activities. Under the Code, REITs may be subject to certain federal income and excise taxes on undistributed taxable income. We paid quarterly cash dividends of $0.30 per common share in 2023. Our future common dividends, if and as declared, may vary and will be determined by the Board based upon the circumstances prevailing at the time, including our financial condition.
Off-Balance Sheet Arrangements
We own interests in certain unconsolidated joint ventures as described in Note 8 to the Consolidated Financial Statements. Two of these joint ventures have aggregate mortgage debt of $88 million, of which our share is $40 million. Except in limited circumstances, our risk of loss is limited to our investment in the applicable joint venture. We have no other material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.
Inflation
A significant portion of our revenues are derived from leases that generally provide for fixed rental rates, subject to annual escalations. A period of high inflation could result in increases in the Consumer Price Index in excess of our fixed annual escalations. Certain of our leases provide that annual rent is modified based on changes in the Consumer Price Index or other thresholds.
Most of our outpatient medical leases require the tenant to pay a share of property operating costs such as real estate taxes, insurance, and utilities. Substantially all of our lab leases require the tenant or operator to pay all of the property operating costs or reimburse us for all such costs.
Labor costs, costs of construction materials, interest, utilities, and other operating costs may increase during periods of inflation. Inflationary increases in expenses will generally be offset, in whole or in part, by the tenant expense reimbursements and contractual rent increases described above.
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Cash Flow Summary
The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 847,041 | $ | 1,214,131 | $ | 1,222,145 | |||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | 1,246,257 | (428,973 | ) | (1,660,365 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net cash provided by (used in) financing activities | (2,148,461 | ) | (1,054,265 | ) | 614,087 | ||||||||||||||||||||||||||||||||||||||||
Operating cash flow decreased $367 million between the years ended December 31, 2017 and 2016 primarily as the result of: (i) decreased Adjusted NOI related to the QCP Spin-Off and dispositions in 2016 and 2017 and (ii) decreased interest received as a result of loan repayments during 2016 and 2017; partially offset by (i) 2016 and 2017 acquisitions, (ii) annual rent increases, (iii) and decreased interest paid as a result of lower balances on our senior unsecured notes and term loans. Cash Flows
Our cash flowflows from operations isare dependent upon the occupancy levels of our buildings, rental rates on leases, our tenants’ performance on their lease obligations, the level of operating expenses, and other factors.
Our cash flows from the saleinvesting activities are generally used to fund acquisitions, developments, and redevelopments of real estate, including the sale and recapitalizationnet of RIDEA II;
proceeds received net proceeds of $559 million primarily from the sale of our Four Seasons investments, the repayment of our HC-One Facility, and a DFL repayment;
Financing Cash Flows
Our cash flows from financing activities are generally impacted by issuances of equity, borrowings and loans, and purchases of securities) and received proceeds of $908 million primarily from real estate and DFL sales;
Discontinued Operations
Operating, investing, and noncontrolling interest,financing cash flows in our Consolidated Statements of Cash Flows are reported inclusive of both cash flows from continuing operations and an additional $684cash flows from discontinued operations. Certain significant cash flows from discontinued operations are disclosed in Note 17 to the Consolidated Financial Statements.
Debt
In January 2023 and May 2023, we completed public offerings of $750 million from salesaggregate principal amount of real estate, and loan and DFL repayments; and repaid $969 million of5.25% senior unsecured notes bank linedue 2032.
In February 2023, the Revolving Facility was amended to change the interest rate benchmark from LIBOR to SOFR.
Also in February 2023, the agreements associated with $142 million of credit andvariable rate mortgage debt.debt were amended to change the interest rate benchmarks from LIBOR to SOFR, effective March 2023. Concurrently, we modified the related interest rate swap instruments to reflect the change in the interest rate benchmarks from LIBOR to SOFR.
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In addition to the 2024 Term Loan, we anticipate that our principal indebtedness will increase due to debt assumed in connection with the Mergers.
See Note 10 into the Consolidated Financial Statements for additional information about our outstanding debt.
Supplemental Guarantor Information
Healthpeak OP has issued the senior unsecured notes described in Note 10 to the Consolidated Financial Statements. The obligations of Healthpeak OP to pay principal, premiums, if any, and interest on such senior unsecured notes are guaranteed on a full and unconditional basis by the Company.
Subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the parent guarantee is “full and unconditional”, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and consolidated financial statements of the parent company have been filed. Accordingly, separate consolidated financial statements of Healthpeak OP have not been presented.
As permitted under Rule 13-01 of Regulation S-X, we have excluded the summarized financial information regarding our significantfor the operating subsidiary because the Company and Healthpeak OP have no material assets, liabilities, or operations other than debt financing activities during the year ended December 31, 2017.and their investments in non-guarantor subsidiaries, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
Equity
At December 31, 2017,2023, we had 469547 million shares of common stock outstanding, equity totaled $5.6$6.9 billion, and our equity securities had a market value of $12.4$11.0 billion.
The Merger Agreement
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of Physicians Realty Trust will be converted into the right to receive 0.674 shares of our common stock when the Mergers are consummated. Based on the number of outstanding Physicians Realty Trust common shares as of January 8, 2024 (the record date for the special meetings of stockholders), we expect to issue approximately 163 million shares of our common stock when the Mergers are consummated.
At-The-Market Program
In February 2023, in connection with the Reorganization, we terminated our previous at-the-market equity offering program and established a new at-the-market equity offering program (the “ATM Program”) that allows for the sale of shares of common stock having an aggregate gross sales price of up to $1.5 billion. In addition to the issuance and sale of shares of our common stock, we may also enter into one or more forward sales agreements (each, an “ATM forward contract”) with sales agents for the sale of our shares of common stock under our ATM Program.
During the year ended December 31, 2023, we did not issue any shares of our common stock under any ATM program.
At December 31, 2017,2023, $1.5 billionof our common stock remained available for sale under the ATM Program. Actual future sales of our common stock will depend upon a variety of factors, including but not limited to market conditions, the trading price of our common stock, and our capital needs. We have no obligation to sell any shares under our ATM Program.
See Note 12 to the Consolidated Financial Statements for additional information about our ATM Program.
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Noncontrolling Interests
Healthpeak OP. Immediately following the Reorganization, Healthpeak Properties, Inc. was the initial sole member and 100% owner of Healthpeak OP. Subsequent to the Reorganization, certain of our employees (“OP Unitholders”) were issued approximately 2 million noncontrolling, non-managing member units in Healthpeak OP (“OP Units”), all of which were LTIP Units (see Note 14 to the Consolidated Financial Statements). When certain conditions are met, the OP Unitholders have the right to require redemption of part or all of their OP Units for cash or shares of our common stock, at our option as managing member of Healthpeak OP. The per unit redemption amount is equal to either one share of our common stock or cash equal to the fair value of a share of common stock at the time of redemption. We classify the OP Units in permanent equity because we may elect, in our sole discretion, to issue shares of our common stock to OP Unitholders who choose to redeem their OP Units rather than using cash. None of the outstanding OP Units met the criteria for redemption as of December 31, 2023.
DownREITs. At December 31, 2023, non-managing members held an aggregate of 4approximately 5 million units in fiveseven limited liability companies (“DownREITs”) for which we are the managing member. The DownREIT units are exchangeable for an amount of cash approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications).
Share Repurchase Program
On August 1, 2022, our Board of Directors approved the Share Repurchase Program under which we may sellacquire shares of our common stock from timein the open market up to time having an aggregate gross salespurchase price of up to $750 million through$500 million. Purchases of common stock under the Share Repurchase Program may be exercised at our discretion with the timing and number of shares repurchased depending on a consortiumvariety of banks acting as sales agentsfactors, including price, corporate and regulatory requirements, and other corporate liquidity requirements and priorities. The Share Repurchase Program expires in August 2024 and may be suspended or directly to the banks acting as principals. There was no activity duringterminated at any time without prior notice. During the year ended December 31, 2017 and, as of December 31, 2017,2022, we repurchased 2.1 million shares of our common stock having an aggregate gross salesat a weighted average price of $676 million$27.16 per share for a total of $56 million. During the year ended December 31, 2023, there were available for saleno repurchases under the at-the-market program. Actual future sales will depend upon a variety of factors, including but not limited to market conditions, the trading priceShare Repurchase Program. Therefore, at December 31, 2023, $444 million of our common stock and our capital needs. We have no obligation to sell the remaining sharesremained available for salerepurchase under our program.the Share Repurchase Program.
Shelf Registration
Total(1) | 2018 | 2019-2020 | 2021-2022 | More than Five Years | |||||||||||||||
Bank line of credit(2) | $ | 1,017,076 | $ | — | $ | — | $ | 1,017,076 | $ | — | |||||||||
Term loan(3) | 228,674 | — | 228,674 | — | — | ||||||||||||||
| Senior unsecured notes | 6,450,000 | — | 1,250,000 | 1,600,000 | 3,600,000 | ||||||||||||||
| Mortgage debt | 138,567 | 3,512 | 7,458 | 13,978 | 113,619 | ||||||||||||||
U.K. loan commitments(4) | 3,236 | 3,236 | — | — | — | ||||||||||||||
Construction loan commitments(5) | 114,691 | 45,863 | 68,828 | — | — | ||||||||||||||
Development commitments(6) | 133,371 | 128,101 | 2,228 | 3,042 | — | ||||||||||||||
| Ground and other operating leases | 395,796 | 6,619 | 13,434 | 13,524 | 362,219 | ||||||||||||||
Interest(7) | 1,938,466 | 297,694 | 551,684 | 419,699 | 669,389 | ||||||||||||||
| Total | $ | 10,419,877 | $ | 485,025 | $ | 2,122,306 | $ | 3,067,319 | $ | 4,745,227 | |||||||||
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Non-GAAP Financial MeasureMeasures Reconciliations
The following is a reconciliation from net income (loss) applicable to common shares, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Nareit FFO, FFO as adjustedAdjusted, and FADAFFO (in thousands, except per share data)thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | 502,271 | |||||||||||
| Real estate related depreciation and amortization | 749,901 | 710,569 | 684,286 | ||||||||||||||
| Healthpeak’s share of real estate related depreciation and amortization from unconsolidated joint ventures | 24,800 | 27,691 | 17,085 | ||||||||||||||
| Noncontrolling interests’ share of real estate related depreciation and amortization | (18,654) | (19,201) | (19,367) | ||||||||||||||
Loss (gain) on sales of depreciable real estate, net(1) | (86,463) | (10,422) | (605,311) | ||||||||||||||
| Healthpeak’s share of loss (gain) on sales of depreciable real estate, net, from unconsolidated joint ventures | — | 134 | (6,737) | ||||||||||||||
| Noncontrolling interests’ share of gain (loss) on sales of depreciable real estate, net | 11,546 | 12 | 5,555 | ||||||||||||||
Loss (gain) upon change of control, net(2) | (234) | (311,438) | (1,042) | ||||||||||||||
| Taxes associated with real estate dispositions | — | 29 | 2,666 | ||||||||||||||
| Impairments (recoveries) of depreciable real estate, net | — | — | 25,320 | ||||||||||||||
| Nareit FFO applicable to common shares | 985,180 | 895,166 | 604,726 | ||||||||||||||
| Distributions on dilutive convertible units and other | 9,394 | 9,407 | 6,162 | ||||||||||||||
| Diluted Nareit FFO applicable to common shares | $ | 994,574 | $ | 904,573 | $ | 610,888 | |||||||||||
| Impact of adjustments to Nareit FFO: | |||||||||||||||||
Transaction and merger-related items(3) | $ | 13,835 | $ | 4,788 | $ | 7,044 | |||||||||||
Other impairments (recoveries) and other losses (gains), net(4) | (3,850) | 3,829 | 24,238 | ||||||||||||||
Restructuring and severance-related charges(5) | 1,368 | 32,749 | 3,610 | ||||||||||||||
| Loss (gain) on debt extinguishments | — | — | 225,824 | ||||||||||||||
Casualty-related charges (recoveries), net(6) | (4,033) | 4,401 | 5,203 | ||||||||||||||
Recognition (reversal) of valuation allowance on deferred tax assets(7) | (14,194) | — | — | ||||||||||||||
| Total adjustments | $ | (6,874) | $ | 45,767 | $ | 265,919 | |||||||||||
| FFO as Adjusted applicable to common shares | $ | 978,306 | $ | 940,933 | $ | 870,645 | |||||||||||
| Distributions on dilutive convertible units and other | 9,402 | 9,326 | 8,577 | ||||||||||||||
| Diluted FFO as Adjusted applicable to common shares | $ | 987,708 | $ | 950,259 | $ | 879,222 | |||||||||||
| FFO as Adjusted applicable to common shares | $ | 978,306 | $ | 940,933 | $ | 870,645 | |||||||||||
| Stock-based compensation amortization expense | 14,480 | 16,537 | 18,202 | ||||||||||||||
| Amortization of deferred financing costs | 11,916 | 10,881 | 9,216 | ||||||||||||||
Straight-line rents(8) | (14,387) | (49,183) | (31,188) | ||||||||||||||
| AFFO capital expenditures | (113,596) | (108,510) | (111,480) | ||||||||||||||
| Deferred income taxes | (816) | (4,096) | (8,015) | ||||||||||||||
| Amortization of above (below) market lease intangibles, net | (25,791) | (23,380) | (17,978) | ||||||||||||||
| Other AFFO adjustments | (9,335) | 520 | (1,532) | ||||||||||||||
| AFFO applicable to common shares | 840,777 | 783,702 | 727,870 | ||||||||||||||
| Distributions on dilutive convertible units and other | 6,581 | 6,594 | 6,164 | ||||||||||||||
| Diluted AFFO applicable to common shares | $ | 847,358 | $ | 790,296 | $ | 734,034 | |||||||||||
| Year Ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Net income (loss) applicable to common shares | $ | 413,013 | $ | 626,549 | $ | (560,552 | ) | $ | 919,796 | $ | 969,103 | ||||||||
| Real estate related depreciation and amortization | 534,726 | 572,998 | 510,785 | 459,995 | 429,174 | ||||||||||||||
| Real estate related depreciation and amortization on unconsolidated joint ventures | 60,058 | 49,043 | 48,188 | 21,303 | 9,891 | ||||||||||||||
| Real estate related depreciation and amortization on noncontrolling interests and other | (15,069 | ) | (21,001 | ) | (14,506 | ) | (8,027 | ) | (6,217 | ) | |||||||||
| Other depreciation and amortization | 9,364 | 11,919 | 22,223 | 18,864 | 14,326 | ||||||||||||||
| Loss (gain) on sales of real estate, net | (356,641 | ) | (164,698 | ) | (6,377 | ) | (31,298 | ) | (69,866 | ) | |||||||||
| Loss (gain) on sales of real estate, net on unconsolidated joint ventures | (1,430 | ) | (16,332 | ) | (15,003 | ) | — | — | |||||||||||
| Loss (gain) on sales of real estate, net on noncontrolling interests | — | 224 | 1,453 | 1,001 | 1,481 | ||||||||||||||
Taxes associated with real estate dispositions(1) | (5,498 | ) | 60,451 | — | — | — | |||||||||||||
| Impairments (recoveries) of real estate, net | 22,590 | — | 2,948 | — | 1,372 | ||||||||||||||
| FFO applicable to common shares | 661,113 | 1,119,153 | (10,841 | ) | 1,381,634 | 1,349,264 | |||||||||||||
| Distributions on dilutive convertible units | — | 8,732 | — | 13,799 | 13,276 | ||||||||||||||
| Diluted FFO applicable to common shares | $ | 661,113 | $ | 1,127,885 | $ | (10,841 | ) | $ | 1,395,433 | $ | 1,362,540 | ||||||||
| Weighted average shares used to calculate diluted FFO per common share | 468,935 | 471,566 | 462,795 | 464,845 | 461,710 | ||||||||||||||
| Impact of adjustments to FFO: | |||||||||||||||||||
Transaction-related items(2) | $ | 62,576 | $ | 96,586 | $ | 32,932 | $ | (18,856 | ) | $ | 6,191 | ||||||||
Other impairments (recoveries), net(3) | 92,900 | — | 1,446,800 | 35,913 | — | ||||||||||||||
Severance and related charges(4) | 5,000 | 16,965 | 6,713 | — | 27,244 | ||||||||||||||
Loss on debt extinguishments(5) | 54,227 | 46,020 | — | — | — | ||||||||||||||
Litigation costs(6) | 15,637 | 3,081 | — | — | — | ||||||||||||||
| Casualty-related charges (recoveries), net | 10,964 | — | — | — | — | ||||||||||||||
| Foreign currency remeasurement losses (gains) | (1,043 | ) | 585 | (5,437 | ) | — | — | ||||||||||||
Tax rate legislation impact(7) | 17,028 | — | — | — | — | ||||||||||||||
| $ | 257,289 | $ | 163,237 | $ | 1,481,008 | $ | 17,057 | $ | 33,435 | ||||||||||
| FFO as adjusted applicable to common shares | $ | 918,402 | $ | 1,282,390 | $ | 1,470,167 | $ | 1,398,691 | $ | 1,382,699 | |||||||||
| Distributions on dilutive convertible units and other | 6,657 | 12,849 | 13,597 | 13,766 | 13,220 | ||||||||||||||
| Diluted FFO as adjusted applicable to common shares | $ | 925,059 | $ | 1,295,239 | $ | 1,483,764 | $ | 1,412,457 | $ | 1,395,919 | |||||||||
| Weighted average shares used to calculate diluted FFO as adjusted per common share | 473,620 | 473,340 | 469,064 | 464,845 | 461,710 | ||||||||||||||
| FFO as adjusted applicable to common shares | $ | 918,402 | $ | 1,282,390 | $ | 1,470,167 | $ | 1,398,691 | $ | 1,382,699 | |||||||||
Amortization of deferred compensation(8) | 13,510 | 15,581 | 23,233 | 21,885 | 23,327 | ||||||||||||||
| Amortization of deferred financing costs | 14,569 | 20,014 | 20,222 | 19,260 | 18,541 | ||||||||||||||
| Straight-line rents | (23,933 | ) | (27,560 | ) | (38,415 | ) | (43,857 | ) | (39,587 | ) | |||||||||
FAD capital expenditures(9) | (124,176 | ) | (93,407 | ) | (91,320 | ) | (85,183 | ) | (75,163 | ) | |||||||||
| Lease restructure payments | 1,470 | 16,604 | 22,657 | 9,425 | — | ||||||||||||||
CCRC entrance fees(10) | 21,385 | 21,287 | 27,895 | 11,121 | — | ||||||||||||||
Deferred income taxes(11) | (15,490 | ) | (13,692 | ) | (15,281 | ) | (4,580 | ) | 3,500 | ||||||||||
Other FAD adjustments(12) | (2,017 | ) | (5,521 | ) | (157,309 | ) | (147,940 | ) | (155,235 | ) | |||||||||
| FAD applicable to common shares | 803,720 | 1,215,696 | 1,261,849 | 1,178,822 | 1,158,082 | ||||||||||||||
| Distributions on dilutive convertible units | — | 13,088 | 14,230 | 13,799 | 13,276 | ||||||||||||||
| Diluted FAD applicable to common shares | $ | 803,720 | $ | 1,228,784 | $ | 1,276,079 | $ | 1,192,621 | $ | 1,171,358 | |||||||||
Refer to footnotes on the next page.
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| Year Ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| Diluted earnings per common share | $ | 0.88 | $ | 1.34 | $ | (1.21 | ) | $ | 2.00 | $ | 2.13 | ||||||||
| Depreciation and amortization | 1.25 | 1.30 | 1.22 | 1.07 | 0.97 | ||||||||||||||
| Loss (gain) on sales of real estate, net | (0.76 | ) | (0.38 | ) | (0.04 | ) | (0.07 | ) | (0.15 | ) | |||||||||
| Taxes associated with real estate dispositions | (0.01 | ) | 0.13 | — | — | — | |||||||||||||
| Impairments (recoveries) of real estate, net | 0.05 | — | 0.01 | — | — | ||||||||||||||
| Diluted FFO per common shares | $ | 1.41 | $ | 2.39 | $ | (0.02 | ) | $ | 3.00 | $ | 2.95 | ||||||||
Transaction-related items(2) | 0.13 | 0.20 | 0.07 | (0.04 | ) | 0.01 | |||||||||||||
Other impairments (recoveries), net(3) | 0.20 | — | 3.11 | 0.08 | — | ||||||||||||||
Severance and related charges(4) | 0.01 | 0.04 | 0.01 | — | 0.06 | ||||||||||||||
Loss on debt extinguishments(5) | 0.11 | 0.10 | — | — | — | ||||||||||||||
Litigation costs(6) | 0.03 | 0.01 | — | — | — | ||||||||||||||
| Casualty-related charges (recoveries), net | 0.02 | — | — | — | — | ||||||||||||||
| Foreign currency remeasurement losses (gains) | — | — | (0.01 | ) | — | — | |||||||||||||
Tax rate legislation impact(7) | 0.04 | — | — | — | — | ||||||||||||||
| Diluted FFO as adjusted per common shares | $ | 1.95 | $ | 2.74 | $ | 3.16 | $ | 3.04 | $ | 3.02 | |||||||||
(1)This amount can be reconciled by combining the balances from the corresponding line of the Consolidated Statements of Operations and the detailed financial information for discontinued operations in Note 4 to the Consolidated Financial Statements. (2)The year ended December 31, 2022 includes a gain upon change of control related to the sale of a 30% interest to a sovereign wealth fund and deconsolidation of seven previously consolidated lab buildings in South San Francisco, California. The gain upon change of control is included in other income (expense), net in the Consolidated Statements of Operations. (3)The year ended December 31, 2023 includes costs related to the Mergers, which are primarily comprised of legal, accounting, tax, and other costs that were incurred prior to year-end, partially offset by termination fee income associated with Graphite Bio, Inc., for which the lease terms have been modified to accelerate expiration of the lease to December 2024. Termination fee income is included in rental and related revenues on the Consolidated Statements of Operations. (4)The year ended December 31, 2022 includes the following: (i) $7 million of charges incurred in connection with the downsizing of our corporate headquarters in Denver, Colorado, which are included in general and administrative expenses in the Consolidated Statements of Operations, (ii) $14 million of expenses incurred for tenant relocation and other costs associated with the demolition of an outpatient medical building, which are included in other income (expense), net in the Consolidated Statements of Operations, and (iii) a $23 million gain on sale of a hospital under a DFL, which is included in other income (expense), net in the Consolidated Statements of Operations. The year ended December 31, 2021 includes the following: (i) a $29 million goodwill impairment charge in connection with our senior housing triple-net and SHOP asset sales, which is reported in income (loss) from discontinued operations in the Consolidated Statements of Operations and (ii) $6 million of accelerated recognition of a mark-to-market discount, less loan fees, resulting from prepayments on loans receivable, which is included in interest income in the Consolidated Statements of Operations. The years ended December 31, 2023, 2022, and 2021 include reserves and (recoveries) for expected loan losses recognized in impairments and loan loss reserves (recoveries), net in the Consolidated Statements of Operations. (5)The year ended December 31, 2022 includes $32 million of severance-related charges associated with the departures of our former Chief Executive Officer and former Chief Legal Officer and General Counsel in the fourth quarter of 2022. These expenses are included in general and administrative expenses in the Consolidated Statements of Operations. (6)Casualty-related charges (recoveries), net are recognized in other income (expense), net and equity income (loss) from unconsolidated joint ventures in the Consolidated Statements of Operations. (7)In conjunction with classifying the assets related to the Callan Ridge JV (see Note 8 to the Consolidated Financial Statements) as held for sale as of December 31, 2023, we concluded it was more likely than not that we would realize the future value of certain deferred tax assets generated by the net operating losses of taxable REIT subsidiaries. Accordingly, during the year ended December 31, 2023, we recognized the reversal of a portion of the associated valuation allowance and recognized a corresponding income tax benefit. See Note 16 to the Consolidated Financial Statements for additional information. (8)The year ended December 31, 2023 includes a $9 million write-off of straight-line rent receivable associated with Sorrento Therapeutics, Inc., which commenced voluntary reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code. This activity is reflected as a reduction of rental and related revenues in the Consolidated Statements of Operations. |
Critical Accounting PoliciesEstimates
The preparation of financial statements in conformity with U.S. GAAP requires our management to use judgment in the application of critical accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates could affect the reported amountsour financial position or results of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.operations. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, see Note 2 to the Consolidated Financial Statements. Below is a discussion of accounting policiesestimates that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. For a more detailed discussion of our significant accounting policies, including those related to critical accounting estimates further discussed below, see Note 2 to the Consolidated Financial Statements.
We assess the carrying value of our real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable. Recoverability of real estate assets is measured by comparing the carrying amount of the real estate assets to the respective estimated future undiscounted cash flows. The expected future undiscounted cash flows reflect external market factors, and based on the specific facts and circumstances, may be probability-weighted to reflect multiple possible cash-flow scenarios, including selling the assets at various points in the future. Additionally, the estimated future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. In order to review our real estate assets for recoverability, we make assumptions regarding external market conditions (including capitalization rates and growth rates), forecasted cash flows and sales prices, and our intent with respect to holding or disposing of the asset. If our analysis indicates that the carrying value of the real estate assets is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the carrying value exceeds the fair value of the real estate assets.
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Determining the fair value of real estate assets, including assets classified as held for sale, involves significant judgment and generally utilizes market capitalization rates, comparable market transactions, estimated per unit or per square foot prices, negotiations with prospective buyers, and forecasted cash flows (primarily lease revenue rates, expense rates, and growth rates). Our ability to accurately predict future operating results and resulting cash flows, and estimate fair values, impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, primarily from the potential loss arising from adverse changes in interest rates. We use derivative and other financial instruments in the normal course of business to mitigate interest rate risk. We do not use derivative financial instruments for speculative or trading purposes. Derivatives are recorded on the Consolidated Balance Sheets at fair value (see Note 21 to the Consolidated Financial Statements).
To illustrate the effect of movements in the interest rate markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves of our derivative portfolio in order to determine the change in fair value. At December 31, 2023, a one percentage point increase or decrease in the underlying interest rate curve would result in a corresponding increase or decrease in the fair value of the derivative instruments by up to $18 million.
Interest Rate Risk
At December 31, 2023, our exposure to interest rate risk was primarily on our variable rate debt. At December 31, 2023, $142 million of our variable rate mortgage debt and our $500 million Term Loan Facilities were swapped to fixed rates through interest rate swap instruments. The interest rate swap instruments are designated as cash flow hedges, with the objective of managing the exposure to interest rate risk by converting the interest rates on our variable rate debt to fixed interest rates. At December 31, 2023, both the fair value and carrying value of the interest rate swap instruments were $21 million.
Our remaining variable rate debt at December 31, 2023 was comprised of borrowings under our commercial paper program and certain of our mortgage debt. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. Interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2023, a one percentage point increase in interest rates would decrease the fair value of our fixed rate debt by approximately $255 million and a one percentage point decrease in interest rates would increase the fair value of our fixed rate debt by approximately $272 million. These changes would not materially impact earnings or cash flows. Conversely, changes in interest rates on variable rate debt would change our future earnings and cash flows, but not materially impact the fair value of those instruments. Assuming a one percentage point increase in the interest rates related to our variable rate debt, and assuming no other changes in the outstanding balance at December 31, 2023, our annual interest expense would increase by approximately $7 million. Lastly, assuming a one percentage point decrease in the interest rates related to our variable rate loans receivable, and assuming no other changes in the outstanding balance at December 31, 2023, our annual interest income would decrease by approximately $2 million.
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ITEM 8. Financial Statements and Supplementary Data
Healthpeak Properties, Inc.
Index to the Consolidated Financial Statements
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | |||||
Consolidated Balance Sheets—December 31, 2023 and 2022 | |||||
Consolidated Statements of Operations—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Comprehensive Income (Loss)—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Equity and Redeemable Noncontrolling Interests—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Cash Flows—for the years ended December 31, 2023, 2022, and 2021 | |||||
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Healthpeak Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Healthpeak Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related Consolidated Statements of Operations, Comprehensive Income (Loss), Equity and Redeemable Noncontrolling Interests, and Cash Flows, for each of the three years in the period ended December 31, 2023, and the related Notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairments — Real Estate — Refer to Notes 2 and 5 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of impairment of real estate involves an assessment of the carrying value of real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable.
Auditing the Company’s process to evaluate real estate assets for impairment was complex due to the subjectivity in determining whether impairment indicators were present. Additionally, for real estate assets where indicators of impairment were determined to be present, the determination of the future undiscounted cash flows involved significant judgment. In particular, the undiscounted cash flows were forecasted based on significant assumptions such as lease-up periods, lease revenue rates, operating expenses, and revenue and expense growth rates, and included judgments around the intended hold period and terminal capitalization rates.
Given the Company’s evaluation of impairment indicators, forecasted cash flows and sales prices of a long-lived asset requires management to make significant estimates and assumptions related to market capitalization rates, market prices per unit, and/or forecasted cash flows, performing audit procedures required a high degree of auditor judgment and an increased extent of effort.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to real estate asset impairment included the following, among others:
•We tested the effectiveness of controls over impairment of real estate assets, including those over identifying impairment indicators and the determination of forecasted undiscounted cash flows and sales prices for real estate assets.
•We performed an independent search for impairment indicators through the evaluation of several factors including an analysis of industry and market data, a comparison of real estate asset implied capitalization rates to market capitalization rates, and trends in financial performance.
•For real estate assets where indicators of impairment were determined to be present, we subjected a sample of undiscounted cash flow models to testing by (1) evaluating the source information used by management, (2) testing the mathematical accuracy of the undiscounted cash flow models, (3) evaluating management’s intended hold period, and (4) performing an independent recoverability test based on market data.
| /s/ DELOITTE & TOUCHE LLP | |||||
Costa Mesa, California
February 9, 2024
We have served as the Company’s auditor since 2010.
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Healthpeak Properties, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Real estate: | |||||||||||
| Buildings and improvements | $ | 13,329,464 | $ | 12,784,078 | |||||||
| Development costs and construction in progress | 643,217 | 760,355 | |||||||||
| Land and improvements | 2,647,633 | 2,667,188 | |||||||||
| Accumulated depreciation and amortization | (3,591,951) | (3,188,138) | |||||||||
| Net real estate | 13,028,363 | 13,023,483 | |||||||||
| Loans receivable, net of reserves of $2,830 and $8,280 | 218,450 | 374,832 | |||||||||
| Investments in and advances to unconsolidated joint ventures | 782,853 | 706,677 | |||||||||
| Accounts receivable, net of allowance of $2,282 and $2,399 | 55,820 | 53,436 | |||||||||
| Cash and cash equivalents | 117,635 | 72,032 | |||||||||
| Restricted cash | 51,388 | 54,802 | |||||||||
| Intangible assets, net | 314,156 | 418,061 | |||||||||
| Assets held for sale, net | 117,986 | 49,866 | |||||||||
| Right-of-use asset, net | 240,155 | 237,318 | |||||||||
| Other assets, net | 772,044 | 780,722 | |||||||||
| Total assets | $ | 15,698,850 | $ | 15,771,229 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Bank line of credit and commercial paper | $ | 720,000 | $ | 995,606 | |||||||
| Term loans | 496,824 | 495,957 | |||||||||
| Senior unsecured notes | 5,403,378 | 4,659,451 | |||||||||
| Mortgage debt | 256,097 | 346,599 | |||||||||
| Intangible liabilities, net | 127,380 | 156,193 | |||||||||
| Liabilities related to assets held for sale, net | 729 | 4,070 | |||||||||
| Lease liability | 206,743 | 208,515 | |||||||||
| Accounts payable, accrued liabilities, and other liabilities | 657,196 | 772,485 | |||||||||
| Deferred revenue | 905,633 | 844,076 | |||||||||
| Total liabilities | 8,773,980 | 8,482,952 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Redeemable noncontrolling interests | 48,828 | 105,679 | |||||||||
| Common stock, $1.00 par value: 750,000,000 shares authorized; 547,156,311 and 546,641,973 shares issued and outstanding | 547,156 | 546,642 | |||||||||
| Additional paid-in capital | 10,405,780 | 10,349,614 | |||||||||
| Cumulative dividends in excess of earnings | (4,621,861) | (4,269,689) | |||||||||
| Accumulated other comprehensive income (loss) | 19,371 | 28,134 | |||||||||
| Total stockholders’ equity | 6,350,446 | 6,654,701 | |||||||||
| Joint venture partners | 310,998 | 327,721 | |||||||||
| Non-managing member unitholders | 214,598 | 200,176 | |||||||||
| Total noncontrolling interests | 525,596 | 527,897 | |||||||||
| Total equity | 6,876,042 | 7,182,598 | |||||||||
| Total liabilities and equity | $ | 15,698,850 | $ | 15,771,229 | |||||||
See accompanying Notes to the Consolidated Financial Statements.
72
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Rental and related revenues | $ | 1,631,805 | $ | 1,541,775 | $ | 1,378,384 | |||||||||||
| Resident fees and services | 527,417 | 494,935 | 471,325 | ||||||||||||||
| Interest income | 21,781 | 23,300 | 37,773 | ||||||||||||||
| Income from direct financing leases | — | 1,168 | 8,702 | ||||||||||||||
| Total revenues | 2,181,003 | 2,061,178 | 1,896,184 | ||||||||||||||
| Costs and expenses: | |||||||||||||||||
| Interest expense | 200,331 | 172,944 | 157,980 | ||||||||||||||
| Depreciation and amortization | 749,901 | 710,569 | 684,286 | ||||||||||||||
| Operating | 902,060 | 862,991 | 773,279 | ||||||||||||||
| General and administrative | 95,132 | 131,033 | 98,303 | ||||||||||||||
| Transaction and merger-related costs | 17,515 | 4,853 | 1,841 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | 23,160 | ||||||||||||||
| Total costs and expenses | 1,959,338 | 1,889,394 | 1,738,849 | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Gain (loss) on sales of real estate, net | 86,463 | 9,078 | 190,590 | ||||||||||||||
| Gain (loss) on debt extinguishments | — | — | (225,824) | ||||||||||||||
| Other income (expense), net | 6,808 | 326,268 | 6,266 | ||||||||||||||
| Total other income (expense), net | 93,271 | 335,346 | (28,968) | ||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 314,936 | 507,130 | 128,367 | ||||||||||||||
| Income tax benefit (expense) | 9,617 | 4,425 | 3,261 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,204 | 1,985 | 6,100 | ||||||||||||||
| Income (loss) from continuing operations | 334,757 | 513,540 | 137,728 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | 388,202 | ||||||||||||||
| Net income (loss) | 334,757 | 516,424 | 525,930 | ||||||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (17,851) | ||||||||||||||
| Noncontrolling interests’ share in discontinued operations | — | — | (2,539) | ||||||||||||||
| Net income (loss) attributable to Healthpeak Properties, Inc. | 306,009 | 500,449 | 505,540 | ||||||||||||||
| Participating securities’ share in earnings | (1,725) | (2,657) | (3,269) | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | 502,271 | |||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
| Diluted earnings (loss) per common share: | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 547,006 | 538,809 | 538,930 | ||||||||||||||
| Diluted | 547,275 | 539,147 | 539,241 | ||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
73
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income (loss) | $ | 334,757 | $ | 516,424 | $ | 525,930 | |||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Net unrealized gains (losses) on derivatives | (8,900) | 30,145 | 332 | ||||||||||||||
| Change in Supplemental Executive Retirement Plan obligation and other | 137 | 1,136 | 457 | ||||||||||||||
| Reclassification adjustment realized in net income (loss) | — | — | (251) | ||||||||||||||
| Total other comprehensive income (loss) | (8,763) | 31,281 | 538 | ||||||||||||||
| Total comprehensive income (loss) | 325,994 | 547,705 | 526,468 | ||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (17,851) | ||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in discontinued operations | — | — | (2,539) | ||||||||||||||
| Total comprehensive income (loss) attributable to Healthpeak Properties, Inc. | $ | 297,246 | $ | 531,730 | $ | 506,078 | |||||||||||
See accompanying Notes to the Consolidated Financial Statements.
74
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | 538,405 | $ | 538,405 | $ | 10,175,235 | $ | (3,976,232) | $ | (3,685) | $ | 6,733,723 | $ | 556,227 | $ | 7,289,950 | $ | 57,396 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 505,540 | — | 505,540 | 20,346 | 525,886 | 44 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 538 | 538 | — | 538 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 1,005 | 1,005 | 740 | — | — | 1,745 | — | 1,745 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 8 | 8 | 193 | — | — | 201 | (201) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (418) | (418) | (12,423) | — | — | (12,841) | — | (12,841) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 97 | 97 | 3,194 | — | — | 3,291 | — | 3,291 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 22,851 | — | — | 22,851 | — | 22,851 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (650,082) | — | (650,082) | — | (650,082) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (33,017) | (33,017) | (162) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | (5) | — | — | (5) | (65) | (70) | (60,065) | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | 640 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | (89,491) | — | — | (89,491) | — | (89,491) | 89,491 | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | 539,097 | $ | 539,097 | $ | 10,100,294 | $ | (4,120,774) | $ | (3,147) | $ | 6,515,470 | $ | 543,290 | $ | 7,058,760 | $ | 87,344 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 500,449 | — | 500,449 | 15,876 | 516,325 | 99 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 31,281 | 31,281 | — | 31,281 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 9,936 | 9,936 | 299,481 | — | — | 309,417 | — | 309,417 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 27 | 27 | 853 | — | — | 880 | (880) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (2,418) | (2,418) | (65,420) | — | — | (67,838) | — | (67,838) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 31,412 | — | — | 31,412 | — | 31,412 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (649,364) | — | (649,364) | — | (649,364) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (30,389) | (30,389) | (160) | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | 1,390 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | (17,006) | — | — | (17,006) | — | (17,006) | 17,006 | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 546,642 | $ | 546,642 | $ | 10,349,614 | $ | (4,269,689) | $ | 28,134 | $ | 6,654,701 | $ | 527,897 | $ | 7,182,598 | $ | 105,679 | ||||||||||||||||||||||||||||||||||||
75
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (CONTINUED)
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 546,642 | $ | 546,642 | $ | 10,349,614 | $ | (4,269,689) | $ | 28,134 | $ | 6,654,701 | $ | 527,897 | $ | 7,182,598 | $ | 105,679 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 306,009 | — | 306,009 | 28,111 | 334,120 | 637 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (8,763) | (8,763) | — | (8,763) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 683 | 683 | 755 | — | — | 1,438 | — | 1,438 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 72 | 72 | 1,200 | — | — | 1,272 | (1,272) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (241) | (241) | (6,283) | — | — | (6,524) | — | (6,524) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 2,966 | — | — | 2,966 | 15,693 | 18,659 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (658,181) | — | (658,181) | — | (658,181) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (44,848) | (44,848) | (276) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | — | — | — | — | (158) | (158) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | 173 | 173 | 316 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | 57,528 | — | — | 57,528 | — | 57,528 | (57,528) | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | 547,156 | $ | 547,156 | $ | 10,405,780 | $ | (4,621,861) | $ | 19,371 | $ | 6,350,446 | $ | 525,596 | $ | 6,876,042 | $ | 48,828 | ||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
76
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | 334,757 | $ | 516,424 | $ | 525,930 | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Depreciation and amortization of real estate, in-place lease, and other intangibles | 749,901 | 710,569 | 684,286 | |||||||||||||||||
| Stock-based compensation amortization expense | 14,480 | 26,456 | 18,202 | |||||||||||||||||
| Amortization of deferred financing costs | 11,916 | 10,881 | 9,216 | |||||||||||||||||
| Straight-line rents | (14,387) | (49,183) | (31,188) | |||||||||||||||||
| Amortization of nonrefundable entrance fees and above (below) market lease intangibles | (108,988) | (102,747) | (94,362) | |||||||||||||||||
| Equity loss (income) from unconsolidated joint ventures | (10,204) | (2,049) | (11,235) | |||||||||||||||||
| Distributions of earnings from unconsolidated joint ventures | 910 | 943 | 4,976 | |||||||||||||||||
| Loss (gain) on sale of real estate under direct financing leases | — | (22,693) | — | |||||||||||||||||
| Deferred income tax expense (benefit) | (14,605) | (6,001) | (5,792) | |||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | 55,896 | |||||||||||||||||
| Loss (gain) on debt extinguishments | — | — | 225,824 | |||||||||||||||||
| Loss (gain) on sales of real estate, net | (86,463) | (10,422) | (605,311) | |||||||||||||||||
| Loss (gain) upon change of control, net | (234) | (311,438) | (1,042) | |||||||||||||||||
| Casualty-related loss (recoveries), net | (3,085) | 7,168 | 1,632 | |||||||||||||||||
| Other non-cash items | 4,900 | 6,489 | (8,178) | |||||||||||||||||
| Changes in: | ||||||||||||||||||||
| Decrease (increase) in accounts receivable and other assets, net | (21,566) | (17,433) | 18,626 | |||||||||||||||||
| Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue | 104,511 | 136,293 | 7,768 | |||||||||||||||||
| Net cash provided by (used in) operating activities | 956,242 | 900,261 | 795,248 | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Acquisitions of real estate | (15,847) | (178,133) | (1,483,026) | |||||||||||||||||
| Development, redevelopment, and other major improvements of real estate | (731,206) | (861,636) | (610,555) | |||||||||||||||||
| Leasing costs, tenant improvements, and recurring capital expenditures | (113,596) | (108,510) | (111,480) | |||||||||||||||||
| Proceeds from sales of real estate, net | 141,651 | 47,885 | 2,399,120 | |||||||||||||||||
| Proceeds from the South San Francisco JVs transaction, net | — | 125,985 | — | |||||||||||||||||
| Investments in unconsolidated joint ventures | (88,391) | (21,143) | (25,260) | |||||||||||||||||
| Distributions in excess of earnings from unconsolidated joint ventures | 20,640 | 12,518 | 37,640 | |||||||||||||||||
| Proceeds from insurance recovery | 24,980 | 1,450 | — | |||||||||||||||||
| Proceeds from sales/principal repayments on loans receivable, direct financing leases, and marketable debt securities | 204,865 | 115,988 | 342,420 | |||||||||||||||||
| Investments in loans receivable and other | (19,850) | (10,747) | (17,827) | |||||||||||||||||
| Net cash provided by (used in) investing activities | (576,754) | (876,343) | 531,032 | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Borrowings under bank line of credit and commercial paper | 10,344,705 | 15,882,153 | 16,821,450 | |||||||||||||||||
| Repayments under bank line of credit and commercial paper | (10,620,311) | (16,052,522) | (15,785,065) | |||||||||||||||||
| Issuances and borrowings of term loans, senior unsecured notes, and mortgage debt | 743,778 | 500,000 | 1,088,537 | |||||||||||||||||
| Repayments and repurchases of term loans, senior unsecured notes, and mortgage debt | (90,089) | (5,048) | (2,425,936) | |||||||||||||||||
| Payments for debt extinguishment and deferred financing costs | (7,322) | (4,171) | (236,942) | |||||||||||||||||
| Issuance of common stock and exercise of options, net of offering costs | 278 | 308,100 | 5,036 | |||||||||||||||||
| Repurchase of common stock | (6,524) | (67,838) | (12,841) | |||||||||||||||||
| Dividends paid on common stock | (657,021) | (648,047) | (650,082) | |||||||||||||||||
| Distributions to and purchase of noncontrolling interests | (45,282) | (30,549) | (93,314) | |||||||||||||||||
| Contributions from and issuance of noncontrolling interests | 489 | 1,390 | 640 | |||||||||||||||||
| Net cash provided by (used in) financing activities | (337,299) | (116,532) | (1,288,517) | |||||||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 42,189 | (92,614) | 37,763 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of year | 126,834 | 219,448 | 181,685 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, end of year | $ | 169,023 | $ | 126,834 | $ | 219,448 | ||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
77
Healthpeak Properties, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Business
Overview
Healthpeak Properties, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) that, together with its consolidated entities (collectively, “Healthpeak” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). Healthpeak® acquires, develops, owns, leases, and manages healthcare real estate. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) lab; (ii) outpatient medical; and (iii) continuing care retirement community (“CCRC”).
The Company’s corporate headquarters are in Denver, Colorado, and it has additional offices in California, Tennessee, and Massachusetts.
UPREIT Reorganization
On February 10, 2023, the Company completed its corporate reorganization (the “Reorganization”) into an umbrella partnership REIT (“UPREIT”). Substantially all of the Company’s business is conducted through Healthpeak OP, LLC (“Healthpeak OP”). The Company is the managing member of Healthpeak OP and does not have material assets or liabilities, other than through its investment in Healthpeak OP. For additional information on the UPREIT reorganization, see the Company’s Current Report on Form 8-K12B filed with the U.S. Securities and Exchange Commission (“SEC”) on February 10, 2023.
The Merger Agreement
On October 29, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Physicians Realty Trust, Physicians Realty L.P. (the “Physicians Partnership”), and certain of the Company’s subsidiaries, pursuant to which, among other things, and through a series of transactions (the “Mergers”), (i) each outstanding common share of Physicians Realty Trust (other than Physicians Realty Trust common shares to be canceled in accordance with the Merger Agreement) will be converted into the right to receive 0.674 (the “Exchange Ratio”) shares of Company common stock, and (ii) each outstanding common unit of the Physicians Partnership will be converted into common units in the successor entity to the Physicians Partnership equal to the Exchange Ratio. Following the transactions contemplated in the Merger Agreement, the successor entities to Physicians Realty Trust and the Physicians Partnership will be subsidiaries of Healthpeak OP.
The Merger Agreement contains customary representations, warranties, and covenants, as well as certain termination rights for the Company and Physicians Realty Trust, in each case, as more fully described in the Merger Agreement.
During the year ended December 31, 2023, the Company incurred approximately$11 million of merger-related costs, which primarily related to advisory, legal, accounting, and other costs. These merger-related costs are included in transaction and merger-related costs on the Consolidated Statements of Operations.
In addition, the Company has engaged service providers, including investment banks and advisors, to help the Company negotiate the terms of the transactions contemplated by the Merger Agreement and to advise the Company on other merger-related matters. In connection with these services, the Company expects to be required to pay success-based fees to the extent that certain conditions, including the closing of the transactions contemplated by the Merger Agreement, are met. As of December 31, 2023, the Company expects to incur approximately$22 million of such success fees. As closing of the transactions contemplated by the Merger Agreement has not occurred, no such amounts have been paid or accrued through December 31, 2023.
In connection with the Mergers, the Company filed a Registration Statement on Form S-4 with the SEC on December 15, 2023 (the “Initial Filing”), as amended on January 9, 2024, and a definitive joint proxy statement/prospectus for the Company and Physicians Realty Trust on January 11, 2024 in connection with their respective special meetings of stockholders and shareholders, as applicable, which will be held on February 21, 2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions, including the approval of the Company’s stockholders and the shareholders of Physicians Realty Trust. The parties expect the Mergers to close on March 1, 2024. If the Mergers are not consummated by July 31, 2024 (unless extended under certain circumstances), either the Company or Physicians Realty Trust may terminate the Merger Agreement.
78
NOTE 2. Summary of Significant Accounting Policies
Use of Estimates
Management is required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 revenues and expenses during the reporting period. Actual results could differ from management’s estimates.
Basis of Presentation
The consolidated financial statements include the accounts of HCP,Healthpeak Properties, Inc., ourits wholly-owned subsidiaries, and joint ventures (“JVs”), and variable interest entities (“VIEs”) that we control,it controls through voting rights or other means. WeIntercompany transactions and balances have been eliminated upon consolidation.
The Company is required to continually evaluate its VIE relationships and consolidate investments in variable interestthese entities (“VIEs”) when we areit is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either: (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity. Criterion (iii) above is generally applied to limited partnerships and similarly structured entities by assessing whether a simple majority of the limited partners hold substantive rights to participate in the significant decisions of the entity or have the ability to remove the decision maker or liquidate the entity without cause. If neither of those criteria are met, the entity is a VIE.
The designation of an entity as a VIE is reassessed upon certain events, including, but not limited to: (i) a change to the contractual arrangements of the entity or in the ability of a party to exercise its participation or kick-out rights, (ii) a change to the capitalization structure of the entity, or (iii) acquisitions or sales of interests that constitute a change in control.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.
For its investments in joint ventures that are not considered to correctly assess our influence orbe VIEs, the Company evaluates the type of ownership rights held by the limited partner(s) that may preclude consolidation by the majority interest holder. The assessment of limited partners’ rights and their impact on the control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. When we perform a re-analysis of the primary beneficiary at a date other thanjoint venture should be made at inception of the VIE, our assumptions may be differentjoint venture and may result in the identificationcontinually reassessed.
79
67
Determining the four criteria is metfair value of real estate assets, including assets classified as held for sale, involves significant judgment and the minimumgenerally utilizes market capitalization rates, comparable market transactions, estimated per unit or per square foot prices, negotiations with prospective buyers, and forecasted cash flows (primarily lease payments are determinedrevenue rates, expense rates, and growth rates). Our ability to be reasonably predictableaccurately predict future operating results and collectible, the lease arrangement is generally accounted for as a DFL. If the assumptions utilized in the above classifications assessments were different, our lease classification for accounting purposes may have been different; thusresulting cash flows, and estimate fair values, impacts the timing and amountrecognition of impairments. While we believe our revenue recognized wouldassumptions are reasonable, changes in these assumptions may have been impacted, which may bea material toimpact on our consolidated financial statements.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We recognize rental revenueare exposed to various market risks, primarily from the potential loss arising from adverse changes in interest rates. We use derivative and other financial instruments in the normal course of business to mitigate interest rate risk. We do not use derivative financial instruments for operating leasesspeculative or trading purposes. Derivatives are recorded on the Consolidated Balance Sheets at fair value (see Note 21 to the Consolidated Financial Statements).
To illustrate the effect of movements in the interest rate markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves of our derivative portfolio in order to determine the change in fair value. At December 31, 2023, a one percentage point increase or decrease in the underlying interest rate curve would result in a corresponding increase or decrease in the fair value of the derivative instruments by up to $18 million.
Interest Rate Risk
At December 31, 2023, our exposure to interest rate risk was primarily on our variable rate debt. At December 31, 2023, $142 million of our variable rate mortgage debt and our $500 million Term Loan Facilities were swapped to fixed rates through interest rate swap instruments. The interest rate swap instruments are designated as cash flow hedges, with the objective of managing the exposure to interest rate risk by converting the interest rates on our variable rate debt to fixed interest rates. At December 31, 2023, both the fair value and carrying value of the interest rate swap instruments were $21 million.
Our remaining variable rate debt at December 31, 2023 was comprised of borrowings under our commercial paper program and certain of our mortgage debt. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. Interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2023, a one percentage point increase in interest rates would decrease the fair value of our fixed rate debt by approximately $255 million and a one percentage point decrease in interest rates would increase the fair value of our fixed rate debt by approximately $272 million. These changes would not materially impact earnings or cash flows. Conversely, changes in interest rates on variable rate debt would change our future earnings and cash flows, but not materially impact the fair value of those instruments. Assuming a one percentage point increase in the interest rates related to our variable rate debt, and assuming no other changes in the outstanding balance at December 31, 2023, our annual interest expense would increase by approximately $7 million. Lastly, assuming a one percentage point decrease in the interest rates related to our variable rate loans receivable, and assuming no other changes in the outstanding balance at December 31, 2023, our annual interest income would decrease by approximately $2 million.
68
ITEM 8. Financial Statements and Supplementary Data
Healthpeak Properties, Inc.
Index to the Consolidated Financial Statements
| Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | |||||
Consolidated Balance Sheets—December 31, 2023 and 2022 | |||||
Consolidated Statements of Operations—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Comprehensive Income (Loss)—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Equity and Redeemable Noncontrolling Interests—for the years ended December 31, 2023, 2022, and 2021 | |||||
Consolidated Statements of Cash Flows—for the years ended December 31, 2023, 2022, and 2021 | |||||
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Healthpeak Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Healthpeak Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related Consolidated Statements of Operations, Comprehensive Income (Loss), Equity and Redeemable Noncontrolling Interests, and Cash Flows, for each of the three years in the period ended December 31, 2023, and the related Notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a straight-linetest basis, overevidence regarding the lease term when collectibilityamounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of all minimum lease paymentsthe financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is reasonably assureda matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the tenant hasfinancial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken possession or controls the physical use ofas a leased asset. If the lease provides for tenant improvements, we determine whether the tenant improvements are owned by the tenant or us. Whenwhole, and we are not, by communicating the ownercritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairments — Real Estate — Refer to Notes 2 and 5 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of the tenant improvements, the tenant is not considered to have taken physical possession or have controlimpairment of the leased
Auditing the Company’s process to evaluate real estate assets for impairment was complex due to the subjectivity in determining whether impairment indicators were present. Additionally, for real estate assets where indicators of impairment were determined to be present, the determination of the tenant improvements was different,future undiscounted cash flows involved significant judgment. In particular, the timingundiscounted cash flows were forecasted based on significant assumptions such as lease-up periods, lease revenue rates, operating expenses, and amountrevenue and expense growth rates, and included judgments around the intended hold period and terminal capitalization rates.
Given the Company’s evaluation of our revenue recognized would be impacted.
70
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to real estate asset impairment included the following, among others:
•We tested the effectiveness of controls over impairment of real estate assets, including those over identifying impairment indicators and the determination of forecasted undiscounted cash flows and sales prices for real estate assets.
•We performed an independent search for impairment indicators through the evaluation of several factors including an analysis of industry and market data, a certain extent, is dependent oncomparison of real estate asset implied capitalization rates to market capitalization rates, and trends in financial performance.
•For real estate assets where indicators of impairment were determined to be present, we subjected a sample of undiscounted cash flow models to testing by (1) evaluating the source information used by management, (2) testing the mathematical accuracy of the facility results reported to us. Our estimates may differ from actual results, which could be material to our consolidated financial statements.undiscounted cash flow models, (3) evaluating management’s intended hold period, and (4) performing an independent recoverability test based on market data.
| /s/ DELOITTE & TOUCHE LLP | |||||
Costa Mesa, California
February 9, 2024
We maintain an allowance for doubtful accounts, including an allowance for operating lease straight-line rent receivables, for estimated losses resulting from tenant defaultshave served as the Company’s auditor since 2010.
71
Healthpeak Properties, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Real estate: | |||||||||||
| Buildings and improvements | $ | 13,329,464 | $ | 12,784,078 | |||||||
| Development costs and construction in progress | 643,217 | 760,355 | |||||||||
| Land and improvements | 2,647,633 | 2,667,188 | |||||||||
| Accumulated depreciation and amortization | (3,591,951) | (3,188,138) | |||||||||
| Net real estate | 13,028,363 | 13,023,483 | |||||||||
| Loans receivable, net of reserves of $2,830 and $8,280 | 218,450 | 374,832 | |||||||||
| Investments in and advances to unconsolidated joint ventures | 782,853 | 706,677 | |||||||||
| Accounts receivable, net of allowance of $2,282 and $2,399 | 55,820 | 53,436 | |||||||||
| Cash and cash equivalents | 117,635 | 72,032 | |||||||||
| Restricted cash | 51,388 | 54,802 | |||||||||
| Intangible assets, net | 314,156 | 418,061 | |||||||||
| Assets held for sale, net | 117,986 | 49,866 | |||||||||
| Right-of-use asset, net | 240,155 | 237,318 | |||||||||
| Other assets, net | 772,044 | 780,722 | |||||||||
| Total assets | $ | 15,698,850 | $ | 15,771,229 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Bank line of credit and commercial paper | $ | 720,000 | $ | 995,606 | |||||||
| Term loans | 496,824 | 495,957 | |||||||||
| Senior unsecured notes | 5,403,378 | 4,659,451 | |||||||||
| Mortgage debt | 256,097 | 346,599 | |||||||||
| Intangible liabilities, net | 127,380 | 156,193 | |||||||||
| Liabilities related to assets held for sale, net | 729 | 4,070 | |||||||||
| Lease liability | 206,743 | 208,515 | |||||||||
| Accounts payable, accrued liabilities, and other liabilities | 657,196 | 772,485 | |||||||||
| Deferred revenue | 905,633 | 844,076 | |||||||||
| Total liabilities | 8,773,980 | 8,482,952 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Redeemable noncontrolling interests | 48,828 | 105,679 | |||||||||
| Common stock, $1.00 par value: 750,000,000 shares authorized; 547,156,311 and 546,641,973 shares issued and outstanding | 547,156 | 546,642 | |||||||||
| Additional paid-in capital | 10,405,780 | 10,349,614 | |||||||||
| Cumulative dividends in excess of earnings | (4,621,861) | (4,269,689) | |||||||||
| Accumulated other comprehensive income (loss) | 19,371 | 28,134 | |||||||||
| Total stockholders’ equity | 6,350,446 | 6,654,701 | |||||||||
| Joint venture partners | 310,998 | 327,721 | |||||||||
| Non-managing member unitholders | 214,598 | 200,176 | |||||||||
| Total noncontrolling interests | 525,596 | 527,897 | |||||||||
| Total equity | 6,876,042 | 7,182,598 | |||||||||
| Total liabilities and equity | $ | 15,698,850 | $ | 15,771,229 | |||||||
See accompanying Notes to the Consolidated Financial Statements.
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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Rental and related revenues | $ | 1,631,805 | $ | 1,541,775 | $ | 1,378,384 | |||||||||||
| Resident fees and services | 527,417 | 494,935 | 471,325 | ||||||||||||||
| Interest income | 21,781 | 23,300 | 37,773 | ||||||||||||||
| Income from direct financing leases | — | 1,168 | 8,702 | ||||||||||||||
| Total revenues | 2,181,003 | 2,061,178 | 1,896,184 | ||||||||||||||
| Costs and expenses: | |||||||||||||||||
| Interest expense | 200,331 | 172,944 | 157,980 | ||||||||||||||
| Depreciation and amortization | 749,901 | 710,569 | 684,286 | ||||||||||||||
| Operating | 902,060 | 862,991 | 773,279 | ||||||||||||||
| General and administrative | 95,132 | 131,033 | 98,303 | ||||||||||||||
| Transaction and merger-related costs | 17,515 | 4,853 | 1,841 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | 23,160 | ||||||||||||||
| Total costs and expenses | 1,959,338 | 1,889,394 | 1,738,849 | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Gain (loss) on sales of real estate, net | 86,463 | 9,078 | 190,590 | ||||||||||||||
| Gain (loss) on debt extinguishments | — | — | (225,824) | ||||||||||||||
| Other income (expense), net | 6,808 | 326,268 | 6,266 | ||||||||||||||
| Total other income (expense), net | 93,271 | 335,346 | (28,968) | ||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 314,936 | 507,130 | 128,367 | ||||||||||||||
| Income tax benefit (expense) | 9,617 | 4,425 | 3,261 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,204 | 1,985 | 6,100 | ||||||||||||||
| Income (loss) from continuing operations | 334,757 | 513,540 | 137,728 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | 388,202 | ||||||||||||||
| Net income (loss) | 334,757 | 516,424 | 525,930 | ||||||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (17,851) | ||||||||||||||
| Noncontrolling interests’ share in discontinued operations | — | — | (2,539) | ||||||||||||||
| Net income (loss) attributable to Healthpeak Properties, Inc. | 306,009 | 500,449 | 505,540 | ||||||||||||||
| Participating securities’ share in earnings | (1,725) | (2,657) | (3,269) | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 304,284 | $ | 497,792 | $ | 502,271 | |||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
| Diluted earnings (loss) per common share: | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 547,006 | 538,809 | 538,930 | ||||||||||||||
| Diluted | 547,275 | 539,147 | 539,241 | ||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Net income (loss) | $ | 334,757 | $ | 516,424 | $ | 525,930 | |||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Net unrealized gains (losses) on derivatives | (8,900) | 30,145 | 332 | ||||||||||||||
| Change in Supplemental Executive Retirement Plan obligation and other | 137 | 1,136 | 457 | ||||||||||||||
| Reclassification adjustment realized in net income (loss) | — | — | (251) | ||||||||||||||
| Total other comprehensive income (loss) | (8,763) | 31,281 | 538 | ||||||||||||||
| Total comprehensive income (loss) | 325,994 | 547,705 | 526,468 | ||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (17,851) | ||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in discontinued operations | — | — | (2,539) | ||||||||||||||
| Total comprehensive income (loss) attributable to Healthpeak Properties, Inc. | $ | 297,246 | $ | 531,730 | $ | 506,078 | |||||||||||
See accompanying Notes to the Consolidated Financial Statements.
74
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | 538,405 | $ | 538,405 | $ | 10,175,235 | $ | (3,976,232) | $ | (3,685) | $ | 6,733,723 | $ | 556,227 | $ | 7,289,950 | $ | 57,396 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 505,540 | — | 505,540 | 20,346 | 525,886 | 44 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 538 | 538 | — | 538 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 1,005 | 1,005 | 740 | — | — | 1,745 | — | 1,745 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 8 | 8 | 193 | — | — | 201 | (201) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (418) | (418) | (12,423) | — | — | (12,841) | — | (12,841) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 97 | 97 | 3,194 | — | — | 3,291 | — | 3,291 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 22,851 | — | — | 22,851 | — | 22,851 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (650,082) | — | (650,082) | — | (650,082) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (33,017) | (33,017) | (162) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | (5) | — | — | (5) | (65) | (70) | (60,065) | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | 640 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | (89,491) | — | — | (89,491) | — | (89,491) | 89,491 | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | 539,097 | $ | 539,097 | $ | 10,100,294 | $ | (4,120,774) | $ | (3,147) | $ | 6,515,470 | $ | 543,290 | $ | 7,058,760 | $ | 87,344 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 500,449 | — | 500,449 | 15,876 | 516,325 | 99 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 31,281 | 31,281 | — | 31,281 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 9,936 | 9,936 | 299,481 | — | — | 309,417 | — | 309,417 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 27 | 27 | 853 | — | — | 880 | (880) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (2,418) | (2,418) | (65,420) | — | — | (67,838) | — | (67,838) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 31,412 | — | — | 31,412 | — | 31,412 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (649,364) | — | (649,364) | — | (649,364) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (30,389) | (30,389) | (160) | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | — | — | 1,390 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | (17,006) | — | — | (17,006) | — | (17,006) | 17,006 | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 546,642 | $ | 546,642 | $ | 10,349,614 | $ | (4,269,689) | $ | 28,134 | $ | 6,654,701 | $ | 527,897 | $ | 7,182,598 | $ | 105,679 | ||||||||||||||||||||||||||||||||||||
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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (CONTINUED)
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 546,642 | $ | 546,642 | $ | 10,349,614 | $ | (4,269,689) | $ | 28,134 | $ | 6,654,701 | $ | 527,897 | $ | 7,182,598 | $ | 105,679 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 306,009 | — | 306,009 | 28,111 | 334,120 | 637 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (8,763) | (8,763) | — | (8,763) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 683 | 683 | 755 | — | — | 1,438 | — | 1,438 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 72 | 72 | 1,200 | — | — | 1,272 | (1,272) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (241) | (241) | (6,283) | — | — | (6,524) | — | (6,524) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 2,966 | — | — | 2,966 | 15,693 | 18,659 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (658,181) | — | (658,181) | — | (658,181) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (44,848) | (44,848) | (276) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | — | — | — | — | (158) | (158) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | 173 | 173 | 316 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | 57,528 | — | — | 57,528 | — | 57,528 | (57,528) | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | 547,156 | $ | 547,156 | $ | 10,405,780 | $ | (4,621,861) | $ | 19,371 | $ | 6,350,446 | $ | 525,596 | $ | 6,876,042 | $ | 48,828 | ||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | 334,757 | $ | 516,424 | $ | 525,930 | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Depreciation and amortization of real estate, in-place lease, and other intangibles | 749,901 | 710,569 | 684,286 | |||||||||||||||||
| Stock-based compensation amortization expense | 14,480 | 26,456 | 18,202 | |||||||||||||||||
| Amortization of deferred financing costs | 11,916 | 10,881 | 9,216 | |||||||||||||||||
| Straight-line rents | (14,387) | (49,183) | (31,188) | |||||||||||||||||
| Amortization of nonrefundable entrance fees and above (below) market lease intangibles | (108,988) | (102,747) | (94,362) | |||||||||||||||||
| Equity loss (income) from unconsolidated joint ventures | (10,204) | (2,049) | (11,235) | |||||||||||||||||
| Distributions of earnings from unconsolidated joint ventures | 910 | 943 | 4,976 | |||||||||||||||||
| Loss (gain) on sale of real estate under direct financing leases | — | (22,693) | — | |||||||||||||||||
| Deferred income tax expense (benefit) | (14,605) | (6,001) | (5,792) | |||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | 55,896 | |||||||||||||||||
| Loss (gain) on debt extinguishments | — | — | 225,824 | |||||||||||||||||
| Loss (gain) on sales of real estate, net | (86,463) | (10,422) | (605,311) | |||||||||||||||||
| Loss (gain) upon change of control, net | (234) | (311,438) | (1,042) | |||||||||||||||||
| Casualty-related loss (recoveries), net | (3,085) | 7,168 | 1,632 | |||||||||||||||||
| Other non-cash items | 4,900 | 6,489 | (8,178) | |||||||||||||||||
| Changes in: | ||||||||||||||||||||
| Decrease (increase) in accounts receivable and other assets, net | (21,566) | (17,433) | 18,626 | |||||||||||||||||
| Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue | 104,511 | 136,293 | 7,768 | |||||||||||||||||
| Net cash provided by (used in) operating activities | 956,242 | 900,261 | 795,248 | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Acquisitions of real estate | (15,847) | (178,133) | (1,483,026) | |||||||||||||||||
| Development, redevelopment, and other major improvements of real estate | (731,206) | (861,636) | (610,555) | |||||||||||||||||
| Leasing costs, tenant improvements, and recurring capital expenditures | (113,596) | (108,510) | (111,480) | |||||||||||||||||
| Proceeds from sales of real estate, net | 141,651 | 47,885 | 2,399,120 | |||||||||||||||||
| Proceeds from the South San Francisco JVs transaction, net | — | 125,985 | — | |||||||||||||||||
| Investments in unconsolidated joint ventures | (88,391) | (21,143) | (25,260) | |||||||||||||||||
| Distributions in excess of earnings from unconsolidated joint ventures | 20,640 | 12,518 | 37,640 | |||||||||||||||||
| Proceeds from insurance recovery | 24,980 | 1,450 | — | |||||||||||||||||
| Proceeds from sales/principal repayments on loans receivable, direct financing leases, and marketable debt securities | 204,865 | 115,988 | 342,420 | |||||||||||||||||
| Investments in loans receivable and other | (19,850) | (10,747) | (17,827) | |||||||||||||||||
| Net cash provided by (used in) investing activities | (576,754) | (876,343) | 531,032 | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Borrowings under bank line of credit and commercial paper | 10,344,705 | 15,882,153 | 16,821,450 | |||||||||||||||||
| Repayments under bank line of credit and commercial paper | (10,620,311) | (16,052,522) | (15,785,065) | |||||||||||||||||
| Issuances and borrowings of term loans, senior unsecured notes, and mortgage debt | 743,778 | 500,000 | 1,088,537 | |||||||||||||||||
| Repayments and repurchases of term loans, senior unsecured notes, and mortgage debt | (90,089) | (5,048) | (2,425,936) | |||||||||||||||||
| Payments for debt extinguishment and deferred financing costs | (7,322) | (4,171) | (236,942) | |||||||||||||||||
| Issuance of common stock and exercise of options, net of offering costs | 278 | 308,100 | 5,036 | |||||||||||||||||
| Repurchase of common stock | (6,524) | (67,838) | (12,841) | |||||||||||||||||
| Dividends paid on common stock | (657,021) | (648,047) | (650,082) | |||||||||||||||||
| Distributions to and purchase of noncontrolling interests | (45,282) | (30,549) | (93,314) | |||||||||||||||||
| Contributions from and issuance of noncontrolling interests | 489 | 1,390 | 640 | |||||||||||||||||
| Net cash provided by (used in) financing activities | (337,299) | (116,532) | (1,288,517) | |||||||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 42,189 | (92,614) | 37,763 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of year | 126,834 | 219,448 | 181,685 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, end of year | $ | 169,023 | $ | 126,834 | $ | 219,448 | ||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
77
Healthpeak Properties, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Business
Overview
Healthpeak Properties, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) that, together with its consolidated entities (collectively, “Healthpeak” or the inability“Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). Healthpeak® acquires, develops, owns, leases, and manages healthcare real estate. The Company’s diverse portfolio is comprised of tenantsinvestments in the following reportable healthcare segments: (i) lab; (ii) outpatient medical; and (iii) continuing care retirement community (“CCRC”).
The Company’s corporate headquarters are in Denver, Colorado, and it has additional offices in California, Tennessee, and Massachusetts.
UPREIT Reorganization
On February 10, 2023, the Company completed its corporate reorganization (the “Reorganization”) into an umbrella partnership REIT (“UPREIT”). Substantially all of the Company’s business is conducted through Healthpeak OP, LLC (“Healthpeak OP”). The Company is the managing member of Healthpeak OP and does not have material assets or liabilities, other than through its investment in Healthpeak OP. For additional information on the UPREIT reorganization, see the Company’s Current Report on Form 8-K12B filed with the U.S. Securities and Exchange Commission (“SEC”) on February 10, 2023.
The Merger Agreement
On October 29, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Physicians Realty Trust, Physicians Realty L.P. (the “Physicians Partnership”), and certain of the Company’s subsidiaries, pursuant to make contractual rentwhich, among other things, and tenant recovery payments. We monitorthrough a series of transactions (the “Mergers”), (i) each outstanding common share of Physicians Realty Trust (other than Physicians Realty Trust common shares to be canceled in accordance with the liquidityMerger Agreement) will be converted into the right to receive 0.674 (the “Exchange Ratio”) shares of Company common stock, and creditworthiness(ii) each outstanding common unit of our tenantsthe Physicians Partnership will be converted into common units in the successor entity to the Physicians Partnership equal to the Exchange Ratio. Following the transactions contemplated in the Merger Agreement, the successor entities to Physicians Realty Trust and operators on a continuous basis. This evaluation considers industrythe Physicians Partnership will be subsidiaries of Healthpeak OP.
The Merger Agreement contains customary representations, warranties, and economic conditions, property performance, credit enhancementscovenants, as well as certain termination rights for the Company and Physicians Realty Trust, in each case, as more fully described in the Merger Agreement.
During the year ended December 31, 2023, the Company incurred approximately$11 million of merger-related costs, which primarily related to advisory, legal, accounting, and other factors. For straight-line rent receivable amounts, our assessment is based on income recoverable over the term of the lease. We exercise judgment in establishing allowances and consider payment history and current credit status in developing these estimates.costs. These estimates may differ from actual results, which could be material to our consolidated financial statements.
In addition, the related loans. If management determined that certain loans should no longer be classified as held-for-investment,Company has engaged service providers, including investment banks and advisors, to help the timing and amount of our interest income recognized would be impacted.
In connection with the Mergers, the Company filed a Registration Statement on Form S-4 with the SEC on December 15, 2023 (the “Initial Filing”), as amended on January 9, 2024, and a definitive joint proxy statement/prospectus for the Company and Physicians Realty Trust on January 11, 2024 in connection with their respective special meetings of stockholders and shareholders, as applicable, which will be held on February 21, 2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions, including the approval of the Company’s stockholders and the shareholders of Physicians Realty Trust. The parties expect the Mergers to close on March 1, 2024. If the Mergers are not consummated by July 31, 2024 (unless extended under certain circumstances), either the Company or Physicians Realty Trust may terminate the Merger Agreement.
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NOTE 2. Summary of Significant Accounting Policies
Use of Estimates
Management is reasonably assured.required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 revenues and expenses during the reporting period. Actual results could differ from management’s estimates.
The consolidated financial statements include the accounts of Healthpeak Properties, 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.
The Company is required to continually evaluate its VIE relationships and consolidate these entities when it is determined to be impaired. Finance Receivablesthe primary beneficiary of their operations. A VIE is broadly defined as an entity where either: (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are impaired whenconducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity. Criterion (iii) above is generally applied to limited partnerships and similarly structured entities by assessing whether a simple majority of the limited partners hold substantive rights to participate in the significant decisions of the entity or have the ability to remove the decision maker or liquidate the entity without cause. If neither of those criteria are met, the entity is a VIE.
The designation of an entity as a VIE is reassessed upon certain events, including, but not limited to: (i) a change to the contractual arrangements of the entity or in the ability of a party to exercise its participation or kick-out rights, (ii) a change to the capitalization structure of the entity, or (iii) acquisitions or sales of interests that constitute a change in control.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is deemed probable(or is not) the primary beneficiary of a VIE. Consideration of various factors include, but is not limited to, which activities most significantly impact the entity’s economic performance and the ability to direct those activities, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions, its ability to manage its ownership interest relative to the other interest holders, and its ability to replace the VIE manager and/or liquidate the entity.
For its investments in joint ventures that we willare not considered to be unable to collect all amounts due in accordance withVIEs, the contractual termsCompany evaluates the type of ownership rights held by the limited partner(s) that may preclude consolidation by the majority interest holder. The assessment of limited partners’ rights and their impact on the control of a joint venture should be made at inception of the loan or lease. An allowance is based upon our assessmentjoint venture and continually reassessed.
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Impairment of Long-Lived Assets
We assess the carrying value of our real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying amount of the real estate assetsvalue may not be recoverable, but at least annually.recoverable. Recoverability of real estate assets is measured by comparing the carrying amount of the real estate assets to the respective estimated future undiscounted cash flows. The expected future undiscounted cash flows reflect external market factors, and based on the specific facts and circumstances, may be probability-weighted to reflect multiple possible cash-flow scenarios, including selling the assets at various points in the future. Additionally, the estimated future undiscounted cash flows are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. In order to review our real estate assets for recoverability, we considermake assumptions regarding external market conditions as well as(including capitalization rates and growth rates), forecasted cash flows and sales prices, and our intent with respect to holding or disposing of the asset. If our analysis indicates that the carrying value of the real estate assets is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the carrying value exceeds the fair value of the real estate asset.assets.
67
Determining the fair value of real estate assets, including assets classified as held for sale, involves significant judgment. This judgment is based on our analysis and estimates of fair value of real estate assets, future operating resultsgenerally utilizes market capitalization rates, comparable market transactions, estimated per unit or per square foot prices, negotiations with prospective buyers, and resultingforecasted cash flows of each real estate asset whose carrying amount may not be recoverable.(primarily lease revenue rates, expense rates, and growth rates). Our ability to accurately predict future operating results and resulting cash flows, and estimate and allocate fair values, impacts the timing and recognition of impairments. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements for the impact of new accounting standards.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, includingprimarily from the potential loss arising from adverse changes in interest rates and foreign currency exchange rates, specifically the GBP.rates. We use derivative and other financial instruments in the normal course of business to mitigate interest rate and foreign currency risk. We do not use derivative financial instruments for speculative or trading purposes. Derivatives are recorded on the consolidated balance sheetsConsolidated Balance Sheets at fair value (see Note 2321 to the Consolidated Financial Statements).
To illustrate the effect of movements in the interest rate and foreign currency markets, we performed a market sensitivity analysis on our hedging instruments. We applied various basis point spreads to the underlying interest rate curves and foreign currency exchange rates of theour derivative portfolio in order to determine the change in fair value. AssumingAt December 31, 2023, a one percentage point changeincrease or decrease in the underlying interest rate curve and foreign currency exchange rates,would result in a corresponding increase or decrease in the estimated change in fair value of each of the underlying derivative instruments would not exceed $2by up to $18 million.
Interest Rate Risk
At December 31, 2017, we are exposed2023, our exposure to market risks related to fluctuations in interest ratesrate risk was primarily on our variable rate debt. As ofAt December 31, 2017, $442023, $142 million of our variable-ratevariable rate mortgage debt was hedged byand our $500 million Term Loan Facilities were swapped to fixed rates through interest rate swap transactions.instruments. The interest rate swapsswap instruments are designated as cash flow hedges, with the objective of managing the exposure to interest rate risk by converting the interest rates on our variable-ratevariable rate debt to fixed interest rates. At December 31, 2023, both the fair value and carrying value of the interest rate swap instruments were $21 million.
Our remaining variable rate debt at December 31, 2023 was comprised of borrowings under our commercial paper program and certain of our mortgage debt. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and assets until their maturity or earlier prepayment and refinancing. If interest rates have risen at the time we seek to refinance our fixed rate debt, whether at maturity or otherwise, our future earnings and cash flows could be adversely be affected by additional borrowing costs. Conversely, lower interest rates at the time of refinancing may reduce our overall borrowing costs. However, interestInterest rate changes will affect the fair value of our fixed rate instruments. AAt December 31, 2023, a one percentage point increase or decrease in interest rates would changedecrease the fair value of our fixed rate debt by approximately $332$255 million and $358 million, respectively, and would not materially impact earnings or cash flows. Aa one percentage point increase or decrease in interest rates would changeincrease the fair value of our fixed rate debt investments by approximately $8 million and $9 million, respectively, and$272 million. These changes would not materially impact earnings or cash flows. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not materially impact the fair value of those instruments. Assuming a one percentage point changeincrease in the interest raterates related to our variable-ratevariable rate debt, and variable-rate investments, and assuming no other changes in the outstanding balance as ofat December 31, 2017,2023, our annual interest expense would increase by approximately $7 million. Lastly, assuming a one percentage point decrease in the interest rates related to our variable rate loans receivable, and assuming no other changes in the outstanding balance at December 31, 2023, our annual interest income would changedecrease by approximately $12 million$2 million.
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ITEM 8. Financial Statements and $1 million, respectively.Supplementary Data
Index to the Consolidated Financial Statements
| (PCAOB ID No. 34) | |||||
Consolidated Balance Sheets—December 31, | |||||
Consolidated Statements of Operations—for the years ended December 31, | |||||
Consolidated Statements of Comprehensive Income (Loss)—for the years ended December 31, | |||||
Consolidated Statements of | |||||
Consolidated Statements of Cash Flows—for the years ended December 31, | |||||
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of HCP,Healthpeak Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsConsolidated Balance Sheets of HCP,Healthpeak Properties, Inc. and subsidiaries (the "Company"“Company”) as of December 31, 20172023 and 2016,2022, the related consolidated statementsConsolidated Statements of operations, comprehensive income (loss)Operations, Comprehensive Income (Loss), equity,Equity and cash flows,Redeemable Noncontrolling Interests, and Cash Flows, for each of the three years in the period ended December 31, 2017,2023, and the related notesNotes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 13, 2018,9, 2024, expressed an unqualified opinion on the Company'sCompany’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairments — Real Estate — Refer to Notes 2 and 5 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of impairment of real estate involves an assessment of the carrying value of real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable.
Auditing the Company’s process to evaluate real estate assets for impairment was complex due to the subjectivity in determining whether impairment indicators were present. Additionally, for real estate assets where indicators of impairment were determined to be present, the determination of the future undiscounted cash flows involved significant judgment. In particular, the undiscounted cash flows were forecasted based on significant assumptions such as lease-up periods, lease revenue rates, operating expenses, and revenue and expense growth rates, and included judgments around the intended hold period and terminal capitalization rates.
Given the Company’s evaluation of impairment indicators, forecasted cash flows and sales prices of a long-lived asset requires management to make significant estimates and assumptions related to market capitalization rates, market prices per unit, and/or forecasted cash flows, performing audit procedures required a high degree of auditor judgment and an increased extent of effort.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to real estate asset impairment included the following, among others:
•We tested the effectiveness of controls over impairment of real estate assets, including those over identifying impairment indicators and the determination of forecasted undiscounted cash flows and sales prices for real estate assets.
•We performed an independent search for impairment indicators through the evaluation of several factors including an analysis of industry and market data, a comparison of real estate asset implied capitalization rates to market capitalization rates, and trends in financial performance.
•For real estate assets where indicators of impairment were determined to be present, we subjected a sample of undiscounted cash flow models to testing by (1) evaluating the source information used by management, (2) testing the mathematical accuracy of the undiscounted cash flow models, (3) evaluating management’s intended hold period, and (4) performing an independent recoverability test based on market data.
| /s/ | ||||||
February 13, 2018
9, 2024
We have served as the Company'sCompany’s auditor since 2010.
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Healthpeak Properties, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| Real estate: | |||||||||||
| Buildings and improvements | $ | 13,329,464 | $ | 12,784,078 | |||||||
| Development costs and construction in progress | 643,217 | 760,355 | |||||||||
| Land and improvements | 2,647,633 | 2,667,188 | |||||||||
| Accumulated depreciation and amortization | (3,591,951) | (3,188,138) | |||||||||
| Net real estate | 13,028,363 | 13,023,483 | |||||||||
| Loans receivable, net of reserves of $2,830 and $8,280 | 218,450 | 374,832 | |||||||||
| Investments in and advances to unconsolidated joint ventures | 782,853 | 706,677 | |||||||||
| Accounts receivable, net of allowance of $2,282 and $2,399 | 55,820 | 53,436 | |||||||||
| Cash and cash equivalents | 117,635 | 72,032 | |||||||||
| Restricted cash | 51,388 | 54,802 | |||||||||
| Intangible assets, net | 314,156 | 418,061 | |||||||||
| Assets held for sale, net | 117,986 | 49,866 | |||||||||
| Right-of-use asset, net | 240,155 | 237,318 | |||||||||
| Other assets, net | 772,044 | 780,722 | |||||||||
| Total assets | $ | 15,698,850 | $ | 15,771,229 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Bank line of credit and commercial paper | $ | 720,000 | $ | 995,606 | |||||||
| Term loans | 496,824 | 495,957 | |||||||||
| Senior unsecured notes | 5,403,378 | 4,659,451 | |||||||||
| Mortgage debt | 256,097 | 346,599 | |||||||||
| Intangible liabilities, net | 127,380 | 156,193 | |||||||||
| Liabilities related to assets held for sale, net | 729 | 4,070 | |||||||||
| Lease liability | 206,743 | 208,515 | |||||||||
| Accounts payable, accrued liabilities, and other liabilities | 657,196 | 772,485 | |||||||||
| Deferred revenue | 905,633 | 844,076 | |||||||||
| Total liabilities | 8,773,980 | 8,482,952 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Redeemable noncontrolling interests | 48,828 | 105,679 | |||||||||
| Common stock, $1.00 par value: 750,000,000 shares authorized; 547,156,311 and 546,641,973 shares issued and outstanding | 547,156 | 546,642 | |||||||||
| Additional paid-in capital | 10,405,780 | 10,349,614 | |||||||||
| Cumulative dividends in excess of earnings | (4,621,861) | (4,269,689) | |||||||||
| Accumulated other comprehensive income (loss) | 19,371 | 28,134 | |||||||||
| Total stockholders’ equity | 6,350,446 | 6,654,701 | |||||||||
| Joint venture partners | 310,998 | 327,721 | |||||||||
| Non-managing member unitholders | 214,598 | 200,176 | |||||||||
| Total noncontrolling interests | 525,596 | 527,897 | |||||||||
| Total equity | 6,876,042 | 7,182,598 | |||||||||
| Total liabilities and equity | $ | 15,698,850 | $ | 15,771,229 | |||||||
| December 31, | |||||||
| 2017 | 2016 | ||||||
| ASSETS | |||||||
| Real estate: | |||||||
| Buildings and improvements | $ | 11,239,732 | $ | 11,692,654 | |||
| Development costs and construction in progress | 447,976 | 400,619 | |||||
| Land | 1,785,865 | 1,881,487 | |||||
| Accumulated depreciation and amortization | (2,741,695 | ) | (2,648,930 | ) | |||
| Net real estate | 10,731,878 | 11,325,830 | |||||
| Net investment in direct financing leases | 714,352 | 752,589 | |||||
| Loans receivable, net | 313,326 | 807,954 | |||||
| Investments in and advances to unconsolidated joint ventures | 800,840 | 571,491 | |||||
| Accounts receivable, net of allowance of $4,425 and $4,459, respectively | 40,733 | 45,116 | |||||
| Cash and cash equivalents | 55,306 | 94,730 | |||||
| Restricted cash | 26,897 | 42,260 | |||||
| Intangible assets, net | 410,082 | 479,805 | |||||
| Assets held for sale, net | 417,014 | 927,866 | |||||
| Other assets, net | 578,033 | 711,624 | |||||
| Total assets | $ | 14,088,461 | $ | 15,759,265 | |||
| LIABILITIES AND EQUITY | |||||||
| Bank line of credit | $ | 1,017,076 | $ | 899,718 | |||
| Term loans | 228,288 | 440,062 | |||||
| Senior unsecured notes | 6,396,451 | 7,133,538 | |||||
| Mortgage debt | 144,486 | 623,792 | |||||
| Other debt | 94,165 | 92,385 | |||||
| Intangible liabilities, net | 52,579 | 58,145 | |||||
| Liabilities of assets held for sale, net | 14,031 | 3,776 | |||||
| Accounts payable and accrued liabilities | 401,738 | 417,360 | |||||
| Deferred revenue | 144,709 | 149,181 | |||||
| Total liabilities | 8,493,523 | 9,817,957 | |||||
| Commitments and contingencies | |||||||
| Common stock, $1.00 par value: 750,000,000 shares authorized; 469,435,678 and 468,081,489 shares issued and outstanding, respectively | 469,436 | 468,081 | |||||
| Additional paid-in capital | 8,226,113 | 8,198,890 | |||||
| Cumulative dividends in excess of earnings | (3,370,520 | ) | (3,089,734 | ) | |||
| Accumulated other comprehensive income (loss) | (24,024 | ) | (29,642 | ) | |||
| Total stockholders' equity | 5,301,005 | 5,547,595 | |||||
| Joint venture partners | 117,045 | 214,377 | |||||
| Non-managing member unitholders | 176,888 | 179,336 | |||||
| Total noncontrolling interests | 293,933 | 393,713 | |||||
| Total equity | 5,594,938 | 5,941,308 | |||||
| Total liabilities and equity | $ | 14,088,461 | $ | 15,759,265 | |||
See accompanying Notes to the Consolidated Financial Statements.
72
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||
| Rental and related revenues | $ | 1,071,153 | $ | 1,159,791 | $ | 1,116,830 | |||||||||||||||||||||||||||||||||||||||
| Tenant recoveries | 142,496 | 134,280 | 125,022 | ||||||||||||||||||||||||||||||||||||||||||
| Rental and related revenues | |||||||||||||||||||||||||||||||||||||||||||||
| Rental and related revenues | |||||||||||||||||||||||||||||||||||||||||||||
| Resident fees and services | 524,275 | 686,835 | 525,453 | ||||||||||||||||||||||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||||||||||||||||||||
| Income from direct financing leases | 54,217 | 59,580 | 61,000 | ||||||||||||||||||||||||||||||||||||||||||
| Interest income | 56,237 | 88,808 | 112,184 | ||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,848,378 | 2,129,294 | 1,940,489 | ||||||||||||||||||||||||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | 307,716 | 464,403 | 479,596 | ||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 534,726 | 568,108 | 504,905 | ||||||||||||||||||||||||||||||||||||||||||
| Operating | 666,251 | 738,399 | 610,679 | ||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 88,772 | 103,611 | 95,965 | ||||||||||||||||||||||||||||||||||||||||||
| Transaction costs | 7,963 | 9,821 | 27,309 | ||||||||||||||||||||||||||||||||||||||||||
| Impairments (recoveries), net | 166,384 | — | 108,349 | ||||||||||||||||||||||||||||||||||||||||||
| Transaction and merger-related costs | |||||||||||||||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | |||||||||||||||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | |||||||||||||||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | |||||||||||||||||||||||||||||||||||||||||||||
| Total costs and expenses | 1,771,812 | 1,884,342 | 1,826,803 | ||||||||||||||||||||||||||||||||||||||||||
| Other income (expense): | Other income (expense): | ||||||||||||||||||||||||||||||||||||||||||||
| Gain (loss) on sales of real estate, net | 356,641 | 164,698 | 6,377 | ||||||||||||||||||||||||||||||||||||||||||
| Loss on debt extinguishments | (54,227 | ) | (46,020 | ) | — | ||||||||||||||||||||||||||||||||||||||||
| Gain (loss) on debt extinguishments | |||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | 31,420 | 3,654 | 16,208 | ||||||||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | 333,834 | 122,332 | 22,585 | ||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 410,400 | 367,284 | 136,271 | ||||||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | 1,333 | (4,473 | ) | 9,807 | |||||||||||||||||||||||||||||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 10,901 | 11,360 | 6,590 | ||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 422,634 | 374,171 | 152,668 | ||||||||||||||||||||||||||||||||||||||||||
| Discontinued operations: | |||||||||||||||||||||||||||||||||||||||||||||
| Income before impairments, transaction costs and income taxes | — | 400,701 | 643,109 | ||||||||||||||||||||||||||||||||||||||||||
| Impairments, net | — | — | (1,341,399 | ) | |||||||||||||||||||||||||||||||||||||||||
| Transaction costs | — | (86,765 | ) | — | |||||||||||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | — | (48,181 | ) | (796 | ) | ||||||||||||||||||||||||||||||||||||||||
| Total discontinued operations | — | 265,755 | (699,086 | ) | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 422,634 | 639,926 | (546,418 | ) | |||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests' share in earnings | (8,465 | ) | (12,179 | ) | (12,817 | ) | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to HCP, Inc. | 414,169 | 627,747 | (559,235 | ) | |||||||||||||||||||||||||||||||||||||||||
| Participating securities' share in earnings | (1,156 | ) | (1,198 | ) | (1,317 | ) | |||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share in continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share in discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Healthpeak Properties, Inc. | |||||||||||||||||||||||||||||||||||||||||||||
| Participating securities’ share in earnings | |||||||||||||||||||||||||||||||||||||||||||||
| Participating securities’ share in earnings | |||||||||||||||||||||||||||||||||||||||||||||
| Participating securities’ share in earnings | |||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 413,013 | $ | 626,549 | $ | (560,552 | ) | ||||||||||||||||||||||||||||||||||||||
| Basic earnings per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | $ | 0.88 | $ | 0.77 | $ | 0.30 | |||||||||||||||||||||||||||||||||||||||
| Discontinued operations | — | 0.57 | (1.51 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.88 | $ | 1.34 | $ | (1.21 | ) | ||||||||||||||||||||||||||||||||||||||
| Diluted earnings per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Diluted earnings (loss) per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | $ | 0.88 | $ | 0.77 | $ | 0.30 | |||||||||||||||||||||||||||||||||||||||
| Discontinued operations | — | 0.57 | (1.51 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.88 | $ | 1.34 | $ | (1.21 | ) | ||||||||||||||||||||||||||||||||||||||
| Weighted average shares used to calculate earnings per common share: | |||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||||||||||||||
| Basic | 468,759 | 467,195 | 462,795 | ||||||||||||||||||||||||||||||||||||||||||
| Diluted | 468,935 | 467,403 | 462,795 | ||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
73
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on derivatives | |||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 422,634 | $ | 639,926 | $ | (546,418 | ) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||
| Change in net unrealized gains (losses) on cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gains (losses) | (11,107 | ) | 3,233 | 1,894 | |||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on derivatives | |||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized gains (losses) on derivatives | |||||||||||||||||||||||||||||||||||||||||||||
| Change in Supplemental Executive Retirement Plan obligation and other | |||||||||||||||||||||||||||||||||||||||||||||
| Reclassification adjustment realized in net income (loss) | 799 | 707 | 148 | ||||||||||||||||||||||||||||||||||||||||||
| Change in Supplemental Executive Retirement Plan obligation and other | 64 | 220 | 121 | ||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 15,862 | (3,332 | ) | (8,738 | ) | ||||||||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | 5,618 | 828 | (6,575 | ) | |||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | 428,252 | 640,754 | (552,993 | ) | |||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) attributable to noncontrolling interests | (8,465 | ) | (12,179 | ) | (12,817 | ) | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) attributable to HCP, Inc. | $ | 419,787 | $ | 628,575 | $ | (565,810 | ) | ||||||||||||||||||||||||||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in continuing operations | |||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive (income) loss attributable to noncontrolling interests’ share in discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) attributable to Healthpeak Properties, Inc. | |||||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
74
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2015 | 459,746 | $ | 459,746 | $ | 11,431,987 | $ | (1,132,541 | ) | $ | (23,895 | ) | $ | 10,735,297 | $ | 261,802 | $ | 10,997,099 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | (559,235 | ) | — | (559,235 | ) | 12,817 | (546,418 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (6,575 | ) | (6,575 | ) | — | (6,575 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 5,117 | 5,117 | 176,950 | — | — | 182,067 | (3,183 | ) | 178,884 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (198 | ) | (198 | ) | (8,540 | ) | — | — | (8,738 | ) | — | (8,738 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 823 | 823 | 26,764 | — | — | 27,587 | — | 27,587 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | — | — | 26,127 | — | — | 26,127 | — | 26,127 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Dividends ($2.260 per share) | — | — | — | (1,046,638 | ) | — | (1,046,638 | ) | — | (1,046,638 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interest | — | — | (263 | ) | — | — | (263 | ) | (18,884 | ) | (19,147 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances of noncontrolling interest | — | — | — | — | — | — | 151,185 | 151,185 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | (5,986 | ) | — | — | (5,986 | ) | (1,063 | ) | (7,049 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2015 | 465,488 | $ | 465,488 | $ | 11,647,039 | $ | (2,738,414 | ) | $ | (30,470 | ) | $ | 9,343,643 | $ | 402,674 | $ | 9,746,317 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 627,747 | — | 627,747 | 12,179 | 639,926 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 828 | 828 | — | 828 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 2,552 | 2,552 | 61,625 | — | — | 64,177 | — | 64,177 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 145 | 145 | 5,948 | — | — | 6,093 | (6,093 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (237 | ) | (237 | ) | (8,448 | ) | — | — | (8,685 | ) | — | (8,685 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 133 | 133 | 3,340 | — | — | 3,473 | — | 3,473 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | — | — | 22,884 | — | — | 22,884 | — | 22,884 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($2.095 per share) | — | — | — | (979,542 | ) | — | (979,542 | ) | — | (979,542 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution of QCP, Inc. | — | — | (3,532,763 | ) | — | — | (3,532,763 | ) | — | (3,532,763 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | (36 | ) | — | — | (36 | ) | (26,311 | ) | (26,347 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances of noncontrolling interests | — | — | — | — | — | — | 11,834 | 11,834 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deconsolidation of noncontrolling interests | — | — | (36 | ) | 475 | — | 439 | 67 | 506 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | (663 | ) | — | — | (663 | ) | (637 | ) | (1,300 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2016 | 468,081 | $ | 468,081 | $ | 8,198,890 | $ | (3,089,734 | ) | $ | (29,642 | ) | $ | 5,547,595 | $ | 393,713 | $ | 5,941,308 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 414,169 | — | 414,169 | 8,465 | 422,634 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 5,618 | 5,618 | — | 5,618 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 1,402 | 1,402 | 25,951 | — | — | 27,353 | — | 27,353 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 78 | 78 | 2,411 | — | — | 2,489 | (2,489 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (157 | ) | (157 | ) | (4,628 | ) | — | — | (4,785 | ) | — | (4,785 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 32 | 32 | 736 | — | — | 768 | — | 768 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred compensation | — | — | 14,258 | — | — | 14,258 | — | 14,258 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Dividends ($1.480 per share) | — | — | — | (694,955 | ) | — | (694,955 | ) | — | (694,955 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (26,129 | ) | (26,129 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuances of noncontrolling interests | — | — | — | — | — | — | 1,615 | 1,615 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deconsolidation of noncontrolling interests | — | — | — | — | — | — | (58,062 | ) | (58,062 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | (11,505 | ) | — | — | (11,505 | ) | (23,180 | ) | (34,685 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2017 | 469,436 | $ | 469,436 | $ | 8,226,113 | $ | (3,370,520 | ) | $ | (24,024 | ) | $ | 5,301,005 | $ | 293,933 | $ | 5,594,938 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
75
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (CONTINUED)
(In thousands, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Cumulative Dividends In Excess Of Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | Total Noncontrolling Interests | Total Equity | Redeemable Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 546,642 | $ | 546,642 | $ | 10,349,614 | $ | (4,269,689) | $ | 28,134 | $ | 6,654,701 | $ | 527,897 | $ | 7,182,598 | $ | 105,679 | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 306,009 | — | 306,009 | 28,111 | 334,120 | 637 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (8,763) | (8,763) | — | (8,763) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | 683 | 683 | 755 | — | — | 1,438 | — | 1,438 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of DownREIT units to common stock | 72 | 72 | 1,200 | — | — | 1,272 | (1,272) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | (241) | (241) | (6,283) | — | — | (6,524) | — | (6,524) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 2,966 | — | — | 2,966 | 15,693 | 18,659 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common dividends ($1.20 per share) | — | — | — | (658,181) | — | (658,181) | — | (658,181) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | (44,848) | (44,848) | (276) | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests | — | — | — | — | — | — | (158) | (158) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Contributions from noncontrolling interests | — | — | — | — | — | — | 173 | 173 | 316 | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redemption value of redeemable noncontrolling interests | — | — | 57,528 | — | — | 57,528 | — | 57,528 | (57,528) | ||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | 547,156 | $ | 547,156 | $ | 10,405,780 | $ | (4,621,861) | $ | 19,371 | $ | 6,350,446 | $ | 525,596 | $ | 6,876,042 | $ | 48,828 | ||||||||||||||||||||||||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
76
Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 422,634 | $ | 639,926 | $ | (546,418 | ) | ||||
| 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: | |||||||||||
| Continuing operations | 534,726 | 568,108 | 504,905 | ||||||||
| Discontinued operations | — | 4,890 | 5,880 | ||||||||
| Amortization of deferred compensation | 14,258 | 22,884 | 26,127 | ||||||||
| Amortization of deferred financing costs | 14,569 | 20,014 | 20,222 | ||||||||
| Straight-line rents | (23,933 | ) | (18,003 | ) | (28,859 | ) | |||||
| Loan and direct financing lease non-cash interest, net: | |||||||||||
| Continuing operations | (613 | ) | 599 | (5,648 | ) | ||||||
| Discontinued operations | — | — | (90,065 | ) | |||||||
| Equity loss (income) from unconsolidated joint ventures | (10,901 | ) | (11,360 | ) | (57,313 | ) | |||||
| Distributions of earnings from unconsolidated joint ventures | 44,142 | 26,492 | 15,111 | ||||||||
| Loss (gain) on sales of real estate, net | (356,641 | ) | (164,698 | ) | (6,377 | ) | |||||
| Lease and management fee termination loss (income), net | 54,641 | — | (1,103 | ) | |||||||
| Deferred income tax expense (benefit) | (5,523 | ) | 47,195 | — | |||||||
| Impairments (recoveries), net | 166,384 | — | 1,449,748 | ||||||||
| Loss on extinguishment of debt | 54,227 | 46,020 | — | ||||||||
| Casualty-related loss (recoveries), net | 12,053 | — | — | ||||||||
| Loss (gain) on sale of marketable securities | (50,895 | ) | — | — | |||||||
| Other non-cash items | (2,122 | ) | (2,968 | ) | (11,286 | ) | |||||
| Decrease (increase) in accounts receivable and other assets, net | (24,782 | ) | (6,992 | ) | (29,022 | ) | |||||
| Increase (decrease) accounts payable and accrued liabilities | 4,817 | 42,024 | (23,757 | ) | |||||||
| Net cash provided by (used in) operating activities | 847,041 | 1,214,131 | 1,222,145 | ||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of RIDEA III, net | — | — | (768,413 | ) | |||||||
| Acquisitions of other real estate | (560,753 | ) | (467,162 | ) | (613,252 | ) | |||||
| Development and redevelopment of real estate | (373,479 | ) | (421,322 | ) | (281,017 | ) | |||||
| Leasing costs, tenant improvements, and recurring capital expenditures | (115,260 | ) | (91,442 | ) | (84,282 | ) | |||||
| Proceeds from sales of real estate, net | 1,314,325 | 647,754 | 73,149 | ||||||||
| Contributions to unconsolidated joint ventures | (46,334 | ) | (10,186 | ) | (69,936 | ) | |||||
| Distributions in excess of earnings from unconsolidated joint ventures | 37,023 | 28,366 | 30,989 | ||||||||
| Proceeds from the RIDEA II transaction, net | 462,242 | — | — | ||||||||
| Proceeds from sales/principal repayments on debt investments and direct financing leases | 558,769 | 231,990 | 628,049 | ||||||||
| Investments in loans receivable, direct financing leases and other | (30,276 | ) | (273,693 | ) | (575,652 | ) | |||||
| Purchase of securities for debt defeasance | — | (73,278 | ) | — | |||||||
| Net cash provided by (used in) investing activities | 1,246,257 | (428,973 | ) | (1,660,365 | ) | ||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings under bank line of credit, net | 1,244,189 | 1,108,417 | 98,743 | ||||||||
| Repayments under bank line of credit | (1,150,596 | ) | (540,000 | ) | (511,521 | ) | |||||
| Proceeds related to QCP Spin-Off, net | — | 1,685,172 | — | ||||||||
| Issuance and borrowings of debt, excluding bank line of credit | 5,395 | — | 2,269,031 | ||||||||
| Repayments and repurchase of debt, excluding bank line of credit | (1,468,446 | ) | (2,316,774 | ) | (457,845 | ) | |||||
| Payments for debt extinguishment and deferred financing costs | (51,415 | ) | (54,856 | ) | (19,995 | ) | |||||
| Issuance of common stock and exercise of options | 28,121 | 67,650 | 206,471 | ||||||||
| Repurchase of common stock | (4,785 | ) | (8,685 | ) | (8,738 | ) | |||||
| Dividends paid on common stock | (694,955 | ) | (979,542 | ) | (1,046,638 | ) | |||||
| Issuance of noncontrolling interests | 1,615 | 11,834 | 110,775 | ||||||||
| Distributions to and purchase of noncontrolling interests | (57,584 | ) | (27,481 | ) | (26,196 | ) | |||||
| Net cash provided by (used in) financing activities | (2,148,461 | ) | (1,054,265 | ) | 614,087 | ||||||
| Effect of foreign exchanges on cash, cash equivalents and restricted cash | 376 | (1,019 | ) | (1,537 | ) | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (54,787 | ) | (270,126 | ) | 174,330 | ||||||
| Cash, cash equivalents and restricted cash, beginning of year | 136,990 | 407,116 | 232,786 | ||||||||
| Cash, cash equivalents and restricted cash, end of year | $ | 82,203 | $ | 136,990 | $ | 407,116 | |||||
| Less: cash, cash equivalents and restricted cash of discontinued operations | — | — | (6,058 | ) | |||||||
| Cash, cash equivalents and restricted cash of continuing operations, end of year | $ | 82,203 | $ | 136,990 | $ | 401,058 | |||||
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | 334,757 | $ | 516,424 | $ | 525,930 | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Depreciation and amortization of real estate, in-place lease, and other intangibles | 749,901 | 710,569 | 684,286 | |||||||||||||||||
| Stock-based compensation amortization expense | 14,480 | 26,456 | 18,202 | |||||||||||||||||
| Amortization of deferred financing costs | 11,916 | 10,881 | 9,216 | |||||||||||||||||
| Straight-line rents | (14,387) | (49,183) | (31,188) | |||||||||||||||||
| Amortization of nonrefundable entrance fees and above (below) market lease intangibles | (108,988) | (102,747) | (94,362) | |||||||||||||||||
| Equity loss (income) from unconsolidated joint ventures | (10,204) | (2,049) | (11,235) | |||||||||||||||||
| Distributions of earnings from unconsolidated joint ventures | 910 | 943 | 4,976 | |||||||||||||||||
| Loss (gain) on sale of real estate under direct financing leases | — | (22,693) | — | |||||||||||||||||
| Deferred income tax expense (benefit) | (14,605) | (6,001) | (5,792) | |||||||||||||||||
| Impairments and loan loss reserves (recoveries), net | (5,601) | 7,004 | 55,896 | |||||||||||||||||
| Loss (gain) on debt extinguishments | — | — | 225,824 | |||||||||||||||||
| Loss (gain) on sales of real estate, net | (86,463) | (10,422) | (605,311) | |||||||||||||||||
| Loss (gain) upon change of control, net | (234) | (311,438) | (1,042) | |||||||||||||||||
| Casualty-related loss (recoveries), net | (3,085) | 7,168 | 1,632 | |||||||||||||||||
| Other non-cash items | 4,900 | 6,489 | (8,178) | |||||||||||||||||
| Changes in: | ||||||||||||||||||||
| Decrease (increase) in accounts receivable and other assets, net | (21,566) | (17,433) | 18,626 | |||||||||||||||||
| Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue | 104,511 | 136,293 | 7,768 | |||||||||||||||||
| Net cash provided by (used in) operating activities | 956,242 | 900,261 | 795,248 | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Acquisitions of real estate | (15,847) | (178,133) | (1,483,026) | |||||||||||||||||
| Development, redevelopment, and other major improvements of real estate | (731,206) | (861,636) | (610,555) | |||||||||||||||||
| Leasing costs, tenant improvements, and recurring capital expenditures | (113,596) | (108,510) | (111,480) | |||||||||||||||||
| Proceeds from sales of real estate, net | 141,651 | 47,885 | 2,399,120 | |||||||||||||||||
| Proceeds from the South San Francisco JVs transaction, net | — | 125,985 | — | |||||||||||||||||
| Investments in unconsolidated joint ventures | (88,391) | (21,143) | (25,260) | |||||||||||||||||
| Distributions in excess of earnings from unconsolidated joint ventures | 20,640 | 12,518 | 37,640 | |||||||||||||||||
| Proceeds from insurance recovery | 24,980 | 1,450 | — | |||||||||||||||||
| Proceeds from sales/principal repayments on loans receivable, direct financing leases, and marketable debt securities | 204,865 | 115,988 | 342,420 | |||||||||||||||||
| Investments in loans receivable and other | (19,850) | (10,747) | (17,827) | |||||||||||||||||
| Net cash provided by (used in) investing activities | (576,754) | (876,343) | 531,032 | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Borrowings under bank line of credit and commercial paper | 10,344,705 | 15,882,153 | 16,821,450 | |||||||||||||||||
| Repayments under bank line of credit and commercial paper | (10,620,311) | (16,052,522) | (15,785,065) | |||||||||||||||||
| Issuances and borrowings of term loans, senior unsecured notes, and mortgage debt | 743,778 | 500,000 | 1,088,537 | |||||||||||||||||
| Repayments and repurchases of term loans, senior unsecured notes, and mortgage debt | (90,089) | (5,048) | (2,425,936) | |||||||||||||||||
| Payments for debt extinguishment and deferred financing costs | (7,322) | (4,171) | (236,942) | |||||||||||||||||
| Issuance of common stock and exercise of options, net of offering costs | 278 | 308,100 | 5,036 | |||||||||||||||||
| Repurchase of common stock | (6,524) | (67,838) | (12,841) | |||||||||||||||||
| Dividends paid on common stock | (657,021) | (648,047) | (650,082) | |||||||||||||||||
| Distributions to and purchase of noncontrolling interests | (45,282) | (30,549) | (93,314) | |||||||||||||||||
| Contributions from and issuance of noncontrolling interests | 489 | 1,390 | 640 | |||||||||||||||||
| Net cash provided by (used in) financing activities | (337,299) | (116,532) | (1,288,517) | |||||||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 42,189 | (92,614) | 37,763 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of year | 126,834 | 219,448 | 181,685 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, end of year | $ | 169,023 | $ | 126,834 | $ | 219,448 | ||||||||||||||
See accompanying Notes to the Consolidated Financial Statements.
77
Healthpeak Properties, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Business
Overview
The Company’s corporate headquarters are in Denver, Colorado, and it has additional offices in California, Tennessee, and Massachusetts.
UPREIT Reorganization
On February 10, 2023, the Company completed its corporate reorganization (the “Reorganization”) into an umbrella partnership REIT (“UPREIT”). Substantially all of the Company’s business is conducted through Healthpeak OP, LLC (“Healthpeak OP”). The Company is the managing member of Healthpeak OP and does not have material assets or liabilities, other than through its investment in Healthpeak OP. For additional information on the UPREIT reorganization, see the Company’s Current Report on Form 8-K12B filed with the U.S. Securities and Exchange Commission (“SEC”) on February 10, 2023.
The Merger Agreement
On October 29, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Physicians Realty Trust, Physicians Realty L.P. (the “Physicians Partnership”), (iii) life science and (iv) medical office.certain of the Company’s subsidiaries, pursuant to which, among other things, and through a series of transactions (the “Mergers”), (i) each outstanding common share of Physicians Realty Trust (other than Physicians Realty Trust common shares to be canceled in accordance with the Merger Agreement) will be converted into the right to receive 0.674 (the “Exchange Ratio”) shares of Company common stock, and (ii) each outstanding common unit of the Physicians Partnership will be converted into common units in the successor entity to the Physicians Partnership equal to the Exchange Ratio. Following the transactions contemplated in the Merger Agreement, the successor entities to Physicians Realty Trust and the Physicians Partnership will be subsidiaries of Healthpeak OP.
The Merger Agreement contains customary representations, warranties, and covenants, as well as certain termination rights for the Company and Physicians Realty Trust, in each case, as more fully described in the Merger Agreement.
During the year ended December 31, 2023, the Company incurred approximately$11 million of merger-related costs, which primarily related to advisory, legal, accounting, and other costs. These merger-related costs are included in transaction and merger-related costs on the Consolidated Statements of Operations.
In addition, the Company has engaged service providers, including investment banks and advisors, to help the Company negotiate the terms of the transactions contemplated by the Merger Agreement and to advise the Company on other merger-related matters. In connection with these services, the Company expects to be required to pay success-based fees to the extent that certain conditions, including the closing of the transactions contemplated by the Merger Agreement, are met. As of December 31, 2023, the Company expects to incur approximately$22 million of such success fees. As closing of the transactions contemplated by the Merger Agreement has not occurred, no such amounts have been paid or accrued through December 31, 2023.
In connection with the Mergers, the Company filed a Registration Statement on Form S-4 with the SEC on December 15, 2023 (the “Initial Filing”), as amended on January 9, 2024, and a definitive joint proxy statement/prospectus for the Company and Physicians Realty Trust on January 11, 2024 in connection with their respective special meetings of stockholders and shareholders, as applicable, which will be held on February 21, 2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions, including the approval of the Company’s stockholders and the shareholders of Physicians Realty Trust. The parties expect the Mergers to close on March 1, 2024. If the Mergers are not consummated by July 31, 2024 (unless extended under certain circumstances), either the Company or Physicians Realty Trust may terminate the Merger Agreement.
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NOTE 2. Summary of Significant Accounting Policies
Use of Estimates
Management is required to make estimates and assumptions in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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 revenues and expenses during the reporting period. Actual results could differ from management’s estimates.
The consolidated financial statements include the accounts of HCP,Healthpeak Properties, 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.
The Company is required to continually evaluate its variable interest entity (“VIE”)VIE relationships and consolidate these entities when it is determined to be the primary beneficiary of their operations. A VIE is broadly defined as an entity where either: (i) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights, or (iii) the equity investors as a group lack any of the following: (a) the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity, or (c) the right to receive the expected residual returns of an entity. Criterion (iii) above is generally applied to limited partnerships and similarly structured entities by assessing whether a simple majority of the limited partners hold substantive rights to participate in the significant decisions of the entity or have the ability to remove the decision maker or liquidate the entity without cause. If neither of those criteria are met, the entity is a VIE.
The designation of an entity as a VIE is reassessed upon certain events, including, but not limited to: (i) a change to the contractual arrangements of the entity or in the ability of a party to exercise its participation or kick-out rights, (ii) a change to the capitalization structure of the entity, or (iii) acquisitions or sales of interests that constitute a change in control.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but is not limited to, which activities most significantly impact the entity’s economic performance and the ability to direct those activities, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions, its ability to manage its ownership interest relative to the other interest holders, and its ability to replace the VIE manager and/or liquidate the entity.
For its investments in joint ventures that are not considered to be VIEs, the Company evaluates the type of ownership rights held by the limited partner(s) that may preclude consolidation by the sole general partner or majority interest holder. The assessment of limited partners’ rights and their impact on the control of a joint venture should be made at inception of the joint venture and should be reassessed if: (i) there is a change to the terms or in the ability to exercise the limited partner rights, (ii) the sole general partner increases or decreases its ownership interest in the limited partnership, or (iii) there is an increase or decrease in the numbercontinually reassessed.
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Revenue Recognition
The Company classifies a new lease arrangement, including new leases that arise from amendments, the Company assesses its terms and conditions to determine the proper lease classification. A lease arrangement is classified as an operating lease if none of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly afterby the end of the lease term, (ii) lessee has a bargain purchase option during or at the end of the lease term that it is reasonably certain to exercise, (iii) the lease term is equal to 75% or morefor the major part of the remaining economic life of the underlying property’s economic life, orasset, (iv) the present value of future minimum lease payments (excluding executory costs) is equal to 90% or moresubstantially all of the excess fair value (over retained tax credits) of the leased property. If one of the four criteria is met and the minimum lease payments are determined to be reasonably predictable and collectible, the lease arrangement is generally accounted for as a direct financing lease (“DFL”).
Rental and Related Revenues
The Company recognizes rental revenue from its lab and outpatient medical buildings in accordance with Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”). The Company commences recognition of rental revenue for operating lease arrangements when the tenant has taken possession or controls the physical use of a leased asset; theasset. The tenant is not considered to have taken physical possession or have control of the leased asset until the Company-owned tenant improvements are substantially completed.complete. If a lease arrangement provides for tenant improvements, the Company determines whether the tenant improvements are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, any tenant improvements funded by the tenant are treated as lease payments which are deferred and amortized into income over the lease term. When the tenant is the owner of the tenant improvements, any tenant improvement allowance that is funded by the Company is treated as a lease incentive and amortized as a reduction of revenue over the lease term.
Ownership of tenant improvements is determined based on various factors including, but not limited to, the following criteria:
•lease stipulations of how and on what a tenant improvement allowance may be spent;
•which party to the arrangement retains legal title to the tenant improvements upon lease expiration;
•whether the tenant improvements are unique to the tenant or general purpose in nature;
•if the tenant improvements are expected to have significant residual value at the end of the lease term;
•the responsible party for construction cost overruns; and
•which party constructs or directs the construction of the improvements.
Certain leases provide for additional rents that are contingent upon a percentage of the facility’sbuilding’s revenue in excess of specified base amounts or other thresholds. Such revenue is recognized when actual results reported by the tenant or estimates of tenant results, exceed the base amount or other thresholds, and only after any contingency has been removed (when the related thresholds are achieved). This may result in the recognition of rental revenue in periods subsequent to when such payments are received.
Tenant recoveries subject to operating leases generally relate to the reimbursement of real estate taxes, insurance, and repairsrepair and maintenance expense. These expensesexpense, and are recognized as both revenue (in rental and related revenues) and expense (in operating expenses) in the period they are incurred. The reimbursements of these expenses are recognized and presented gross,the expense is incurred as the Company is generally the primary obligorparty paying the service provider. Rental and with respect to purchasing goods and servicesrelated revenues from third party suppliers, has discretion in selecting the supplier and bearsother variable payments are recognized when the associated credit risk.contingencies are removed. In accordance with ASC 842, the Company accounts for lease and nonlease components as a single lease component for the purpose of revenue recognition and disclosure.
For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight linestraight-line basis over the lease term when collectibility of future minimum lease payments is reasonably assured.probable. Recognizing rental income on a straight linestraight-line basis results in a difference in the timing of revenue amounts from what is contractually due from tenants. If the Company determines that collectibility of straight line rentsfuture minimum lease payments is not reasonably assured,probable, the accounts receivable and straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid,paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue.
The Company’s operating leases generally contain options to extend lease terms at prevailing market rates at the time of expiration. Certain operating leases contain early termination options that require advance notice and when appropriate, an allowance for estimated lossespayment of a penalty, which in most cases is established.substantial enough to be deemed economically disadvantageous by a tenant to exercise.
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Resident Fees and Services
The Company recognizes resident fee and service revenue from its Senior Housing Operating Property (“SHOP”) portfolios and CCRC properties in accordance with ASC 606, Revenue from Contracts with Customers. Resident fee revenue is recorded when services are rendered and includes resident room and care charges, community fees, and other resident charges. Residency agreements for SHOP and CCRC facilities are generally for a term of 30 days to one year, with resident fees billed monthly.monthly, in advance. Revenue for certain care related services is recognized as services are provided and is billed monthly in arrears.
The Company’s CCRCs are operated as entrance fee communities, which typically require a resident to pay an upfront entrance fee that includes both a refundable portion and non-refundable portion. When the Company receives a nonrefundable entrance fee, it is recorded in deferred revenue in the Consolidated Balance Sheets and amortized into revenue over the estimated stay of the resident. The Company utilizes third-party actuarial experts in its determination of the estimated stay of residents.
Income from Direct Financing Leases
The Company utilizes the direct finance method of accounting to record direct financing lease (“DFL”) income. For a lease accounted for as a DFL, the net investment in the DFL represents receivables for the sum of future minimum lease payments and the estimated residual value of the leased property, less the unamortized unearned income. Unearned income is deferred and amortized to income over the lease term to provide a constant yield when collectibility of the lease payments is reasonably assured. During the first quarter of 2022, the Company sold its remaining hospital under a DFL.
Interest Income
Loans receivable are classified as held-for-investment based on management’s intent and ability to hold the loans for the foreseeable future or to maturity. Loans held-for-investment are carried at amortized cost and reduced by a valuation allowance for estimated credit losses, as necessary. The Company recognizes interest income on loans, including the amortization of discounts and premiums, loan fees paid and received, using the interest method. The interest method is applied on a loan-by-loan basis whenWhen collectibility of the future payments is reasonably assured. Premiumsassured, the Company utilizes the interest method on a loan-by-loan basis to recognize interest income on its loans, which includes the amortization of discounts and discounts are recognizedpremiums as yield adjustments over the termwell as loan fees paid and received.
Gain (loss) on sales of the related loans.
real estate, net
The Company recognizes a gain (loss) on salessale of real estate uponwhen the closing ofcriteria for an asset to be derecognized are met, which include when: (i) a transaction withcontract exists, (ii) the purchaser. Gains on real estate sold are recognized using the full accrual method when collectibilitybuyer obtains control of the sales priceasset, and (iii) it is reasonably assured,probable that the Company will receive substantially all of the consideration to which it is not obligatedentitled. These criteria are generally satisfied at the time of sale.
Government Grant Income
On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to perform additional activitiesprovide financial aid to individuals, businesses, and state and local governments.During the years ended December 31, 2023, 2022, and 2021, the Company received government grants under the CARES Act primarily to cover increased expenses and lost revenues during the coronavirus pandemic. Grant income is recognized to the extent that may be considered significant,qualifying expenses and lost revenues exceed grants received and the initial investment fromCompany will comply with all conditions attached to the buyer is sufficientgrant. As of December 31, 2023, the amount of qualifying expenditures and other profit recognition criteria have been satisfied. Gain on saleslost revenues exceeded grant income recognized and the Company believes it has complied and will continue to comply with all grant conditions. In the event of real estate may be deferred in whole or in part untilnon-compliance, all such amounts received are subject to recapture.
The following table summarizes information related to government grant income received and recognized by the requirements for gain recognition have been met.Company (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| Government grant income recorded in other income (expense), net | $ | 184 | $ | 6,765 | $ | 1,412 | ||||||||||||||||||||||||||
| Government grant income recorded in equity income (loss) from unconsolidated joint ventures | 229 | 878 | 1,749 | |||||||||||||||||||||||||||||
| Government grant income recorded in income (loss) from discontinued operations | — | 217 | 3,669 | |||||||||||||||||||||||||||||
| Total government grants received | $ | 413 | $ | 7,860 | $ | 6,830 | ||||||||||||||||||||||||||
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Credit Losses
The Company evaluates the liquidity and creditworthiness of its tenants,occupants, operators, and borrowers on a monthly and quarterly basis.basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers payment history and current credit status, industry andconditions, current economic conditions, forecasted economic conditions, individual and portfolio property performance, credit enhancements, liquidity, and other factors. Future economic conditions are based primarily on near-term economic forecasts from the Federal Reserve and reasonable assumptions for long-term economic trends. The determination of loan losses also considers concentration of credit risk associated with the senior housing industry to which its loans receivable relate. The Company’s tenants,occupants, operators, and borrowers and operators furnish property, portfolio, and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis; the Company utilizes this financial information to calculate the lease or debt service coverages in its assessment of internal ratings that it uses as a primary credit quality indicator. Lease and debt service coverage information is evaluated together with other property, portfolio, and operator performance information, including revenue, expense, net operating income, occupancy, rental rate, reimbursement trends, capital expenditures, and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures. The Company evaluates, on a monthly basis or immediately upon a significant change in circumstance, its tenants’occupants’, operators’, and borrowers’ ability to service their obligations with the Company.
In connection with the Company’s quarterly review process or upon the occurrence of a significant event, loans receivable and DFLs (collectively, “Finance Receivables”“finance receivables”), are reviewed and assigned an internal rating of Performing, Watch List, or Workout. Finance Receivablesreceivables that are deemed Performing meet all present contractual obligations, and collection and timing, of all amounts owed is reasonably assured. Watch List Finance Receivablesfinance receivables are defined as Finance Receivablesfinance receivables that do not meet the definition of Performing or Workout. Workout Finance Receivablesfinance receivables are defined as Finance Receivablesfinance receivables in which the Company has determined, based on current information and events, that: (i) it is probable it will be unable to collect all amounts due according to the contractual terms of the agreement, (ii) the tenant, operator, or borrower is delinquent on making payments under the contractual terms of the agreement, and (iii) the Company has commenced action or anticipates pursuing action in the near term to seek recovery of its investment.
Finance Receivablesreceivables are placed on nonaccrual status when management determines that the collectibility of contractual amounts is not reasonably assured (the asset will have an internal rating of either Watch List or Workout). Further, the Company performs a credit analysis to support the tenant’s, operator’s, borrower’s, and/or guarantor’s repayment capacity and the underlying collateral values. The Company uses the cash basis method of accounting for Finance Receivablesfinance receivables placed on nonaccrual status unless one of the following conditions exist whereby it utilizes the cost recovery method of accounting:accounting if: (i) if the Company determines that it is probable that it will only recover the recorded investment in the Finance Receivable,finance receivable, net of associated allowances or charge-offs (if any), or (ii) the Company cannot reasonably estimate the amount of an impaired Finance Receivable.finance receivable. For cash basis method of accounting, the Company applies payments received, excluding principal paydowns, to interest income so long as that amount does not exceed the amount that would have been earned under the original contractual terms. For cost recovery method of accounting, any payment received is applied to reduce the recorded investment. Generally, the Company returns a Finance Receivablefinance receivable to accrual status when all delinquent payments become current under the terms of the loan or lease agreements and collectibility of the remaining contractual loan or lease payments is reasonably assured.
Real Estate
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The Company assesses fair value based on available market information, such as capitalization and discount rates, comparable sale transactions, and relevant per square foot or unit cost information. A real estate asset’s fair value may be determined utilizing cash flow projections that incorporate appropriate discount and/or capitalization rates or other availablesuch market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, as well as market and economic conditions. The fair value of tangible assets of an acquired property is based on the value of the property as if it is vacant.
The Company recordsrecognizes acquired “above and below market” leases at their relative fair value (for asset acquisitions) using discount rates which reflect the risks associated with the leases acquired. The amount recordedfair value is based on the present value of the difference between (i) the contractual amounts paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the extended term for any leases with bargain renewal options.options that are reasonably certain to be exercised. Other intangible assets acquired include amounts for in-place lease values that are based on an evaluation of the specific characteristics of each property and the acquired tenant lease(s). Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions, and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rents at market rates during the hypothetical expected lease-up periods, which are dependent on local market conditions and expected trends. In estimating costs to execute similar leases, the Company considers leasing commissions, legal, and other related costs.
Certain of the Company's acquisitions involve the assumption of contract liabilities. The Company typically estimates the fair value of contract liabilities by applying a reasonable profit margin to the total discounted estimated future costs associated with servicing the contract. A variety of market and contract-specific conditions are considered when making assumptions that impact the estimated fair value of the contract liability.
The Company capitalizes direct construction and development costs, including predevelopment costs, interest, property taxes, insurance, and other costs directly related and essential to the development or construction of a real estate asset. The Company capitalizes construction and development costs while substantive activities are ongoing to prepare an asset for its intended use. During the holding or development period, certain real estate assets generate incidental income that is not associated with the future profit or return from the intended use of the property. Such income is recognized as a reduction of the associated project costs. The Company considers a construction project as substantially complete and held available for occupancy upon the completion of Company-owned tenant improvements, but no later than one year from cessation of significant construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. For redevelopment of existing operating properties, the Company capitalizes the cost for the construction and improvement incurred in connection with the redevelopment.
Costs previously capitalized related to abandoned developments/redevelopments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred. The Company considers costs incurred in conjunction with re-leasing properties, including tenant improvements and lease commissions, to represent the acquisition of productive assets and accordingly, such costs are reflected as investing activities in the Company’s consolidated statementConsolidated Statements of cash flows.Cash Flows.
Initial direct costs incurred in connection with successful property leasing are capitalized as deferred leasing costs and classified as investing activities in the Consolidated Statements of Cash Flows. Initial direct costs include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. Initial direct costs consist of leasing commissions paid to external third party brokers and lease incentives. Initial direct costs are included in other assets, net in the Consolidated Balance Sheets and amortized in depreciation and amortization in the Consolidated Statements of Operations using the straight-line method over the lease term.
The Company computes depreciation on properties using the straight-line method over the assets’ estimated useful lives. DepreciationThese useful lives are reassessed following changes in the remaining period that the asset is expected to be held and used, and depreciation is discontinued when a property is identifiedmeets the criteria to be classified as held for sale. Buildings and improvements are depreciated over useful lives ranging up to 60approximately 50 years. MarketAbove and below market lease intangibles are amortized primarily to revenue over the remaining noncancellable lease terms and bargain renewal periods that are reasonably certain to be exercised, if any. In-place lease intangibles are amortized to expense over the remaining noncancellable lease term and bargain renewal periods that are reasonably certain to be exercised, if any.
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Lessee Accounting
For leases greater than 12 months for which the Company is the lessee, such as ground leases and corporate office leases, the Company recognizes a right-of-use asset and related lease liability on the Consolidated Balance Sheets at inception of the lease. The lease liability is calculated as the sum of: (i) the present value of minimum lease payments at lease commencement (discounted using the Company's secured incremental borrowing rate) and (ii) the present value of amounts probable of being paid under any residual value guarantees. Certain of the Company’s lease agreements have options to extend or terminate the contract terms upon meeting certain criteria. The lease term utilized in the calculation of the lease liability includes these options if they are considered reasonably certain of exercise. The right-of-use asset is calculated as the lease liability, adjusted for the following: (i) any lease payments made to the lessor at or before the commencement date, minus any lease incentives received and (ii) any initial direct costs incurred by the Company. Lease expense related to corporate assets is included in general and administrative expenses and lease expense related to ground leases is included within operating expenses in the Company’s Consolidated Statements of Operations.
For leases with a noncancellable lease term of 12 months or less for which the Company is the lessee, the Company recognizes expenses on a straight-line basis and does not recognize such leases on the Consolidated Balance Sheets.
Impairment of Long-Lived Assets and Goodwill
The Company assesses the carrying value of real estate assets and related intangibles (“real estate assets”) when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company tests its real estate assets for impairment by comparing the sum of the expected future undiscounted cash flows to the carrying value of the real estate assets. The expected future undiscounted cash flows reflect external market factors and the expected use and eventual disposition of the asset, and based on the specific facts and circumstances, may be probability-weighted to reflect multiple possible cash-flow scenarios, including selling the assets at various points in the future. Further, the analysis considers the impact, if any, of master lease agreements on cash flows, which are calculated utilizing the lowest level of identifiable cash flows that are largely independent of the cash flows of other assets and liabilities. If the carrying value exceeds the expected future undiscounted cash flows, an impairment loss will be recognized to the extent that the carrying value of the real estate assets is greater thanexceeds their fair value. If an asset is
Determining the fair value of real estate assets, including assets classified as heldheld-for-sale, involves significant judgment and generally utilizes market capitalization rates, comparable market transactions, estimated per unit or per square foot prices, negotiations with prospective buyers, and forecasted cash flows (primarily lease revenue rates, expense rates, and growth rates).
When testing goodwill for sale, it is reported at the lower of its carrying value or fair value less costs to sell and no longer depreciated.
likely than not that the fair value of a reporting unit is less than its carrying value, the Company recognizes an impairment loss for the amount by which the carrying value, including goodwill, exceeds the reporting unit’s fair value.
Assets Held for Sale and Discontinued Operations
The Company classifies a real estate property as held for sale when: (i) management has approved the disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly change or be withdrawn. If a real estate property is classified as held for sale, it is reported at the lower of its carrying value or fair value less costs to sell and no longer depreciated.
The Company classifies a loan receivable as held for sale when management no longer has the intent and ability to hold the loan receivable for the foreseeable future or until maturity. If a loan receivable is classified as held for sale, it is reported at the lower of amortized cost or fair value.
A discontinued operation represents: (i) a component of an entitythe Company or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition. Examples of a strategic shift may include disposing of: (i) a separate major line of business, (ii) a separate major geographic area of operations, or (iii) other major parts of the Company.
Senior Housing Triple-Net and Senior Housing Operating Portfolio Dispositions
In 2020, the Company concluded that the dispositions of its senior housing triple-net and SHOP portfolios represented a strategic shift that had a major effect on its operations and financial results. Therefore, the results of senior housing triple-net and SHOP assets are classified as discontinued operations in all periods presented herein. In September 2021, the Company successfully completed the disposition of the remaining senior housing triple-net and SHOP properties. See Note 4 for further information.
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Investments in Unconsolidated Joint Ventures
Investments in entities which the Company does not consolidate, but over which the Company has the ability to exercise significant influence over the operating and financial policies, of, are reported under the equity method of accounting. Under the equity method of accounting, the Company’s share of the investee’s earnings or losses is included in equity income (loss) from unconsolidated joint ventures within the Company’s consolidated resultsConsolidated Statements of operations.Operations.
The initial carrying value of investments in unconsolidated joint ventures is based on the amount paid to purchase the joint venture interest, the fair value of assets contributed to the joint venture, or the fair value of the assets prior to the sale of interests in the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of equity in earnings of the joint venture. TheIf an equity method investment shows indicators of impairment, the Company evaluates its equity method investments for impairment based uponon a comparison of the fair value of the equity method investment to its carrying value. When the Company determines a decline in the fair value below carrying value of an investment in an unconsolidated joint venture below its carrying value is other-than-temporary, an impairment is recorded. The Company recognizes gains on the sale of interests in joint ventures to the extent the economic substance of the transaction is a sale.
The Company’s fair values of its equity method investments are determined based on discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and, where applicable, any estimated debt premiums or discounts. Capitalization rates, discount rates, and credit spreads utilized in these valuation models are based uponon assumptions that the Company believes to be within a reasonable range of current market rates for the respective investments.
Compensation expense for share-based awards granted to employees including grants of employee stock options, are recognized in the consolidated statements of operations based on their grant date fair market value. Compensation expense for awards with graded vesting schedules is generally recognized on a straight-line basis over the vesting period. Forfeitures of share-based awards are recognized as they occur.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash on hand and short-term investments with original maturities of three months or less when purchased. Restricted cash primarily consists of amounts held by mortgage lenders to provide forfor: (i) real estate tax expenditures, (ii) tenant improvements, and (iii) capital expenditures, (ii)as well as security deposits and (iii) net proceeds from property sales that were executed as tax-deferred dispositions.
The Company maintains its cash and cash equivalents at financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per institution. As the account balances at each institution periodically exceed the FDIC insurance coverage, there is a concentration of credit risk related to amounts in excess of such coverage.
Derivatives and Hedging
During its normal course of business, the Company uses certain types of derivative instruments for the purpose of managing interest rate and foreign currency risk. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with the Company’s related assertions.
The Company recognizes all derivative instruments, including embedded derivatives that are required to be bifurcated, as assets or liabilities into the consolidated balance sheetsConsolidated Balance Sheets at fair value. Changes in fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in earnings.other income (expense), net. For derivative instruments designated in qualifying cash flow hedging relationships, changes in fair value related to the effective portion of the derivative instruments are recognized in accumulated other comprehensive income (loss), whereas changes in fair value ofrelated to the ineffective portion arewould be recognized in earnings.
If it is determined that a derivative instrument ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, the Company discontinues its cash flow hedge accounting prospectively and records the appropriate adjustment to earnings based on the current fair value of the derivative instrument. For net investment hedge accounting, upon sale or liquidation
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Income Taxes
The Company is required to evaluate its deferred tax assets for realizability and recognize a valuation allowance, which is recorded against its deferred tax assets, if it is more likely than not that the deferred tax assets will not be realized. The Company considers all available evidence in its determination of whether a valuation allowance for deferred tax assets is required.
Advertising Costs
All advertising costs are expensed as incurred and reported within operating expenses on the Consolidated Statements of Operations. During the years ended December 31, 2023, 2022, and 2021, total advertising expense was $8 million, $8 million, and $11 million, respectively (zero, $0.1 million, and $3 million, respectively, of which is reported in income (loss) from discontinued operations on the Consolidated Statements of Operations).
Capital Raising Issuance Costs
Costs incurred in connection with the issuance of common shares are recorded as a reduction of additional paid-in capital. Debt issuance costs related to debt instruments, excluding line of credit arrangements and commercial paper, are deferred, recorded as a reduction of the related debt liability, and amortized to interest expense over the remaining term of the related debt liability utilizing the effective interest method. Debt issuance costs related to line of credit arrangements and commercial paper are deferred, included in other assets, and amortized to interest expense on a straight-line basis over the remaining term of the related line of credit arrangement utilizing the interest method.arrangement. Commercial paper are unsecured short-term debt securities with varying maturities. A line of credit serves as a liquidity backstop for repayment of commercial paper borrowings.
Penalties incurred to extinguish debt and any remaining unamortized debt issuance costs, discounts, and premiums are recognized as income or expense in the consolidated statementsConsolidated Statements of operationsOperations at the time of extinguishment.
Segment Reporting
The Company’s reportable segments, based on how it evaluates its business and allocates resources, are as follows: (i) senior housing triple-net,lab, (ii) SHOP,outpatient medical, and (iii) life science and (iv) medical office. During the fourth quarter of 2017, as a result of a change in how operating results are reported to the Company's chief operating decision makers, for the purpose of evaluating performance and allocating resources, unconsolidated joint ventures are now included in other non-reportable segments. Accordingly, all prior period segment information has been recast to conform to the current period presentation.CCRC.
Noncontrolling Interests
Arrangements with noncontrolling interest holders are reported as a component of equity separate fromassessed for appropriate balance sheet classification based on the Company’s equity.redemption and other rights held by the noncontrolling interest holder. Net income (loss) attributable to a noncontrolling interest is included in net income (loss) on the consolidated statementsConsolidated Statements of operationsOperations and, upon a gain or loss of control, the interest purchased or sold, and any interest retained, is recorded at fair value with any gain or loss recognized in earnings. The Company accounts for purchases or sales of equity interests that do not result in a change in control as equity transactions.
Redeemable Noncontrolling Interests
Certain of the Company’s noncontrolling interest holders have the ability to put their equity interests to the Company upon specified events or after the passage of a predetermined period of time. Each put option is payable in cash and subject to increases in redemption value in the event that the underlying property generates specified returns and meets certain promote thresholds pursuant to the respective agreements. Accordingly, the Company records redeemable noncontrolling interests outside of permanent equity and presents the redeemable noncontrolling interests at the greater of their carrying amount or redemption value at the end of each reporting period.
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Healthpeak OP
Immediately following the Reorganization, Healthpeak Properties, Inc. was the initial sole member and 100% owner of Healthpeak OP. Subsequent to the Reorganization, certain employees of the Company (“OP Unitholders”) were issued noncontrolling, non-managing member units in Healthpeak OP (“OP Units”). When certain conditions are met, the OP Unitholders have the right to require redemption of part or all of their OP Units for cash or shares of the Company’s common stock, at the Company’s option as managing member of Healthpeak OP. The per unit redemption amount is equal to either one share of the Company’s common stock or cash equal to the fair value of a share of common stock at the time of redemption. The Company classifies the OP Units in permanent equity because it may elect, in its sole discretion, to issue shares of its common stock to OP Unitholders who choose to redeem their OP Units rather than using cash.
DownREITs
The Company consolidates non-managing member limited liability companies (“DownREITs”) because it exercises control, and the noncontrolling interests in these entities are carried at cost. The non-managing member limited liability company (“LLC”) units (“DownREIT units”) are exchangeable for an amount of cash approximating the then-current market value of shares of the
Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications). Upon exchange of DownREIT units for the Company’s common stock, the carrying amount of the DownREIT units is reclassified to stockholders’ equity.
Fair Value Measurement
The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
•Level 1—quoted prices for identical instruments in active markets;
•Level 2—quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3—fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The Company measures fair value using a set of standardized procedures that are outlined herein for all assets and liabilities whichthat are required to be measured at fair value. When available, the Company utilizes quoted market prices from an independent third party source to determine fair value and classifies such items in Level 1. In instances where a market price is available, but the instrument is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and classifies the asset or liability in Level 2.
If quoted market prices or inputs are not available, fair value measurements are based uponon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads, and/or market capitalization rates. Items valued using such internally-generated valuation techniques are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified in either Level 2 or Level 3 even though there may be some significant inputs that are readily observable. Internal fair value models and techniques used by the Company include discounted cash flow models. The Company also considers its counterparty’s and own credit risk for derivative instruments and other liabilities measured at fair value. The Company has elected the mid-market pricing expedient when determining fair value.
Earnings per Share
Basic earnings per common share is computed by dividing net income (loss) applicable to common shares by the weighted average number of shares of common stock outstanding during the period. The Company accounts for unvested share-based payment awards that contain non-forfeitable dividend rights or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share pursuant to the two-class method. Diluted earnings per common share is calculated by including the effect of dilutive securities.securities, such as the impact of forward equity sales agreements using the treasury stock method and common shares issuable from the assumed conversion of DownREIT units, stock options, certain performance restricted stock units, and unvested restricted stock units.
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Recent Accounting Pronouncements
Government Assistance. In November 2021, the year ended December 31, 2017,Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which increased the Company adoptedtransparency of government assistance including the following ASUs, eachdisclosure of whichthe types of assistance, an entity’s accounting for assistance, and the effect of the assistance on an entity’s financial statements. The adoption of ASU 2021-10 on January 1, 2022 did not have a material impact to itson the Company’s consolidated financial position, results of operations, cash flows, or disclosuresdisclosures.
Reference Rate Reform. From March 2020 to December 2022, the FASB issued a series of ASUs that provide optional expedients that may be elected through December 31, 2024 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The amendments in these ASUs were effective immediately upon adoption:
Not Yet Adopted
Segment Reporting. In November 2023, the FASB issued ASU 2017-01 which narrowsNo. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements so that investors can better understand an entity’s overall performance and assess potential future cash flows. The amendments in ASU 2023-07 include, but are not limited to: (i) disclosure of, on an annual basis, significant segment expenses that are regularly provided to the FASB’s definitionchief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (ii) disclosure of, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss); (iii) disclosure of, on an interim basis, all currently required annual disclosures about a reportable segment’s profit (loss) and assets; (iv) clarification that if the CODM uses more than one measure of a businesssegment’s profit or loss in assessing segment performance and providesdeciding how to allocate resources, an entity may report one or more of those additional measures of segment profit; and (v) disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact ASU 2023-07 will have on its disclosures.
Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to provide disaggregated information about a frameworkreporting entity’s effective tax rate reconciliation as well as information on income taxes paid. One of the amendments in ASU 2023-09 includes disclosure of, on an annual basis, a tabular rate reconciliation (using both percentages and reporting currency amounts) of (i) the reported income tax expense (or benefit) from continuing operations, to (ii) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile using specific categories, including separate disclosure for any reconciling items within certain categories that gives entitiesare equal to or greater than a specified quantitative threshold of 5%. ASU 2023-09 also requires disclosure of, on an annual basis, the year to date amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions, including additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective for making reasonable judgments about whetherannual periods beginning after December 15, 2024. The Company is evaluating the impact ASU 2023-09 will have on its disclosures.
NOTE 3. Real Estate
2023 Real Estate Investment Acquisitions
60 Loomis Land Parcel
In January 2023, the Company acquired a transaction involves an asset, or a group of assets, or a business. ASU 2017-01 states that when substantially alllab land parcel in Cambridge, Massachusetts for $9 million.
Wylie Outpatient Medical Building
In April 2023, the Company acquired the remaining 80% interest in one of the outpatient medical buildings in the Ventures IV unconsolidated joint venture for $4 million (see Note 8). Concurrent with the acquisition, the Company began consolidating the building and recognized a gain upon change of control of $0.2 million, which is recorded in other income (expense), net.
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2022 Real Estate Investment Acquisitions
67 Smith Place
In January 2022, the Company closed a lab acquisition in Cambridge, Massachusetts for $72 million.
Vista Sorrento Phase II
In January 2022, the Company closed a lab acquisition in San Diego, California for $24 million.
Webster Outpatient Medical Portfolio
In March 2022, the Company acquired a portfolio of two outpatient medical buildings in Houston, Texas for $43 million.
Northwest Medical Plaza
In May 2022, the Company acquired one outpatient medical building in Bentonville, Arkansas for $26 million.
Concord Avenue Land Parcels
In December 2022, the Company closed a lab acquisition in Cambridge, Massachusetts for $18 million.
2021 Real Estate Investment Acquisitions
In 2021, the Company closed the following lab acquisitions: (i) eight acquisitions in Cambridge, Massachusetts for $498 million, (ii) one acquisition in San Diego, California for $20 million, and (iii) 12 acres of land for $128 million in South San Francisco, California.
Also during 2021, the Company closed the following outpatient medical acquisitions: (i) one outpatient medical building in Nashville, Tennessee for $13 million, (ii) one outpatient medical building in Denver, Colorado for $38 million, (iii) a portfolio of 14 outpatient medical buildings for $371 million (the “Outpatient Medical Building Portfolio”), (iv) one outpatient medical building in Fort Lauderdale, Florida for $16 million, (v) one outpatient medical building in Wichita, Kansas for $50 million, (vi) three outpatient medical buildings in Morristown, New Jersey for $155 million, (vii) two outpatient medical buildings in Dallas, Texas for $60 million, (viii) one outpatient medical building in Seattle, Washington for $43 million, (ix) one outpatient medical building in New Orleans, Louisiana for $34 million, and (x) one outpatient medical building in Cambridge, Massachusetts for $55 million. In conjunction with the acquisition of the Outpatient Medical Building Portfolio, the Company originated $142 million of secured mortgage debt (see Note 10).
Development Activities
Construction, Tenant, and Other Capital Improvements
The following table summarizes the Company’s expenditures for construction, tenant improvements, and other capital improvements for its consolidated property investments, excluding expenditures related to properties classified as discontinued operations (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| Segment | 2023 | 2022 | 2021 | |||||||||||||||||
| Lab | $ | 428,961 | $ | 658,542 | $ | 472,301 | ||||||||||||||
| Outpatient medical | 236,135 | 237,761 | 230,227 | |||||||||||||||||
| CCRC | 109,465 | 65,691 | 57,192 | |||||||||||||||||
| $ | 774,561 | $ | 961,994 | $ | 759,720 | |||||||||||||||
NOTE 4. Dispositions of Real Estate and Discontinued Operations
2023 Dispositions of Real Estate
During the three months ended March 31, 2023, the Company sold two lab buildings in Durham, North Carolina, which were classified as held for sale as of December 31, 2022, for $113 million, resulting in total gain on sales of $60 million. Also during the three months ended March 31, 2023, the Company sold two outpatient medical buildings for $32 million, resulting in total gain on sales of $21 million.
2022 Dispositions of Real Estate
During the three months ended March 31, 2022, the Company sold one lab building in Salt Lake City, Utah for $14 million, resulting in a gain on sale of $4 million.
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During the three months ended June 30, 2022, the Company sold three outpatient medical buildings and one outpatient medical land parcel for $27 million, resulting in total gain on sales of $10 million.
During the three months ended September 30, 2022, the Company sold two outpatient medical buildings for $9 million, resulting in total gain on sales of$1 million.
2021 Dispositions of Real Estate
Sunrise Senior Housing Portfolio
In January 2021, the Company sold a portfolio of 32 SHOP assets (the “Sunrise Senior Housing Portfolio”) for $664 million, resulting in an immaterial loss on sale, which is recognized in income (loss) from discontinued operations, and provided the buyer with: (i) financing of $410 million and (ii) a commitment to finance up to $92 million of additional debt for capital expenditures (see Note 7). Upon completion of the license transfer process in June 2021, the Company sold the two remaining Sunrise senior housing triple-net assets for $80 million, resulting in a gain on sale of $22 million, which is recognized in income (loss) from discontinued operations.
Brookdale Triple-Net Portfolio
In January 2021, the Company sold 24 senior housing assets in a triple-net lease with Brookdale for $510 million, resulting in total gain on sale of $169 million, which is recognized in income (loss) from discontinued operations.
Additional SHOP Portfolio
In January 2021, the Company sold a portfolio of 16 SHOP assets for $230 million, resulting in total gain on sale of $59 million, which is recognized in income (loss) from discontinued operations. The Company provided the buyer with financing of $150 million (see Note 7).
HRA Triple-Net Portfolio
In February 2021, the Company sold eight senior housing assets in a triple-net lease with Harbor Retirement Associates for $132 million, resulting in total gain on sale of $33 million, which is recognized in income (loss) from discontinued operations.
Oakmont SHOP Portfolio
In April 2021, the Company sold a portfolio of 12 SHOP assets for $564 million. In conjunction with the sale, mortgage debt held on two properties with a carrying value of $64 million was repaid and the remaining mortgage debt held on four properties with a carrying value of $107 million was assumed by the buyer. The transaction resulted in total gain on sale of $80 million, which is recognized in income (loss) from discontinued operations.
Discovery SHOP Portfolio
In April 2021, the Company sold a portfolio of 10 SHOP assets for $334 million, resulting in total gain on sale of $9 million, which is recognized in income (loss) from discontinued operations. Also included in this transaction was the sale of two mezzanine loans and two preferred equity investments for $21 million, resulting in no gain or loss on sale of the investments (collectively, the “Discovery SHOP Portfolio”).
Sonata SHOP Portfolio
In April 2021, the Company sold a portfolio of five SHOP assets for $64 million, resulting in total gain on sale of $3 million, which is recognized in income (loss) from discontinued operations.
SLC SHOP Portfolio
In May 2021, the Company sold seven SHOP assets for $113 million and repaid $70 million of mortgage debt that was held on six of the assets, resulting in total gain on sale of $1 million, which is recognized in income (loss) from discontinued operations.
Hoag Hospital
In May 2021, the Company sold one hospital for $226 million through the exercise of a purchase option by a tenant, resulting in gain on sale of $172 million.
2021 Other Dispositions
In addition to the portfolio and individual sales discussed above, during the year ended December 31, 2021, the Company sold the following: (i) 15 SHOP assets for $169 million, (ii) 7 senior housing triple-net assets for $24 million, and (iii) 10 outpatient medical buildings and a portion of 1 outpatient medical land parcel for$68 million, resulting in total gain on sales of$58 million ($39 millionof which is recognized in income (loss) from discontinued operations). In conjunction with one of the SHOP asset sales, mortgage debt held on the property with a carrying value of $36 million was assumed by the buyer.
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Held for Sale and Discontinued Operations
As of December 31, 2023, two lab buildingsand one outpatient medical building were classified as held for sale, with a carrying value of $118 million, primarily comprised of net real estate assets. As of December 31, 2023, liabilities related to the assets held for sale were $1 million. In January 2024, we sold a 65% interest in these two lab buildings (see Note 8). As of December 31, 2022, two lab buildings were classified as held for sale, with an aggregate carrying value of $50 million, primarily comprised of net real estate assets of $44 million. As of December 31, 2022, liabilities related to these assets held for sale were $4 million. These two lab buildings were sold during the three months ended March 31, 2023, as discussed above.
In 2020, the Company concluded that the dispositions of its senior housing triple-net and SHOP portfolios represented a strategic shift that had a major effect on its operations and financial results. Therefore, the results of senior housing triple-net and SHOP assets are classified as discontinued operations in all periods presented herein. In September 2021, the Company successfully completed the disposition of the remaining senior housing triple-net and SHOP properties.
At each of December 31, 2023 and 2022, the total assets and total liabilities classified as discontinued operations were zero.
The results of discontinued operations during the years ended December 31, 2023, 2022, and 2021 are presented below (in thousands) and are included in the consolidated results of operations for the years ended December 31, 2023, 2022, and 2021:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Rental and related revenues | $ | — | $ | — | $ | 7,535 | |||||||||||
| Resident fees and services | — | 7,489 | 114,936 | ||||||||||||||
| Total revenues | — | 7,489 | 122,471 | ||||||||||||||
| Costs and expenses: | |||||||||||||||||
| Interest expense | — | — | 3,900 | ||||||||||||||
| Operating | — | 6,452 | 122,571 | ||||||||||||||
| Transaction and merger-related costs | — | — | 76 | ||||||||||||||
| Impairments and loan loss reserves (recoveries), net | — | — | 32,736 | ||||||||||||||
| Total costs and expenses | — | 6,452 | 159,283 | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Gain (loss) on sales of real estate, net | — | 1,344 | 414,721 | ||||||||||||||
| Other income (expense), net | — | 169 | 4,189 | ||||||||||||||
| Total other income (expense), net | — | 1,513 | 418,910 | ||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | — | 2,550 | 382,098 | ||||||||||||||
| Income tax benefit (expense) | — | 270 | 969 | ||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | — | 64 | 5,135 | ||||||||||||||
| Income (loss) from discontinued operations | $ | — | $ | 2,884 | $ | 388,202 | |||||||||||
NOTE 5. Impairments of Real Estate
2023 and 2022
During the years ended December 31, 2023 and 2022, the Company did not recognize any impairment charges.
2021
During the year ended December 31, 2021, the Company recognized an aggregate impairment charge of $22 million, which is reported in impairments and loan loss reserves (recoveries), net, related to: (i) three outpatient medical buildings that met the held for sale criteria during the year and (ii) one outpatient medical building held for use; the aggregate fair value of these four outpatient medical buildings was $14 million as of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets,related impairment assessment dates. For the set is not a business. If this initial test is notthree outpatient medical buildings that met a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifiesheld for sale criteria during the requirements for
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Additionally, during the year ended December 31, 2021, the Company adopted ASU 2017-04recognized an impairment charge of $4 million related to one SHOP asset, which eliminatesis reported in income (loss) from discontinued operations. Following a reduction in the two-stepexpected sales price of the SHOP asset occurring in the second quarter of 2021, the Company wrote down its carrying value of $20 million to its fair value, less estimated costs to sell, of $16 million.
The fair values of the impaired assets were based on forecasted sales prices and market comparable data, which are considered to be Level 3 measurements within the fair value hierarchy. These fair values are typically determined using an income approach toand/or a market approach (comparable sales model), which rely on certain assumptions by management, including: (i) market capitalization rates, (ii) comparable market transactions, (iii) estimated prices per unit, (iv) negotiations with prospective buyers, and (v) forecasted cash flow streams (primarily lease revenue rates, expense rates, and growth rates). There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during and as of the year ended December 31, 2021, the Company’s fair value estimates primarily relied on a market approach, which utilized comparable market transactions and negotiations with prospective buyers.
Goodwill Impairment
When testing goodwill for impairment, by requiring that an entity, upon concludingif the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, recognizethe Company recognizes an impairment losscharge for the amount by which the carrying value, including goodwill, exceeds the reporting unit’s fair value.
| Year Ended | ||||||||||||||||
| December 31, 2016 | December 31, 2015 | |||||||||||||||
| Net cash provided by (used in): | As Reported | As Previously Reported | As Reported | As Previously Reported | ||||||||||||
| Net cash provided by (used in) investing activities | $ | (428,973 | ) | $ | (410,617 | ) | $ | (1,660,365 | ) | $ | (1,672,005 | ) | ||||
Net increase (decrease) in balance(1) | (270,126 | ) | (251,770 | ) | 174,330 | 162,690 | ||||||||||
Balance - beginning of year(1) | 407,116 | 346,500 | 232,786 | 183,810 | ||||||||||||
Balance - end of year(1) | 136,990 | 94,730 | 407,116 | 346,500 | ||||||||||||
Balance - continuing operations, end of year(1) | 136,990 | 94,730 | 401,058 | 340,442 | ||||||||||||
| Consideration | Assets Acquired | |||||||||||||||
| Segment | Cash Paid | Net Liabilities Assumed | Real Estate | Net Intangibles | ||||||||||||
| SHOP | $ | 44,258 | $ | 797 | $ | 37,940 | $ | 7,115 | ||||||||
| Life science | 315,255 | 3,524 | 305,760 | 13,019 | ||||||||||||
| Medical office | 201,240 | 1,104 | 184,115 | 18,229 | ||||||||||||
| $ | 560,753 | $ | 5,425 | $ | 527,815 | $ | 38,363 | |||||||||
| Consideration | Assets Acquired(1) | |||||||||||||||
| Segment | Cash Paid/ Debt Settled | Net Liabilities Assumed | Real Estate | Net Intangibles | ||||||||||||
| Senior housing triple-net | $ | 76,362 | $ | 1,200 | $ | 71,875 | $ | 5,687 | ||||||||
| SHOP | 113,971 | 76,931 | 177,551 | 13,351 | ||||||||||||
| Life science | 49,000 | — | 47,400 | 1,600 | ||||||||||||
| Medical office | 209,920 | 4,854 | 209,178 | 5,596 | ||||||||||||
| Other non-reportable segments | 17,909 | — | 16,596 | 1,313 | ||||||||||||
| $ | 467,162 | $ | 82,985 | $ | 522,600 | $ | 27,547 | |||||||||
| Year Ended December 31, | ||||||||||||
| Segment | 2017 | 2016 | 2015 | |||||||||
| Senior housing triple-net | $ | 32,343 | $ | 49,109 | $ | 53,980 | ||||||
| SHOP | 49,473 | 74,158 | 77,425 | |||||||||
| Life science | 240,901 | 200,122 | 122,319 | |||||||||
| Medical office | 148,926 | 128,308 | 131,021 | |||||||||
| Other | 135 | 7,203 | 37 | |||||||||
| $ | 471,778 | $ | 458,900 | $ | 384,782 | |||||||
| Year Ended December 31, | |||||||
| 2016 | 2015 | ||||||
| Revenues: | |||||||
| Rental and related revenues | $ | 22,971 | $ | 27,651 | |||
| Tenant recoveries | 1,233 | 1,464 | |||||
| Income from direct financing leases | 384,752 | 572,835 | |||||
| Total revenues | 408,956 | 601,950 | |||||
| Costs and expenses: | |||||||
| Depreciation and amortization | (4,892 | ) | (5,880 | ) | |||
| Operating | (3,367 | ) | (3,697 | ) | |||
| General and administrative | (67 | ) | (57 | ) | |||
| Transaction costs | (86,765 | ) | — | ||||
| Impairments | — | (1,295,504 | ) | ||||
| Other income (expense), net | 71 | 70 | |||||
| Income (loss) before income taxes and income from impairments of equity method investments | 313,936 | (703,118 | ) | ||||
| Income tax benefit (expense) | (48,181 | ) | (796 | ) | |||
| Income from equity method investment | — | 50,723 | |||||
| Impairments of equity method investment | — | (45,895 | ) | ||||
| Total discontinued operations | $ | 265,755 | $ | (699,086 | ) | ||
Casualty-Related Charges
During the quantitative information about fair value measurements for the impairment related to the Company’s equity ownership interest in HCRMC using a discounted cash flow valuation model:
During the year ended December 31, 2016,2022, the Company determined that it may sell assets duringrecognized $14 million of expenses within other income (expense), net on the next five years and, therefore, recorded a deferred tax liabilityConsolidated Statements of $47 million, representing its estimated exposure to state built-in gain tax.
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NOTE 6. Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Fixed income from operating leases | $ | 1,236,502 | $ | 1,182,463 | $ | 1,087,683 | |||||||||||
| Variable income from operating leases | 395,303 | 359,312 | 290,701 | ||||||||||||||
| Interest income from direct financing leases | — | 1,168 | 8,702 | ||||||||||||||
Direct Financing Leases
2022 Direct Financing Lease Sale Transaction
| December 31, | |||||||
| 2017 | 2016 | ||||||
| Minimum lease payments receivable | $ | 1,062,452 | $ | 1,108,237 | |||
| Estimated residual value | 504,457 | 539,656 | |||||
| Less unearned income | (852,557 | ) | (895,304 | ) | |||
| Net investment in direct financing leases | $ | 714,352 | $ | 752,589 | |||
| Properties subject to direct financing leases | 29 | 30 | |||||
The following table summarizes future minimum lease payments contractually dueto be received from tenants under DFLs atnon-cancelable operating leases as of December 31, 20172023 (in thousands):
| Year | Amount | |||||||
| 2024 | $ | 1,135,628 | ||||||
| 2025 | 1,063,147 | |||||||
| 2026 | 975,246 | |||||||
| 2027 | 888,223 | |||||||
| 2028 | 788,742 | |||||||
| Thereafter | 2,818,655 | |||||||
| $ | 7,669,641 | |||||||
Tenant Purchase Options
Certain leases contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable are as follows (dollars in thousands):
| Year | Annualized Base Rent(1) | Number of Properties | ||||||||||||
| 2024 | $ | 14,199 | 12 | |||||||||||
| 2025 | 14,244 | 16 | ||||||||||||
| 2026 | 16,422 | 8 | ||||||||||||
| 2027 | 8,116 | 5 | ||||||||||||
| 2028 | 1,252 | 1 | ||||||||||||
| Thereafter | 16,212 | 5 | ||||||||||||
| $ | 70,445 | 47 | ||||||||||||
(1)Represents the most recent month’s base rent including additional rent floors annualized for 12 months. Base rent does not include tenant recoveries, additional rents in excess of floors, and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
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| Year | Amount | |||
| 2018 | $ | 102,983 | ||
| 2019 | 68,204 | |||
| 2020 | 62,781 | |||
| 2021 | 63,175 | |||
| 2022 | 57,762 | |||
| Thereafter | 707,547 | |||
| $ | 1,062,452 | |||
| Year Ended December 31, | ||||||||||||||||||||
| Lease Expense Information: | 2023 | 2022 | 2021 | |||||||||||||||||
| Total lease expense | $ | 17,010 | $ | 16,689 | $ | 14,442 | ||||||||||||||
| Weighted Average Lease Term and Discount Rate: | December 31, 2023 | December 31, 2022 | ||||||||||||
| Weighted average remaining lease term (years): | ||||||||||||||
Operating leases(1) | 51 | 51 | ||||||||||||
| Weighted average discount rate: | ||||||||||||||
| Operating leases | 4.23 | % | 4.20 | % | ||||||||||
(1)As of both December 31, 2023 and 2022, the weighted average remaining lease term including the Company’s options to extend its operating leases is 67 years.
The following table summarizes future minimum lease payments under non-cancelable ground and other operating leases included in the Company’s lease liability as of December 31, 2023 (in thousands):
| Year | Amount | |||||||
| 2024 | $ | 16,950 | ||||||
| 2025 | 12,399 | |||||||
| 2026 | 12,326 | |||||||
| 2027 | 12,321 | |||||||
| 2028 | 12,351 | |||||||
| Thereafter | 475,584 | |||||||
| Undiscounted minimum lease payments included in the lease liability | 541,931 | |||||||
| Less: imputed interest | (335,188) | |||||||
| Present value of lease liability | $ | 206,743 | ||||||
Depreciation Expense
While the Company leases the majority of its property, plant, and equipment to various tenants under operating leases, in certain situations, the Company owns and operates certain property, plant, and equipment for general corporate purposes. Corporate assets are recorded within other assets, net within the Company’s Consolidated Balance Sheets and depreciation expense for those assets is recorded in general and administrative expenses in the Company’s Consolidated Statements of Operations. Included within other assets, net as of both December 31, 2023 and 2022 is $10 million of accumulated depreciation related to corporate assets. Included within general and administrative expenses for the years ended December 31, 2023, 2022, and 2021 is $3 million, $3 million, and $2 million, respectively, of depreciation expense related to corporate assets.
Denver Corporate Headquarters
During the year ended December 31, 2022, the Company recognized $7 million of charges in connection with the downsizing of the Company’s corporate headquarters in Denver, Colorado which are included in general and administrative expenses on the Consolidated Statements of Operations.
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Tenant Updates
During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. Subsequent to the Filing, the U.S. Bankruptcy Court approved Sorrento’s rejection of the development lease and three of the four operating leases, resulting in termination of these four leases during the year ended December 31, 2023. The Company filed proofs of claim for related damages during the year, $4 million of which was received by the Company by drawing on Sorrento’s related letters of credit and security deposits. These cash proceeds were recognized as rental revenue and lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations. Given the nature of bankruptcy proceedings, the probability, timing, or amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the Company’s claims related to the rejected leases is uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with these claims as of December 31, 2023.
On October 26, 2023, the Company amended its lease with Graphite Bio, Inc. (“Graphite Bio”) at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million, comprised of a $21 million termination fee and $16 million prepayment of Graphite Bio's contractual rent through the amended term. The $37 million will be recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.
NOTE 7. Loans Receivable
The following table summarizes the Company’s internal ratings for net investment in DFLs atloans receivable (in thousands):
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Secured loans(1) | $ | 178,678 | $ | 350,837 | |||||||
| CCRC resident loans | 42,733 | 33,083 | |||||||||
| Unamortized discounts and fees | (131) | (808) | |||||||||
| Reserve for loan losses | (2,830) | (8,280) | |||||||||
| Loans receivable, net | $ | 218,450 | $ | 374,832 | |||||||
(1)At December 31, 2017 (dollars in thousands):
| Internal Ratings | ||||||||||||||||||
| Segment | Carrying Amount | Percentage of DFL Portfolio | Performing DFLs | Watch List DFLs | Workout DFLs | |||||||||||||
| Senior housing triple-net | $ | 629,748 | 88 | $ | 273,886 | $ | 355,862 | $ | — | |||||||||
| Other non-reportable segments | 84,604 | 12 | 84,604 | — | — | |||||||||||||
| $ | 714,352 | 100 | $ | 358,490 | $ | 355,862 | $ | — | ||||||||||
During the years ended December 31, 2023, 2022, and 2021, the Company recognized $22 million, $22 million, and $36 million, respectively, of interest income related to loans secured by real estate.
Sunrise Senior Housing Portfolio Seller Financing
In conjunction with the sale of 32 SHOP facilities for $664 million in January 2021 (see Note4), the Company provided the buyer with initial financing of $410 million. The remainder of the sales price was received in cash at the time of sale. Additionally, the Company agreed to provide up to $92 million of additional financing for capital expenditures (up to 65% of the estimated cost of capital expenditures). The initial and additional financing is secured by the buyer’s equity ownership in each property. In June 2023, the interest rate on nonaccrual statusthis secured loan was converted from a variable rate based on LIBOR to a variable rate based on Term SOFR (plus a 10 basis point adjustment related to SOFR transition).
In June 2021, February 2022, July 2022, and classifiedDecember 2022, the DFL Portfolio on “Watch List” status.Company received principal repayments of $246 million, $8 million, $27 million, and $10 million, respectively, in conjunction with the disposition of the underlying collateral. In connection with these principal repayments, the additional financing available was reduced to $40 million, of which $11 million had been funded as of December 31, 2023. At December 31, 2023 and 2022, this secured loan had an outstanding principal balance of $131 millionand $120 million, respectively.
In February 2024, the loan reached its maturity. The Company determined thatprovided a short-term extension to the collectionborrower, and the Company and the borrower are currently negotiating long-term refinance and extension terms.
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Other Seller Financing
In conjunction with the sale of 16 additional SHOP facilities for $230 million in January 2021 (see Note 4), the Company provided the buyer with financing of $150 million. The remainder of the sales price was received in cash at the time of sale. The financing is secured by the buyer’s equity ownership in each property. Upon maturity in January 2023, the borrower did not make the required principal repayment. In February 2023, the borrower made a partial principal repayment of $102 million and continuesthe remaining balance owed was refinanced with the Company. In connection with the refinance, the maturity date of the loan was extended to beJanuary 2024 and the interest rate on the loan was increased to a variable rate based on Term SOFR (plus an 11 basis point adjustment related to SOFR transition) plus 6.0% for the first six months of the extended term, increasing to 7.0% for the last six months of the extended term. The Company also received a $1 million extension fee in connection with the refinance, which is recognized in interest income over the remaining term of the loan. At December 31, 2023 and 2022, this secured loan had an outstanding principal balance of $48 millionand $150 million, respectively.
In January 2024, the loan was refinanced with the Company. In connection with the refinance, the maturity date of the loan was extended to January 2025. The interest rate on the loan will remain as Term SOFR (plus an 11 basis point adjustment related to SOFR transition) plus 7.0% but is now subject to a fixed floor of 12%. The Company also received a $1 million extension fee in connection with the refinance, which is recognized in interest income over the remaining term of the loan.
2023 Other Loans Receivable Transactions
In February 2023, the Company received full repayment of the outstanding balance of one $35 million secured loan.
In April 2023, the Company received full repayment of the outstanding balance of one $14 million secured loan.
In May 2023, the Company received full repayment of two outstanding secured loans with an aggregate balance of $12 million.
Also in May 2023, the interest rate on one secured loan with an outstanding balance of $21 million was converted from a variable rate based on LIBOR to a variable rate based on Term SOFR (plus a 10 basis point adjustment related to SOFR transition). In October 2023, the Company received full repayment of the outstanding balance of this $21 million secured loan.
2022 Other Loans Receivable Transactions
In May 2022, the Company received full repayment of the outstanding balance of one $2 million secured loan.
In November 2022, the Company received full repayment of the outstanding balance of one $1 million mezzanine loan.
In December 2022, the Company extended the maturity dates of four secured loans with an aggregate outstanding balance of $61 million, originally scheduled to mature in December 2022, by one year to December 2023. In connection with the extensions, the interest rates on the loans were increased to a variable rate based on Term SOFR (plus an 11 basis point adjustment related to SOFR transition) with a floor of 8.5% for the first six months of the extended term, increasing to a floor of 10.5% for the last six months of the extended term. All four of these secured loans were repaid during 2023 as discussed above.
2021 Other Loans Receivable Transactions
The Company classifies a loan receivable as held for sale when management no longer reasonably assured; therefore, rental revenuehas the intent or ability to hold the loan receivable for the DFL Portfolio has been recognized onforeseeable future or until maturity. If a cash basis. The Company re-assessedloan receivable is classified as held for sale, previously recorded reserves for loan losses are reversed and the DFL Portfolioloan is reported at the lower of amortized cost or fair value. During the second quarter of 2021, two loans receivable with a total amortized cost of $64 million were classified as held for impairment on December 31, 2017 and determined thatsale. Upon the DFL Portfoliotransfer of these two loans to held for sale, the carrying value was not impaired based on its belief that: (i) it was not probable that it will not collect all of the rental payments under the terms of the lease; and (ii) thedecreased by $11 million to an estimated fair value of $53 million, $8 million of which was previously recognized as a reserve for loan losses. As a result, a $3 million net loss was recognized in impairments and loan loss reserves (recoveries), net during the underlying collateral exceededyear ended December 31, 2021. In September 2021, the DFL Portfolio’sCompany sold one of the loans receivable previously classified as held for sale for its carrying amount. Thevalue of $2 million. In November 2021, the Company sold the other loan receivable previously classified as held for sale for its carrying value of $51 million.
These fair value of the DFL Portfolio was estimated basedestimates were made for each individual loan classified as held for sale and primarily relied on an incomea market approach, utilizing comparable market transactions, forecasted sales prices, and utilizes inputs whichnegotiations with prospective buyers. These estimates are considered to be a Level 3 measurement within the fair value hierarchy. Inputshierarchy, and are subject to this valuation model include real estate capitalization rates, industry growth rates,inherent uncertainties.
Additionally, in April 2021, the Company sold two mezzanine loans as part of the Discovery SHOP Portfolio disposition (see Note4), resulting in no gain or loss on sale of the mezzanine loans.
In May 2021, the Company received a $10 million principal repayment related to one of its secured loans. In September 2021, the Company received repayment of the remaining $15 million balance.
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In July 2021, the Company received full repayment of the outstanding balance of an $8 million secured loan.
CCRC Resident Loans
For certain residents that qualify, CCRCs may offer to lend residents the necessary funds to satisfy the entrance fee requirements so that they are able to move into a community while still continuing the process of selling their previous home. The loans are due upon sale of the resident’s previous home. At December 31, 2023 and operating margins, some2022, the Company held $43 millionand $33 million, respectively, of which influencesuch notes receivable.
Loans Receivable Internal Ratings
Refer to Note 2 for a discussion of the Company’s expectation of future cash flows fromquarterly review process over its loans receivable and the DFL Portfolio and, accordingly, the fair value of its investment. During the years ended December 31, 2017, 2016 and 2015, the Company recognized DFL income of $13 million, $13 million and $15 million, respectively, and received cash payments of $18 million, $18 million and $20 million, respectively, from the DFL Portfolio. The carrying value of the DFL Portfolio was $356 million and $361 million at December 31, 2017 and 2016, respectively.
related internal ratings process. The following table summarizes, the Company’s loans receivable (in thousands):
| December 31, | |||||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||||
Real Estate Secured | Other Secured | Total | Real Estate Secured | Other Secured | Total | ||||||||||||||||||
Mezzanine(1)(2) | $ | — | $ | 269,299 | $ | 269,299 | $ | — | $ | 615,188 | $ | 615,188 | |||||||||||
Other(3) | 188,418 | — | 188,418 | 195,946 | — | 195,946 | |||||||||||||||||
Unamortized discounts, fees and costs(1) | — | (596 | ) | (596 | ) | 413 | (3,593 | ) | (3,180 | ) | |||||||||||||
| Allowance for loan losses | — | (143,795 | ) | (143,795 | ) | — | — | — | |||||||||||||||
| $ | 188,418 | $ | 124,908 | $ | 313,326 | $ | 196,359 | $ | 611,595 | $ | 807,954 | ||||||||||||
| Investment Type | Year of Origination | Total | ||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021(1) | 2020 | 2019 | Prior | |||||||||||||||||||||||||||||||||||||||
| Secured loans | ||||||||||||||||||||||||||||||||||||||||||||
| Risk rating: | ||||||||||||||||||||||||||||||||||||||||||||
| Performing loans | $ | — | $ | — | $ | 175,717 | $ | — | $ | — | $ | — | $ | 175,717 | ||||||||||||||||||||||||||||||
| Watch list loans | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Workout loans | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Total secured loans | $ | — | $ | — | $ | 175,717 | $ | — | $ | — | $ | — | $ | 175,717 | ||||||||||||||||||||||||||||||
| Current period gross write-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| Current period recoveries | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Current period net write-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| CCRC resident loans | ||||||||||||||||||||||||||||||||||||||||||||
| Risk rating: | ||||||||||||||||||||||||||||||||||||||||||||
| Performing loans | $ | 42,132 | $ | 601 | $ | — | $ | — | $ | — | $ | — | $ | 42,733 | ||||||||||||||||||||||||||||||
| Watch list loans | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Workout loans | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Total CCRC resident loans | $ | 42,132 | $ | 601 | $ | — | $ | — | $ | — | $ | — | $ | 42,733 | ||||||||||||||||||||||||||||||
| Current period gross write-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
| Current period recoveries | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Current period net write-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
(1)Additional financing funded on the Sunrise Senior Housing Portfolio Seller Financing (as discussed above) is included in the year of origination of the initial financing.
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Carrying Amount | Percentage of Loan Portfolio | Internal Ratings | ||||||||||||||||
| Investment Type | Performing Loans | Watch List Loans | Workout Loans(1) | |||||||||||||||
| Real estate secured | $ | 188,418 | 60 | $ | 188,418 | $ | — | $ | — | |||||||||
| Other secured | 124,908 | 40 | 19,908 | — | 105,000 | |||||||||||||
| $ | 313,326 | 100 | $ | 208,326 | $ | — | $ | 105,000 | ||||||||||
Refer to Note 2 for a discussion of the Company’s assessment of current expected credit losses for loans receivable and unfunded loan commitments. The following table summarizes the Company’s reserve for loan losses (in thousands):
| December 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| Secured Loans | Other(1) | Total | Secured Loans | Other(1) | Total | ||||||||||||||||||||||||||||||
| Reserve for loan losses, beginning of period | $ | 8,280 | $ | — | $ | 8,280 | $ | 1,804 | $ | 9 | $ | 1,813 | |||||||||||||||||||||||
| Provision for expected loan losses | 2,088 | — | 2,088 | 6,527 | 7 | 6,534 | |||||||||||||||||||||||||||||
| Expected loan losses (recoveries) related to loans sold or repaid | (7,538) | — | (7,538) | (51) | (16) | (67) | |||||||||||||||||||||||||||||
| Reserve for loan losses, end of period | $ | 2,830 | $ | — | $ | 2,830 | $ | 8,280 | $ | — | $ | 8,280 | |||||||||||||||||||||||
(1)Includes CCRC resident loans receivable secured by real estateand other loan activity.
Additionally, at December 31, 2017 (dollars2023 and 2022, a liability of$0.7 million and $0.8 million, respectively, related to expected credit losses for unfunded loan commitments was included in thousands):accounts payable, accrued liabilities, and other liabilities.
Final Maturity Date | Number of Loans | Payment Terms | Principal Amount(1) | Carrying Amount | ||||||||
| 2018 | 1 | monthly interest-only payments, accrues interest at 8.0% and secured by a senior housing facility in Pennsylvania | $ | 21,458 | $ | 21,597 | ||||||
| 2021 | 2 | aggregate monthly interest-only payments, accrues interest at 8.0% and 9.75% and secured by two senior housing facility in the U.K. | 22,706 | 24,001 | ||||||||
| 2023 | 1 | monthly interest-only payments, accrues interest at 7.22% and secured by seven senior housing facilities in the U.K. | 142,820 | 142,820 | ||||||||
| 4 | $ | 186,984 | $ | 188,418 | ||||||||
NOTE 8. Investments in and Advances to the Agreement Maturity Date and (ii) close on the Purchase Option by the Purchase Option Expiration Date. The Deposits were applied to reduce the Company’s recorded carrying value of the Mezzanine Loan to $189 million.Unconsolidated Joint Ventures
The Company owns interests in the following entities that are accounted for under the equity method (dollars in thousands):
| Carrying Amount | ||||||||||||||||||||||||||||||||
| December 31, | ||||||||||||||||||||||||||||||||
Entity(1) | Segment | Property Count(2) | Ownership %(2) | 2023 | 2022 | |||||||||||||||||||||||||||
South San Francisco JVs(3) | Lab | 7 | 70 | $ | 393,374 | $ | 309,969 | |||||||||||||||||||||||||
| SWF SH JV | Other | 19 | 54 | 332,693 | 345,978 | |||||||||||||||||||||||||||
| Lab JV | Lab | 1 | 49 | 31,761 | 26,601 | |||||||||||||||||||||||||||
Needham Land Parcel JV(4) | Lab | — | 38 | 17,084 | 15,391 | |||||||||||||||||||||||||||
Outpatient Medical JVs(5) | Outpatient medical | 2 | 20 - 67 | 7,941 | 8,738 | |||||||||||||||||||||||||||
| $ | 782,853 | $ | 706,677 | |||||||||||||||||||||||||||||
| Carrying Amount | ||||||||||
| December 31, | ||||||||||
Entity(1) | Ownership % | 2017 | 2016 | |||||||
| CCRC JV | 49 | $ | 400,241 | $ | 439,449 | |||||
| RIDEA II | 40 | 259,651 | — | |||||||
Life Science JVs(2) | 50 - 63 | 65,581 | 67,879 | |||||||
| MBK JV | 50 | 38,005 | 38,909 | |||||||
Development JVs(3) | 50 - 90 | 23,365 | 10,459 | |||||||
Medical Office JVs(4) | 20 - 67 | 12,488 | 13,438 | |||||||
K&Y JVs(5) | 80 | 1,283 | 1,342 | |||||||
| Advances to unconsolidated joint ventures, net | 226 | 15 | ||||||||
| $ | 800,840 | $ | 571,491 | |||||||
(1)These entities are not consolidated because the Company does not control, through voting rights or other means, the joint ventures.
(3)Includes seven unconsolidated lab joint ventures in South San Francisco, California in which the Company holds a 70% ownership percentage in each joint venture. These joint ventures have been aggregated herein due to similarity of the investments and operations. See “South San Francisco JVs” below for further information.
(4)Land held for development is excluded from the property count as of December 31, 2023.
(5)Includestwo unconsolidated outpatient medical joint ventures in which the Company holds an ownership percentage as follows: (i) Ventures IV (20%) and (ii) Suburban Properties, LLC (67%). As of December 31, 2022, these joint ventures held a total of three properties. In April 2023, the Company acquired the remaining 80% interest in one of the two properties in the Ventures IV unconsolidated joint venture for $4 million (see Note 3). These joint ventures have been aggregated herein due to similarity of the investments and operations.
At December 31, 2023 and 2022, the aggregate unamortized basis difference of the Company’s investments in unconsolidated joint ventures of$49 million and$41 million, respectively, is primarily attributable to the difference between the amount for which the Company purchased its interest in the Lab JV and the historical carrying value of the net assets of the Lab JV and capitalized interest related to the redevelopment activities at the South San Francisco JVs. The differences are amortized over the remaining useful lives of the related assets and are included in equity income (loss) from unconsolidated joint ventures.
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South San Francisco JVs
On December 30, 2015, HCP Ventures III, LLCAugust 1, 2022, the Company sold a 30% interest in seven lab buildings in South San Francisco, California to a sovereign wealth fund (“HCP Ventures III”SWF Partner”) for cash of $126 million. Following this transaction, the Company and HCP Ventures IV, LLC sold 61 MOBs, three hospitalsthe SWF Partner share in key decisions of the assets through their voting rights, resulting in the Company deconsolidating the assets, recognizing its retained 70% investment in the South San Francisco joint ventures (the “South San Francisco JVs”) at fair value, and a redevelopment propertyaccounting for total proceedsits investment using the equity method. The fair values of $634 million, recognizing gain on sales of real estate of $59 million, of which the Company’s share was $15 million.retained investment were based on a market approach, utilizing an agreed-upon contractual sales price, which is considered to be a Level 3 measurement within the fair value hierarchy. During the year ended December 31, 2022, the Company recognized a gain upon change of control of $311 million, which is recorded in other income (expense), net.
The Company is entitled to a preferred return, a promote, and certain fees in exchange for development and asset management services provided to the South San Francisco JVs when certain conditions are met.
Callan Ridge JV
In December 2023, the Company entered into definitive agreements with a third party to sell a 65% interest in two lab buildings in San Diego, California. The Company received an $8 million nonrefundable deposit upon completion of due diligence in December 2023. As part of December 31, 2023, these sales,two lab buildings had a carrying value of $110 million and were classified as held for sale (see Note 4). In January 2024, the transaction closed and the Company received aggregate distributionsnet proceeds of $45$128 million including repayment of its loan receivable. Duringin connection with the quarter ended December 31, 2016, HCP Ventures III sold the remaining three assets in its portfolio for $31 million, recognizing gain on sales of real estate of $5 million, of which the Company’s share was $1 million. As part of this sale, the Company received aggregate distributions of $8 million.
NOTE 9. Intangibles
Intangible assets primarily consist of lease-up intangibles and above market lease intangibles. The following table summarizes the Company’s intangible lease assets (in(dollars in thousands):
| December 31, | ||||||||||||||
| Intangible lease assets | 2023 | 2022(1) | ||||||||||||
| Gross intangible lease assets | $ | 739,228 | $ | 770,285 | ||||||||||
| Accumulated depreciation and amortization | (425,072) | (352,224) | ||||||||||||
| Intangible assets, net | $ | 314,156 | $ | 418,061 | ||||||||||
| Weighted average remaining amortization period in years | 5 | 5 | ||||||||||||
| December 31, | ||||||||
| Intangible lease assets | 2017 | 2016 | ||||||
| Lease-up intangibles | $ | 645,143 | $ | 719,788 | ||||
| Above market tenant lease intangibles | 105,663 | 147,409 | ||||||
| Below market ground lease intangibles | 44,499 | 44,500 | ||||||
| Gross intangible lease assets | 795,305 | 911,697 | ||||||
| Accumulated depreciation and amortization | (385,223 | ) | (431,892 | ) | ||||
| Net intangible lease assets | $ | 410,082 | $ | 479,805 | ||||
Intangible liabilities consist of below market lease intangibles. The following table summarizes the Company’s intangible lease liabilities (in(dollars in thousands):
| December 31, | December 31, | |||||||||||||||||||||||||||
| Intangible lease liabilities | 2017 | 2016 | Intangible lease liabilities | 2023 | 2022 | |||||||||||||||||||||||
| Below market lease intangibles | $ | 123,883 | $ | 161,595 | ||||||||||||||||||||||||
| Above market ground lease intangibles | 2,329 | 2,329 | ||||||||||||||||||||||||||
| Gross intangible lease liabilities | ||||||||||||||||||||||||||||
| Gross intangible lease liabilities | ||||||||||||||||||||||||||||
| Gross intangible lease liabilities | 126,212 | 163,924 | ||||||||||||||||||||||||||
| Accumulated depreciation and amortization | (73,633 | ) | (105,779 | ) | ||||||||||||||||||||||||
| Net intangible lease liabilities | $ | 52,579 | $ | 58,145 | ||||||||||||||||||||||||
| Intangible liabilities, net | ||||||||||||||||||||||||||||
| Weighted average remaining amortization period in years | ||||||||||||||||||||||||||||
| Weighted average remaining amortization period in years | ||||||||||||||||||||||||||||
| Weighted average remaining amortization period in years | 7 | |||||||||||||||||||||||||||
The following table sets forth amortization related to deferred leasing costsintangible assets, net and acquisition-related intangibles forintangible liabilities, net (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
Depreciation and amortization expense related to amortization of lease-up intangibles(1) | $ | 102,249 | $ | 104,885 | $ | 106,106 | ||||||||||||||
Rental and related revenues related to amortization of net below market lease liabilities(1) | 27,012 | 24,640 | 20,597 | |||||||||||||||||
(1)Excludes amortization related to assets classified as discontinued operations.
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During the yearsyear ended December 31, 2017, 20162023, in conjunction with the Company’s acquisition of real estate, the Company acquired $0.5 million of intangible assets with a weighted average amortization period at acquisition of 5 years.
During the year ended December 31, 2022, in conjunction with the Company’s acquisitions of real estate, the Company acquired intangible assets of $7 million and 2015 (in thousands):
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Depreciation and amortization expense related to amortization of lease-up intangibles | $ | 76,732 | $ | 84,487 | $ | 74,978 | ||||||
| Rental and related revenues related to amortization of net below market lease liabilities | 2,030 | 3,877 | 3,781 | |||||||||
| Operating expense related to amortization of net below market ground lease intangibles | 740 | 664 | 664 | |||||||||
intangible liabilities of $6 million. The intangible assets and liabilities acquired had a weighted average amortization period at acquisition of 7 years and 11 years, respectively.
The following table summarizes the estimated annual amortization for each of the five succeeding fiscal years and thereafter (in thousands):
| Rental and Related Revenues | Depreciation and Amortization | ||||||||||
| 2024 | $ | 22,577 | $ | 95,208 | |||||||
| 2025 | 21,560 | 83,629 | |||||||||
| 2026 | 19,071 | 51,580 | |||||||||
| 2027 | 15,064 | 25,981 | |||||||||
| 2028 | 11,945 | 16,216 | |||||||||
| Thereafter | 29,909 | 34,288 | |||||||||
| $ | 120,126 | $ | 306,902 | ||||||||
Goodwill
At each of December 31, 2023 and 2022, the Company’s goodwill balance was $18 millionand is recognized in other assets, net on the Consolidated Balance Sheets. See Note 15 for goodwill attributable to the Company’s reportable segments. During the year ended December 31, 2021, the Company recognized a $29 million goodwill impairment charge, recognized within income (loss) from discontinued operations (see Note 5).
NOTE 10. Debt
Rental and Related Revenues(1) | Operating Expense(2) | Depreciation and Amortization(3) | |||||||||
| 2018 | $ | 4,099 | $ | 763 | $ | 66,651 | |||||
| 2019 | 4,102 | 763 | 49,868 | ||||||||
| 2020 | 3,418 | 759 | 40,151 | ||||||||
| 2021 | 3,401 | 756 | 35,963 | ||||||||
| 2022 | 4,199 | 756 | 30,490 | ||||||||
| Thereafter | 17,133 | 31,782 | 135,153 | ||||||||
| $ | 36,352 | $ | 35,579 | $ | 358,276 | ||||||
Subsequent to the Reorganization, Healthpeak OP, the Company’s consolidated operating subsidiary, is the borrower under, and the Company is the guarantor of, all of the unsecured debt discussed below, which includes the Revolving Facility, Term Loan Facilities, Commercial Paper Program (each as defined below), and senior unsecured notes. The Company’s guarantee of the senior unsecured notes is full and unconditional and applicable to existing and future senior unsecured notes.
Bank Line of Credit and Term Loans
On October 19, 2017,May 23, 2019, the Company executed a $2.0$2.5 billion unsecured revolving line of credit facility, (the “Facility”), which matures on October 19, 2021with a maturity date of May 23, 2023 and contains two six-month extension options.options, subject to certain customary conditions. In September 2021, the Company executed an amended and restated unsecured revolving line of credit (the “Revolving Facility”) to increase total revolving commitments from $2.5 billion to $3.0 billion and extend the maturity date to January 20, 2026. This maturity date may be further extended pursuant to two six-month extension options, subject to certain customary conditions. Borrowings under the Revolving Facility accrue interest at LIBORthe applicable interest rate benchmark plus a margin that depends uponon the credit ratings of the Company’s credit ratings.senior unsecured long-term debt. On February 10, 2023, the Company executed an amendment to the Revolving Facility to convert the interest rate benchmark from LIBOR to SOFR. The Company also pays a facility fee on the entire revolving commitment that depends on its credit ratings. Additionally, the Revolving Facility includes a sustainability-linked pricing component whereby the applicable margin may be reduced by up to 0.025% based on the Company’s achievement of specified sustainability-linked metrics, subject to certain conditions. Based on the Company’s credit ratings at December 31, 2017,2023, and inclusive of achievement of a sustainability-linked metric, the margin on the Revolving Facility was 1.00%,0.85% and the facility fee was 0.20%0.15%. The Revolving Facility also includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to $750 million, subject to securing additional commitments. At each of December 31, 2017,2023 and 2022, the Company had $1.0 billion, including £105 million ($142 million),no balance outstanding under the FacilityRevolving Facility.
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On August 22, 2022, the Company executed a term loan agreement (the “Term Loan Agreement”) that provided for two senior unsecured delayed draw term loans in an aggregate principal amount of up to $500 million (the “Term Loan Facilities”). The Term Loan Facilities were available to be drawn from time to time during a 180-day period after closing, subject to customary borrowing conditions, and the Company drew the entirety of the $500 million under the Term Loan Facilities in October 2022. $250 million of the Term Loan Facilities has an initial stated maturity of 4.5 years, which may be extended for a one-year period subject to certain customary conditions. The other $250 million of the Term Loan Facilities has a stated maturity of 5 years with no option to extend. At each of December 31, 2023 and 2022, the Company had $500 million outstanding under the Term Loan Facilities.
Loans outstanding under the Term Loan Facilities accrue interest at TermSOFR plus a weighted averagemargin that depends on the credit ratings of the Company’s senior unsecured long-term debt. The Term Loan Agreement also includes a sustainability-linked pricing component whereby the applicable margin under the Term Loan Facilities may be reduced by 0.01% based on the Company’s achievement of specified sustainability-linked metrics. Based on the Company’s credit ratings as of December 31, 2023, and inclusive of achievement of a sustainability-linked metric, the margin on the Term Loan Facilities was 0.94%. The Term Loan Agreement includes a feature that allows the Company to increase the borrowing capacity by an aggregate amount of up to an additional $500 million, subject to securing additional commitments.
In August 2022, the Company entered into two forward-starting interest rate swap instruments that are designated as cash flow hedges (see Note 21). The Term Loan Facilities associated with these interest rate swap instruments are reported as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instruments. Based on the Company’s credit ratings as of December 31, 2023, the Term Loan Facilities had a blended fixed effective interest rate of 2.74%.
The Revolving Facility and Term Loan and therefore, beginning June 30, 2017, the 2015 Term Loan accrued interest at a rate of GBP LIBOR plus 1.15%,Facilities are subject to adjustments based on the Company's credit ratings. At December 31, 2017 the Company had £169 million ($229 million) outstanding on the 2015 Term Loan. The 2015 Term Loan contains a one-year committed extension option. The Company has a one–time right to repay the outstanding GBP balance and re-borrow in USD with all other key terms unchanged.
The Company has secured commitments for a $750 million five-year unsecured term loan (the “2024 Term Loan”), to be incurred as an incremental facility under the Term Loan Agreement. In January 2024, the Company entered into forward-starting interest rate swap instruments that are designated as cash flow hedges (see Note 21) that will effectively establish a fixed interest rate for the 2024 Term Loan at a blended contractual rate of 4.5%.
Commercial Paper Program
In September 2019, the Company established an unsecured commercial paper program (the “Commercial Paper Program”). Under the terms of the Commercial Paper Program, the Company may issue, from time to time, short-term unsecured notes with varying maturities. Amounts available under the Commercial Paper Program may be borrowed, repaid, and re-borrowed from time to time. At each of December 31, 2023 and 2022, the maximum aggregate face or principal amount that could be outstanding at any one time was $2.0 billion. Amounts borrowed under the Commercial Paper Program will be sold on terms that are customary for the U.S. commercial paper market and will be at least equal in right of payment with all of the Company’s other unsecured and unsubordinated indebtedness. The Company uses its Revolving Facility as a liquidity backstop for the repayment of short-term unsecured notes issued under the Commercial Paper Program. At December 31, 2023, the Company had $720 million of notes outstanding under the Commercial Paper Program, with original maturities of approximately 37 days and 2015 Term Loan.a weighted average interest rate of 5.70%. At December 31, 2022, the Company had $996 million of notes outstanding under the Commercial Paper Program, with original maturities of approximately two months and a weighted average interest rate of 4.90%.
Senior Unsecured Notes
At December 31, 2017,2023 and 2022, the Company had senior unsecured notes outstanding with an aggregate principal balance of $6.45 billion.$5.5 billion and $4.7 billion, respectively. The senior unsecured notes contain certain covenants including limitations on debt, maintenance of unencumbered assets, cross-acceleration provisions, and other customary terms. The Company believes it was in compliance with these covenants at December 31, 2017.2023.
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The following table summarizes the Company’s senior unsecured notes payoffsissuances for the periods presentedyears ended December 31, 2023, 2022, and 2021 (dollars in thousands):
| Issue Date | Amount | Coupon Rate | Maturity Year | |||||||||||||||||
| Year ended December 31, 2023: | ||||||||||||||||||||
| January 17, 2023 | $ | 400,000 | 5.25 | % | 2032 | |||||||||||||||
May 10, 2023(1) | 350,000 | 5.25 | % | 2032 | ||||||||||||||||
| Year ended December 31, 2021: | ||||||||||||||||||||
November 24, 2021(2) | 500,000 | 2.13 | % | 2028 | ||||||||||||||||
July 12, 2021(2) | 450,000 | 1.35 | % | 2027 | ||||||||||||||||
| Period | Amount | Coupon Rate | |||||
| Year ended December 31, 2017 | |||||||
| May 1, 2017 | $ | 250,000 | 5.625 | % | |||
| July 27, 2017 | $ | 500,000 | 5.375 | % | |||
| Year ended December 31, 2016: | |||||||
| February 1, 2016 | $ | 500,000 | 3.750 | % | |||
| September 15, 2016 | $ | 400,000 | 6.300 | % | |||
| November 30, 2016 | $ | 500,000 | 6.000 | % | |||
| November 30, 2016 | $ | 600,000 | 6.700 | % | |||
(2)In 2021, the Company completed two green bond offerings. The net proceeds from both green bonds have been allocated to eligible green projects, and the Company may choose to re-allocate net proceeds from such offerings to one or more other eligible green projects.
During the years ended December 31, 20172023 and 2016,2022, there were no repurchases or redemptions of senior unsecured notes.
The following table summarizes the Company’s senior unsecured notes repurchases and redemptions for the year ended December 31, 2021 (dollars in thousands):
Payoff Date(1) | Amount | Coupon Rate | Maturity Year | |||||||||||||||||
| May 19, 2021 | $ | 251,806 | 3.40 | % | 2025 | |||||||||||||||
| May 19, 2021 | 298,194 | 4.00 | % | 2025 | ||||||||||||||||
| February 26, 2021 | 188,000 | 4.25 | % | 2023 | ||||||||||||||||
| February 26, 2021 | 149,000 | 4.20 | % | 2024 | ||||||||||||||||
| February 26, 2021 | 331,000 | 3.88 | % | 2024 | ||||||||||||||||
| January 28, 2021 | 112,000 | 4.25 | % | 2023 | ||||||||||||||||
| January 28, 2021 | 201,000 | 4.20 | % | 2024 | ||||||||||||||||
| January 28, 2021 | 469,000 | 3.88 | % | 2024 | ||||||||||||||||
(1)As a result of the repurchases and redemptions of these senior unsecured notes, the Company recorded lossesrecognized an aggregate $225 million loss on debt extinguishment related toduring the repurchase of senior notes of $54 million and $46 million, respectively.
Mortgage Debt
At December 31, 2017,2023 and 2022, the Company had $139$255 million and $345 million, respectively, in aggregate principal of mortgage debt outstanding, which isoutstanding. At December 31, 2023, this mortgage debt was secured by 16 healthcare facilities (including redevelopment properties)15outpatient medical buildings and 2 CCRCs, with aan aggregate carrying value of$587 million.At December 31, 2022, this mortgage debt was secured by 15 outpatient medical buildings and 3 CCRCs, with an aggregate carrying value of $299$793 million. In March 2017, the Company paid off $472 million of mortgage debt.
Mortgage debt generally requires monthly principal and interest payments, is collateralized by real estate assets, and is generally non-recourse. Mortgage debt typically restricts transfer of the encumbered assets, prohibits additional liens, restricts prepayment, requires payment of real estate taxes, requires maintenance of the assets in good condition, requires maintenance of insurance on the assets and includes conditions to obtain lender consent to enter into or terminate material leases.leases, requires insurance on the assets, requires payment of real estate taxes, restricts transfer of the encumbered assets and repayment of the loan, and prohibits additional liens. Some of the mortgage debt is also cross-collateralized by multiple assets and may require tenants or operators to maintain compliance with the applicable leases or operating agreements of such real estate assets.
During the years ended December 31, 2023, 2022, and 2021, the Company made aggregate principal repayments of mortgage debt of $90 million, $5 million, and $9 million, respectively (excluding mortgage debt on assets held for sale and discontinued operations). Included in the $90 millionof aggregate principal repayments of mortgage debt for the year endedDecember 31, 2023 was an $85 millionfull principal repayment of mortgage debt secured by one CCRC that matured in December 2023.
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The Company has $142 million of mortgage debt secured by a portfolio of 13 outpatient medical buildings that matures in May 2026 (see Note 3). In April 2022, the Company terminated its existing interest rate cap instruments associated with this variable rate mortgage debt and entered into two interest rate swap instruments that are designated as cash flow hedgesand mature in May 2026. In February 2023, the agreements associated with this variable rate mortgage debt were amended to change the interest rate benchmarks from LIBOR to SOFR, effective March 2023. Concurrently, the Company modified the related interest rate swap instruments to reflect the change in the interest rate benchmarks from LIBOR to SOFR (see Note 21). The variable rate mortgage debt associated with these interest rate swap instruments is reported as fixed rate debt due to the Company having effectively established a fixed interest rate for the underlying debt instrument.
Debt Maturities Maturities
The following table summarizes the Company’s stated debt maturities and scheduled principal repayments at December 31, 20172023 (dollars in thousands):
Bank Line of Credit(1) | Term Loan(2) | Senior Unsecured Notes(3) | Mortgage Debt(4) | Total(5) | ||||||||||||||||||||||
| Year | Amount | Interest Rate | Amount | Interest Rate | ||||||||||||||||||||||
| 2018 | $ | — | $ | — | $ | — | — | % | $ | 3,512 | — | % | $ | 3,512 | ||||||||||||
| 2019 | — | 228,674 | 450,000 | 3.95 | % | 3,700 | — | % | 682,374 | |||||||||||||||||
| 2020 | — | — | 800,000 | 2.79 | % | 3,758 | 5.08 | % | 803,758 | |||||||||||||||||
| 2021 | 1,017,076 | — | 700,000 | 5.49 | % | 11,117 | 5.26 | % | 1,728,193 | |||||||||||||||||
| 2022 | — | — | 900,000 | 3.93 | % | 2,861 | — | % | 902,861 | |||||||||||||||||
| Thereafter | — | — | 3,600,000 | 4.36 | % | 113,619 | 4.09 | % | 3,713,619 | |||||||||||||||||
| 1,017,076 | 228,674 | 6,450,000 | 138,567 | 7,834,317 | ||||||||||||||||||||||
| Discounts, premium and debt costs, net | — | (386 | ) | (53,549 | ) | 5,919 | (48,016 | ) | ||||||||||||||||||
| $ | 1,017,076 | $ | 228,288 | $ | 6,396,451 | $ | 144,486 | $ | 7,786,301 | |||||||||||||||||
Senior Unsecured Notes(2) | Mortgage Debt(3) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Year | Bank Line of Credit | Commercial Paper(1) | Term Loans | Amount | Interest Rate | Amount | Interest Rate | Total | ||||||||||||||||||||||||||||||||||||||||||
| 2024 | $ | — | $ | — | $ | — | $ | — | — | % | $ | 7,024 | 6.90 | % | $ | 7,024 | ||||||||||||||||||||||||||||||||||
| 2025 | — | — | — | 800,000 | 3.92 | % | 3,209 | 3.82 | % | 803,209 | ||||||||||||||||||||||||||||||||||||||||
| 2026 | — | 720,000 | — | 650,000 | 3.40 | % | 244,523 | 4.44 | % | 1,614,523 | ||||||||||||||||||||||||||||||||||||||||
| 2027 | — | — | 500,000 | 450,000 | 1.54 | % | 366 | 5.91 | % | 950,366 | ||||||||||||||||||||||||||||||||||||||||
| 2028 | — | — | — | 500,000 | 2.35 | % | — | — | % | 500,000 | ||||||||||||||||||||||||||||||||||||||||
| Thereafter | — | — | — | 3,050,000 | 4.18 | % | — | — | % | 3,050,000 | ||||||||||||||||||||||||||||||||||||||||
| — | 720,000 | 500,000 | 5,450,000 | 255,122 | 6,925,122 | |||||||||||||||||||||||||||||||||||||||||||||
| Premiums, (discounts), and debt issuance costs, net | — | — | (3,176) | (46,622) | 975 | (48,823) | ||||||||||||||||||||||||||||||||||||||||||||
| $ | — | $ | 720,000 | $ | 496,824 | $ | 5,403,378 | $ | 256,097 | $ | 6,876,299 | |||||||||||||||||||||||||||||||||||||||
(1)Commercial Paper Program borrowings are backstopped by the Revolving Facility. As such, the Company calculates the weighted average remaining term of its Commercial Paper Program borrowings using the maturity date of the Revolving Facility.
(2)Effective interest rates on the senior unsecured notes range from 1.54% to 6.87% with a weighted average effective interest rate of 3.66% and a weighted average maturity of 6 years.
(3)Effective interest rates on the mortgage debt range from 3.44% to 9.26% with a weighted average effective interest rate of 4.50% and a weighted average maturity of 3 years. These interest rates include the impact of designated interest rate swap instruments, which effectively fix the interest rate on certain variable rate debt.
NOTE 11. Commitments and Contingencies
Legal Proceedings
From time to time, the Company is a party to or has a significant relationship to, legal proceedings, lawsuits and other claims. Except as described below,claims that arise in the ordinary course of the Company’s business. The Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s financial condition, results of operations, or cash flows. The Company’s policy is to expense legal costs as they are incurred.
31, 2023. The Company believes that the lawsuits and demands are without merit, but cannot predict the outcome of these proceedings or reasonably estimate any potential loss at this time.
Additionally, four lawsuits have been filed by purported shareholders of Physicians Realty Trust against Physicians Realty Trust and is unable to estimate the amountmembers of loss or rangethe Physicians Realty Trust board of reasonably possible losses with respect totrustees challenging the matters discussed above as of December 31, 2017.
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DownREITs and file a joint dismissal of all claims and counterclaims.
In connection with the formation of certain DownREIT LLCs,DownREITs, members may contribute appreciated real estate to a DownREIT LLC in exchange for DownREIT units. These contributions are generally tax-deferred, so that the pre-contribution gain related to the property is not taxed to the member. However, if a contributed property is later sold by the DownREIT, LLC, the unamortized pre-contribution gain that exists at the date of sale is specifically allocated and taxed to the contributing members. In many of the DownREITs, the Company has entered into indemnification agreements with those members who contributed appreciated property into the DownREIT LLC.DownREIT. Under these indemnification agreements, if any of the appreciated real estate contributed by the members is sold by the DownREIT LLC in a taxable transaction within a specified number of years, the Company will reimburse the affected members for the federal and state income taxes associated with the pre-contribution gain that is specially allocated to the affected member under the Internal Revenue Code (“make-whole payments”). These make-whole payments include a tax gross-up provision. These indemnification agreements have expirationexpirations terms that range through 20332039 on a total of 3529 properties.
Additionally, the Company owns a 49% interest in the Lab JV (see Note 8). If the property in the joint venture is sold in a taxable transaction, the Company is generally obligated to indemnify its joint venture partner for its federal and state income taxes associated with the gain that existed at the time of the contribution to the joint venture.
Commitments
The following table summarizes the Company’s material commitments, excluding potential success-based fees as a result of the Mergers (see Note 1), obligations as the lessee under operating leases (see Note 6), commitments to fund additional loans for senior housing redevelopment and capital expenditure projects (see Note 7), debt servicingservice obligations (see Note 10), and operating leasespotential future obligations related to redeemable noncontrolling interests (see disclosure below),Note 12) at December 31, 20172023 (in thousands):
| Total | 2018 | 2019-2020 | 2021-2022 | More than Five Years | |||||||||||||||
U.K. loan commitments(1) | $ | 3,236 | $ | 3,236 | $ | — | $ | — | $ | — | |||||||||
Construction loan commitments(2) | 114,691 | 45,863 | 68,828 | — | — | ||||||||||||||
Development commitments(3) | 133,371 | 128,101 | 2,228 | 3,042 | — | ||||||||||||||
| Total | $ | 251,298 | $ | 177,200 | $ | 71,056 | $ | 3,042 | $ | — | |||||||||
| Amount | |||||
Development and redevelopment commitments(1) | |||||
| $ | 151,996 | |||
Lease and other contractual commitments(2) | ||||
| 27,655 | |||||
| $ | 179,651 | ||||
(1)Represents construction and other commitments for developments in progress.Credit Enhancement GuaranteeAt December 31, 2017, certain of the Company’s senior housing facilities serve as collateral for $83 million of debt (maturing May 1, 2025) that is owed by a previous owner of the facilities. This indebtedness is guaranteed by the previous owner who has an investment grade credit rating. These senior housing facilities, which are classified as DFLs, had a carrying value of $356 million as of December 31, 2017.2023 for developments and redevelopments in progress and includes allowances for Company-owned tenant improvements that the Company has provided as a lessor.Tenant Purchase OptionsCertain leases, including DFLs contain purchase options whereby the tenant may elect to acquire the underlying real estate. Annualized base rent from leases subject to purchase options, summarized by the year the purchase options are exercisable, are as follows (dollars in thousands):deductibles and have limits.
Rental ExpenseThe Company’s rental expense attributable to continuing operations was $10 million for each of the years ended December 31, 2017, 2016 and 2015. These rental expense amounts include ground rent and other leases. Ground leases generally require fixed annual rent payments and may also include escalation clauses and renewal options. These leases have terms that are up to 99 years, excluding extension options.Future minimum lease obligations under non-cancelable ground and other operating leases as of December 31, 2017 were as follows (in thousands):
Common StockDividends
On October 7, 2015,Redeemable Noncontrolling Interests
See Note 5 for the deconsolidation of RIDEA II and Note 19 for the supplemental schedule of non-cash financing activities.
The Company evaluates its business and allocates resourcesBasic income (loss) per common share (“EPS”) is computed based on its reportable business segments: (i) senior housing triple-net, (ii) SHOP, (iii) life science and (iv) medical office. The Company has non-reportable segments that are comprised primarilythe weighted average number of common shares outstanding. Diluted income (loss) per common share is computed based on the Company’s debt investments, hospital properties, unconsolidated joint ventures (see below), and care homes in the U.K. The accounting policiesweighted average number of the segments are the same as those described under Summary of Significant Accounting Policies (see Note 2).During the fourth quarter of 2017, as a result of a change in how operating results are reported to the chief operating decision makers, for the purpose of evaluating performance and allocating resources, the Company began excluding unconsolidated joint ventures from its evaluation of its segments' operating results. Unconsolidated joint ventures are now reflected in other non-reportable segments, and as a result, excluded from NOI and Adjusted NOI. Prior period NOI and Adjusted NOI have also been recast to conform to current period presentation, which excludes unconsolidated joint ventures.During the year ended December 31, 2017, 42 senior housing triple-net facilities were transferred to the Company’s SHOP segment. During the year ended December 31, 2016, 17 senior housing triple-net facilities were transitioned to a RIDEA structure (reported in the Company’s SHOP segment). There were no intersegment sales or transfers during the year ended December 31, 2015.The Company evaluates performance based upon: (i) property net operating income from continuing operations (“NOI”) and (ii) Adjusted NOI. NOI is defined as rental and related revenues, including tenant recoveries, resident fees and services, and income from DFLs, less property level operating expenses. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, lease termination fees andcommon shares outstanding plus the impact of deferred community feeforward equity sales agreements using the treasury stock method, common shares issuable from the assumed conversion of DownREIT units, stock options, certain performance restricted stock units, and unvested restricted stock units. Only those instruments having a dilutive impact on the Company’s basic income (loss) per share are included in diluted income (loss) per share during the periods presented.Non-segment assets consist of assets incalculate the Company's other non-reportable segments (see above) and corporate non-segment assets. Corporate non-segment assets consist primarily of corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, net, marketable equity securities and,dilution, if any, real estate held for sale.See Note 22 for other information regarding concentrationsresulting from the forward sales agreements during the period of credit risk.time prior to settlement.
The following table summarizes the Company’s revenues by segment (in thousands):
The following table summarizes the Company’s total assets by segment (in thousands):
As a resultFor each of the change in the composition of reportable segments during the fourth quarter of 2017, as further described above, the Company allocated goodwill to its revised reporting units using a relative fair value approach. The Company completed a goodwill impairment assessment for all reporting units immediately prior to the reallocation and determined that no impairment existed at September 30, 2017. Additionally, the Company completed the required annual goodwill impairment test during the fourth quarter of 2017 and no impairment was recognized. Atyears ended December 31, 2017, goodwill2023, 2022, and 2021, all 7 million shares issuable upon conversion of $47 million was allocated to segment assets as follows: (i) senior housing triple-net—$21 million, (ii) SHOP—$9 million, (iii) medical office—$11 million and (iv) other—$6 million. At December 31, 2016, goodwillDownREIT units were not included because they were anti-dilutive.
The following table summarizes future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under non-cancelable operating leases as of December 31, 2017 (in thousands):
Stock BasedStock-Based Compensation
Restricted Stock UnitsTotal share-based compensation expense recognizedUnder the Plans, time-based restricted stock units and market-based restricted stock units (collectively, “Restricted Stock Units”) are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. Restrictions on certain awards generally lapse, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control, or other specified events. The fair market value of Restricted Stock Units is expensed over the period of vesting. Time-based restricted stock units, which vest based solely upon passage of time, generally vest on a graded schedule over a period of three to five years. The fair value of time-based restricted stock units is determined based on the closing market price of the Company’s shares on the grant date. Market-based restricted stock units, which vest dependent upon attainment of total shareholder return (“TSR”) performance that equal or exceed threshold levels as measured against certain peer and industry benchmarks, generally vest in their entirety at the end of a three-year performance period. The number of shares that ultimately vest based on performance can vary from 0% to 200% of target depending on the level of achievement of the performance criteria. The fair value of market-based restricted stock units is determined based on the Monte Carlo valuation model primarily using the following assumptions for awards granted during the years ended December 31, 2017, 20162023, 2022, and 20152021, respectively: (i) expected term of 3 years, 3 years, and 3 years (equal to the remaining performance period at the grant date), (ii) historical volatility of 33.0%, 38.9%, and 39.1%, (iii) dividend yield of 4.4%, 3.5%, and 4.0%, (iv) risk-free rate of 4.4%, 1.8%, and 0.2%, and (v) post-vesting restrictions discount of 10.0%, 5.8%, and 12.9%. The total grant date fair value of time-based restricted stock units and market-based restricted stock units granted during the years ended December 31, 2023, 2022, and 2021 was $14$9 million, $23$27 million, and $26$23 million, respectively. The yeartotal fair value (at vesting) of time-based restricted stock units and market-based restricted stock units that vested during the years ended December 31, 2016 includes a $72023, 2022, and 2021 was $16 million, charge recognized in general$27 million, and administrative expenses primarily resulting from$29 million, respectively.Conversion of Equity Awards at the Spin-Off DateThe Plans were established with anti-dilution provisions, such that in the event of an equity restructuring of the Company (including spin-off transactions), equity awards would preserve their value post-transaction. In order to achieve an equitable modification of the existing awards following the Spin-Off, the Company converted pre-spin awards to their post-spin value, resulting in grants to remaining employees denominated solely in the Company’s common stock. The modification assumed a conversion ratio on all awards calculated as the final pre-spin closing market price of the Company’s common stock divided byon the five trading day average post-spin closing price (“Five Day Average Price”)date prior to the relevant transaction occurring. During the years ended December 31, 2023, 2022, and 2021, the Company withheld 241,000, 356,000, and 418,000 shares, respectively, to offset tax withholding obligations with respect to the vesting of the Restricted Stock Units.
Stock options are granted with an exercise price per share equal to the closing market price of the Company’s common stock on the grant date. Stock options generally vest ratably over a three- to five-year period and have a 10-year contractual term. Vesting of certain stock options may accelerate, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control or other specified events.Restricted Stock AwardsUnder the Plans, restricted stock awards, including restricted stock units and performance stock units are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. Restrictions on certain awards generally lapse, as provided in the Plans or in the applicable award agreement, upon retirement, a change in control or other specified events. The fair market value of restricted stock awards, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time generally vest over a period of three to six years. The fair value of restricted stock units is determined based on the closing market price of the Company's shares on the grant date. Performance stock units, which are restricted stock awards that vest dependent upon attainment of various levels of performance that equal or exceed targeted levels, generally vest in their entirety at the end of a three year performance period. The number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of the performance criteria. The fair value of performance stock units is determined based on the Monte Carlo valuation model. The compensation expense recognized for all restricted stock awards is net of actual forfeitures.Upon vesting of restricted stock awards, the participant is required to pay the related tax withholding obligation. Participants can generally elect to have the Company reduce the number of common stock shares delivered to pay the employee tax withholding obligation. The value of the shares withheld is dependent on the closing market price of the Company’s common stock on the trading date prior to the relevant transaction occurring. Duringincurred during the years ended December 31, 2017, 20162023, 2022, and 2015, the Company withheld 157,000, 237,000 and 200,000 shares, respectively, to offset tax withholding obligations with respect to the vesting of the restricted stock and performance restricted stock unit awards.Holders of restricted stock awards, including restricted stock units and performance stock units, are generally entitled to receive dividends equal to the amount that would be paid on an equivalent number of shares of common stock.
2021.
At December 31, 2017, the weighted average remaining vesting period of restricted stockTotal stock-based compensation cost was $19 million, $32 million, and performance based units was two years. The total fair value (at vesting) of restricted stock and performance based units which vested$23 million for the years ended December 31, 2017, 20162023, 2022, and 20152021, respectively, which was $15recognized in general and administrative expenses. The year ended December 31, 2022 included $10 million $24of severance-related charges resulting from a decrease in the requisite service period of restricted stock units associated with the Company's former CEO, as further described below. Of the total stock-based compensation cost, $4 million, $4 million, and $21$3 million was capitalized as part of real estate for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, there was $20 million of future expenses related to unvested stock-based compensation arrangements granted under the Company’s incentive plans, which is expected to be recognized over a weighted average period of 1.5 years associated with future employee service. Compensation cost recognized for all Restricted Stock Units and LTIP Units is net of actual forfeitures.Subsequent events.
Casualty-RelatedAs a result of Hurricane Harvey and Hurricane Irma duringFor the year ended December 31, 2017,2023:
Real EstateDuring the third quarter 2017, the Company determined that 11 underperforming senior housing triple-net assets that are candidates for potential future sale were impaired. Accordingly, the Company wrote-down the carrying amount of these 11 assets to their fair value, which resulted in an aggregate impairment charge of $23 million. The fair value of the assets was based on forecasted sales prices which are considered to be Level 2 measurements within the fair value hierarchy.OtherSee Note 7 for further information on the impairment charges related to the mezzanine loan facility to Tandem (the "Tandem Mezzanine Loan").In June 2015 and September 2015, the Company determined that its Four Seasons senior notes (the “Four Seasons Notes”) were other-than-temporarily impaired resulting from a continued decrease in the fair value of its investment. Although the Company did not intend to sell and did not believe it would be required to sell the Four Seasons Notes before their maturity, the Company determined that a credit loss existed resulting from several factors including: (i) deterioration in Four Seasons’ operating performance since the fourth quarter of 2014 and (ii) credit downgrades to Four Seasons received during the first half of 2015. Accordingly, the Company recorded impairment charges during the three months ended June 30, 2015 and September 30, 2015 of $42 million and $70 million, respectively, reducing the carrying value of the Four Seasons Notes at September 30, 2015 to $100 million (£66 million).The fair value of the Four Seasons Notes used to calculate the impairment charge was based on quoted market prices. However, because the Four Seasons Notes were not actively traded, these prices were considered to be Level 2 measurements within the fair value hierarchy. When calculating the fair value and determining whether a credit loss existed, the Company also evaluated Four Season’s ability to repay the Four Seasons Notes according to their contractual terms based on its estimate of future cash flows. The estimated future cash flow inputs included forecasted revenues, capital expenditures, operating expenses, care home occupancy and continued implementation of Four Seasons’ business plan which included executing on its business line segmentation and continuing to invest in its core real estate portfolio. This information was consistent with the results of the valuation technique
used by the Company to determine if a credit loss existed and to calculate the fair value of the Four Seasons Notes during its impairment review.In March 2017, pursuant to a shift in the Company’s investment strategy, the Company sold its £138.5 million par value Four Seasons Notes for £83 million ($101 million). The disposition of the Four Seasons Notes generated a £42 million ($51 million) gain on sale, recognized in other income (expense), net in the Consolidated Statements of Operations (see Note 2).
Through October 2015, the Company held a secured term loan made to Delphis Operations, L.P. (“Delphis”). In October 2015, the Company received $23 million in cash proceeds from the sale of Delphis’ collateral and recognized an impairment recovery of $6follows: (i) $14 million for the amount received in excess of the loan’s carrying value.outpatient medical, (ii) $2 million for CCRC, and (iii) $2 million for other non-reportable.
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HCP common stockholders on October 24, 2016, the record dateThe Company’s pretax income (loss) from continuing operations for the Spin-Off (the “Record Date”), received uponyears ended December 31, 2023, 2022, and 2021 was $325 million, $509 million, and $134 million, respectively, of which$318 million, $527 million, and $150 million was attributable to the Spin-Off on October 31, 2016 one share of QCP common stockREIT entities for every five shares of HCP common stock they held (the “Distributed Shares”) and cash in lieu of fractional shares of QCP. For U.S. federal income tax purposes, HCP reported the fair market value of the QCP common stock distributed per each share of HCP common stock outstanding on the Record Date was $6.17, or $30.85 for each share of QCP common stock.
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. As a result of the reduced U.S. federal corporate tax rate, the Company recorded a tax expense of $17 million, due to a remeasurement of deferred tax assets and liabilities, which is included in total deferred tax expense in the table above.
DeferredNet deferred tax assets and liabilities are included in other assets, net and accounts payable and accrued liabilities.At December 31, 2017on the Company had a net operating loss (“NOL”) carryforward of $42 million related to the TRS entities. These amounts can be used to offset future taxable income, if any. The NOL carryforwards begin to expire in 2033 with respect to the TRS entities.Consolidated Balance Sheets.
For the years ended December 31, 2017 and 2016, the tax basis
The Company is no longer subject to federal corporate-level tax on the taxable disposition of SEUSA pre-acquisition assets.NOTE 17. Supplemental Cash Flow Information
Restricted stock and certain performance restricted stock units are considered participating securities because dividend payments are not forfeited even if the underlying award does not vest and require use of the two-class method when computing basic and diluted earnings per share.For the year ended December 31, 2015, diluted loss per share from continuing operations is calculated using the weighted-average common shares outstanding during the period, as the effect of shares issuable under employee compensation plans and upon DownREIT unit conversions would have been anti-dilutive. All DownREIT units and approximately 1 million stock options were anti-dilutive for all periods presented.
The following table summarizesprovides supplemental cash flow information (in thousands):
On January 1, 2016,Operating Subsidiary
The Company holds a 49% ownership interest in CCRC OpCo, a joint venture entity formed in August 2014 that operates senior housing properties in a RIDEA structure and has been identified as a VIE. The equity members of CCRC OpCo “lack power” because they share certain operating rights with Brookdale, as manager of the CCRCs. The assets of CCRC OpCo primarily consist of the CCRCs that it owns and leases, resident fees receivable, notes receivable, and cash and cash equivalents; its obligations primarily consist of operating lease obligations to CCRC PropCo, debt service payments and capital expenditures for the properties, and accounts payable and expense accruals associated with the cost of its CCRCs’ operations. Assets generated by the CCRC operations (primarily rents from CCRC residents) of CCRC OpCo may only be used to settle its contractual obligations (primarily from debt service payments, capital expenditures, and rental costs and operating expenses incurred to manage such facilities).In January 2017, as a result of the partial sale of its interest in RIDEA II, the Company concluded that it should deconsolidate RIDEA II as it is no longer the primary beneficiary of the joint venture. The HCP/CPA JV is the primary beneficiary of both RIDEA II PropCo and RIDEA II OpCo as it controls the significant activities of RIDEA II PropCo and, of the group that controls the significant activities of RIDEA II OpCo, is most closely associated to the entity. Furthermore, control over the HCP/CPA JV is shared between HCP and CPA, and as such, the Company does not consolidate the HCP/CPA JV. Subsequent to the partial sale of its interest in RIDEA II, the Company continues to hold a direct investment in RIDEA II PropCo, which has been identified as a VIE as Brookdale, the non-managing member, does not have any substantive participating rights or kick-out rights over the managing member, HCP/CPA PropCo. The assets of RIDEA II PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of a combination of third-party and HCP debt (see Note 5). Assets generated by RIDEA II PropCo (primarily from RIDEA II OpCo lease payments) may only be used to settle its contractual obligations (primarily debt service payments on the third-party and HCP debt).The Company holds an 85% ownership interest in two development joint ventures (Vintage Park Development JV and Waldwick JV) (see Note 8), which have been identified as VIEs as power is shared with a member that does not have a substantive equity investment at risk. The assets of each joint venture primarily consist of an in-progress senior housing facility development project that it owns and cash and cash equivalents; its obligations primarily consist of accounts payable and expense accruals associated with the cost of its development obligations. Any assets generated by each joint venture may only be used to settle its respective contractual obligations (primarily development expenses and debt service payments).TheDebt Securities Investment. At December 31, 2022, the Company leases 48 properties to a total held $22 millionof seven tenants that have also been identified as VIEs (“VIE tenants”). These VIE tenants are “thinly capitalized” entities that rely on the operating cash flows generated from the senior housing facilities to pay operating expenses, including the rent obligations under their leases.The Company holds commercial mortgage-backed securities (“CMBS”) issued by Federal Home Loan Mortgage Corporation (commonly referred to as Freddie MAC)Mac) through a special purpose entity that hashad been identified as a VIE because it iswas “thinly capitalized.” The CMBS issued by the VIE arewere backed by mortgage debt obligations on real estate assets.The Company provided a £105 million ($131 million) bridge loan to Maria Mallaband Care Group Ltd. (“MMCG”) to fund the acquisition of a portfolio of care homes in the U.K. MMCG created a special purpose entity to acquire the portfolio and funded it entirely using the Company’s bridge loan. As such, the special purpose entity has been identified These securities were classified as a VIEheld-to-maturity because it is “thinly capitalized.” The Company retains a three-year call option to acquire all the shares of the special purpose entity, which it can only exercise upon the occurrence of certain events.The Company provided seller financing of $10 million related to its sale of seven senior housing triple-net facilities. The financing was provided in the form of a secured five-year mezzanine loan to a “thinly capitalized” borrower created to acquire the facilities.Between 2012 and 2015, the Company funded a $257 million mezzanine loan facilityhad the intent and ability to Tandem as part of a recapitalization ofhold the Tandem Portfolio (see Note 7). Due to a declinesecurities until maturity. These securities matured on December 31, 2022, and the Company received the related proceeds in the fair value of the Tandem Portfolio over time, there is no longer sufficient equity at risk in Tandem and it has become a “thinly capitalized” borrower.
January 2023.
HCP, Inc.'sThe Company’s consolidated total assets and total liabilities at December 31, 20172023 and December 31, 20162022 include certain assets of VIEs that can only be used to settle the liabilities of the related VIE. The VIE creditors do not have recourse to HCP, Inc. Total assets at December 31, 2017 and December 31, 2016 include VIE assets as follows (in thousands):
RIDEA I. The Company holds a 90% ownership interest in JV entities formed in September 2011 that own and operate senior housing properties in a RIDEA structure (“RIDEA I”). The Company has historically classified RIDEA I OpCo as a VIE and, as a result of the adoption of ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), also classifies RIDEA I PropCo as a VIE due to the non-managing member lacking substantive participation rights in the management of RIDEA I PropCo or kick-out rights over the managing member. The Company consolidates RIDEA I PropCo and RIDEA I OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of RIDEA I PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of RIDEA I OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to RIDEA I PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the RIDEA I structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).HCP Ventures V, LLC. The Company holds a 51% ownership interest in and is the managing member of a JVjoint venture entity formed in October 2015 that owns and leases MOBsoutpatient medical buildings (“HCP Ventures V”). Upon adoption of ASU 2015-02, theThe Company classified HCPclassifies Ventures V as a VIE due to the non-managing member lacking substantive participation rights in the management of HCP Ventures V or kick-out rights over the managing member. The Company consolidates HCP Ventures V as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of HCP Ventures V primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by HCP Ventures V may only be used to settle its contractual obligations (primarily from capital expenditures).obligations.
Vintage Park JVLab JVs. The Company holds a 90%98% or greater ownership interest in multiple joint venture entities that own and lease lab buildings (the “Lab JVs”). The Lab JVs are VIEs as the members share in certain decisions of the entities, but substantially all of the activities are performed on behalf of the Company. The Company consolidates the Lab JVs as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the Lab JVs primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; their obligations primarily consist of capital expenditures for the properties. Assets generated by the Lab JVs may only be used to settle their contractual obligations. Refer to Note 12 for a discussion of certain put options associated with the Lab JVs.Watertown JV. The Company holds a 95% ownership interest in JV entities formed in November 2017 that own and operate a senior housing property in a RIDEA structure (“Watertown JV”). Watertown PropCo is a VIE as the Company and the non-managing member share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. Watertown OpCo is a VIE as the non-managing member, through its equity interest, lacks substantive participation rights in the management of Watertown OpCo or kick-out rights over the managing member. The Company consolidates Watertown PropCo and Watertown OpCo as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of Watertown PropCo primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of notes payable to a non-VIE consolidated subsidiary of the Company. The assets of Watertown OpCo primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to Watertown PropCo and operating expenses of its senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the Watertown structure may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).Hayden JV. The Company holds a 99% ownership interest in a JV entity formed in December 2017 that owns and leases a life science complex (“Hayden JV”). The Hayden JV is a VIE as the members share in control of the entity, but substantially all of the entity's activities are performed on behalf of the Company. The Company consolidates the Hayden JV as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the HaydenMSREI JV primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by Haydenthe MSREI JV may only be used to settle its contractual obligations (primarily from capital expenditures).obligations.Consolidated Lessees. The Company leases 21 senior housing properties to lessee entities under cash flow leases through which the Company receives monthly rent equal to the residual cash flows of the properties. The lessee entities are classified as VIEs as they are "thinly capitalized" entities. The Company consolidates the lessee entities as it has the ability to control the activities that most significantly impact the economic performance of the lessee entities. The lessee entities' assets primarily consist of leasehold interests in senior housing facilities (operating leases), resident fees receivable, and cash and cash equivalents; its obligations primarily consist of lease payments to the Company and operating expenses of the senior housing facilities (accounts payable and accrued expenses). Assets generated by the senior housing operations (primarily from senior housing resident rents) of the may only be used to settle its contractual obligations (primarily from the rental costs, operating expenses incurred to manage such facilities and debt costs).
Other consolidated VIEs. The Company made a loan to an entity that entered into a tax credit structure (“Tax Credit Subsidiary”)
Exchange Accommodation Titleholder. During the year ended December 31, 2017, the Company acquired a portfolio of 11 MOBs (the "acquired properties") using a reverse like-kind exchange structure pursuant to Section 1031 of the Internal Revenue Code (a "reverse 1031 exchange"). As of December 31, 2017, the Company had not completed the reverse 1031 exchange and as such, the acquired properties remained in the possession of an Exchange Accommodation Titleholder ("EAT"). The EAT is classified as aheld for sale include VIE as it is a “thinly capitalized” entity. The Company consolidates the EAT because it is the primary beneficiary as it has the ability to control the activities that most significantly impact the EAT's economic performance. The properties held by the EAT are reflected as real estate with an aggregate carrying value of $153 million as of December 31, 2017. The assets of the EAT primarily consist of a leased property (net real estate), rents receivable, and cash and cash equivalents; its obligations primarily consist of capital expenditures for the properties. Assets generated by the EAT may only be used to settle its contractual obligations (primarily from capital expenditures).
Financial assets and liabilities, measured at fair value on a recurring basis at December 31, 2017 in the consolidated balance sheets are immaterial.The table below summarizes the carrying amounts and fair valuesexcluding those of the Company’s financial instrumentsHealthpeak OP, as follows (in thousands):
As of December 31, 2017 and 2016, Brookdale managed or operated, in the Company’s SHOP segment, approximately 13% and 18%, respectively, of the Company’s real estate investments based on total assets. Because an operator manages the Company’s facilities in exchange for the receipt of a management fee, the Company is not directly exposed to the credit risk of its operators in the same manner or to the same extent as its triple-net tenants. As of December 31, 2017, Brookdale provided comprehensive facility management and accounting services with respect to 78 of the Company’s senior housing facilities and 62 SHOP facilities owned by its unconsolidated joint ventures, for which the Company or joint venture pay annual management fees pursuant to long-term management agreements. The Company's concentration with respect to Brookdale as an operator in its SHOP segment is expected to decrease with the completion of the Brookdale Transaction (see Note 3) and the sale of its remaining 40% ownership interest in RIDEA II (see Note 5). Most of the management agreements have terms ranging from 10 to 15 years, with three to four 5-year renewals. The base management fees are 4.5% to 5.0% of gross revenues (as defined) generated by the RIDEA facilities. In addition, there are incentive management fees payable to Brookdale if operating results of the RIDEA properties exceed pre-established EBITDAR (as defined) thresholds.Brookdale is subject to the registration and reporting requirements of the U.S. Securities and Exchange Commission (“SEC”) and is required to file with the SEC annual reports containing audited financial information and quarterly reports containing unaudited financial information. The information related to Brookdale contained or referred to in this report has been derived from SEC filings made by Brookdale or other publicly available information, or was provided to the Company by Brookdale, and the Company has not verified this information through an independent investigation or otherwise. The Company has no reason to believe that this information is inaccurate in any material respect, but the Company cannot assure the reader of its accuracy. The Company is providing this data for informational purposes only, and encourages the reader to obtain Brookdale’s publicly available filings, which can be found on the SEC’s website at www.sec.gov.See Note 3 for further information on the reduction of concentration related to Brookdale.To mitigate the credit risk of leasing properties to certain senior housing and post-acute/skilled nursing operators, leases with operators are often combined into portfolios that contain cross-default terms, so that if a tenant of any of the properties in a portfolio defaults on its obligations under its lease, the Company may pursue its remedies under the lease with respect to any of the properties in the portfolio. Certain portfolios also contain terms whereby the net operating profits of the properties are combined for the purpose of securing the funding of rental payments due under each lease.
The following table provides information regarding the Company’s concentrations with respect to certain states; the information provided is presented for the gross assets and revenues that are associated with certain real estate assets as percentages of totalthe Company’s total assets and revenues:revenues, excluding discontinued operations:
_____________________________NOTE 21. Derivative Financial Instruments
As of December 31, 2017, £150 million of the Company’s GBP-denominated borrowings under the 2015 Term Loan and a £105 million cross currency swap are designated as a hedge of a portion of the Company’s net investments in GBP-functional subsidiaries to mitigate its exposure to fluctuations in the GBP to USD exchange rate. For instrumentsderivatives that are designated and qualify as net investmentcash flow hedges the variability in the foreign currency to USD exchange rate of the instrument isare recorded as part of the cumulative translation adjustment component of accumulated other comprehensive income (loss). Accordingly, (i) the remeasurement value of the designated £150 million GBP-denominated borrowings and (ii) the change in fair value of the £105 million cross currency swap due primarily to fluctuations in the GBP to USD exchange rate are reported in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.
The above selected quarterly financial data includes2022, the following significant transactions:2017During the quarter ended December 31, 2017, the Company recorded an impairment charge
During the quarter ended December 31, 2017, the Company recognized a tax expense of $17 million due to a re-measurement of deferred tax assets and liabilities.During the quarter ended September 30, 2017, the Company repurchased $500 million of our 5.375% senior notes due 2021 and recorded a $54 million loss on debt extinguishment.During the quarter ended June 30, 2017, the Company recorded an impairment charge of $57 million related to the Tandem Mezzanine Loan.The quarter ended March 31, 2017, the Company deconsolidated the net assets of RIDEA II and recognized a net gain on sale of $99 million.The quarter ended March 31, 2017, the Company sold 64 senior housing triple-net assets, resulting in a net gain on sale of $170 million.The quarter ended March 31, 2017, the Company sold its Four Seasons Notes, which generated a £42 million ($51 million) gain on sale.
2016The quarter ended December 31, 2016 includes the following related to the Spin-Off: (i) $46 million of loss on debt extinguishment and (ii) $58 million of transaction costs.The quarter ended June 30, 2016 includes $120 million of gain on sales from real estate dispositions.The quarter ended March 31, 2016 includes $53 million of income tax expense associated with state built-in gain tax payable upon the disposition of specific real estate assets, of which $49 million relates to the HCRMC real estate portfolio.
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A summary of activity for real estate and accumulated depreciation, excluding assets classified as discontinued operations, is as follows (in thousands):
Schedule IV: Mortgage Loans on Real Estate
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2017 to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Los Angeles,Costa Mesa, California
None.
We hereby incorporate
We hereby incorporateITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We hereby incorporateITEM 13. Certain Relationships and Related Transactions, and Director Independence
We hereby incorporateITEM 14. Principal Accountant Fees and Services
We hereby incorporate by reference under the caption “Audit and Non-Audit Fees” in the Registrant’s definitive proxy statement relating to its 2018 Annual MeetingTable of Stockholders to be held on April 26, 2018.Contents
Schedule IV: Mortgage Loans on Real Estate
(File No. 001‑ 08895)
+ Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2).
142145
(2)Represents the Company’s commitments, as lessor, under signed leases and contracts for operating properties as of December 31, 2023 and includes allowances for Company-owned tenant improvements and leasing commissions. Excludes allowances for Company-owned tenant improvements related to developments and redevelopments in progress for which the Company has executed an agreement with a general contractor to complete the tenant improvements (recognized in the “Development and redevelopment commitments” line).
Environmental Costs
Various environmental laws govern certain aspects of the ongoing management and operation of our facilities, including those related to presence of asbestos-containing materials. The presence of, or the failure to manage and/or remediate, such materials may adversely affect the occupancy and performance of the Company’s facilities. The Company monitors its properties for the presence of such hazardous or toxic substances. The Companysubstances and is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Company’s business, financial condition, or results of operations. The Company carries environmental insurance and believes that the policy terms, conditions, limitations, and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage, and current industry practice.
General Uninsured Losses
The Company obtains various types of insurance to mitigate the impact of property, business interruption, liability, workers’ compensation, flood, windstorm, earthquake, environmental, cyber, and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits, and deductibles considering the relative risk of loss, the cost of such coverage, and current industry practice. There are, however, certain types of extraordinary losses, such as those due to acts of war or other events that may be either uninsurable or not economically insurable. In addition, the Company has a large number of properties that are exposed to earthquake, flood, and windstorm occurrences for which the related insurances carry high deductibles.
104
| Year | Annualized Base Rent(1) | Number of Properties | |||||
| 2018 | $ | 8,534 | 8 | ||||
| 2019 | 14,702 | 2 | |||||
| 2020 | 14,201 | 4 | |||||
| 2021 | 12,402 | 6 | |||||
| 2022 | 10,459 | 3 | |||||
| Thereafter | 33,964 | 22 | |||||
| $ | 94,262 | 45 | |||||
NOTE 12. Equity and Redeemable Noncontrolling Interests
| Year | Amount | |||
| 2018 | $ | 6,619 | ||
| 2019 | 6,766 | |||
| 2020 | 6,668 | |||
| 2021 | 6,704 | |||
| 2022 | 6,820 | |||
| Thereafter | 362,219 | |||
| $ | 395,796 | |||
On February 1, 2018,January 31, 2024, the Company announced that itsCompany’s Board of Directors declared a quarterly cash dividend of $0.37$0.30 per share. The common stock cash dividend will be paid on March 2, 2018February 26, 2024 to stockholders of record as of the close of business on February 15, 2018.14, 2024.
During each of the years ended December 31, 2017, 20162023, 2022, and 2015,2021, the Company declared and paid common stock cash dividendsof $1.480, $2.095 and $2.260 per share, respectively. $1.20.
At-The-Market Equity Offering Program
In June 2015,February 2023, in connection with the Reorganization, the Company established anterminated the previous at-the-market equity offering program (“ATM Program”). Under this program, the Company may sell shares of its common stock(as amended from time to time, the “2020 ATM Program”) and established a new at-the-market equity offering program (the “2023 ATM Program” and, together with the 2020 ATM Program, the “ATM Programs”). The ATM Programs allow for the sale of shares of common stock having an aggregate gross sales price of up to $750 million$1.5 billion (i) by the Company through a consortium of banks acting as sales agents or directly to the banks acting as principals. principals or (ii) by a consortium of banks acting as forward sellers on behalf of any forward purchasers pursuant to a forward sale agreement (each, an “ATM forward contract”). The use of ATM forward contracts allows the Company to lock in a share price on the sale of shares at the time the ATM forward contract becomes effective, but defer receiving the proceeds from the sale of shares until a later date.
ATM forward contracts generally have a one to two year term. At any time during the term, the Company may settle a forward sale by delivery of physical shares of common stock to the forward seller or, at the Company’s election, in cash or net shares. The forward sale price the Company expects to receive upon settlement of outstanding ATM forward contracts will be the initial forward price established upon the effective date, subject to adjustments for: (i) accrued interest, (ii) the forward purchasers’ stock borrowing costs, and (iii) certain fixed price reductions during the term of the ATM forward contract.
At December 31, 2023, $1.5 billion of the Company’s common stock remained available for sale under the 2023 ATM Program.
ATM Forward Contracts
During the year ended December 31, 2015,2021, the Company issued 1.8utilized the forward provisions under the 2020 ATM Program to allow for the sale of an aggregate of 9.1 million shares of its common stock at an initial weighted average net price of $35.25 per share, after commissions. The Company did not enter into any forward contracts under the 2020 ATM Program during the year ended December 31, 2022. In December 2022, the Company settled all 9.1 million shares previously outstanding under ATM forward contracts at a weighted average net price of $34.01 per share, after commissions, resulting in net proceeds of $308 million. During the year ended December 31, 2023, the Company did not utilize the forward provisions under the ATM Programs.
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ATM Direct Issuances
During each of the years ended December 31, 2023, 2022, and 2021, there were no direct issuances of shares of common stock under the ATM Programs.
Share Repurchase Program
On August 1, 2022, the Company’s Board of Directors approved a share repurchase program under which the Company may acquire shares of its common stock in the open market up to an aggregate purchase price of $500 million (the “Share Repurchase Program”). Purchases of common stock under the Share Repurchase Program may be exercised at the Company’s discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements, and other corporate liquidity requirements and priorities. The Share Repurchase Program expires in August 2024 and may be suspended or terminated at any time without prior notice. Under Maryland General Corporation Law, outstanding shares of common stock acquired by a corporation become authorized but unissued shares, which may be re-issued. In August 2022, the Company repurchased 2.1 million shares of its common stock at a weighted average price of $40.14$27.16 per share for proceedsa total of $73 million, net of fees and commissions of $1$56 million. There was no activity duringDuring the yearsyear ended December 31, 2017 and 2016.2023, there were no repurchases under the Share Repurchase Program. Therefore, at December 31, 2023, $444 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program.
Other Common Stock Activities
The following table summarizes the Company’s other common stock activities (shares in(in thousands):
Year Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||
| Dividend Reinvestment and Stock Purchase Plan | 983 | 2,021 | 2,762 | ||||||||||||||||||||||||||||
| Conversion of DownREIT units | 78 | 145 | 104 | ||||||||||||||||||||||||||||
| Exercise of stock options | 32 | 133 | 823 | ||||||||||||||||||||||||||||
| Vesting of restricted stock units | 419 | 529 | 409 | ||||||||||||||||||||||||||||
| Repurchase of common stock | 157 | 237 | 198 | ||||||||||||||||||||||||||||
Accumulated Other Comprehensive LossIncome (Loss)
The following table summarizes the Company’s accumulated other comprehensive lossincome (loss) (in thousands):
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Unrealized gains (losses) on derivatives, net | $ | 21,245 | $ | 30,145 | |||||||
| Supplemental Executive Retirement Plan minimum liability | (1,874) | (2,011) | |||||||||
| Total accumulated other comprehensive income (loss) | $ | 19,371 | $ | 28,134 | |||||||
| December 31, | |||||||
| 2017 | 2016 | ||||||
| Cumulative foreign currency translation adjustment | $ | (6,955 | ) | $ | (22,817 | ) | |
| Unrealized gains (losses) on cash flow hedges, net | (13,950 | ) | (3,642 | ) | |||
| Supplemental Executive Retirement plan minimum liability and other | (3,119 | ) | (3,183 | ) | |||
| Total accumulated other comprehensive loss | $ | (24,024 | ) | $ | (29,642 | ) | |
Noncontrolling Interests
Arrangements with noncontrolling interest holders are assessed for appropriate balance sheet classification based on the redemption and other rights held by the noncontrolling interest holder. Certain of the Company’s noncontrolling interest holders have the ability to put their equity interests to the Company issuedupon specified events or after the passage of a 49%predetermined period of time (the “Option Requirements”). Each put option is payable in cash and subject to changes in redemption value in the event that the underlying property generates specified returns for the Company and meets certain promote thresholds pursuant to the respective agreements. Accordingly, the Company records redeemable noncontrolling interests outside of permanent equity and presents the redeemable noncontrolling interests at the greater of their carrying amount or redemption value at the end of each reporting period. In addition to the rights of the redeemable noncontrolling interest holders, once the Option Requirements have been met, the Company has the ability to buy out the interests of the noncontrolling interest holders.
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As of December 31, 2023, three of the redeemable noncontrolling interests met the conditions for redemption, but were not yet exercised. The one remaining redeemable noncontrolling interest met the redemption conditions in HCP Ventures VJanuary 2024. The values of the redeemable noncontrolling interests are subject to change based on the assessment of redemption value at each redemption date.
Healthpeak OP
Immediately following the Reorganization, Healthpeak Properties, Inc. was the initial sole member and 100% owner of Healthpeak OP. Subsequent to the Reorganization, OP Unitholders were issued approximately 2 million OP Units during the year ended December 31, 2023, all of which were LTIP Units (as defined below, see also Note 14). When certain conditions are met, the OP Unitholders have the right to require redemption of part or all of their OP Units for cash or shares of the Company’s common stock, at the Company’s option as managing member of Healthpeak OP. The per unit redemption amount is equal to either one share of the Company’s common stock or cash equal to the fair value of a share of common stock at the time of redemption. The Company classifies the OP Units in permanent equity because it may elect, in its sole discretion, to issue shares of its common stock to OP Unitholders who choose to redeem their OP Units rather than using cash. None of the outstanding OP Units met the criteria for redemption as of December 31, 2023.
DownREITs
The non-managing member units of the Company’s DownREITs are exchangeable for an institutional capital investoramount of cash approximating the then-current market value of shares of the Company’s common stock or, at the Company’s option, shares of the Company’s common stock (subject to certain adjustments, such as stock splits and reclassifications). Upon exchange of DownREIT units for $110 million. HCP Ventures V owns a portfoliothe Company’s common stock, the carrying amount of 11 on-campus MOBs located in Texas and acquired through a sale-leaseback transaction with Memorial Hermann in June 2015.
the DownREIT units is reclassified to stockholders’ equity. At December 31, 2017,2023, there were fourapproximately 5 million DownREIT units (seven(7 million shares of HCPHealthpeak common stock are issuable upon conversion) outstanding in fiveseven DownREIT LLCs, for all of which the Company isacts as the managing member. At December 31, 2017,2023, the carrying and market values of the four5 million DownREIT units were $177$199 million and $173$143 million, respectively. At December 31, 2022, the carrying and market values of the 5 million DownREIT units were $200 million and $183 million, respectively.
Certain restricted stock units are considered participating securities, because dividend payments are not forfeited even if the underlying award does not vest, and expense.require use of the two-class method when computing basic and diluted earnings per share.
Refer to Note 12 for a discussion of the sale of shares under and settlement of forward sales agreements during the periods presented. The adjustments to NOI andCompany considered the potential dilution resulting Adjusted NOI for SHOP have been recast for prior periods presented to conformfrom forward agreements under its ATM Programs to the current period presentation which excludes (i)calculation of earnings per share. At inception, the impactagreements do not have an effect on the computation of deferred community fee income and expense, resulting in recognitionbasic EPS as cash is received and expensesno shares are paid and (ii) adjustments relateddelivered until settlement. However, the Company uses the treasury stock method to unconsolidated joint ventures (see above).
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The following tables summarize information fortable illustrates the reportable segmentscomputation of basic and diluted earnings per share (in thousands)thousands, except per share amounts):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Numerator | |||||||||||||||||
| Income (loss) from continuing operations | $ | 334,757 | $ | 513,540 | $ | 137,728 | |||||||||||
| Noncontrolling interests’ share in continuing operations | (28,748) | (15,975) | (17,851) | ||||||||||||||
| Income (loss) from continuing operations attributable to Healthpeak Properties, Inc. | 306,009 | 497,565 | 119,877 | ||||||||||||||
| Less: Participating securities’ share in continuing operations | (1,725) | (2,657) | (3,269) | ||||||||||||||
| Income (loss) from continuing operations applicable to common shares | 304,284 | 494,908 | 116,608 | ||||||||||||||
| Income (loss) from discontinued operations | — | 2,884 | 388,202 | ||||||||||||||
| Noncontrolling interests’ share in discontinued operations | — | — | (2,539) | ||||||||||||||
| Net income (loss) applicable to common shares - basic and diluted | $ | 304,284 | $ | 497,792 | $ | 502,271 | |||||||||||
| Denominator | |||||||||||||||||
| Basic weighted average shares outstanding | 547,006 | 538,809 | 538,930 | ||||||||||||||
Dilutive potential common shares - equity awards(1) | 269 | 338 | 310 | ||||||||||||||
Dilutive potential common shares - forward equity agreements(2) | — | — | 1 | ||||||||||||||
| Diluted weighted average common shares | 547,275 | 539,147 | 539,241 | ||||||||||||||
| Basic earnings (loss) per common share | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
| Diluted earnings (loss) per common share | |||||||||||||||||
| Continuing operations | $ | 0.56 | $ | 0.92 | $ | 0.22 | |||||||||||
| Discontinued operations | — | 0.00 | 0.71 | ||||||||||||||
| Net income (loss) applicable to common shares | $ | 0.56 | $ | 0.92 | $ | 0.93 | |||||||||||
(1)For all periods presented, represents the dilutive impact of1 million outstanding equity awards (restricted stock units and stock options).
(2)For the year ended December 31, 2017:
| Segments | Senior Housing Triple-Net | SHOP | Life Science | Medical Office | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||
Rental revenues(1) | $ | 313,547 | $ | 525,473 | $ | 358,816 | $ | 477,459 | $ | 116,846 | $ | — | $ | 1,792,141 | ||||||||||||||
| Operating expenses | (3,819 | ) | (396,491 | ) | (78,001 | ) | (183,197 | ) | (4,743 | ) | — | (666,251 | ) | |||||||||||||||
| NOI | 309,728 | 128,982 | 280,815 | 294,262 | 112,103 | — | 1,125,890 | |||||||||||||||||||||
Adjustments to NOI(2) | 17,098 | 33,227 | (4,517 | ) | (2,952 | ) | (4,446 | ) | — | 38,410 | ||||||||||||||||||
| Adjusted NOI | 326,826 | 162,209 | 276,298 | 291,310 | 107,657 | — | 1,164,300 | |||||||||||||||||||||
| Addback adjustments | (17,098 | ) | (33,227 | ) | 4,517 | 2,952 | 4,446 | — | (38,410 | ) | ||||||||||||||||||
| Interest income | — | — | — | — | 56,237 | — | 56,237 | |||||||||||||||||||||
| Interest expense | (2,518 | ) | (7,920 | ) | (373 | ) | (506 | ) | (4,230 | ) | (292,169 | ) | (307,716 | ) | ||||||||||||||
| Depreciation and amortization | (103,820 | ) | (103,162 | ) | (128,864 | ) | (169,795 | ) | (29,085 | ) | — | (534,726 | ) | |||||||||||||||
| General and administrative | — | — | — | — | — | (88,772 | ) | (88,772 | ) | |||||||||||||||||||
| Transaction costs | — | — | — | — | — | (7,963 | ) | (7,963 | ) | |||||||||||||||||||
| Recoveries (impairments), net | (22,590 | ) | — | — | — | (143,794 | ) | — | (166,384 | ) | ||||||||||||||||||
| Gain (loss) on sales of real estate, net | 280,349 | 17,485 | 45,916 | 9,095 | 3,796 | — | 356,641 | |||||||||||||||||||||
| Loss on debt extinguishment | — | — | — | — | — | (54,227 | ) | (54,227 | ) | |||||||||||||||||||
| Other income (expense), net | — | — | — | — | 50,895 | (19,475 | ) | 31,420 | ||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | — | 1,333 | 1,333 | |||||||||||||||||||||
| Equity income (loss) from unconsolidated JVs | — | — | — | — | 10,901 | — | 10,901 | |||||||||||||||||||||
| Net income (loss) | $ | 461,149 | $ | 35,385 | $ | 197,494 | $ | 133,056 | $ | 56,823 | $ | (461,273 | ) | $ | 422,634 | |||||||||||||
2023, forward equity sales agreements had no dilutive impact as no shares were outstanding under ATM forward contracts during the year. For the year ended December 31, 2016:
| Segments | Senior Housing Triple-Net | SHOP | Life Science | Medical Office | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||
Rental revenues(1) | $ | 423,118 | $ | 686,822 | $ | 358,537 | $ | 446,280 | $ | 125,729 | $ | — | $ | 2,040,486 | ||||||||||||||
| Operating expenses | (6,710 | ) | (480,870 | ) | (72,478 | ) | (173,687 | ) | (4,654 | ) | — | (738,399 | ) | |||||||||||||||
| NOI | 416,408 | 205,952 | 286,059 | 272,593 | 121,075 | — | 1,302,087 | |||||||||||||||||||||
Adjustments to NOI(2) | (7,566 | ) | (2,686 | ) | (2,954 | ) | (3,536 | ) | (3,022 | ) | — | (19,764 | ) | |||||||||||||||
| Adjusted NOI | 408,842 | 203,266 | 283,105 | 269,057 | 118,053 | — | 1,282,323 | |||||||||||||||||||||
| Addback adjustments | 7,566 | 2,686 | 2,954 | 3,536 | 3,022 | — | 19,764 | |||||||||||||||||||||
| Interest income | — | — | — | — | 88,808 | — | 88,808 | |||||||||||||||||||||
| Interest expense | (9,499 | ) | (29,745 | ) | (2,357 | ) | (5,895 | ) | (9,153 | ) | (407,754 | ) | (464,403 | ) | ||||||||||||||
| Depreciation and amortization | (136,146 | ) | (108,806 | ) | (130,829 | ) | (161,790 | ) | (30,537 | ) | — | (568,108 | ) | |||||||||||||||
| General and administrative | — | — | — | — | — | (103,611 | ) | (103,611 | ) | |||||||||||||||||||
| Transaction costs | — | — | — | — | — | (9,821 | ) | (9,821 | ) | |||||||||||||||||||
| Gain (loss) on sales of real estate, net | 48,744 | 675 | 49,042 | 8,333 | 57,904 | — | 164,698 | |||||||||||||||||||||
| Loss on debt extinguishment | (46,020 | ) | (46,020 | ) | ||||||||||||||||||||||||
| Other income (expense), net | — | — | — | — | — | 3,654 | 3,654 | |||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | — | (4,473 | ) | (4,473 | ) | |||||||||||||||||||
| Equity income (loss) from unconsolidated JVs | — | — | — | — | 11,360 | — | 11,360 | |||||||||||||||||||||
| Discontinued operations | — | — | — | — | — | 265,755 | 265,755 | |||||||||||||||||||||
| Net income (loss) | $ | 319,507 | $ | 68,076 | $ | 201,915 | $ | 113,241 | $ | 239,457 | $ | (302,270 | ) | $ | 639,926 | |||||||||||||
2022, all 9.1 millionshares that were settled during the year then ended were anti-dilutive. For the year ended December 31, 2015:2021, represents the dilutive impact of 9.1 million shares that were not settled during the year then ended.
| Segments | Senior Housing Triple-Net | SHOP | Life Science | Medical Office | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||
Rental revenues(1) | $ | 428,269 | $ | 518,264 | $ | 342,984 | $ | 415,351 | $ | 123,437 | $ | — | $ | 1,828,305 | ||||||||||||||
| Operating expenses | (3,427 | ) | (371,016 | ) | (70,217 | ) | (162,054 | ) | (3,965 | ) | — | (610,679 | ) | |||||||||||||||
| NOI | 424,842 | 147,248 | 272,767 | 253,297 | 119,472 | — | 1,217,626 | |||||||||||||||||||||
Adjustments to NOI(2) | (9,716 | ) | 8,145 | (10,128 | ) | (4,933 | ) | (2,356 | ) | — | (18,988 | ) | ||||||||||||||||
| Adjusted NOI | 415,126 | 155,393 | 262,639 | 248,364 | 117,116 | — | 1,198,638 | |||||||||||||||||||||
| Addback adjustments | 9,716 | (8,145 | ) | 10,128 | 4,933 | 2,356 | — | 18,988 | ||||||||||||||||||||
| Interest income | — | — | — | — | 112,184 | — | 112,184 | |||||||||||||||||||||
| Interest expense | (16,899 | ) | (31,869 | ) | (2,878 | ) | (9,603 | ) | (9,745 | ) | (408,602 | ) | (479,596 | ) | ||||||||||||||
| Depreciation and amortization | (125,538 | ) | (80,981 | ) | (126,241 | ) | (143,682 | ) | (28,463 | ) | — | (504,905 | ) | |||||||||||||||
| General and administrative | — | — | — | — | — | (95,965 | ) | (95,965 | ) | |||||||||||||||||||
| Transaction costs | — | — | — | — | — | (27,309 | ) | (27,309 | ) | |||||||||||||||||||
| Recoveries (impairments), net | — | — | — | — | (108,349 | ) | — | (108,349 | ) | |||||||||||||||||||
| Gain (loss) on sales of real estate, net | 6,325 | — | — | 52 | — | — | 6,377 | |||||||||||||||||||||
| Other income (expense), net | — | — | — | — | — | 16,208 | 16,208 | |||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | — | 9,807 | 9,807 | |||||||||||||||||||||
| Equity income (loss) from unconsolidated JVs | — | — | — | — | 6,590 | — | 6,590 | |||||||||||||||||||||
| Discontinued operations | — | — | — | — | — | (699,086 | ) | (699,086 | ) | |||||||||||||||||||
| Net income (loss) | $ | 288,730 | $ | 34,398 | $ | 143,648 | $ | 100,064 | $ | 91,689 | $ | (1,204,947 | ) | $ | (546,418 | ) | ||||||||||||
| Year Ended | ||||||||||||
| December 31, | ||||||||||||
| Segments | 2017 | 2016 | 2015 | |||||||||
| Senior housing triple-net | $ | 313,547 | $ | 423,118 | $ | 428,269 | ||||||
| SHOP | 525,473 | 686,822 | 518,264 | |||||||||
| Life science | 358,816 | 358,537 | 342,984 | |||||||||
| Medical office | 477,459 | 446,280 | 415,351 | |||||||||
| Other non-reportable segments | 173,083 | 214,537 | 235,621 | |||||||||
| Total revenues | $ | 1,848,378 | $ | 2,129,294 | $ | 1,940,489 | ||||||
| December 31, | ||||||||||||
| Segments | 2017 | 2016 | 2015 | |||||||||
| Senior housing triple-net | $ | 3,515,400 | $ | 3,871,720 | $ | 5,092,443 | ||||||
| SHOP | 2,392,130 | 3,135,115 | 2,684,675 | |||||||||
| Life science | 4,154,372 | 3,961,623 | 3,613,726 | |||||||||
| Medical office | 3,989,168 | 3,724,483 | 3,410,931 | |||||||||
| Gross reportable segment assets | 14,051,070 | 14,692,941 | 14,801,775 | |||||||||
| Accumulated depreciation and amortization | (2,919,278 | ) | (2,900,060 | ) | (2,704,425 | ) | ||||||
| Net reportable segment assets | 11,131,792 | 11,792,881 | 12,097,350 | |||||||||
| Other non-reportable segment assets | 1,904,433 | 2,255,712 | 2,392,823 | |||||||||
| Assets held for sale and discontinued operations, net | 417,014 | 927,866 | 5,654,326 | |||||||||
| Other non-segment assets | 635,222 | 782,806 | 1,305,350 | |||||||||
| Total assets | $ | 14,088,461 | $ | 15,759,265 | $ | 21,449,849 | ||||||
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| Year | Amount | |||
| 2018 | $ | 1,021,212 | ||
| 2019 | 956,092 | |||
| 2020 | 874,617 | |||
| 2021 | 793,058 | |||
| 2022 | 691,352 | |||
| Thereafter | 2,807,315 | |||
| $ | 7,143,646 | |||
On May 11, 2006, the Company’s stockholders approved the 2006 Performance Incentive Plan, which was amended and restated in 2009 (“the 2006(the “2006 Plan”). On May 1, 2014, the Company’s stockholders approved the 2014 Performance Incentive Plan, (“the 2014which was amended and restated in 2019 and further amended in 2023 (the “2014 Plan”) (collectively, “the Plans”). Following the adoption of the 2014 Plan, no new awards willwere issued under the 2006 Plan. On April 27, 2023, the Company’s stockholders approved the 2023 Performance Plan (the “2023 Plan” and collectively with the 2006 Plan and the 2014 Plan, the “Plans”). Following the adoption of the 2023 Plan, no new awards may be issued under the 20062014 Plan. The Plans provide for the granting of stock-based compensation to officers, employees, and directors, including stock options, restricted stock, and restricted stock units, to officers, employees and directors in connection with their employment with or services providedrespect to the Company.2014 and 2023 Plans, profits interests in Healthpeak OP (“LTIP Units”). The maximum number of shares reserved for awards under the 20142023 Plan is 3331 million shares, and, as of December 31, 2017, 302023, 31 million of the reserved shares under the 20142023 Plan are available for future awards, of which 2021 million shares may be issued as restricted stock, and restricted stock units.units, or LTIP Units.
Restricted Stock Units
Upon vesting of Restricted Stock Units, the terminationparticipant is required to pay the related tax withholding obligation, as applicable. The Company reduces the number of common stock shares delivered to pay the employee tax withholding obligation. The value of the Company’s former chief executive officer (“CEO”) that was comprised ofshares withheld is dependent on the accelerated vesting of restricted stock units in accordance with the terms of the former CEO’s employment agreement. As of December 31, 2017 and 2016, there was $20 million and $14 million, respectively, related to unvested share-based compensation arrangements granted under the Company’s incentive plans, which is expected to be recognized over a weighted average period of three years associated with future employee service.
LTIP Units
During the year ended December 31, 2023, approximately 2 million LTIP Units were issued to officers of the Company. These awards are designed to qualify as “profits interests” in Healthpeak OP for federal income tax purposes. Such interests are initially not economically equivalent in value to a share of common stock until reaching one-for-one parity with the Company’s common stock, subject to any vesting conditions applicable to the award. When certain conditions are met, LTIP Units are converted to common units, which may then be redeemed for cash or shares of the Company’s common stock.stock, at the Company’s option as managing member of Healthpeak OP (see also Note 12).
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Under the Plans, time-based LTIP Units and market-based LTIP Units (collectively, “LTIP Units”), are granted subject to certain restrictions. Time-based LTIP Units, which vest solely upon passage of time, generally vest over a period of three to six years. The conversion impacted 133 participants, resulted in additional awards being granted and incremental fair value of unvested awards due to the difference between the Five Day Average Price and the pre-spin closing pricetime-based LTIP Units is determined based on the Spin-Off date.closing market price of the Company’s shares on the grant date less a discount for post-vesting restrictions, liquidity risk, and uncertainty of the time-based LTIP Units reaching parity. The vesting periods were unchanged for unvested grantsmarket-based LTIP Units are granted at the Spin-Off date.maximum potential payout, inclusive of expected distributions during the performance period. Market-based LTIP Units, which vest dependent upon attainment of various levels of TSR performance that equal or exceed threshold levels as measured against certain peer and industry benchmarks, generally vest in their entirety at the end of a three-year performance period. The incrementalnumber of market-based LTIP Units that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of the performance criteria, and any difference from the original grant are forfeited. The fair value of unvested awardsmarket-based LTIP Units granted during the year ended December 31, 2023 is determined based on the Monte Carlo valuation model using the same assumptions as market-based restricted stock units described above less a discount for post-vesting restrictions, liquidity risk, and uncertainty of the market-based LTIP Units reaching parity with the value of the Company’s common stock and the vesting terms of the awards. The total grant date fair value of LTIP Units granted during the year ended December 31, 2023 was immaterial.$29 million. The total fair value (at vesting) of LTIP Units that vested during the year ended December 31, 2023 was $2 million.
Dividends and Distributions
Holders of time-based restricted stock units and time-based LTIP Units are generally entitled to receive dividends and distributions, respectively, equal to the amount that would be paid on an equivalent number of shares of common stock. Market-based restricted stock units receive cumulative cash dividends upon vesting for the entirety of the performance period based on the level of achievement of the performance criteria. The market-based LTIP Units receive cash distributions equal to 10% of the quarterly dividends paid on the Company’s common stock during the performance period. Based on the level of achievement of the performance criteria at the end of the performance period, the market-based LTIP Units receive distributions in the form of additional LTIP Units for amounts ultimately vested during the performance period, less cash distributions already paid.
Stock Options
There have been no grants of stock options since 2014. Stock options outstanding and exercisable were 1.10.2 millionat December 31, 2023 and 0.3 million at December 31, 2017, and 1.3 million and 1.2 million at December 31, 2016, respectively. Proceeds received from2022. There were no stock options exercised under the Plans for the years ended December 31, 2017, 20162023 and 2015 were $1 million, $4 million and $28 million, respectively. Compensation expense2022. For the year ended December 31, 2021, proceeds received from stock options exercised under the Plans was $3 million. No compensation cost related to stock options was immaterial for all periods presented.
2021.
The following table summarizes restricted stock awardRestricted Stock Unit and LTIP Unit activity including performance stock units, for the year ended December 31, 20172023 (units and shares in thousands):
| Restricted Stock Units | LTIP Units | ||||||||||||||||||||||
| Number of Units | Weighted Average Grant Date Fair Value | Number of Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Unvested at January 1, 2023 | 1,709 | $ | 33.66 | — | $ | — | |||||||||||||||||
| Granted | 393 | 28.12 | 1,970 | 14.66 | |||||||||||||||||||
| Vested | (613) | 37.97 | (76) | 24.56 | |||||||||||||||||||
| Forfeited | (610) | 31.16 | — | — | |||||||||||||||||||
| Unvested at December 31, 2023 | 879 | $ | 29.91 | 1,894 | $ | 14.26 | |||||||||||||||||
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||
| Unvested at January 1, 2017 | 962 | $ | 37.39 | |||
| Granted | 844 | 33.57 | ||||
| Vested | (419 | ) | 35.10 | |||
| Forfeited | (248 | ) | 35.04 | |||
| Unvested at December 31, 2017 | 1,139 | 33.41 | ||||
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Departure of Executives
On October 6, 2022, the Company and Thomas M. Herzog mutually agreed that Mr. Herzog would step down from his position as CEO and from the board of directors of the Company, effective immediately. On November 1, 2022, the Company and Troy E. McHenry mutually agreed that Mr. McHenry would step down from his position as Chief Legal Officer and General Counsel, effective immediately. During the fourth quarter of 2022, the Company recognized total severance-related charges of$33 millionin general and administrative expenses on the Consolidated Statements of Operations,$10 millionof which related to a decrease in the requisite service period of Restricted Stock Units as discussed above. These Restricted Stock Units continue to vest in accordance with the original terms of the grants. As of December 31, 2023, and 2022, $8 million and $15 millionof these severance-related charges have not yet been paid and were included in accounts payable, accrued liabilities, and other liabilities on the Consolidated Balance Sheets.
NOTE 15. Segment Disclosures
The Company’s reportable segments, based on how its CODM evaluates the business and allocates resources, are as follows: (i) lab, (ii) outpatient medical, and (iii) CCRC.The Company expectshas non-reportable segments that are comprised primarily of the Company’s interests in an unconsolidated JV that owns 19 senior housing assets (the “SWF SH JV”), loans receivable, and marketable debt securities. These marketable debt securities matured on December 31, 2022, and the Company received the related proceeds in January 2023. Non-reportable segments have been presented on an aggregate basis within the Notes to record severancethe Consolidated Financial Statements herein.The accounting policies of the segments are the same as those described in the Company’s Summary of Significant Accounting Policies (see Note 2).
During the second quarter of 2023, the Company changed the name of its “life science” and “medical office” segments to “lab” and “outpatient medical,” respectively. The segment name changes did not result in any changes to the composition of the Company’s segments or information reviewed by its CODM, and therefore, had no impact on the Company’s historical results of segment operations.
The Company evaluates performance based on property Adjusted NOI. NOI is defined as real estate revenues (inclusive of rental and related chargesrevenues, resident fees and services, income from direct financing leases, and government grant income and exclusive of approximately $9 millioninterest income), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss). Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense.
NOI and Adjusted NOI are non-GAAP supplemental measures that are calculated as NOI and Adjusted NOI from consolidated properties, plus the Company’s share of NOI and Adjusted NOI from unconsolidated joint ventures (calculated by applying the Company’s actual ownership percentage for the period), less noncontrolling interests’ share of NOI and Adjusted NOI from consolidated joint ventures (calculated by applying the Company’s actual ownership percentage for the period). Management utilizes its share of NOI and Adjusted NOI in assessing its performance as the Company has various joint ventures that contribute to its performance. The Company does not control its unconsolidated joint ventures, and the Company’s share of amounts from unconsolidated joint ventures do not represent the Company’s legal claim to such items. The Company’s share of NOI and Adjusted NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP. Management believes that Adjusted NOI is an important supplemental measure because it provides relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and presenting it on an unlevered basis. Additionally, management believes that net income (loss) is the most directly comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items.
Non-segment assets consist of assets in the first quarterCompany’s other non-reportable segments and corporate non-segment assets. Corporate non-segment assets consist primarily of 2018corporate assets, including cash and cash equivalents, restricted cash, accounts receivable, loans receivable, marketable debt securities, other assets, real estate assets held for sale, and liabilities related to assets held for sale.
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The following tables summarize information for the departure of our Executive Chairman, effective March 1, 2018.reportable segments (in thousands):
| Lab | Outpatient Medical | CCRC | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 878,326 | $ | 753,479 | $ | 527,417 | $ | 21,781 | $ | — | $ | 2,181,003 | ||||||||||||||||||||||||||
Government grant income(1) | — | — | 184 | — | — | 184 | ||||||||||||||||||||||||||||||||
| Less: Interest income | — | — | — | (21,781) | — | (21,781) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 9,924 | 3,033 | — | 82,426 | — | 95,383 | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | — | 229 | — | 229 | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (619) | (35,073) | — | — | — | (35,692) | ||||||||||||||||||||||||||||||||
| Operating expenses | (229,630) | (263,132) | (413,472) | — | 4,174 | (902,060) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (4,092) | (1,189) | — | (60,811) | — | (66,092) | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 156 | 9,921 | — | — | — | 10,077 | ||||||||||||||||||||||||||||||||
Adjustments to NOI(2) | (36,524) | (14,314) | (1,618) | 366 | (4,174) | (56,264) | ||||||||||||||||||||||||||||||||
| Adjusted NOI | 617,541 | 452,725 | 112,511 | 22,210 | — | 1,204,987 | ||||||||||||||||||||||||||||||||
Plus: Adjustments to NOI(2) | 36,524 | 14,314 | 1,618 | (366) | 4,174 | 56,264 | ||||||||||||||||||||||||||||||||
| Interest income | — | — | — | 21,781 | — | 21,781 | ||||||||||||||||||||||||||||||||
| Interest expense | — | (7,770) | (7,010) | — | (185,551) | (200,331) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (328,349) | (289,683) | (131,869) | — | — | (749,901) | ||||||||||||||||||||||||||||||||
| General and administrative | — | — | — | — | (95,132) | (95,132) | ||||||||||||||||||||||||||||||||
| Transaction and merger-related costs | (333) | (1,120) | (1,881) | — | (14,181) | (17,515) | ||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves, net | — | — | — | 5,601 | — | 5,601 | ||||||||||||||||||||||||||||||||
| Gain (loss) on sales of real estate, net | 60,498 | 21,312 | — | 4,653 | — | 86,463 | ||||||||||||||||||||||||||||||||
| Other income (expense), net | 7 | 2,697 | 228 | (81) | 3,957 | 6,808 | ||||||||||||||||||||||||||||||||
| Less: Government grant income | — | — | (184) | — | — | (184) | ||||||||||||||||||||||||||||||||
| Less: Healthpeak’s share of unconsolidated joint venture NOI | (5,832) | (1,844) | — | (21,844) | — | (29,520) | ||||||||||||||||||||||||||||||||
| Plus: Noncontrolling interests’ share of consolidated joint venture NOI | 463 | 25,152 | — | — | — | 25,615 | ||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 380,519 | 215,783 | (26,587) | 31,954 | (286,733) | 314,936 | ||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | 9,617 | 9,617 | ||||||||||||||||||||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 4,540 | 835 | — | 4,829 | — | 10,204 | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 385,059 | 216,618 | (26,587) | 36,783 | (277,116) | 334,757 | ||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 385,059 | $ | 216,618 | $ | (26,587) | $ | 36,783 | $ | (277,116) | $ | 334,757 | ||||||||||||||||||||||||||
(1)Represents government grant income received under the Company recorded an estimated $13 million of casualty-related losses, net of a small insurance recovery. The losses are comprised of $8 million of property damage and $5 million of other associated costs, including storm preparation, clean up, relocation and other costs. Of the total $13 million casualty losses incurred, $12 million wasCARES Act, which is recorded in Otherother income (expense), net in the Consolidated Statements of Operations (see Note 2).
(2)Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and $1 million was recorded in equitytermination fees. Includes the Company’s share of income (loss) fromgenerated by unconsolidated joint ventures as it relates to casualty losses for properties ownedand excludes noncontrolling interests’ share of income (loss) generated by certainconsolidated joint ventures.
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For the Companyyear ended December 31, 2022:
| Lab | Outpatient Medical | CCRC | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 817,573 | $ | 725,370 | $ | 494,935 | $ | 23,300 | $ | — | $ | 2,061,178 | ||||||||||||||||||||||||||
Government grant income(1) | — | — | 6,765 | — | — | 6,765 | ||||||||||||||||||||||||||||||||
| Less: Interest income | — | — | — | (23,300) | — | (23,300) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 9,921 | 2,999 | — | 73,885 | — | 86,805 | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | 380 | 498 | — | 878 | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (268) | (35,717) | — | — | — | (35,985) | ||||||||||||||||||||||||||||||||
| Operating expenses | (209,143) | (253,309) | (400,539) | — | — | (862,991) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (2,883) | (1,178) | — | (57,632) | — | (61,693) | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 87 | 10,317 | — | — | — | 10,404 | ||||||||||||||||||||||||||||||||
Adjustments to NOI(2) | (62,754) | (15,513) | 2,300 | 169 | — | (75,798) | ||||||||||||||||||||||||||||||||
| Adjusted NOI | 552,533 | 432,969 | 103,841 | 16,920 | — | 1,106,263 | ||||||||||||||||||||||||||||||||
Plus: Adjustments to NOI(2) | 62,754 | 15,513 | (2,300) | (169) | — | 75,798 | ||||||||||||||||||||||||||||||||
| Interest income | — | — | — | 23,300 | — | 23,300 | ||||||||||||||||||||||||||||||||
| Interest expense | — | (6,900) | (7,509) | — | (158,535) | (172,944) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (302,649) | (279,546) | (128,374) | — | — | (710,569) | ||||||||||||||||||||||||||||||||
| General and administrative | — | — | — | — | (131,033) | (131,033) | ||||||||||||||||||||||||||||||||
| Transaction and merger-related costs | (387) | (1,255) | (725) | — | (2,486) | (4,853) | ||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves, net | — | — | — | (7,004) | — | (7,004) | ||||||||||||||||||||||||||||||||
| Gain (loss) on sales of real estate, net | 3,744 | 10,659 | — | (5,325) | — | 9,078 | ||||||||||||||||||||||||||||||||
| Other income (expense), net | 311,939 | 12,709 | (1,380) | (13) | 3,013 | 326,268 | ||||||||||||||||||||||||||||||||
| Less: Government grant income | — | — | (6,765) | — | — | (6,765) | ||||||||||||||||||||||||||||||||
| Less: Healthpeak’s share of unconsolidated joint venture NOI | (7,038) | (1,821) | (380) | (16,751) | — | (25,990) | ||||||||||||||||||||||||||||||||
| Plus: Noncontrolling interests’ share of consolidated joint venture NOI | 181 | 25,400 | — | — | — | 25,581 | ||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 621,077 | 207,728 | (43,592) | 10,958 | (289,041) | 507,130 | ||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | 4,425 | 4,425 | ||||||||||||||||||||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | (972) | 852 | 539 | 1,566 | — | 1,985 | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 620,105 | 208,580 | (43,053) | 12,524 | (284,616) | 513,540 | ||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | — | — | — | — | 2,884 | 2,884 | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 620,105 | $ | 208,580 | $ | (43,053) | $ | 12,524 | $ | (281,732) | $ | 516,424 | ||||||||||||||||||||||||||
(1)Represents government grant income received under the CARES Act, which is recorded a $1 million deferred tax benefit associated with the casualty-related losses.
(2)Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.
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For the year ended December 31, 2021:
| Lab | Outpatient Medical | CCRC | Other Non-reportable | Corporate Non-segment | Total | |||||||||||||||||||||||||||||||||
| Total revenues | $ | 715,844 | $ | 671,242 | $ | 471,325 | $ | 37,773 | $ | — | $ | 1,896,184 | ||||||||||||||||||||||||||
Government grant income(1) | — | — | 1,412 | — | — | 1,412 | ||||||||||||||||||||||||||||||||
| Less: Interest income | — | — | — | (37,773) | — | (37,773) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture total revenues | 5,757 | 2,882 | 6,903 | 67,835 | — | 83,377 | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture government grant income | — | — | 200 | 1,549 | — | 1,749 | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture total revenues | (292) | (35,363) | — | — | — | (35,655) | ||||||||||||||||||||||||||||||||
| Operating expenses | (169,044) | (223,383) | (380,865) | 13 | — | (773,279) | ||||||||||||||||||||||||||||||||
| Healthpeak’s share of unconsolidated joint venture operating expenses | (1,836) | (1,174) | (6,639) | (51,866) | — | (61,515) | ||||||||||||||||||||||||||||||||
| Noncontrolling interests’ share of consolidated joint venture operating expenses | 87 | 10,071 | — | — | — | 10,158 | ||||||||||||||||||||||||||||||||
Adjustments to NOI(2) | (46,589) | (11,118) | 3,241 | (47) | — | (54,513) | ||||||||||||||||||||||||||||||||
| Adjusted NOI | 503,927 | 413,157 | 95,577 | 17,484 | — | 1,030,145 | ||||||||||||||||||||||||||||||||
Plus: Adjustments to NOI(2) | 46,589 | 11,118 | (3,241) | 47 | — | 54,513 | ||||||||||||||||||||||||||||||||
| Interest income | — | — | — | 37,773 | — | 37,773 | ||||||||||||||||||||||||||||||||
| Interest expense | (232) | (2,837) | (7,701) | — | (147,210) | (157,980) | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | (303,196) | (255,746) | (125,344) | — | — | (684,286) | ||||||||||||||||||||||||||||||||
| General and administrative | — | — | — | — | (98,303) | (98,303) | ||||||||||||||||||||||||||||||||
| Transaction and merger-related costs | (24) | (323) | (1,445) | (49) | — | (1,841) | ||||||||||||||||||||||||||||||||
| Impairments and loan loss reserves, net | — | (21,577) | — | (1,583) | — | (23,160) | ||||||||||||||||||||||||||||||||
| Gain (loss) on sales of real estate, net | — | 190,590 | — | — | — | 190,590 | ||||||||||||||||||||||||||||||||
| Gain (loss) on debt extinguishments | — | — | — | — | (225,824) | (225,824) | ||||||||||||||||||||||||||||||||
| Other income (expense), net | 55 | (2,725) | 2,141 | 486 | 6,309 | 6,266 | ||||||||||||||||||||||||||||||||
| Less: Government grant income | — | — | (1,412) | — | — | (1,412) | ||||||||||||||||||||||||||||||||
| Less: Healthpeak’s share of unconsolidated joint venture NOI | (3,921) | (1,708) | (464) | (17,518) | — | (23,611) | ||||||||||||||||||||||||||||||||
| Plus: Noncontrolling interests’ share of consolidated joint venture NOI | 205 | 25,292 | — | — | — | 25,497 | ||||||||||||||||||||||||||||||||
| Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures | 243,403 | 355,241 | (41,889) | 36,640 | (465,028) | 128,367 | ||||||||||||||||||||||||||||||||
| Income tax benefit (expense) | — | — | — | — | 3,261 | 3,261 | ||||||||||||||||||||||||||||||||
| Equity income (loss) from unconsolidated joint ventures | 1,118 | 794 | 1,484 | 2,704 | — | 6,100 | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 244,521 | 356,035 | (40,405) | 39,344 | (461,767) | 137,728 | ||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | — | — | — | — | 388,202 | 388,202 | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 244,521 | $ | 356,035 | $ | (40,405) | $ | 39,344 | $ | (73,565) | $ | 525,930 | ||||||||||||||||||||||||||
(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations (see Note 2).
(2)Represents straight-line rents, DFL non-cash interest, amortization of market lease intangibles, net, actuarial reserves for insurance claims that have been incurred but not reported, deferral of community fees, and termination fees. Includes the Company’s share of income (loss) generated by unconsolidated joint ventures and excludes noncontrolling interests’ share of income (loss) generated by consolidated joint ventures.
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The following table summarizes the Company’s total assets by segment (in thousands):
| December 31, | ||||||||||||||
| Segment | 2023 | 2022 | ||||||||||||
| Lab | $ | 9,313,395 | $ | 9,019,271 | ||||||||||
| Outpatient medical | 6,376,191 | 6,291,986 | ||||||||||||
| CCRC | 2,369,883 | 2,276,898 | ||||||||||||
| Reportable segment assets | 18,059,469 | 17,588,155 | ||||||||||||
| Accumulated depreciation and amortization | (4,017,023) | (3,540,362) | ||||||||||||
| Net reportable segment assets | 14,042,446 | 14,047,793 | ||||||||||||
| Other non-reportable segment assets | 553,031 | 744,550 | ||||||||||||
| Assets held for sale, net | 117,986 | 49,866 | ||||||||||||
| Other non-segment assets | 985,387 | 929,020 | ||||||||||||
| Total assets | $ | 15,698,850 | $ | 15,771,229 | ||||||||||
See Notes 3, 4, 5, 6, 7, 8, and 18 for significant transactions impacting the Company’s segment assets during the periods presented.
At each of December 31, 2023 and 2022, goodwill of $18 million was allocated to the Company’s segment assets as the sales price was above the previously-impaired carrying value of £41 million ($50 million).
NOTE 17.16. Income Taxes
The Company has elected to be taxed as a REIT under the applicable provisions of the Code for every year beginning with the year ended December 31, 1985. The Company has also elected for certain of its subsidiaries to be treated as taxable REIT subsidiaries (“TRS” orTRSs (the “TRS entities”), which are subject to federal and state income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this Note 17.16. Certain REIT entities are also subject to state local and foreignlocal income taxes.
Distributions with respect to ourthe Company’s common stock can be characterized for federal income tax purposes as taxable ordinary dividends, capital gain dividends,gains, nondividend distributions, or a combination thereof. Following is
The following table shows the characterization of ourthe Company’s annual common stock distributions per share:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
Ordinary dividends(1) | $ | 0.909692 | $ | 0.872948 | $ | 0.152336 | |||||||||||
Capital gains(2)(3) | 0.116992 | 0.183208 | 0.379960 | ||||||||||||||
| Nondividend distributions | 0.173316 | 0.143844 | 0.667704 | ||||||||||||||
| $ | 1.200000 | $ | 1.200000 | $ | 1.200000 | ||||||||||||
(1)For the year ended December 31, 2023,the amount includes $0.882312 of ordinary dividends qualified as business income for purposes of Code Section 199A and $0.027380 of qualified dividend income for purposes of Code Section 1(h)(11). For the year ended December 31, 2022, all $0.872948 of ordinary dividends qualified as business income for purposes of Code Section 199A. For the year ended December 31, 2021, the amount includes $0.137064 of ordinary dividends qualified as business income for purposes of Code Section 199A and $0.015272 of qualified dividend income for purposes of Code Section 1(h)(11).
(2)For the years ended December 31, 2023, 2022, and 2021, the amount includes $0.036256, $0.017760, and $0.379960, respectively, of unrecaptured Code Section 1250 gain. Pursuant to Treasury Regulation Section 1.1061-6(c), the Company is disclosing additional information related to the capital gain dividends for purposes of Section 1061 of the Code. Code Section 1061 is generally applicable to direct and indirect holders of “applicable partnership interests.” For the year ended December 31, 2023, the “One Year Amounts” and “Three Year Amounts” are each zero, since all capital gains relate to Code Section 1231 gains. For the year ended December 31, 2022, the “One Year Amounts” and “Three Year Amounts” are each89.6708% of the total capital gain distributions and the remaining capital gain distributions are attributable to Code Section 1231 gains, which are not subject to Code Section 1061. For the year ended December 31, 2021, the “One Year Amounts” and “Three Year Amounts” are each zero, since all capital gains relate to Code Section 1231 gains.
(3)For the years ended December 31, 2023, 2022, and 2021, 100%, 10.3292%, and 100%, respectively, of the capital gain distributions represent gains from dispositions of U.S. real property interests pursuant to Code Section 897 for foreign shareholders.
115
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Ordinary dividends | $ | 1.4800 | $ | 1.5561 | $ | 2.1184 | |||||
| Capital gain dividends | — | — | 0.0316 | ||||||||
| Nondividend distributions | — | 6.7089 | 0.1100 | ||||||||
| $ | 1.4800 | $ | 8.2650 | (1) | $ | 2.2600 | |||||
years then ended. The TRS entities subject to tax reported lossesincome (losses) before income taxes from continuing operations of $58$7 million, $9$(18) million, and $22$(16) million for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, respectively. The REIT’s losses from continuing operations before income taxes from the U.K. were $4 million, $4 million and $15 million for the years ended December 31, 2017, 2016 and 2015, respectively.
The total income tax expense (benefit)benefit (expense) from continuing operations consists of the following components (in thousands):
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Current | |||||||||||
| Federal | $ | 949 | $ | 8,525 | $ | 4,948 | |||||
| State | 1,504 | 8,307 | 1,988 | ||||||||
| Foreign | 1,737 | 1,332 | 828 | ||||||||
| Total current | $ | 4,190 | $ | 18,164 | $ | 7,764 | |||||
| Deferred | |||||||||||
| Federal | $ | 2,730 | $ | (10,241 | ) | $ | (11,317 | ) | |||
| State | (5,889 | ) | (1,401 | ) | (1,382 | ) | |||||
| Foreign | (2,364 | ) | (2,049 | ) | (4,872 | ) | |||||
| Total deferred | $ | (5,523 | ) | $ | (13,691 | ) | $ | (17,571 | ) | ||
| Total income tax expense (benefit) | $ | (1,333 | ) | $ | 4,473 | $ | (9,807 | ) | |||
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | (1,663) | $ | (632) | $ | (126) | |||||||||||
| State | (3,325) | (689) | (1,003) | ||||||||||||||
| Total current | $ | (4,988) | $ | (1,321) | $ | (1,129) | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | 11,682 | $ | 3,157 | $ | 3,469 | |||||||||||
| State | 2,923 | 2,589 | 921 | ||||||||||||||
| Total deferred | $ | 14,605 | $ | 5,746 | $ | 4,390 | |||||||||||
| Total income tax benefit (expense) from continuing operations | $ | 9,617 | $ | 4,425 | $ | 3,261 | |||||||||||
The Company’s income tax expensebenefit from discontinued operations was $0, $48zero, $0.3 million, and $1 million for the years ended December 31, 2017, 20162023, 2022, and 2015,2021, respectively (see Note 5)4).
The following table reconciles the income tax expense (benefit)benefit (expense) from continuing operations at statutory rates to the actual income tax expensebenefit (expense) recorded (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Tax benefit (expense) at U.S. federal statutory income tax rate on income or loss subject to tax | $ | (1,404) | $ | 3,698 | $ | 3,345 | |||||||||||
| State income tax benefit (expense), net of federal tax | (1,035) | 911 | 706 | ||||||||||||||
| Gross receipts and margin taxes | (1,647) | (956) | (989) | ||||||||||||||
| Return to provision adjustments | (90) | 1,260 | (4) | ||||||||||||||
| Change in valuation allowance for deferred tax assets | 13,797 | 194 | 203 | ||||||||||||||
| Change in tax status of TRS | (4) | (682) | — | ||||||||||||||
| Total income tax benefit (expense) from continuing operations | $ | 9,617 | $ | 4,425 | $ | 3,261 | |||||||||||
116
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Tax benefit at U.S. federal statutory income tax rate on income or loss subject to tax | $ | (21,085 | ) | $ | (4,581 | ) | $ | (12,630 | ) | ||
| State income tax expense, net of federal tax | (1,222 | ) | 6,081 | (606 | ) | ||||||
| Gross receipts and margin taxes | 1,716 | 1,847 | 1,383 | ||||||||
| Foreign rate differential | 632 | 647 | 2,269 | ||||||||
| Effect of permanent differences | 6 | (280 | ) | (298 | ) | ||||||
| Return to provision adjustments | 1,597 | 287 | (368 | ) | |||||||
| Re-measurement of deferred tax assets and liabilities | 17,080 | — | — | ||||||||
| Increase (decrease) in valuation allowance | (57 | ) | 472 | 443 | |||||||
| Total income tax expense (benefit) | $ | (1,333 | ) | $ | 4,473 | $ | (9,807 | ) | |||
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table summarizes the significant components of the Company’s deferred tax assets and liabilities from continuing operations (in thousands):
| December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Deferred revenue | $ | 103,530 | $ | 102,504 | $ | 104,397 | |||||||||||
| Net operating loss carryforward | 54,136 | 62,280 | 71,744 | ||||||||||||||
| Expense accruals | 12,324 | 12,399 | 14,229 | ||||||||||||||
| Real estate | 850 | 150 | 129 | ||||||||||||||
| Other | 58 | 689 | — | ||||||||||||||
| Total deferred tax assets | 170,898 | 178,022 | 190,499 | ||||||||||||||
| Valuation allowance | (13,004) | (26,098) | (35,772) | ||||||||||||||
| Deferred tax assets, net of valuation allowance | $ | 157,894 | $ | 151,924 | $ | 154,727 | |||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Real estate | $ | 43,488 | $ | 52,266 | $ | 61,097 | |||||||||||
| Other | 818 | 674 | 648 | ||||||||||||||
| Deferred tax liabilities | $ | 44,306 | $ | 52,940 | $ | 61,745 | |||||||||||
| Net deferred tax assets | $ | 113,588 | $ | 98,984 | $ | 92,982 | |||||||||||
| December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Property, primarily differences in depreciation and amortization, the basis of land, and the treatment of interest and certain costs | $ | 31,691 | $ | 28,940 | $ | 19,862 | |||||
| Net operating loss carryforward | 10,720 | 8,784 | 3,703 | ||||||||
| Expense accruals and other | 229 | (847 | ) | (753 | ) | ||||||
| Valuation allowance | (548 | ) | (606 | ) | (531 | ) | |||||
| Net deferred tax assets | $ | 42,092 | $ | 36,271 | $ | 22,281 | |||||
The Company records a valuation allowance against deferred tax assets in certain jurisdictions when it cannot sustain a conclusion that it is not more likely than not that it can realize the related deferred tax assets during the periods in which these temporary differences become deductible.assets. The deferred tax asset valuation allowance is adequate to reduce the total deferred tax assets to an amount that the Company estimates will “more-likely-than-not” be realized.
As of December 31, 2021 and 2022, the Company recorded a valuation allowance against certain SHOP deferred tax assets generated by net operating losses of its TRS entities. During the year ended December 31, 2023, the Company concluded that it was more likely than not that certain deferred tax assets (primarily net operating loss carryforwards) would be realized. This conclusion was based on recent revisions to estimates of future taxable income for certain TRS entities in connection with the Callan Ridge JV transaction (see also Notes 4 and 8). Accordingly, the Company reversed its deferred tax asset valuation allowance and recognized an income tax benefit of $14 million during the year ended December 31, 2023. As of December 31, 2023, 2022, and 2021, the Company had a deferred tax asset valuation allowance of $13 million, $26 million, and $36 million, respectively.
At December 31, 2023, the Company had a net operating loss (“NOL”) carryforward of $216 million related to the TRS entities. If unused, $15 million will begin to expire in 2035. The remainder, totaling $201 million, may be carried forward indefinitely.
The following table summarizes the Company’s unrecognized tax benefits (in thousands):
| December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Total unrecognized tax benefits at January 1 | $ | — | $ | 469 | $ | 469 | |||||||||||
| Gross amount of decreases for prior years’ tax positions | — | (469) | — | ||||||||||||||
| Total unrecognized tax benefits at December 31 | $ | — | $ | — | $ | 469 | |||||||||||
For the years ended December 31, 2023 and 2022, the Company had no unrecognized tax benefits. For the year ended December 31, 2021, the Company had unrecognized tax benefits of $0.5 million, that, if recognized, would reduce the annual effective tax rate.
The Company files numerous U.S. federal, state, and local income and franchise tax returns. With a few exceptions, the Company is no longer subject to U.S. federal, state, or local tax examinations by taxing authorities for years prior to 2014.2020.
117
The following table illustrates the computation of basic and diluted earnings per share (dollars in thousands, except per share data):
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Numerator | |||||||||||
| Net income (loss) from continuing operations | $ | 422,634 | $ | 374,171 | $ | 152,668 | |||||
| Noncontrolling interests' share in earnings | (8,465 | ) | (12,179 | ) | (12,817 | ) | |||||
| Net income (loss) attributable to HCP, Inc. | 414,169 | 361,992 | 139,851 | ||||||||
| Less: Participating securities' share in earnings | (1,156 | ) | (1,198 | ) | (1,317 | ) | |||||
| Income (loss) from continuing operations applicable to common shares | 413,013 | 360,794 | 138,534 | ||||||||
| Discontinued operations | — | 265,755 | (699,086 | ) | |||||||
| Net income (loss) applicable to common shares | $ | 413,013 | $ | 626,549 | $ | (560,552 | ) | ||||
| Denominator | |||||||||||
| Basic weighted average shares outstanding | 468,759 | 467,195 | 462,795 | ||||||||
| Dilutive potential common shares - equity awards | 176 | 208 | — | ||||||||
| Diluted weighted average common shares | 468,935 | 467,403 | 462,795 | ||||||||
| Basic earnings per common share | |||||||||||
| Continuing operations | $ | 0.88 | $ | 0.77 | $ | 0.30 | |||||
| Discontinued operations | — | 0.57 | (1.51 | ) | |||||||
| Net income (loss) applicable to common shares | $ | 0.88 | $ | 1.34 | $ | (1.21 | ) | ||||
| Diluted earnings per common share | |||||||||||
| Continuing operations | $ | 0.88 | $ | 0.77 | $ | 0.30 | |||||
| Discontinued operations | — | 0.57 | (1.51 | ) | |||||||
| Net income (loss) applicable to common shares | $ | 0.88 | $ | 1.34 | $ | (1.21 | ) | ||||
| Year Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Supplemental cash flow information: | |||||||||||
| Interest paid, net of capitalized interest | $ | 309,111 | $ | 489,453 | $ | 451,615 | |||||
| Income taxes paid | 10,045 | 13,727 | 6,959 | ||||||||
| Capitalized interest | 16,937 | 11,108 | 8,798 | ||||||||
| Supplemental schedule of non-cash investing and financing activities: | |||||||||||
| Accrued construction costs | 67,425 | 49,999 | 52,511 | ||||||||
| Non-cash impact of QCP Spin-Off, net | — | 3,539,584 | — | ||||||||
| Securities transferred for debt defeasance | — | 73,278 | — | ||||||||
| Settlement of loans receivable as consideration for real estate acquisition | — | — | 299,297 | ||||||||
| Vesting of restricted stock units and conversion of non-managing member units into common stock | 2,908 | 6,622 | 3,388 | ||||||||
| Noncontrolling interest and other liabilities, net assumed in connection with the RIDEA III acquisition | — | — | 61,219 | ||||||||
| Deconsolidation of noncontrolling interest in connection with RIDEA II transaction | 58,061 | — | — | ||||||||
| Noncontrolling interest issued in connection with real estate and other acquisitions | — | — | 10,971 | ||||||||
| Mortgages and other liabilities assumed with real estate acquisitions | 5,425 | 82,985 | 23,218 | ||||||||
| Foreign currency translation adjustment | 15,862 | (3,332 | ) | (8,738 | ) | ||||||
| Unrealized gains (losses) on available-for-sale securities and derivatives designated as cash flow hedges, net | (10,315 | ) | 3,171 | 1,889 | |||||||
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Supplemental cash flow information: | |||||||||||||||||
| Interest paid, net of capitalized interest | $ | 188,213 | $ | 162,115 | $ | 173,044 | |||||||||||
| Income taxes paid (refunded) | 1,923 | (1,903) | 4,521 | ||||||||||||||
| Capitalized interest | 56,849 | 41,046 | 24,084 | ||||||||||||||
| Cash paid for amounts included in the measurement of lease liability for operating leases | 21,488 | 12,594 | 10,620 | ||||||||||||||
| Supplemental schedule of non-cash investing and financing activities: | |||||||||||||||||
| Increase in ROU asset in exchange for new lease liability related to operating leases | 3,951 | 9,454 | 28,866 | ||||||||||||||
| Decrease in ROU asset with corresponding change in lease liability related to operating leases | — | — | 8,410 | ||||||||||||||
| Accrued construction costs | 105,572 | 178,626 | 179,995 | ||||||||||||||
| Net noncash impact from the consolidation of property previously held in an unconsolidated joint venture | 993 | — | — | ||||||||||||||
| Retained investment in connection with South San Francisco JVs transaction | — | 293,265 | — | ||||||||||||||
| Seller financing provided on disposition of real estate asset | — | — | 559,745 | ||||||||||||||
| Carrying value of mortgages assumed by buyer in real estate dispositions | — | — | 143,676 | ||||||||||||||
See discussionsNote 8 for discussion of the South San Francisco JVs transaction.
Operating, investing, and financing cash flows in the Consolidated Statements of Cash Flows are reported inclusive of both cash flows from continuing operations and cash flows from discontinued operations. The following table summarizes certain cash flow information related to the Brookdale Transaction in Note 3 and the Spin-Off in Note 5.discontinued operations (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Leasing costs, tenant improvements, and recurring capital expenditures | $ | — | $ | 21 | $ | 2,636 | |||||||||||
| Development, redevelopment, and other major improvements of real estate | — | 18 | 5,780 | ||||||||||||||
| Depreciation and amortization of real estate, in-place lease, and other intangibles | — | — | — | ||||||||||||||
The following table summarizes cash, cash equivalents, and restricted cash (in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Continuing operations | Discontinued operations | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of year: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 72,032 | $ | 158,287 | $ | 44,226 | $ | — | $ | 7,707 | $ | 53,085 | $ | 72,032 | $ | 165,994 | $ | 97,311 | ||||||||||||||||||||||||||||||||||||||
| Restricted cash | 54,802 | 53,454 | 67,206 | — | — | 17,168 | 54,802 | 53,454 | 84,374 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | 126,834 | $ | 211,741 | $ | 111,432 | $ | — | $ | 7,707 | $ | 70,253 | $ | 126,834 | $ | 219,448 | $ | 181,685 | ||||||||||||||||||||||||||||||||||||||
| End of year: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 117,635 | $ | 72,032 | $ | 158,287 | $ | — | $ | — | $ | 7,707 | $ | 117,635 | $ | 72,032 | $ | 165,994 | ||||||||||||||||||||||||||||||||||||||
| Restricted cash | 51,388 | 54,802 | 53,454 | — | — | — | 51,388 | 54,802 | 53,454 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | 169,023 | $ | 126,834 | $ | 211,741 | $ | — | $ | — | $ | 7,707 | $ | 169,023 | $ | 126,834 | $ | 219,448 | ||||||||||||||||||||||||||||||||||||||
118
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash and cash equivalents | $ | 55,306 | $ | 94,730 | ||||
| Restricted cash | 26,897 | 42,260 | ||||||
| Cash, cash equivalents and restricted cash | $ | 82,203 | $ | 136,990 | ||||
Subsequent to the Reorganization, Healthpeak OP is the Company’s operating subsidiary and a limited liability company that has governing provisions that are the functional equivalent of a limited partnership. The Company holds a membership interest in Healthpeak OP, acts as the managing member of Healthpeak OP, and exercises full responsibility, discretion, and control over the day-to-day management of Healthpeak OP. Because the noncontrolling interests in Healthpeak OP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights, the Company adopted ASU 2015-2 usinghas determined that Healthpeak OP is a VIE. The Company, as managing member, has the modified retrospective method as permitted bypower to direct the ASU. As a resultcore activities of Healthpeak OP that most significantly affect Healthpeak OP’s performance, and through its interest in Healthpeak OP, has both the adoption,right to receive benefits from and the obligation to absorb losses of Healthpeak OP. Accordingly, the Company identified additionalis the primary beneficiary of Healthpeak OP and consolidates Healthpeak OP. As the Company conducts its business and holds its assets and liabilities of certain VIEs in itsthrough Healthpeak OP, the total consolidated total assets and liabilities, income (losses), and cash flows of Healthpeak OP represent substantially all of the total consolidated assets and liabilities, at December 31, 2015income (losses), and cash flows of $543 million and $651 million, respectively. Refer to the specific VIE descriptions below for detail on which entities were classified as consolidated VIEs subsequent to the adoption of ASU 2015-2. Additionally, the Company deconsolidated three JVs and recognized $0.5 million as a cumulative-effect adjustment to cumulative dividends in excess of earnings.Company.
Unconsolidated Variable Interest Entities
At December 31, 2017,2023, the Company had investments in two unconsolidated VIE joint ventures. At December 31, 2022, the Company had investments in: (i) five twounconsolidated VIE joint ventures;ventures and (ii) 48 properties leased to VIE tenants; (iii) marketable debt securities of one VIE and (iv) three loans to VIE borrowers.VIE. The Company has determined that it is not the primary beneficiary of and therefore does not consolidate these VIEs because it does not have the ability to control
the activities that most significantly impact their economic performance. Except for the Company’s equity interest in the unconsolidated JVs (CCRC OpCo, RIDEA II PropCo, Vintage Park Developmentjoint ventures (the LLC Investment and Needham Land Parcel JV Waldwick JV and the LLC investment discussed below), it has no formal involvement in these VIEs beyond its investments.
LLC Investment. The Company holds a limited partner ownership interest in an unconsolidated LLC (“LLC Investment”) that has been identified as a VIE. The Company’s involvement in the entity is limited to its equity investment as a limited partner and it does not have any substantive participating rights or kick-out rights over the general partner. The assets and liabilities of the entity primarily consist of those associated with itsthree hospitals as well as senior housing real estate. Any assets generated by the entity may only be used to settle its contractual obligations (primarily capital expenditures and debt service payments).
Needham Land Parcel JV. In December 2021, the Company acquired a 38% interest in a lab development joint venture in Needham, Massachusetts for $13 million. Current equity at risk is not sufficient to finance the joint venture’s activities. The assets and liabilities of the entity primarily consist of real estate and development activities.debt service obligations. Any assets generated by the entity may only be used to settle its contractual obligations (primarily development expensescosts and debt service payments). See Note 8 for additional descriptions of the nature, purpose, and operating activities of this unconsolidated VIE and interests therein.
January 2023.
The classification of the related assets and liabilities and theirthe maximum loss exposure as a result of the Company’s involvement with these VIEs at December 31, 2017 are presented below2023 was as follows (in thousands):
| VIE Type | Asset/Liability Type | Maximum Loss Exposure and Carrying Amount(1) | ||||
VIE tenants - DFLs (2) | Net investment in DFLs | $ | 601,723 | |||
VIE tenants - operating leases (2) | Lease intangibles, net and straight-line rent receivables | 5,519 | ||||
| CCRC OpCo | Investments in unconsolidated joint ventures | 190,454 | ||||
| RIDEA II PropCo | Investments in unconsolidated joint ventures | 252,743 | ||||
| Development JVs | Investments in unconsolidated joint ventures | 12,563 | ||||
| Tandem Health Care | Loans Receivable, net | 105,000 | ||||
| MMCG Loan | Loans Receivable, net | 142,820 | ||||
| Loan - Seller Financing | Loans Receivable, net | 10,000 | ||||
| CMBS and LLC investment | Marketable debt and cost method investment | 33,750 | ||||
| VIE Type | Asset Type | Maximum Loss Exposure and Carrying Amount(1) | ||||||||||||
| Other assets, net | $ | 14,985 | ||||||||||||
| Needham Land Parcel JV | Investments in and advances to | 17,084 | ||||||||||||
(1)The Company’s maximum loss exposure represents the aggregate carrying amount of such investments.
As of December 31, 2017,2023, the Company had not provided, and is not required to provide, financial support through a liquidity arrangement or otherwise, to its unconsolidated VIEs, including under circumstances in which it could be exposed to further losses (e.g., cash shortfalls). See Notes 3, 6, 7 and 8 for additional descriptions
119
Consolidated Variable Interest Entities
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Building and Improvements | $ | 2,436,414 | $ | 3,522,310 | ||||
| Developments in Process | 32,285 | 31,953 | ||||||
| Land | 227,162 | 327,241 | ||||||
| Accumulated Depreciation | (542,091 | ) | (676,276 | ) | ||||
| Net Real Estate | 2,153,770 | 3,205,228 | ||||||
| Investments in and advances to unconsolidated joint ventures | 2,231 | 3,641 | ||||||
| Accounts Receivable, Net | 10,242 | 19,996 | ||||||
| Cash and Cash Equivalents | 15,861 | 35,844 | ||||||
| Restricted Cash | 2,619 | 22,624 | ||||||
| Intangible Assets, Net | 125,475 | 169,027 | ||||||
| Other Assets, Net | 33,749 | 69,562 | ||||||
| Total Assets | $ | 2,343,947 | $ | 3,525,922 | ||||
| Liabilities | ||||||||
| Mortgage Debt | 45,016 | 520,870 | ||||||
| Intangible Liabilities, Net | 10,672 | 8,994 | ||||||
| Accounts Payable and Accrued Expenses | 87,759 | 120,719 | ||||||
| Other Liabilities | 29,034 | — | ||||||
| Intercompany Accounts | 331 | — | ||||||
| Fixed Asset Push Down | 152,156 | — | ||||||
| Deferred Revenue | 14,432 | 23,456 | ||||||
| Total Liabilities | $ | 339,400 | $ | 674,039 | ||||
MSREI JV. The Company holds a 51% ownership interest in, and is the managing member of, a joint venture entity formed in January 2015 (“Vintage Park JV”)August 2018 that owns an 85% interest in an unconsolidated development VIE. Upon adoption of ASU 2015-02, the Company classified Vintage Parkand leases outpatient medical buildings (the “MSREI JV”). The MSREI JV asis a VIE due to the non-managing member lacking substantive participation rights in the management of the Vintage Park JVjoint venture or kick-out rights over the managing member. The Company consolidates Vintage Parkthe MSREI JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIE’s economic performance. The assets of Vintage Park JV primarily consist of an investment in the Vintage Park Development JV and cash and cash equivalents; its obligations primarily consist of funding the ongoing development of the Vintage Park Development JV. Assets generated by the Vintage Park JV may only be used to settle its contractual obligations (primarily from the funding of the Vintage Park Development JV).
DownREITs. The Company holds a controlling ownership interest in and is the managing member of fiveseven DownREITs. Upon adoption of ASU 2015-02, theThe Company classifiedclassifies the DownREITs as VIEs due to the non-managing members lacking substantive participation rights in the management of the DownREITs or kick-out rights over the managing member. The Company consolidates the DownREITs as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the DownREITs primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; their obligations primarily consist of debt service payments and capital expenditures for the properties. Assets generated by the DownREITs (primarily from residenttenant rents) may only be used to settle their contractual obligations (primarily from debt service and capital expenditures).
Other Consolidated Real Estate Partnerships. The Company holds a controlling ownership interest in and is the general partner (or managing member) of multiple partnerships that own and lease real estate assets (the “Partnerships”). Upon adoption of ASU 2015-02, theThe Company classifiedclassifies the Partnerships as VIEs due to the limited partners (non-managing members) lacking substantive participation rights in the management of the Partnerships or kick-out rights over the general partner (managing member). The Company consolidates the Partnerships as the primary beneficiary because it has the ability to control the activities that most significantly impact these VIEs’ economic performance. The assets of the Partnerships primarily consist of leased properties (net real estate), rents receivable, and cash and cash equivalents; their obligations primarily consist of debt service payments and capital
expenditures for the properties. Assets generated by the Partnerships (primarily from residenttenant rents) may only be used to settle their contractual obligations (primarily from debt service and capital expenditures).
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Total assets and a loan to an entity that made an investment in a development JV (“Development JV”) both of which are considered VIEs. The Company consolidates the Tax Credit Subsidiary and Development JV as the primary beneficiary because it has the ability to control the activities that most significantly impact the VIEs’ economic performance. Thetotal liabilities include VIE assets and liabilities, excluding those of the Tax Credit SubsidiaryHealthpeak OP, as follows (in thousands):
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Assets | ||||||||||||||
| Buildings and improvements | $ | 2,392,375 | $ | 2,356,905 | ||||||||||
| Development costs and construction in progress | 47,481 | 58,499 | ||||||||||||
| Land and improvements | 307,166 | 324,714 | ||||||||||||
| Accumulated depreciation and amortization | (665,791) | (623,244) | ||||||||||||
| Net real estate | 2,081,231 | 2,116,874 | ||||||||||||
| Accounts receivable, net | 5,906 | 6,893 | ||||||||||||
| Cash and cash equivalents | 18,410 | 20,586 | ||||||||||||
| Restricted cash | 613 | 354 | ||||||||||||
| Intangible assets, net | 56,975 | 73,860 | ||||||||||||
| Assets held for sale, net | — | 30,355 | ||||||||||||
| Right-of-use asset, net | 97,575 | 99,376 | ||||||||||||
| Other assets, net | 79,248 | 73,690 | ||||||||||||
| Total assets | $ | 2,339,958 | $ | 2,421,988 | ||||||||||
| Liabilities | ||||||||||||||
| Mortgage debt | $ | 144,874 | $ | 144,604 | ||||||||||
| Intangible liabilities, net | 11,884 | 15,066 | ||||||||||||
| Liabilities related to assets held for sale, net | — | 401 | ||||||||||||
| Lease liability | 99,725 | 99,039 | ||||||||||||
| Accounts payable, accrued liabilities, and other liabilities | 54,975 | 68,979 | ||||||||||||
| Deferred revenue | 48,316 | 39,661 | ||||||||||||
| Total liabilities | $ | 359,774 | $ | 367,750 | ||||||||||
Total assets and Development JV substantially consist of a development in progress, notes receivable, prepaid expenses, notes payable, and accounts payable and accruedtotal liabilities generated from their operating activities. Anyrelated to assets generated by the operating activities of the Tax Credit Subsidiary and Development JV may only be used to settle their contractual obligations.
| December 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Assets | ||||||||||||||
| Buildings and improvements | $ | — | $ | 39,934 | ||||||||||
| Land and improvements | — | 1,926 | ||||||||||||
| Accumulated depreciation and amortization | — | (15,612) | ||||||||||||
| Net real estate | — | 26,248 | ||||||||||||
| Intangible assets, net | — | 215 | ||||||||||||
| Other assets, net | — | 3,892 | ||||||||||||
| Total assets | $ | — | $ | 30,355 | ||||||||||
| Liabilities | ||||||||||||||
| Deferred revenue | — | 401 | ||||||||||||
| Total liabilities | $ | — | $ | 401 | ||||||||||
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| December 31, | |||||||||||||||
2017(3) | 2016(3) | ||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Loans receivable, net(2) | $ | 313,326 | $ | 313,242 | $ | 807,954 | $ | 807,505 | |||||||
Marketable debt securities(2) | 18,690 | 18,690 | 68,630 | 68,630 | |||||||||||
Bank line of credit(2) | 1,017,076 | 1,017,076 | 899,718 | 899,718 | |||||||||||
Term loans(2) | 228,288 | 228,288 | 440,062 | 440,062 | |||||||||||
Senior unsecured notes(1) | 6,396,451 | 6,737,825 | 7,133,538 | 7,386,149 | |||||||||||
Mortgage debt(2) | 144,486 | 125,984 | 623,792 | 609,374 | |||||||||||
Other debt(2) | 94,165 | 94,165 | 92,385 | 92,385 | |||||||||||
Interest-rate swap liabilities(2) | 2,483 | 2,483 | 4,857 | 4,857 | |||||||||||
Currency swap asset(2) | — | — | 2,920 | 2,920 | |||||||||||
Cross currency swap liability(2) | 10,968 | 10,968 | — | — | |||||||||||
NOTE 19. Concentration of Credit Risk
Concentrations of credit risk arise when one or more tenants, operators, or obligors related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors various segments of its portfolio to assess potential concentrations of credit risks.
The following tables provide information regarding the Company’s concentrations with respect to Brookdale as a tenant as of and for the periods presented:
| Percentage of Gross Assets | ||||||||
| Total Company | Senior Housing Triple-Net | |||||||
| December 31, | December 31, | |||||||
| Tenant | 2017 | 2016 | 2017 | 2016 | ||||
Brookdale(1) | 10 | 17 | 39 | 69 | ||||
| Percentage of Revenues | ||||||||||||
| Total Company Revenues | Senior Housing Triple-Net Revenues | |||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||
| Tenant | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||
Brookdale(1) | 8 | 12 | 13 | 47 | 59 | 58 | ||||||
| Percentage of Total Company Assets | Percentage of Total Company Revenues | |||||||||
| December 31, | Year Ended December 31, | |||||||||
| State | 2017 | 2016 | 2017 | 2016 | 2015 | |||||
| California | 31 | 29 | 26 | 26 | 27 | |||||
| Texas | 14 | 14 | 17 | 17 | 16 | |||||
| Percentage of Total Company Assets | Percentage of Total Company Revenues | |||||||||||||||||||||||||||||||
| December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
| State | 2023 | 2022 | 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| California | 38 | 37 | 31 | 31 | 28 | |||||||||||||||||||||||||||
| Florida | 10 | 10 | 18 | 18 | 17 | |||||||||||||||||||||||||||
| Texas | 10 | 10 | 11 | 11 | 11 | |||||||||||||||||||||||||||
| Massachusetts | 17 | 17 | 11 | 10 | 9 | |||||||||||||||||||||||||||
The following table summarizes the Company’s outstanding interest-rate and foreign currency swap contracts asrental revenue is generated from multiple tenants across its diverse portfolio. As of December 31, 2017 (dollars2023, the Company’s largest tenant in its outpatient medical and GBP inlab segments accounted for 8% and 2%, respectively, of the Company’s total revenues.
NOTE 20. Fair Value Measurements
The table below summarizes the carrying amounts and fair values of the Company’s financial instruments either recorded or disclosed on a recurring basis (in thousands):
| December 31, | |||||||||||||||||||||||
2023(3) | 2022(3) | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Loans receivable, net(2) | $ | 218,450 | $ | 218,450 | $ | 374,832 | $ | 369,425 | |||||||||||||||
Marketable debt securities(2) | — | — | 21,702 | 21,702 | |||||||||||||||||||
Interest rate swap instruments(2) | 21,359 | 21,359 | 30,259 | 30,259 | |||||||||||||||||||
Bank line of credit and commercial paper(2) | 720,000 | 720,000 | 995,606 | 995,606 | |||||||||||||||||||
Term loans(2) | 496,824 | 496,824 | 495,957 | 495,957 | |||||||||||||||||||
Senior unsecured notes(1) | 5,403,378 | 5,144,667 | 4,659,451 | 4,238,124 | |||||||||||||||||||
Mortgage debt(2) | 256,097 | 244,135 | 346,599 | 330,867 | |||||||||||||||||||
(1)Level 1: Fair value is calculated based on quoted prices in active markets.
(2)Level 2: Fair value is based on (i) for loans receivable, net, interest rate swap instruments, and mortgage debt, standardized pricing models in which significant inputs or value drivers are observable in active markets, respectively, or (ii) for marketable debt securities, quoted prices for similar or identical instruments in active or inactive markets. For bank line of credit, commercial paper, and term loans, the carrying values are a reasonable estimate of fair value because the borrowings are primarily based on market interest rates and the Company’s credit rating.
(3)During the years ended December 31, 2023 and 2022, there were no material transfers of financial assets or liabilities within the fair value hierarchy.
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| Date Entered | Maturity Date | Hedge Designation | Notional | Pay Rate | Receive Rate | Fair Value(1) | |||||||||
| Interest rate: | |||||||||||||||
July 2005(2) | July 2020 | Cash Flow | 44,000 | 3.820% | BMA Swap Index | (2,483 | ) | ||||||||
| Cross currency swap: | |||||||||||||||
April 2017(3) | February 2019 | Net Investment | £105,000 / $131,000 | 2.584% | 3.750 | % | (10,968 | ) | |||||||
The Company uses derivative instruments to mitigate the effects of interest rate and foreign currency fluctuations on specific forecasted transactions as well as recognized financial obligations or assets. Utilizing derivative instruments allows the Company to manage the risk of fluctuations in interest rates and foreign currency ratestheir related to the potential impact these changes could have on future earnings and forecasted cash flows. The Company does not use derivative instruments for speculative or trading purposes. AssumingAt December 31, 2023, a one percentage point shiftincrease or decrease in the underlying interest rate curve would result in a corresponding increase or decrease in the estimatedfair value of the derivative instruments by up to $18 million.
In April 2021, the Company executed two interest rate cap instruments on $142 million of variable rate mortgage debt secured by a portfolio of outpatient medical buildings (see Note 10). During the year ended December 31, 2022, the Company recognized a $2 million increase in the fair value of the interest rate cap instruments within other income (expense), net. In April 2022, the Company terminated these interest rate cap instruments and entered into two interest rate swap instruments that are designated as cash flow hedges and mature in May 2026. In February 2023, the Company modified these two interest rate swap instruments to reflect the change in the related variable rate mortgage debt’s interest rate benchmarks from LIBOR to SOFR (see Note 10). The Company applied certain practical expedients provided by the reference rate reform ASUs in connection with the modifications to these cash flow hedges (see Note 2).
In August 2022, the Company entered into two forward-starting interest rate swap instruments on the $500 million aggregate principal amount of the Term Loan Facilities (see Note 10). The interest rate swap instruments are designated as cash flow hedges.
The following table summarizes the Company’s interest rate swap instruments (in thousands):
Fair Value(2) | ||||||||||||||||||||||||||
| Date Entered | Maturity Date | Hedge Designation | Notional Amount | Pay Rate(1) | Receive Rate(1) | December 31, 2023 | December 31, 2022 | |||||||||||||||||||
April 2022(3) | May 2026 | Cash flow | $ | 51,100 | 4.99 % | USD-SOFR w/ -5 Day Lookback + 2.50% | $ | 1,602 | $ | 2,300 | ||||||||||||||||
April 2022(3) | May 2026 | Cash flow | 91,000 | 4.54 % | USD-SOFR w/ -5 Day Lookback + 2.05% | 2,851 | 4,096 | |||||||||||||||||||
August 2022(3) | February 2027 | Cash flow | 250,000 | 2.60 % | 1 mo. USD-SOFR CME Term | 7,933 | 11,299 | |||||||||||||||||||
August 2022(3) | August 2027 | Cash flow | 250,000 | 2.54 % | 1 mo. USD-SOFR CME Term | 8,973 | 12,564 | |||||||||||||||||||
_____________________________
(1)Pay rates and receive rates are as of December 31, 2023. As of December 31, 2022, the interest rate swap instrument with a $51 million notional amount had a pay rate of 5.08% and a receive rate of 1 mo. USD-LIBOR-BBA + 2.50%. As of December 31, 2022, the interest rate swap instrument with a $91 million notional amount had a pay rate of 4.63% and a receive rate of 1 mo. USD-LIBOR-BBA + 2.05%.
(2)At each of December 31, 2023 and 2022, the interest rate swap instruments were in an asset position. Derivative assets are recorded at fair value in other assets, net on the Consolidated Balance Sheets.
(3)Represents interest rate swap instruments that hedge fluctuations in interest payments on variable rate debt by converting the interest rates to fixed interest rates. The changes in fair value of each of the underlying derivative instruments would not exceed $2 million. Assuming a one percentage point shift in the underlying foreign currency exchange rates, the estimated change in fair value of each of the underlying derivative instruments would not exceed $2 million.
In January 2024, the Company entered into forward-starting interest rate swap instruments that will effectively establish a fixed interest rate on the $750 million aggregate principal amount of the 2024 Term Loan at a blended contractual rate of 4.5% (see Note 10). The interest rate swap instruments are designated as the hedging relationship is considered to be effective. The balance in accumulated other comprehensive income (loss) will be reclassified to earnings when the hedged investment is sold or substantially liquidated.cash flow hedges.
NOTE 22. Accounts Payable, Accrued Liabilities, and Other Liabilities
The following table summarizes selected quarterly informationthe Company’s accounts payable, accrued liabilities, and other liabilities (in thousands):
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Refundable entrance fees | $ | 251,874 | $ | 268,972 | |||||||
| Accrued construction costs | 105,572 | 178,626 | |||||||||
| Accrued interest | 59,492 | 59,291 | |||||||||
| Other accounts payable and accrued liabilities | 240,258 | 265,596 | |||||||||
| Accounts payable, accrued liabilities, and other liabilities | $ | 657,196 | $ | 772,485 | |||||||
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NOTE 23. Deferred Revenue
The following table summarizes the Company’s deferred revenue, excluding deferred revenue related to assets classified as held for sale (in thousands):
| December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Nonrefundable entrance fees(1) | $ | 562,026 | $ | 518,573 | |||||||
Other deferred revenue(2) | 343,607 | 325,503 | |||||||||
| Deferred revenue | $ | 905,633 | $ | 844,076 | |||||||
(1)During the years ended December 31, 20172023 and 2016 (in thousands, except per share amounts):
| Three Months Ended 2017 | |||||||||||||||
| March 31 | June 30 | September 30 | December 31 | ||||||||||||
| Total revenues | $ | 492,168 | $ | 458,928 | $ | 454,023 | $ | 443,259 | |||||||
| Income (loss) before income taxes and equity income from investments in unconsolidated joint ventures | 454,746 | 18,874 | (12,263 | ) | (50,957 | ) | |||||||||
| Net income (loss) | 464,177 | 22,101 | (5,720 | ) | (57,924 | ) | |||||||||
| Net income (loss) applicable to HCP, Inc. | 461,145 | 19,383 | (7,657 | ) | (58,702 | ) | |||||||||
| Dividends paid per common share | 0.37 | 0.37 | 0.37 | 0.37 | |||||||||||
| Basic earnings per common share | 0.98 | 0.04 | (0.02 | ) | (0.13 | ) | |||||||||
| Diluted earnings per common share | 0.97 | 0.04 | (0.02 | ) | (0.13 | ) | |||||||||
| Three Months Ended 2016 | |||||||||||||||
| March 31 | June 30 | September 30 | December 31 | ||||||||||||
| Total revenues | $ | 520,457 | $ | 538,332 | $ | 530,555 | $ | 539,950 | |||||||
| Total discontinued operations | 68,408 | 107,378 | 108,215 | (18,246 | ) | ||||||||||
| Income (loss) before income taxes and equity income from investments in unconsolidated joint ventures | 55,949 | 196,352 | 47,453 | 67,530 | |||||||||||
| Net (loss) income | 119,745 | 304,842 | 154,039 | 61,300 | |||||||||||
| Net (loss) income applicable to HCP, Inc. | 116,119 | 301,717 | 151,250 | 58,661 | |||||||||||
| Dividends paid per common share | 0.58 | 0.58 | 0.58 | 0.37 | |||||||||||
| Basic earnings per common share | 0.25 | 0.65 | 0.32 | 0.12 | |||||||||||
| Diluted earnings per common share | 0.25 | 0.64 | 0.32 | 0.12 | |||||||||||
Company collected nonrefundable entrance fees of $127 million and $101 million, respectively. During the quarteryears ended December 31, 2017,2023, 2022, and 2021, the Company recognized $20amortization of $83 million, net reduction$79 million, and $76 million, respectively, which is included within resident fees and services on the Consolidated Statements of Operations.
(2)Other deferred revenue is primarily comprised of prepaid rent, deferred rent, and tenant-funded tenant improvements owned by the Company. During the years ended December 31, 2023, 2022, and 2021, the Company recognized amortization related to other deferred revenue of $68 million, $44 million, and $39 million, respectively, which is included in rental and related revenues and $35 millionon the Consolidated Statements of operating expense related to the Brookdale Transaction.Operations.
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Schedule II: Valuation and Qualifying Accounts
(In thousands)
Allowance Accounts(1) | Additions | |||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Balance at Beginning of Year | Amounts Charged Against Operations, net | Acquired Properties | Deductions(2) | Balance at End of Year | |||||||||||||||||||||||||||||||||
| Continuing operations: | ||||||||||||||||||||||||||||||||||||||
| 2023 | $ | 2,399 | $ | — | $ | — | $ | (117) | $ | 2,282 | ||||||||||||||||||||||||||||
| 2022 | 1,870 | 529 | — | — | 2,399 | |||||||||||||||||||||||||||||||||
| 2021 | 3,994 | — | — | (2,124) | 1,870 | |||||||||||||||||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||||||||||||||||||||
| 2023 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||
| 2022 | 4,138 | — | — | (4,138) | — | |||||||||||||||||||||||||||||||||
| 2021 | 5,873 | 46 | — | (1,781) | 4,138 | |||||||||||||||||||||||||||||||||
(1)Includes allowance for doubtful accounts. Excludes reserves for loan losses which are disclosed in Note 7 to the Consolidated Financial Statements.
(2)Primarily includes the write-off of uncollectible accounts, dispositions, and other net reductions in the reserves.
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Allowance Accounts(1) | Additions | Deductions | ||||||||||||||||||||||
Year Ended December 31, | Balance at Beginning of Year | Amounts Charged Against Operations, net | Acquired Properties | Uncollectible Accounts Written-off | Disposed Properties | Balance at End of Year | ||||||||||||||||||
| 2017 | $ | 29,518 | $ | 144,135 | $ | — | $ | (2,732 | ) | $ | (1,547 | ) | $ | 169,374 | ||||||||||
| 2016 | 36,180 | 1,177 | — | (2,843 | ) | (4,996 | ) | 29,518 | ||||||||||||||||
| 2015 | 50,531 | 3,174 | — | (17,209 | ) | (316 | ) | 36,180 | ||||||||||||||||
Schedule III: Real Estate and Accumulated Depreciation
(in thousands)
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lab | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1483 | Brisbane | CA | $ | — | $ | 8,498 | $ | 500 | $ | 82,955 | $ | 8,498 | $ | 83,455 | $ | 91,953 | $ | (6,065) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1484 | Brisbane | CA | — | 11,331 | 689 | 159,209 | 11,331 | 159,898 | 171,229 | (10,321) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1485 | Brisbane | CA | — | 11,331 | 600 | 151,954 | 11,331 | 152,554 | 163,885 | (11,224) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1486 | Brisbane | CA | — | 11,331 | — | 135,416 | 11,331 | 135,416 | 146,747 | (22,767) | 2020 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1487 | Brisbane | CA | — | 8,498 | — | 76,398 | 8,498 | 76,398 | 84,896 | (7,089) | 2020 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2874 | Brisbane | CA | — | 26,895 | 62,318 | 75,811 | 26,295 | 138,729 | 165,024 | (13,636) | 1989 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2875 | Brisbane | CA | — | 24,092 | 56,623 | 7,302 | 24,092 | 63,925 | 88,017 | (10,162) | 2000 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3139 | Brisbane | CA | — | 35,805 | — | 5,505 | 35,805 | 5,505 | 41,310 | — | — | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3140 | Brisbane | CA | — | 35,805 | — | 2,668 | 35,805 | 2,668 | 38,473 | — | — | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3142 | Brisbane | CA | — | — | — | 3,724 | — | 3,724 | 3,724 | — | — | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1401 | Hayward | CA | — | 900 | 7,100 | 12,450 | 1,338 | 19,112 | 20,450 | (5,630) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1402 | Hayward | CA | — | 1,500 | 6,400 | 6,837 | 1,500 | 13,237 | 14,737 | (2,971) | 1999 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1403 | Hayward | CA | — | 1,900 | 7,100 | 7,873 | 1,900 | 14,973 | 16,873 | (5,801) | 1998 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1404 | Hayward | CA | — | 2,200 | 17,200 | 8,948 | 2,200 | 26,148 | 28,348 | (10,059) | 1999 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1405 | Hayward | CA | — | 1,000 | 3,200 | 646 | 1,000 | 3,846 | 4,846 | (1,625) | 1999 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1549 | Hayward | CA | — | 1,006 | 4,259 | 4,208 | 1,006 | 8,467 | 9,473 | (4,388) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1550 | Hayward | CA | — | 677 | 2,761 | 876 | 677 | 3,637 | 4,314 | (2,027) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1551 | Hayward | CA | — | 661 | 1,995 | 2,899 | 661 | 4,894 | 5,555 | (1,675) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1552 | Hayward | CA | — | 1,187 | 7,139 | 1,435 | 1,187 | 8,574 | 9,761 | (5,601) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1553 | Hayward | CA | — | 1,189 | 9,465 | 6,555 | 1,189 | 16,020 | 17,209 | (12,099) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1554 | Hayward | CA | — | 1,246 | 5,179 | 11,951 | 1,246 | 17,130 | 18,376 | (6,357) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1555 | Hayward | CA | — | 1,521 | 13,546 | 7,482 | 1,521 | 21,028 | 22,549 | (14,370) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1556 | Hayward | CA | — | 1,212 | 5,120 | 1,127 | 1,212 | 6,247 | 7,459 | (3,853) | 1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1424 | La Jolla | CA | — | 11,175 | 25,283 | 44,107 | 11,389 | 69,176 | 80,565 | (16,131) | 1982 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1425 | La Jolla | CA | — | 7,217 | 19,883 | 61 | 7,217 | 19,944 | 27,161 | (8,193) | 1981 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1426 | La Jolla | CA | — | 8,381 | 12,412 | 11,260 | 8,381 | 23,672 | 32,053 | (15,449) | 1984 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1427 | La Jolla | CA | — | 10,127 | 16,983 | 7,965 | 10,148 | 24,927 | 35,075 | (11,048) | 1982 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1949 | La Jolla | CA | — | 2,686 | 11,045 | 17,501 | 2,686 | 28,546 | 31,232 | (8,278) | 2021 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2229 | La Jolla | CA | — | 8,753 | 32,528 | 16,498 | 8,777 | 49,002 | 57,779 | (13,320) | 1986/2009 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1470 | Poway | CA | — | 5,826 | 12,200 | 341 | 5,826 | 12,541 | 18,367 | (5,094) | 2005 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1471 | Poway | CA | — | 5,978 | 14,200 | — | 5,978 | 14,200 | 20,178 | (5,828) | 2005 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1472 | Poway | CA | — | 8,654 | — | 11,895 | 8,654 | 11,895 | 20,549 | (3,723) | 2014 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1473 | Poway | CA | — | 11,024 | 2,405 | 25,455 | 11,024 | 27,860 | 38,884 | (11,513) | 2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1474 | Poway | CA | — | 5,051 | — | 19,939 | 5,051 | 19,939 | 24,990 | (7,191) | 2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1475 | Poway | CA | — | 5,655 | — | 10,299 | 5,655 | 10,299 | 15,954 | (837) | 2020 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1478 | Poway | CA | — | 6,700 | 14,400 | — | 6,700 | 14,400 | 21,100 | (5,910) | 2002 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1499 | Redwood City | CA | — | 3,400 | 5,500 | 1,501 | 3,455 | 6,946 | 10,401 | (3,391) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1500 | Redwood City | CA | — | 2,500 | 4,100 | 988 | 2,500 | 5,088 | 7,588 | (2,478) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1501 | Redwood City | CA | — | 3,600 | 4,600 | 1,892 | 3,600 | 6,492 | 10,092 | (3,293) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1502 | Redwood City | CA | — | 3,100 | 5,100 | 1,647 | 3,100 | 6,747 | 9,847 | (3,253) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1503 | Redwood City | CA | — | 4,800 | 17,300 | 8,276 | 4,800 | 25,576 | 30,376 | (9,310) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1504 | Redwood City | CA | — | 5,400 | 15,500 | 10,956 | 5,400 | 26,456 | 31,856 | (11,249) | 1989 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1505 | Redwood City | CA | — | 3,000 | 3,500 | 5,316 | 3,000 | 8,816 | 11,816 | (3,374) | 1988 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1506 | Redwood City | CA | — | 6,000 | 14,300 | 14,300 | 6,000 | 28,600 | 34,600 | (15,991) | 1988 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1507 | Redwood City | CA | — | 1,900 | 12,800 | 10,680 | 1,900 | 23,480 | 25,380 | (7,910) | 1988/2011 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1508 | Redwood City | CA | — | 2,700 | 11,300 | 17,193 | 2,700 | 28,493 | 31,193 | (9,485) | 1988/2011 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1509 | Redwood City | CA | — | 2,700 | 10,900 | 1,565 | 2,700 | 12,465 | 15,165 | (5,042) | 1988 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1510 | Redwood City | CA | — | 2,200 | 12,000 | 6,243 | 2,200 | 18,243 | 20,443 | (7,367) | 1988 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1511 | Redwood City | CA | — | 2,600 | 9,300 | 19,676 | 2,600 | 28,976 | 31,576 | (15,352) | 1988 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1512 | Redwood City | CA | — | 3,300 | 18,000 | 19,072 | 3,300 | 37,072 | 40,372 | (18,557) | 2000 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1513 | Redwood City | CA | — | 3,300 | 17,900 | 12,092 | 3,326 | 29,966 | 33,292 | (16,766) | 2000 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 678 | San Diego | CA | — | 2,603 | 11,051 | 3,514 | 2,766 | 14,402 | 17,168 | (6,897) | 1997 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 679 | San Diego | CA | — | 5,269 | 23,566 | 23,961 | 5,669 | 47,127 | 52,796 | (18,457) | 1997 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 837 | San Diego | CA | — | 4,630 | 2,028 | 3,302 | 4,630 | 5,330 | 9,960 | (2,426) | 1988/2012 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 838 | San Diego | CA | — | 2,040 | 903 | 3,354 | 2,040 | 4,257 | 6,297 | (1,325) | 1988/2012 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 839 | San Diego | CA | — | 3,940 | 3,184 | 2,863 | 4,036 | 5,951 | 9,987 | (2,499) | 1987 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 840 | San Diego | CA | — | 5,690 | 4,579 | 1,289 | 5,830 | 5,728 | 11,558 | (2,587) | 1987 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1418 | San Diego | CA | — | 11,700 | 31,243 | 59,282 | 11,700 | 90,525 | 102,225 | (16,917) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1419 | San Diego | CA | — | 2,324 | — | 33,144 | 2,324 | 33,144 | 35,468 | (2,735) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1420 | San Diego | CA | — | 4,200 | — | 41,121 | 4,200 | 41,121 | 45,321 | (2,293) | 2022 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1421 | San Diego | CA | — | 7,000 | 33,779 | — | 7,000 | 33,779 | 40,779 | (13,863) | 2000 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1422 | San Diego | CA | — | 7,179 | 3,687 | 1,171 | 7,179 | 4,858 | 12,037 | (3,687) | 1984 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1423 | San Diego | CA | — | 8,400 | 33,144 | 33,504 | 8,400 | 66,648 | 75,048 | (21,043) | 2002/2020 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1558 | San Diego | CA | — | 7,740 | — | 61,285 | 7,740 | 61,285 | 69,025 | — | — | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1947 | San Diego | CA | — | 2,581 | 10,534 | 4,485 | 2,581 | 15,019 | 17,600 | (7,859) | 2000 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1948 | San Diego | CA | — | 5,879 | 25,305 | 7,951 | 5,879 | 33,256 | 39,135 | (13,014) | 2001 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2197 | San Diego | CA | — | 7,621 | 3,913 | 7,541 | 7,621 | 11,454 | 19,075 | (6,884) | 1984 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2476 | San Diego | CA | — | 7,661 | 9,918 | 13,883 | 7,661 | 23,801 | 31,462 | (3,731) | 2000/2002 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2477 | San Diego | CA | — | 9,207 | 14,613 | 5,993 | 9,207 | 20,606 | 29,813 | (6,371) | 2000/2001 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2478 | San Diego | CA | — | 6,000 | — | 112,511 | 6,000 | 112,511 | 118,511 | — | — | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2617 | San Diego | CA | — | 2,734 | 5,195 | 9,364 | 2,734 | 14,559 | 17,293 | (3,269) | 1991/2020 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2618 | San Diego | CA | — | 4,100 | 12,395 | 22,843 | 4,100 | 35,238 | 39,338 | (11,689) | 1991/2020 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2622 | San Diego | CA | — | — | — | 17,231 | — | 17,231 | 17,231 | (1,658) | 2020 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2872 | San Diego | CA | — | 10,120 | 38,351 | 1,044 | 10,120 | 39,395 | 49,515 | (7,919) | 1995 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2873 | San Diego | CA | — | 6,052 | 14,122 | 1,846 | 6,052 | 15,968 | 22,020 | (3,117) | 1997 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
126
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| Senior housing triple-net | |||||||||||||||||||||||||||||||||||||||
| 1107 | Huntsville | AL | $ | — | $ | 307 | $ | 5,813 | $ | — | $ | 307 | $ | 5,453 | $ | 5,760 | $ | (1,534 | ) | 2006 | |||||||||||||||||||
| 0786 | Douglas | AZ | — | 110 | 703 | — | 110 | 703 | 813 | (365 | ) | 2005 | |||||||||||||||||||||||||||
| 0518 | Tucson | AZ | — | 2,350 | 24,037 | — | 2,350 | 24,037 | 26,387 | (11,418 | ) | 2002 | |||||||||||||||||||||||||||
| 1238 | Beverly Hills | CA | — | 9,872 | 32,590 | 9,188 | 9,872 | 41,030 | 50,902 | (12,043 | ) | 2006 | |||||||||||||||||||||||||||
| 0883 | Carmichael | CA | — | 4,270 | 13,846 | — | 4,270 | 13,236 | 17,506 | (3,668 | ) | 2006 | |||||||||||||||||||||||||||
| 2204 | Chino Hills | CA | — | 3,720 | 41,183 | 24 | 3,720 | 41,205 | 44,925 | (4,931 | ) | 2014 | |||||||||||||||||||||||||||
| 0851 | Citrus Heights | CA | — | 1,180 | 8,367 | — | 1,180 | 8,037 | 9,217 | (3,102 | ) | 2006 | |||||||||||||||||||||||||||
| 0790 | Concord | CA | 25,000 | 6,010 | 39,601 | — | 6,010 | 38,301 | 44,311 | (11,877 | ) | 2005 | |||||||||||||||||||||||||||
| 0787 | Dana Point | CA | — | 1,960 | 15,946 | — | 1,960 | 15,466 | 17,426 | (4,801 | ) | 2005 | |||||||||||||||||||||||||||
| 0798 | Escondido | CA | 14,340 | 5,090 | 24,253 | — | 5,090 | 23,353 | 28,443 | (7,250 | ) | 2005 | |||||||||||||||||||||||||||
| 0791 | Fremont | CA | — | 2,360 | 11,672 | — | 2,360 | 11,192 | 13,552 | (3,475 | ) | 2005 | |||||||||||||||||||||||||||
| 0788 | Granada Hills | CA | — | 2,200 | 18,257 | — | 2,200 | 17,637 | 19,837 | (5,475 | ) | 2005 | |||||||||||||||||||||||||||
| 0227 | Lodi | CA | — | 732 | 5,453 | — | 732 | 5,453 | 6,185 | (3,008 | ) | 1997 | |||||||||||||||||||||||||||
| 0226 | Murietta | CA | — | 435 | 5,729 | — | 435 | 5,729 | 6,164 | (3,093 | ) | 1997 | |||||||||||||||||||||||||||
| 1165 | Northridge | CA | — | 6,718 | 26,309 | 2,710 | 6,752 | 27,780 | 34,532 | (7,981 | ) | 2006 | |||||||||||||||||||||||||||
| 0789 | Pleasant Hill | CA | 6,270 | 2,480 | 21,333 | — | 2,480 | 20,633 | 23,113 | (6,405 | ) | 2005 | |||||||||||||||||||||||||||
| 2205 | Roseville | CA | — | 3,844 | 33,527 | — | 3,844 | 33,527 | 37,371 | (3,938 | ) | 2014 | |||||||||||||||||||||||||||
| 1167 | Santa Rosa | CA | — | 3,582 | 21,113 | 2,230 | 3,627 | 22,003 | 25,630 | (6,189 | ) | 2006 | |||||||||||||||||||||||||||
| 0793 | South San Francisco | CA | — | 3,000 | 16,586 | — | 3,000 | 16,056 | 19,056 | (4,978 | ) | 2005 | |||||||||||||||||||||||||||
| 0792 | Ventura | CA | — | 2,030 | 17,379 | — | 2,030 | 16,749 | 18,779 | (5,200 | ) | 2005 | |||||||||||||||||||||||||||
| 0512 | Denver | CO | — | 2,810 | 36,021 | 1,885 | 2,810 | 37,686 | 40,496 | (17,547 | ) | 2002 | |||||||||||||||||||||||||||
| 1000 | Greenwood Village | CO | — | 3,367 | 43,610 | 2,894 | 3,367 | 45,708 | 49,075 | (12,039 | ) | 2006 | |||||||||||||||||||||||||||
| 2144 | Glastonbury | CT | — | 1,658 | 16,046 | 378 | 1,658 | 16,423 | 18,081 | (2,600 | ) | 2012 | |||||||||||||||||||||||||||
| 0730 | Torrington | CT | — | 166 | 11,001 | 3,686 | 166 | 14,277 | 14,443 | (3,947 | ) | 2005 | |||||||||||||||||||||||||||
| 0861 | Apopka | FL | — | 920 | 4,816 | 854 | 920 | 5,570 | 6,490 | (1,770 | ) | 2006 | |||||||||||||||||||||||||||
| 0852 | Boca Raton | FL | 4,730 | 17,532 | 5,471 | 4,730 | 22,390 | 27,120 | (7,570 | ) | 2006 | ||||||||||||||||||||||||||||
| 2467 | Ft Myers | FL | — | 2,782 | 21,827 | — | 2,782 | 21,827 | 24,609 | (1,577 | ) | 2016 | |||||||||||||||||||||||||||
| 1095 | Gainesville | FL | — | 1,221 | 12,226 | — | 1,221 | 12,001 | 13,222 | (3,375 | ) | 2006 | |||||||||||||||||||||||||||
| 0490 | Jacksonville | FL | — | 3,250 | 25,936 | 6,170 | 3,250 | 32,106 | 35,356 | (12,779 | ) | 2002 | |||||||||||||||||||||||||||
| 1096 | Jacksonville | FL | — | 1,587 | 15,616 | — | 1,587 | 15,298 | 16,885 | (4,303 | ) | 2006 | |||||||||||||||||||||||||||
| 1017 | Palm Harbor | FL | — | 1,462 | 16,774 | 500 | 1,462 | 16,888 | 18,350 | (4,842 | ) | 2006 | |||||||||||||||||||||||||||
| 0732 | Port Orange | FL | — | 2,340 | 9,898 | 1,177 | 2,340 | 10,555 | 12,895 | (3,299 | ) | 2005 | |||||||||||||||||||||||||||
| 2194 | Springtree | FL | — | 1,066 | 15,874 | 1,447 | 1,066 | 17,321 | 18,387 | (3,186 | ) | 2013 | |||||||||||||||||||||||||||
| 0802 | St. Augustine | FL | — | 830 | 11,627 | 1,288 | 830 | 12,515 | 13,345 | (4,322 | ) | 2005 | |||||||||||||||||||||||||||
| 1097 | Tallahassee | FL | — | 1,331 | 19,039 | — | 1,331 | 18,695 | 20,026 | (5,258 | ) | 2006 | |||||||||||||||||||||||||||
| 1605 | Vero Beach | FL | — | 700 | 16,234 | — | 700 | 15,484 | 16,184 | (3,097 | ) | 2010 | |||||||||||||||||||||||||||
| 1257 | Vero Beach | FL | — | 2,035 | 34,993 | 201 | 2,035 | 33,634 | 35,669 | (9,457 | ) | 2006 | |||||||||||||||||||||||||||
| 2108 | Buford | GA | — | 562 | 3,604 | 499 | 562 | 4,103 | 4,665 | (788 | ) | 2012 | |||||||||||||||||||||||||||
| 2109 | Buford | GA | — | 536 | 3,142 | 343 | 536 | 3,486 | 4,022 | (638 | ) | 2012 | |||||||||||||||||||||||||||
| 2053 | Canton | GA | — | 401 | 17,888 | 473 | 401 | 18,361 | 18,762 | (2,366 | ) | 2012 | |||||||||||||||||||||||||||
| 2165 | Hartwell | GA | — | 368 | 6,337 | 300 | 368 | 6,637 | 7,005 | (1,009 | ) | 2012 | |||||||||||||||||||||||||||
| 2066 | Lawrenceville | GA | — | 581 | 2,669 | 417 | 581 | 3,085 | 3,666 | (654 | ) | 2012 | |||||||||||||||||||||||||||
| 1241 | Lilburn | GA | — | 907 | 17,340 | 325 | 907 | 17,102 | 18,009 | (4,841 | ) | 2006 | |||||||||||||||||||||||||||
| 2086 | Newnan | GA | — | 1,227 | 4,202 | 503 | 1,227 | 4,705 | 5,932 | (933 | ) | 2012 | |||||||||||||||||||||||||||
| 1005 | Oak Park | IL | — | 3,476 | 35,259 | 1,862 | 3,476 | 36,575 | 40,051 | (9,556 | ) | 2006 | |||||||||||||||||||||||||||
| 1162 | Orland Park | IL | — | 2,623 | 23,154 | 1,614 | 2,623 | 23,992 | 26,615 | (6,697 | ) | 2006 | |||||||||||||||||||||||||||
| 1237 | Wilmette | IL | — | 1,100 | 9,373 | 774 | 1,100 | 9,922 | 11,022 | (2,711 | ) | 2006 | |||||||||||||||||||||||||||
| 1105 | Louisville | KY | — | 1,499 | 26,252 | 240 | 1,513 | 25,813 | 27,326 | (7,379 | ) | 2006 | |||||||||||||||||||||||||||
| 2115 | Murray | KY | — | 288 | 7,400 | 299 | 288 | 7,698 | 7,986 | (1,286 | ) | 2012 | |||||||||||||||||||||||||||
| 1158 | Plymouth | MA | — | 2,434 | 9,027 | 879 | 2,438 | 9,105 | 11,543 | (2,554 | ) | 2006 | |||||||||||||||||||||||||||
| 1249 | Frederick | MD | — | 609 | 9,158 | 840 | 609 | 9,665 | 10,274 | (2,830 | ) | 2006 | |||||||||||||||||||||||||||
| 0281 | Westminster | MD | — | 768 | 5,251 | 1,451 | 768 | 6,758 | 7,526 | (2,544 | ) | 1998 | |||||||||||||||||||||||||||
| 0546 | Cape Elizabeth | ME | — | 630 | 3,524 | 93 | 630 | 3,617 | 4,247 | (1,337 | ) | 2003 | |||||||||||||||||||||||||||
| 0545 | Saco | ME | — | 80 | 2,363 | 155 | 80 | 2,518 | 2,598 | (928 | ) | 2003 | |||||||||||||||||||||||||||
| 1258 | Auburn Hills | MI | — | 2,281 | 10,692 | — | 2,281 | 10,692 | 12,973 | (3,007 | ) | 2006 | |||||||||||||||||||||||||||
| 1248 | Farmington Hills | MI | — | 1,013 | 12,119 | 939 | 1,013 | 12,418 | 13,431 | (3,530 | ) | 2006 | |||||||||||||||||||||||||||
| 1259 | Sterling Heights | MI | — | 1,593 | 11,500 | — | 1,593 | 11,181 | 12,774 | (3,145 | ) | 2006 | |||||||||||||||||||||||||||
| 1235 | Des Peres | MO | — | 4,361 | 20,664 | 1,225 | 4,361 | 21,271 | 25,632 | (5,760 | ) | 2006 | |||||||||||||||||||||||||||
| 1236 | Richmond Heights | MO | — | 1,744 | 24,232 | 368 | 1,744 | 23,915 | 25,659 | (6,701 | ) | 2006 | |||||||||||||||||||||||||||
| 0853 | St. Louis | MO | — | 2,500 | 20,343 | — | 2,500 | 19,853 | 22,353 | (7,665 | ) | 2006 | |||||||||||||||||||||||||||
| 2074 | Oxford | MS | — | 2,003 | 14,140 | 231 | 2,003 | 14,371 | 16,374 | (2,089 | ) | 2012 | |||||||||||||||||||||||||||
| 0878 | Charlotte | NC | — | 710 | 9,559 | — | 710 | 9,159 | 9,869 | (2,538 | ) | 2006 | |||||||||||||||||||||||||||
| 2465 | Charlotte | NC | — | 1,373 | 10,774 | — | 1,373 | 10,774 | 12,147 | (778 | ) | 2016 | |||||||||||||||||||||||||||
| 2468 | Franklin | NC | — | 1,082 | 8,489 | — | 1,082 | 8,489 | 9,571 | (613 | ) | 2016 | |||||||||||||||||||||||||||
| 2126 | Mooresville | NC | — | 2,538 | 37,617 | 1,684 | 2,538 | 39,302 | 41,840 | (5,390 | ) | 2012 | |||||||||||||||||||||||||||
| 2466 | Raeford | NC | — | 1,304 | 10,230 | — | 1,304 | 10,230 | 11,534 | (739 | ) | 2016 | |||||||||||||||||||||||||||
| 1254 | Raleigh | NC | — | 1,191 | 11,532 | 489 | 1,191 | 11,681 | 12,872 | (3,429 | ) | 2006 | |||||||||||||||||||||||||||
| 2127 | Minot | ND | — | 685 | 16,047 | 676 | 685 | 16,723 | 17,408 | (2,486 | ) | 2012 | |||||||||||||||||||||||||||
| 1599 | Cherry Hill | NJ | — | 2,420 | 11,042 | 2,294 | 2,420 | 12,785 | 15,205 | (3,685 | ) | 2010 | |||||||||||||||||||||||||||
| 1239 | Cresskill | NJ | — | 4,684 | 53,927 | 501 | 4,684 | 53,406 | 58,090 | (15,063 | ) | 2006 | |||||||||||||||||||||||||||
| 0734 | Hillsborough | NJ | — | 1,042 | 10,042 | 491 | 1,042 | 10,066 | 11,108 | (3,125 | ) | 2005 | |||||||||||||||||||||||||||
| 1242 | Madison | NJ | — | 3,157 | 19,909 | 179 | 3,157 | 19,468 | 22,625 | (5,475 | ) | 2006 | |||||||||||||||||||||||||||
| 0733 | Manahawkin | NJ | — | 921 | 9,927 | 691 | 921 | 10,152 | 11,073 | (3,191 | ) | 2005 | |||||||||||||||||||||||||||
| 1231 | Saddle River | NJ | — | 1,784 | 15,625 | 612 | 1,784 | 15,640 | 17,424 | (4,452 | ) | 2006 | |||||||||||||||||||||||||||
| 0245 | Voorhees Township | NJ | — | 900 | 7,629 | 520 | 900 | 8,149 | 9,049 | (3,287 | ) | 1998 | |||||||||||||||||||||||||||
| 0796 | Las Vegas | NV | — | 1,960 | 5,816 | — | 1,960 | 5,426 | 7,386 | (1,685 | ) | 2005 | |||||||||||||||||||||||||||
| 1252 | Brooklyn | NY | — | 8,117 | 23,627 | 1,057 | 8,117 | 23,577 | 31,694 | (6,701 | ) | 2006 | |||||||||||||||||||||||||||
| 1256 | Brooklyn | NY | — | 5,215 | 39,052 | 1,079 | 5,215 | 39,197 | 44,412 | (11,181 | ) | 2006 | |||||||||||||||||||||||||||
| 2174 | Orchard Park | NY | — | 726 | 17,735 | — | 726 | 17,735 | 18,461 | (2,957 | ) | 2012 | |||||||||||||||||||||||||||
| 1386 | Marietta | OH | — | 1,069 | 11,435 | 668 | 1,069 | 11,898 | 12,967 | (4,322 | ) | 2007 | |||||||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3069 | San Diego | CA | — | 7,054 | 7,794 | 19,748 | 6,954 | 27,642 | 34,596 | (3,467) | 2007/2021 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3104 | San Diego | CA | — | — | — | 40,755 | — | 40,755 | 40,755 | — | — | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3110 | San Diego | CA | — | 19,120 | — | 7,212 | 20,587 | 5,745 | 26,332 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3111 | San Diego | CA | — | 24,729 | — | 1,261 | 24,830 | 1,160 | 25,990 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3153 | San Diego | CA | — | 1,215 | — | 30 | 1,216 | 29 | 1,245 | — | — | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1410 | South San Francisco | CA | — | 4,900 | 18,100 | 12,159 | 4,900 | 30,259 | 35,159 | (14,389) | 2000/2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1411 | South San Francisco | CA | — | 8,000 | 27,700 | 33,159 | 8,000 | 60,859 | 68,859 | (18,496) | 2003/2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1412 | South San Francisco | CA | — | 10,100 | 22,521 | 10,207 | 10,100 | 32,728 | 42,828 | (12,170) | 1999 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1413 | South San Francisco | CA | — | 8,000 | 28,299 | 8,489 | 8,000 | 36,788 | 44,788 | (17,427) | 2000 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1430 | South San Francisco | CA | — | 10,700 | 23,621 | 27,632 | 10,700 | 51,253 | 61,953 | (14,113) | 1998/2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1431 | South San Francisco | CA | — | 7,000 | 15,500 | 9,493 | 7,000 | 24,993 | 31,993 | (10,242) | 2001 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1435 | South San Francisco | CA | — | 13,800 | 42,500 | 26,975 | 13,800 | 69,475 | 83,275 | (25,159) | 2008/2010 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1436 | South San Francisco | CA | — | 14,500 | 45,300 | 25,437 | 14,500 | 70,737 | 85,237 | (24,676) | 2008/2010 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1437 | South San Francisco | CA | — | 9,400 | 24,800 | 36,758 | 9,400 | 61,558 | 70,958 | (21,946) | 2008/2010 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1439 | South San Francisco | CA | — | 11,900 | 68,848 | 929 | 11,900 | 69,777 | 81,677 | (28,268) | 2003 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1440 | South San Francisco | CA | — | 10,000 | 57,954 | 471 | 10,000 | 58,425 | 68,425 | (23,883) | 2003 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1441 | South San Francisco | CA | — | 9,300 | 43,549 | 3,004 | 9,300 | 46,553 | 55,853 | (16,875) | 2003 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1442 | South San Francisco | CA | — | 11,000 | 47,289 | 42,670 | 11,000 | 89,959 | 100,959 | (21,784) | 2023 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1443 | South San Francisco | CA | — | 13,200 | 60,932 | 3,259 | 13,200 | 64,191 | 77,391 | (24,832) | 2007 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1444 | South San Francisco | CA | — | 10,500 | 33,776 | 9,449 | 10,500 | 43,225 | 53,725 | (13,088) | 2003 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1445 | South San Francisco | CA | — | 10,600 | 34,083 | 11 | 10,600 | 34,094 | 44,694 | (13,995) | 2003 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1458 | South San Francisco | CA | — | 10,900 | 20,900 | 6,560 | 10,900 | 27,460 | 38,360 | (9,607) | 2005 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1459 | South San Francisco | CA | — | 9,800 | 400 | 157,931 | 9,800 | 158,331 | 168,131 | (4,460) | 2023 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1462 | South San Francisco | CA | — | 7,117 | 600 | 4,112 | 7,117 | 4,712 | 11,829 | (1,785) | 1984/2012 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1463 | South San Francisco | CA | — | 10,381 | 2,300 | 19,648 | 10,381 | 21,948 | 32,329 | (8,511) | 1979/2012 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1464 | South San Francisco | CA | — | 7,403 | 700 | 8,819 | 7,403 | 9,519 | 16,922 | (2,723) | 1965/2012 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1468 | South San Francisco | CA | — | 10,100 | 24,013 | 12,188 | 10,100 | 36,201 | 46,301 | (15,058) | 2006 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1480 | South San Francisco | CA | — | 32,210 | 3,110 | 161,341 | 32,210 | 164,451 | 196,661 | (472) | 2023 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1528 | South San Francisco | CA | — | — | — | 165,770 | — | 165,770 | 165,770 | — | — | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1559 | South San Francisco | CA | — | 5,666 | 5,773 | 161 | 5,666 | 5,934 | 11,600 | (5,919) | 1968 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1560 | South San Francisco | CA | — | 1,204 | 1,293 | 2,683 | 1,204 | 3,976 | 5,180 | (2,917) | 1966 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1983 | South San Francisco | CA | — | 8,648 | — | 97,280 | 8,648 | 97,280 | 105,928 | (34,710) | 2016 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1984 | South San Francisco | CA | — | 7,845 | — | 90,818 | 7,844 | 90,819 | 98,663 | (29,712) | 2017 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1985 | South San Francisco | CA | — | 6,708 | — | 122,646 | 6,708 | 122,646 | 129,354 | (37,274) | 2017 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1986 | South San Francisco | CA | — | 6,708 | — | 120,613 | 6,708 | 120,613 | 127,321 | (31,623) | 2018 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1987 | South San Francisco | CA | — | 8,544 | — | 100,777 | 8,544 | 100,777 | 109,321 | (23,837) | 2019 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1988 | South San Francisco | CA | — | 10,120 | — | 118,498 | 10,120 | 118,498 | 128,618 | (29,452) | 2019 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1989 | South San Francisco | CA | — | 9,169 | — | 100,338 | 9,169 | 100,338 | 109,507 | (18,597) | 2020 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2553 | South San Francisco | CA | — | 2,897 | 8,691 | 4,478 | 2,897 | 13,169 | 16,066 | (4,340) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2554 | South San Francisco | CA | — | 995 | 2,754 | 2,332 | 995 | 5,086 | 6,081 | (1,393) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2555 | South San Francisco | CA | — | 2,202 | 10,776 | 2,497 | 2,202 | 13,273 | 15,475 | (3,326) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2556 | South San Francisco | CA | — | 2,962 | 15,108 | 1,557 | 2,962 | 16,665 | 19,627 | (4,087) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2557 | South San Francisco | CA | — | 2,453 | 13,063 | 3,616 | 2,453 | 16,679 | 19,132 | (5,840) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2558 | South San Francisco | CA | — | 1,163 | 5,925 | 315 | 1,163 | 6,240 | 7,403 | (1,438) | 1988 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2624 | South San Francisco | CA | — | 25,502 | 42,910 | 14,017 | 25,502 | 56,927 | 82,429 | (13,911) | 2001 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2870 | South San Francisco | CA | — | 23,297 | 41,797 | 28,777 | 23,297 | 70,574 | 93,871 | (17,071) | 1996/2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2871 | South San Francisco | CA | — | 20,293 | 41,262 | 22,089 | 20,293 | 63,351 | 83,644 | (19,258) | 1999/2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3100 | South San Francisco | CA | — | 24,059 | — | 3,733 | 24,059 | 3,733 | 27,792 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3101 | South San Francisco | CA | — | 61,208 | — | 22,276 | 61,208 | 22,276 | 83,484 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3102 | South San Francisco | CA | — | 43,885 | — | 3,806 | 43,885 | 3,806 | 47,691 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3123 | South San Francisco | CA | — | — | — | 6,455 | — | 6,455 | 6,455 | — | — | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2705 | Cambridge | MA | — | 24,371 | 128,498 | 83 | 24,371 | 128,581 | 152,952 | (13,274) | 2011 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2706 | Cambridge | MA | — | 15,473 | 149,051 | 797 | 15,473 | 149,848 | 165,321 | (16,851) | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2707 | Cambridge | MA | — | 25,549 | 229,547 | 8,597 | 25,549 | 238,144 | 263,693 | (24,757) | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2708 | Cambridge | MA | — | — | 17,751 | 513 | — | 18,264 | 18,264 | (1,419) | 2010 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2709 | Cambridge | MA | — | — | 15,451 | 29 | — | 15,480 | 15,480 | (1,192) | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2928 | Cambridge | MA | — | 44,215 | 24,120 | 3,076 | 44,215 | 27,196 | 71,411 | (3,966) | 1984 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2929 | Cambridge | MA | — | 20,517 | — | 158,992 | 20,517 | 158,992 | 179,509 | (8,248) | 2022 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3074 | Cambridge | MA | — | 78,762 | 252,153 | 11,380 | 78,762 | 263,533 | 342,295 | (32,549) | 2018 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3106 | Cambridge | MA | — | 20,644 | 2,982 | 570 | 20,644 | 3,552 | 24,196 | (238) | 1950 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3107 | Cambridge | MA | — | 19,009 | 12,327 | — | 19,009 | 12,327 | 31,336 | (841) | 1973 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3108 | Cambridge | MA | — | 123,074 | 7,513 | — | 123,074 | 7,513 | 130,587 | (678) | 1965 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3109 | Cambridge | MA | — | 5,903 | — | 362 | 5,903 | 362 | 6,265 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3112 | Cambridge | MA | — | 23,402 | 47,623 | 69 | 23,402 | 47,692 | 71,094 | (3,950) | 1985 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3113 | Cambridge | MA | — | 32,244 | — | 6,730 | 36,119 | 2,855 | 38,974 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3114 | Cambridge | MA | — | 22,969 | — | (2,306) | 22,969 | (2,306) | 20,663 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3115 | Cambridge | MA | — | 66,786 | — | 1,418 | 66,786 | 1,418 | 68,204 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3116 | Cambridge | MA | — | — | — | 9,680 | — | 9,680 | 9,680 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3119 | Cambridge | MA | — | — | 29,667 | — | — | 29,667 | 29,667 | (2,041) | 2021 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3120 | Cambridge | MA | — | 18,063 | — | 670 | 18,063 | 670 | 18,733 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3122 | Cambridge | MA | — | 25,247 | — | 2,081 | 25,247 | 2,081 | 27,328 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3136 | Cambridge | MA | — | 4,118 | — | (219) | 4,119 | (220) | 3,899 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3137 | Cambridge | MA | — | 41,327 | — | 2,767 | 41,327 | 2,767 | 44,094 | — | — | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3141 | Cambridge | MA | — | 72,466 | — | 5,757 | 72,768 | 5,455 | 78,223 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3148 | Cambridge | MA | — | 2,277 | — | 704 | 2,290 | 691 | 2,981 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3149 | Cambridge | MA | — | 5,690 | — | 314 | 5,734 | 270 | 6,004 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3150 | Cambridge | MA | — | 1,651 | — | 206 | 1,659 | 198 | 1,857 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3151 | Cambridge | MA | — | 8,532 | — | 457 | 8,583 | 406 | 8,989 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3152 | Cambridge | MA | — | 9,892 | — | 1,035 | 10,507 | 420 | 10,927 | — | — | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2630 | Lexington | MA | — | 16,411 | 49,681 | (2,292) | 12,967 | 50,833 | 63,800 | (10,653) | 1999 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2631 | Lexington | MA | — | 7,759 | 142,081 | 30,228 | 6,978 | 173,090 | 180,068 | (27,404) | 2010/2023 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2632 | Lexington | MA | — | — | 21,390 | 125,076 | — | 146,466 | 146,466 | (18,615) | 2021 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
127
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 1253 | Youngstown | OH | — | 695 | 10,444 | 744 | 695 | 10,842 | 11,537 | (3,113 | ) | 2006 | |||||||||||||||||||||||||||
| 2083 | Oklahoma City | OK | — | 2,116 | 28,007 | 1,939 | 2,116 | 29,946 | 32,062 | (4,569 | ) | 2012 | |||||||||||||||||||||||||||
| 2131 | Keizer | OR | 2,431 | 551 | 6,454 | — | 551 | 6,454 | 7,005 | (938 | ) | 2013 | |||||||||||||||||||||||||||
| 2152 | McMinnville | OR | — | 3,203 | 24,909 | 5,381 | 3,203 | 28,796 | 31,999 | (5,040 | ) | 2012 | |||||||||||||||||||||||||||
| 2089 | Newberg | OR | — | 1,889 | 16,855 | 837 | 1,889 | 17,692 | 19,581 | (2,428 | ) | 2012 | |||||||||||||||||||||||||||
| 2133 | Portland | OR | — | 1,615 | 12,030 | 169 | 1,615 | 12,199 | 13,814 | (1,592 | ) | 2012 | |||||||||||||||||||||||||||
| 2171 | Portland | OR | — | — | 16,087 | 311 | — | 16,398 | 16,398 | (2,069 | ) | 2012 | |||||||||||||||||||||||||||
| 2050 | Redmond | OR | — | 1,229 | 21,921 | 809 | 1,229 | 22,731 | 23,960 | (2,932 | ) | 2012 | |||||||||||||||||||||||||||
| 2084 | Roseburg | OR | — | 1,042 | 12,090 | 134 | 1,042 | 12,223 | 13,265 | (1,918 | ) | 2012 | |||||||||||||||||||||||||||
| 2134 | Scappoose | OR | — | 353 | 1,258 | 17 | 353 | 1,275 | 1,628 | (264 | ) | 2012 | |||||||||||||||||||||||||||
| 2153 | Scappoose | OR | — | 971 | 7,116 | 142 | 971 | 7,258 | 8,229 | (1,311 | ) | 2012 | |||||||||||||||||||||||||||
| 2056 | Stayton | OR | — | 48 | 569 | 19 | 48 | 588 | 636 | (160 | ) | 2012 | |||||||||||||||||||||||||||
| 2058 | Stayton | OR | — | 253 | 8,621 | 140 | 253 | 8,762 | 9,015 | (1,370 | ) | 2012 | |||||||||||||||||||||||||||
| 2088 | Tualatin | OR | — | — | 6,326 | 375 | — | 6,701 | 6,701 | (1,376 | ) | 2012 | |||||||||||||||||||||||||||
| 2180 | Windfield Village | OR | 2,722 | 580 | 9,817 | — | 580 | 9,817 | 10,397 | (1,424 | ) | 2013 | |||||||||||||||||||||||||||
| 1163 | Haverford | PA | — | 16,461 | 108,816 | 12,128 | 16,461 | 116,731 | 133,192 | (33,431 | ) | 2006 | |||||||||||||||||||||||||||
| 2063 | Selinsgrove | PA | — | 529 | 9,111 | 237 | 529 | 9,349 | 9,878 | (1,625 | ) | 2012 | |||||||||||||||||||||||||||
| 1973 | South Kingstown | RI | — | 1,390 | 12,551 | 630 | 1,390 | 12,918 | 14,308 | (3,187 | ) | 2011 | |||||||||||||||||||||||||||
| 1975 | Tiverton | RI | — | 3,240 | 25,735 | 651 | 3,240 | 25,938 | 29,178 | (6,242 | ) | 2011 | |||||||||||||||||||||||||||
| 1104 | Aiken | SC | — | 357 | 14,832 | 151 | 363 | 14,395 | 14,758 | (4,081 | ) | 2006 | |||||||||||||||||||||||||||
| 1109 | Columbia | SC | — | 408 | 7,527 | 131 | 412 | 7,414 | 7,826 | (2,123 | ) | 2006 | |||||||||||||||||||||||||||
| 0306 | Georgetown | SC | — | 239 | 3,008 | — | 239 | 3,008 | 3,247 | (1,236 | ) | 1998 | |||||||||||||||||||||||||||
| 0879 | Greenville | SC | — | 1,090 | 12,558 | — | 1,090 | 12,058 | 13,148 | (3,341 | ) | 2006 | |||||||||||||||||||||||||||
| 0305 | Lancaster | SC | — | 84 | 2,982 | — | 84 | 2,982 | 3,066 | (1,142 | ) | 1998 | |||||||||||||||||||||||||||
| 0880 | Myrtle Beach | SC | — | 900 | 10,913 | — | 900 | 10,513 | 11,413 | (2,913 | ) | 2006 | |||||||||||||||||||||||||||
| 0312 | Rock Hill | SC | — | 203 | 2,671 | — | 203 | 2,671 | 2,874 | (1,077 | ) | 1998 | |||||||||||||||||||||||||||
| 1113 | Rock Hill | SC | — | 695 | 4,119 | 322 | 795 | 4,074 | 4,869 | (1,313 | ) | 2006 | |||||||||||||||||||||||||||
| 0313 | Sumter | SC | — | 196 | 2,623 | — | 196 | 2,623 | 2,819 | (1,078 | ) | 1998 | |||||||||||||||||||||||||||
| 2073 | Kingsport | TN | — | 1,113 | 8,625 | 322 | 1,113 | 8,947 | 10,060 | (1,418 | ) | 2012 | |||||||||||||||||||||||||||
| 1003 | Nashville | TN | — | 812 | 16,983 | 2,524 | 812 | 18,759 | 19,571 | (4,691 | ) | 2006 | |||||||||||||||||||||||||||
| 0843 | Abilene | TX | — | 300 | 2,830 | — | 300 | 2,710 | 3,010 | (785 | ) | 2006 | |||||||||||||||||||||||||||
| 2107 | Amarillo | TX | — | 1,315 | 26,838 | 582 | 1,315 | 27,417 | 28,732 | (3,790 | ) | 2012 | |||||||||||||||||||||||||||
| 1116 | Arlington | TX | — | 2,494 | 12,192 | 249 | 2,540 | 11,847 | 14,387 | (3,472 | ) | 2006 | |||||||||||||||||||||||||||
| 0511 | Austin | TX | — | 2,960 | 41,645 | — | 2,960 | 41,645 | 44,605 | (19,781 | ) | 2002 | |||||||||||||||||||||||||||
| 2075 | Bedford | TX | — | 1,204 | 26,845 | 1,599 | 1,204 | 28,444 | 29,648 | (4,134 | ) | 2012 | |||||||||||||||||||||||||||
| 0844 | Burleson | TX | — | 1,050 | 5,242 | — | 1,050 | 4,902 | 5,952 | (1,420 | ) | 2006 | |||||||||||||||||||||||||||
| 0848 | Cedar Hill | TX | — | 1,070 | 11,554 | — | 1,070 | 11,104 | 12,174 | (3,215 | ) | 2006 | |||||||||||||||||||||||||||
| 1325 | Cedar Hill | TX | — | 440 | 7,494 | — | 440 | 6,974 | 7,414 | (1,874 | ) | 2007 | |||||||||||||||||||||||||||
| 0506 | Friendswood | TX | — | 400 | 7,354 | 174 | 400 | 7,528 | 7,928 | (2,582 | ) | 2002 | |||||||||||||||||||||||||||
| 0217 | Houston | TX | — | 835 | 7,195 | 454 | 835 | 7,649 | 8,484 | (3,306 | ) | 1997 | |||||||||||||||||||||||||||
| 1106 | Houston | TX | — | 1,008 | 15,333 | 183 | 1,020 | 15,052 | 16,072 | (4,314 | ) | 2006 | |||||||||||||||||||||||||||
| 0845 | North Richland Hills | TX | — | 520 | 5,117 | — | 520 | 4,807 | 5,327 | (1,392 | ) | 2006 | |||||||||||||||||||||||||||
| 0846 | North Richland Hills | TX | — | 870 | 9,259 | — | 870 | 8,819 | 9,689 | (2,919 | ) | 2006 | |||||||||||||||||||||||||||
| 2162 | Portland | TX | — | 1,233 | 14,001 | 1,353 | 1,233 | 15,354 | 16,587 | (2,520 | ) | 2012 | |||||||||||||||||||||||||||
| 2116 | Sherman | TX | — | 209 | 3,492 | 377 | 209 | 3,870 | 4,079 | (647 | ) | 2012 | |||||||||||||||||||||||||||
| 0847 | Waxahachie | TX | — | 390 | 3,879 | — | 390 | 3,659 | 4,049 | (1,059 | ) | 2006 | |||||||||||||||||||||||||||
| 2470 | Abingdon | VA | — | 1,584 | 12,431 | — | 1,584 | 12,431 | 14,015 | (898 | ) | 2016 | |||||||||||||||||||||||||||
| 1244 | Arlington | VA | — | 3,833 | 7,076 | 882 | 3,833 | 7,630 | 11,463 | (2,248 | ) | 2006 | |||||||||||||||||||||||||||
| 1245 | Arlington | VA | — | 7,278 | 37,407 | 3,185 | 7,278 | 39,481 | 46,759 | (10,900 | ) | 2006 | |||||||||||||||||||||||||||
| 0881 | Chesapeake | VA | — | 1,090 | 12,444 | — | 1,090 | 11,944 | 13,034 | (3,310 | ) | 2006 | |||||||||||||||||||||||||||
| 1247 | Falls Church | VA | — | 2,228 | 8,887 | 677 | 2,228 | 9,240 | 11,468 | (2,734 | ) | 2006 | |||||||||||||||||||||||||||
| 1164 | Fort Belvoir | VA | — | 11,594 | 99,528 | 11,862 | 11,594 | 108,676 | 120,270 | (31,972 | ) | 2006 | |||||||||||||||||||||||||||
| 1250 | Leesburg | VA | — | 607 | 3,236 | 206 | 607 | 3,230 | 3,837 | (3,196 | ) | 2006 | |||||||||||||||||||||||||||
| 1246 | Sterling | VA | — | 2,360 | 22,932 | 1,059 | 2,360 | 23,228 | 25,588 | (6,672 | ) | 2006 | |||||||||||||||||||||||||||
| 2077 | Sterling | VA | — | 1,046 | 15,788 | 385 | 1,046 | 16,173 | 17,219 | (2,214 | ) | 2012 | |||||||||||||||||||||||||||
| 0225 | Woodbridge | VA | — | 950 | 6,983 | 1,459 | 950 | 8,442 | 9,392 | (3,516 | ) | 1997 | |||||||||||||||||||||||||||
| 1173 | Bellevue | WA | — | 3,734 | 16,171 | 645 | 3,737 | 16,094 | 19,831 | (4,541 | ) | 2006 | |||||||||||||||||||||||||||
| 2095 | College Place | WA | — | 758 | 8,051 | 701 | 758 | 8,752 | 9,510 | (1,437 | ) | 2012 | |||||||||||||||||||||||||||
| 1240 | Edmonds | WA | — | 1,418 | 16,502 | 105 | 1,418 | 16,102 | 17,520 | (4,552 | ) | 2006 | |||||||||||||||||||||||||||
| 2160 | Kenmore | WA | — | 3,284 | 16,641 | 638 | 3,284 | 17,278 | 20,562 | (2,406 | ) | 2012 | |||||||||||||||||||||||||||
| 0797 | Kirkland | WA | — | 1,000 | 13,403 | — | 1,000 | 13,043 | 14,043 | (4,049 | ) | 2005 | |||||||||||||||||||||||||||
| 1251 | Mercer Island | WA | — | 4,209 | 8,123 | 581 | 4,209 | 8,202 | 12,411 | (2,334 | ) | 2006 | |||||||||||||||||||||||||||
| 2096 | Poulsbo | WA | — | 1,801 | 18,068 | 224 | 1,801 | 18,292 | 20,093 | (2,734 | ) | 2012 | |||||||||||||||||||||||||||
| 2102 | Richland | WA | — | 249 | 5,067 | 135 | 249 | 5,202 | 5,451 | (764 | ) | 2012 | |||||||||||||||||||||||||||
| 0794 | Shoreline | WA | — | 1,590 | 10,671 | — | 1,590 | 10,261 | 11,851 | (3,185 | ) | 2005 | |||||||||||||||||||||||||||
| 0795 | Shoreline | WA | — | 4,030 | 26,421 | 42 | 4,030 | 25,691 | 29,721 | (7,898 | ) | 2005 | |||||||||||||||||||||||||||
| 2061 | Vancouver | WA | — | 513 | 4,556 | 246 | 513 | 4,802 | 5,315 | (888 | ) | 2012 | |||||||||||||||||||||||||||
| 2062 | Vancouver | WA | — | 1,498 | 9,997 | 192 | 1,498 | 10,189 | 11,687 | (1,477 | ) | 2012 | |||||||||||||||||||||||||||
| 2052 | Yakima | WA | — | 557 | 5,897 | 176 | 557 | 6,074 | 6,631 | (931 | ) | 2012 | |||||||||||||||||||||||||||
| 2078 | Yakima | WA | — | 353 | 5,668 | 27 | 353 | 5,695 | 6,048 | (781 | ) | 2012 | |||||||||||||||||||||||||||
| 2117 | Bridgeport | WV | — | 3,174 | 15,437 | 493 | 3,174 | 15,930 | 19,104 | (3,028 | ) | 2012 | |||||||||||||||||||||||||||
| 2148 | Sheridan | WY | — | 915 | 12,047 | 1,242 | 915 | 13,289 | 14,204 | (2,149 | ) | 2012 | |||||||||||||||||||||||||||
| $ | 50,763 | $ | 289,180 | $ | 2,387,674 | $ | 123,120 | $ | 289,448 | $ | 2,457,872 | $ | 2,747,320 | $ | (641,170 | ) | |||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3070 | Lexington | MA | — | 14,013 | 17,083 | (269) | 14,013 | 16,814 | 30,827 | (2,534) | 1974/2012 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3071 | Lexington | MA | — | 14,930 | 16,677 | (359) | 14,930 | 16,318 | 31,248 | (2,236) | 1970/2012 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3072 | Lexington | MA | — | 34,598 | 43,032 | (288) | 34,598 | 42,744 | 77,342 | (7,547) | 1967/2013 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3073 | Lexington | MA | — | 37,050 | 44,647 | 144 | 37,050 | 44,791 | 81,841 | (8,051) | 2017 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3093 | Waltham | MA | — | 47,792 | 275,556 | 18,351 | 47,792 | 293,907 | 341,699 | (38,172) | 2018 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9999 | Denton | TX | — | 100 | — | — | 100 | — | 100 | — | — | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 464 | Salt Lake City | UT | — | 630 | 6,921 | 2,563 | 630 | 9,484 | 10,114 | (5,812) | 1996 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 465 | Salt Lake City | UT | — | 125 | 6,368 | 68 | 125 | 6,436 | 6,561 | (3,267) | 1999 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 466 | Salt Lake City | UT | — | — | 14,614 | (1,401) | — | 13,213 | 13,213 | (5,371) | 2002 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1593 | Salt Lake City | UT | — | — | 23,998 | 250 | — | 24,248 | 24,248 | (9,774) | 2010 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | — | $ | 1,936,228 | $ | 3,238,815 | $ | 3,654,501 | $ | 1,939,357 | $ | 6,890,187 | $ | 8,829,544 | $ | (1,444,864) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
128
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| Senior housing operating portfolio | |||||||||||||||||||||||||||||||||||||||
| 1974 | Sun City | AZ | — | 2,640 | 33,223 | 2,685 | 2,640 | 35,378 | 38,018 | (9,041 | ) | 2011 | |||||||||||||||||||||||||||
| 2729 | Clearlake | CA | — | 354 | 4,799 | 306 | 354 | 4,635 | 4,989 | (898 | ) | 2012 | |||||||||||||||||||||||||||
| 1965 | Fresno | CA | — | 1,730 | 31,918 | 2,117 | 1,730 | 33,605 | 35,335 | (8,408 | ) | 2011 | |||||||||||||||||||||||||||
| 2726 | Fortuna | CA | — | 818 | 3,295 | 63 | 818 | 3,358 | 4,176 | (1,582 | ) | 2012 | |||||||||||||||||||||||||||
| 2728 | Fortuna | CA | — | 1,346 | 11,856 | 176 | 1,346 | 10,618 | 11,964 | (3,568 | ) | 2012 | |||||||||||||||||||||||||||
| 2593 | Irvine | CA | — | 8,220 | 14,104 | 539 | 8,220 | 14,103 | 22,323 | (3,465 | ) | 2006 | |||||||||||||||||||||||||||
| 2725 | Palm Springs | CA | — | 1,005 | 5,183 | 619 | 1,005 | 5,263 | 6,268 | (2,097 | ) | 2006 | |||||||||||||||||||||||||||
| 1966 | Sun City | CA | — | 2,650 | 22,709 | 3,863 | 2,650 | 26,118 | 28,768 | (7,323 | ) | 2011 | |||||||||||||||||||||||||||
| 2727 | Yreka | CA | — | 565 | 9,184 | 419 | 565 | 6,633 | 7,198 | (1,675 | ) | 2012 | |||||||||||||||||||||||||||
| 2505 | Arvada | CO | — | 1,788 | 29,896 | 1,016 | 1,788 | 30,912 | 32,700 | (2,694 | ) | 2015 | |||||||||||||||||||||||||||
| 2506 | Boulder | CO | — | 2,424 | 36,746 | 674 | 2,424 | 37,421 | 39,845 | (2,492 | ) | 2015 | |||||||||||||||||||||||||||
| 2515 | Denver | CO | — | 2,311 | 18,645 | 1,995 | 2,311 | 20,639 | 22,950 | (2,519 | ) | 2015 | |||||||||||||||||||||||||||
| 2508 | Lakewood | CO | — | 4,384 | 60,795 | 1,988 | 4,384 | 62,782 | 67,166 | (4,928 | ) | 2015 | |||||||||||||||||||||||||||
| 2509 | Lakewood | CO | — | 2,296 | 37,236 | 1,523 | 2,296 | 38,760 | 41,056 | (2,538 | ) | 2015 | |||||||||||||||||||||||||||
| 2603 | Boca Raton | FL | — | 2,415 | 17,923 | 858 | 2,415 | 17,726 | 20,141 | (4,534 | ) | 2006 | |||||||||||||||||||||||||||
| 1963 | Boynton Beach | FL | — | 2,550 | 31,521 | 3,665 | 2,550 | 34,521 | 37,071 | (9,003 | ) | 2011 | |||||||||||||||||||||||||||
| 1964 | Boynton Beach | FL | — | 570 | 5,649 | 2,826 | 570 | 8,282 | 8,852 | (2,799 | ) | 2011 | |||||||||||||||||||||||||||
| 2602 | Boynton Beach | FL | — | 1,270 | 4,773 | 1,918 | 1,270 | 4,775 | 6,045 | (1,278 | ) | 2003 | |||||||||||||||||||||||||||
| 2520 | Clearwater | FL | — | 2,250 | 2,627 | 1,588 | 2,250 | 3,635 | 5,885 | (1,095 | ) | 2015 | |||||||||||||||||||||||||||
| 2604 | Coconut Creek | FL | — | 2,461 | 16,006 | 2,461 | 2,461 | 15,712 | 18,173 | (3,933 | ) | 2006 | |||||||||||||||||||||||||||
| 2601 | Delray Beach | FL | — | 850 | 6,637 | 1,598 | 850 | 6,907 | 7,757 | (1,891 | ) | 2002 | |||||||||||||||||||||||||||
| 2517 | Ft Lauderdale | FL | — | 2,867 | 43,126 | 2,927 | 2,867 | 45,896 | 48,763 | (4,652 | ) | 2015 | |||||||||||||||||||||||||||
| 2518 | Lake Worth | FL | — | 1,669 | 13,267 | 1,180 | 1,669 | 14,447 | 16,116 | (1,916 | ) | 2015 | |||||||||||||||||||||||||||
| 2592 | Lantana | FL | — | 3,520 | 26,452 | 377 | 3,520 | 26,029 | 29,549 | (9,790 | ) | 2006 | |||||||||||||||||||||||||||
| 1968 | Largo | FL | — | 2,920 | 64,988 | 12,399 | 2,920 | 76,167 | 79,087 | (20,269 | ) | 2011 | |||||||||||||||||||||||||||
| 2522 | Lutz | FL | — | 902 | 15,169 | 55 | 902 | 16,152 | 17,054 | (1,213 | ) | 2015 | |||||||||||||||||||||||||||
| 2523 | Orange City | FL | — | 912 | 9,724 | 894 | 912 | 10,618 | 11,530 | (1,092 | ) | 2015 | |||||||||||||||||||||||||||
| 2524 | Port St Lucie | FL | — | 893 | 10,333 | 827 | 893 | 11,161 | 12,054 | (1,252 | ) | 2015 | |||||||||||||||||||||||||||
| 1971 | Sarasota | FL | — | 3,050 | 29,516 | 6,239 | 3,050 | 35,325 | 38,375 | (9,497 | ) | 2011 | |||||||||||||||||||||||||||
| 2525 | Sarasota | FL | — | 1,426 | 16,079 | 1,304 | 1,426 | 17,383 | 18,809 | (1,854 | ) | 2015 | |||||||||||||||||||||||||||
| 2526 | Tamarac | FL | — | 970 | 16,037 | 924 | 970 | 16,968 | 17,938 | (1,324 | ) | 2015 | |||||||||||||||||||||||||||
| 2513 | Venice | FL | — | 1,140 | 20,662 | 1,647 | 1,140 | 22,309 | 23,449 | (1,838 | ) | 2015 | |||||||||||||||||||||||||||
| 2527 | Vero Beach | FL | — | 1,048 | 17,392 | 1,342 | 1,048 | 18,733 | 19,781 | (1,440 | ) | 2015 | |||||||||||||||||||||||||||
| 2200 | Deer Park | IL | — | 4,172 | 2,417 | 44,534 | 4,229 | 44,478 | 48,707 | (2,244 | ) | 2014 | |||||||||||||||||||||||||||
| 2594 | Mount Vernon | IL | — | 296 | 15,935 | 4,340 | 512 | 19,728 | 20,240 | (5,122 | ) | 2006 | |||||||||||||||||||||||||||
| 1969 | Niles | IL | — | 3,790 | 32,912 | 5,884 | 3,790 | 38,024 | 41,814 | (10,772 | ) | 2011 | |||||||||||||||||||||||||||
| 1961 | Olympia Fields | IL | — | 4,120 | 29,400 | 3,832 | 4,120 | 32,706 | 36,826 | (8,523 | ) | 2011 | |||||||||||||||||||||||||||
| 1952 | Vernon Hills | IL | — | 4,900 | 45,854 | 5,999 | 4,900 | 51,157 | 56,057 | (13,321 | ) | 2011 | |||||||||||||||||||||||||||
| 2595 | Indianapolis | IN | — | 1,197 | 7,718 | 1,084 | 1,197 | 8,570 | 9,767 | (2,137 | ) | 2006 | |||||||||||||||||||||||||||
| 2596 | W Lafayette | IN | — | 813 | 10,876 | 1,324 | 813 | 11,949 | 12,762 | (3,023 | ) | 2006 | |||||||||||||||||||||||||||
| 2746 | Watertown | MA | — | 8,828 | 29,112 | 53 | 8,828 | 29,165 | 37,993 | (129 | ) | 2017 | |||||||||||||||||||||||||||
| 2583 | Ellicott City | MD | 19,469 | 3,607 | 31,720 | 1,239 | 3,607 | 32,959 | 36,566 | (1,280 | ) | 2016 | |||||||||||||||||||||||||||
| 2584 | Hanover | MD | 9,065 | 4,513 | 25,625 | 867 | 4,513 | 26,492 | 31,005 | (1,009 | ) | 2016 | |||||||||||||||||||||||||||
| 2585 | Laurel | MD | 5,879 | 3,895 | 13,331 | 993 | 3,895 | 14,323 | 18,218 | (709 | ) | 2016 | |||||||||||||||||||||||||||
| 2541 | Olney | MD | — | 1,580 | 33,802 | 158 | 1,580 | 33,960 | 35,540 | (2,247 | ) | 2015 | |||||||||||||||||||||||||||
| 2586 | Parkville | MD | 21,008 | 3,854 | 29,061 | 902 | 3,854 | 29,963 | 33,817 | (1,356 | ) | 2016 | |||||||||||||||||||||||||||
| 2587 | Waldorf | MD | 8,501 | 392 | 20,514 | 650 | 392 | 21,164 | 21,556 | (799 | ) | 2016 | |||||||||||||||||||||||||||
| 2741 | Lexington | NE | — | 474 | 8,405 | 474 | 474 | 6,362 | 6,836 | (1,657 | ) | 2012 | |||||||||||||||||||||||||||
| 2589 | Albuquerque | NM | — | 767 | 9,324 | 253 | 767 | 9,079 | 9,846 | (4,059 | ) | 1996 | |||||||||||||||||||||||||||
| 2740 | Rio Rancho | NM | — | 1,154 | 13,726 | 495 | 1,154 | 14,221 | 15,375 | (2,259 | ) | 2012 | |||||||||||||||||||||||||||
| 2735 | Roswell | NM | — | 618 | 7,038 | 1,010 | 618 | 7,741 | 8,359 | (1,578 | ) | 2012 | |||||||||||||||||||||||||||
| 2738 | Roswell | NM | — | 837 | 8,614 | 997 | 837 | 9,288 | 10,125 | (1,979 | ) | 2012 | |||||||||||||||||||||||||||
| 2733 | Las Vegas | NV | — | 667 | 14,469 | 509 | 667 | 10,347 | 11,014 | (2,592 | ) | 2012 | |||||||||||||||||||||||||||
| 2743 | Clifton Park | NY | — | 2,257 | 11,470 | 4 | 2,257 | 11,484 | 13,741 | (1,926 | ) | 2012 | |||||||||||||||||||||||||||
| 2742 | Orchard Park | NY | — | 478 | 11,961 | — | 478 | 11,961 | 12,439 | (1,984 | ) | 2012 | |||||||||||||||||||||||||||
| 2516 | Centerville | OH | — | 1,065 | 10,901 | 1,520 | 1,065 | 12,421 | 13,486 | (1,643 | ) | 2015 | |||||||||||||||||||||||||||
| 2512 | Cincinnati | OH | — | 1,180 | 6,157 | 1,393 | 1,180 | 7,549 | 8,729 | (1,442 | ) | 2015 | |||||||||||||||||||||||||||
| 2597 | Fairborn | OH | — | 298 | 10,704 | 3,895 | 298 | 14,368 | 14,666 | (3,732 | ) | 2006 | |||||||||||||||||||||||||||
| 2736 | Gresham | OR | — | 465 | 6,403 | 265 | 465 | 6,668 | 7,133 | (1,563 | ) | 2012 | |||||||||||||||||||||||||||
| 2744 | Hermiston | OR | 2,327 | 582 | 8,087 | — | 582 | 8,087 | 8,669 | (1,400 | ) | 2013 | |||||||||||||||||||||||||||
| 2739 | Portland | OR | — | 1,677 | 9,469 | 374 | 1,677 | 6,940 | 8,617 | (2,306 | ) | 2012 | |||||||||||||||||||||||||||
| 2730 | Cumberland | RI | — | 2,630 | 19,050 | 803 | 2,630 | 13,145 | 15,775 | (4,644 | ) | 2011 | |||||||||||||||||||||||||||
| 1959 | East Providence | RI | — | 1,890 | 13,989 | 1,447 | 1,890 | 15,183 | 17,073 | (4,117 | ) | 2011 | |||||||||||||||||||||||||||
| 1960 | Greenwich | RI | — | 450 | 11,845 | 1,846 | 450 | 13,414 | 13,864 | (3,796 | ) | 2011 | |||||||||||||||||||||||||||
| 2511 | Johnston | RI | — | 2,037 | 12,724 | 3,724 | 2,037 | 16,448 | 18,485 | (2,468 | ) | 2015 | |||||||||||||||||||||||||||
| 2731 | Smithfield | RI | — | 1,250 | 17,816 | 656 | 1,250 | 17,192 | 18,442 | (4,724 | ) | 2011 | |||||||||||||||||||||||||||
| 1962 | Warwick | RI | — | 1,050 | 17,389 | 6,772 | 1,050 | 23,804 | 24,854 | (5,580 | ) | 2011 | |||||||||||||||||||||||||||
| 2401 | Germantown | TN | — | 3,640 | 64,588 | 264 | 3,640 | 64,852 | 68,492 | (5,393 | ) | 2015 | |||||||||||||||||||||||||||
| 2608 | Arlington | TX | — | 2,002 | 19,110 | 128 | 2,002 | 18,857 | 20,859 | (5,035 | ) | 2006 | |||||||||||||||||||||||||||
| 2531 | Austin | TX | — | 607 | 15,972 | 424 | 607 | 16,396 | 17,003 | (1,126 | ) | 2015 | |||||||||||||||||||||||||||
| 2588 | Beaumont | TX | — | 145 | 10,404 | 324 | 145 | 10,282 | 10,427 | (4,679 | ) | 1995 | |||||||||||||||||||||||||||
| 2438 | Dallas | TX | — | 2,091 | 11,698 | 2,091 | 2,091 | 12,307 | 14,398 | (2,074 | ) | 2015 | |||||||||||||||||||||||||||
| 2528 | Graham | TX | — | 754 | 8,803 | 782 | 754 | 9,586 | 10,340 | (1,088 | ) | 2015 | |||||||||||||||||||||||||||
| 2529 | Grand Prairie | TX | — | 865 | 10,650 | 1,118 | 865 | 11,768 | 12,633 | (1,196 | ) | 2015 | |||||||||||||||||||||||||||
| 1955 | Houston | TX | — | 9,820 | 50,079 | 10,526 | 9,820 | 59,293 | 69,113 | (16,391 | ) | 2011 | |||||||||||||||||||||||||||
| 1957 | Houston | TX | — | 8,170 | 37,285 | 5,658 | 8,170 | 42,112 | 50,282 | (11,285 | ) | 2011 | |||||||||||||||||||||||||||
| 1958 | Houston | TX | — | 2,910 | 37,443 | 7,685 | 2,910 | 44,233 | 47,143 | (11,666 | ) | 2011 | |||||||||||||||||||||||||||
| 2402 | Houston | TX | — | 1,740 | 32,057 | 95 | 1,740 | 32,153 | 33,893 | (2,801 | ) | 2015 | |||||||||||||||||||||||||||
| 2606 | Houston | TX | — | 2,470 | 21,710 | 2,176 | 2,470 | 23,036 | 25,506 | (10,451 | ) | 2002 | |||||||||||||||||||||||||||
| 2530 | N Richland Hills | TX | — | 1,190 | 17,756 | 1,104 | 1,190 | 18,859 | 20,049 | (1,659 | ) | 2015 | |||||||||||||||||||||||||||
| 2532 | San Antonio | TX | — | 613 | 5,874 | 990 | 613 | 6,863 | 7,476 | (931 | ) | 2015 | |||||||||||||||||||||||||||
| 2607 | San Antonio | TX | — | 730 | 3,961 | 375 | 730 | 4,022 | 4,752 | (1,391 | ) | 2002 | |||||||||||||||||||||||||||
| 2533 | San Marcos | TX | — | 765 | 18,175 | 898 | 765 | 19,073 | 19,838 | (1,380 | ) | 2015 | |||||||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outpatient medical | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 638 | Anchorage | AK | $ | — | $ | 1,456 | $ | 10,650 | $ | 10,727 | $ | 1,456 | $ | 21,377 | $ | 22,833 | $ | (9,272) | 1993/2014 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3026 | Bentonville | AR | — | 912 | 21,724 | 658 | 912 | 22,382 | 23,294 | (1,712) | 2003 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 126 | Sherwood | AR | — | 709 | 9,604 | 208 | 709 | 9,812 | 10,521 | (7,007) | 1990 | 1989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2572 | Springdale | AR | — | — | 27,714 | — | — | 27,714 | 27,714 | (6,413) | 1995 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 520 | Chandler | AZ | — | 3,669 | 13,503 | 6,374 | 4,013 | 19,533 | 23,546 | (9,353) | 2005 | 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 113 | Glendale | AZ | — | 1,565 | 7,050 | 175 | 1,565 | 7,225 | 8,790 | (5,317) | 1989 | 1988 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2040 | Mesa | AZ | — | — | 17,314 | 3,047 | — | 20,361 | 20,361 | (4,856) | 2007 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1066 | Scottsdale | AZ | — | 5,115 | 14,064 | 5,912 | 4,888 | 20,203 | 25,091 | (8,153) | 1999 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | Scottsdale | AZ | — | — | 12,312 | 4,763 | — | 17,075 | 17,075 | (7,205) | 1984 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | Scottsdale | AZ | — | — | 9,179 | 3,033 | — | 12,212 | 12,212 | (4,579) | 1996 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | Scottsdale | AZ | — | — | 6,398 | 1,818 | — | 8,216 | 8,216 | (3,614) | 2000 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | Scottsdale | AZ | — | — | 9,522 | 1,163 | 32 | 10,653 | 10,685 | (4,712) | 2007 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | Scottsdale | AZ | — | — | 4,102 | 2,451 | — | 6,553 | 6,553 | (2,764) | 1981 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | Scottsdale | AZ | — | — | 3,655 | 2,031 | — | 5,686 | 5,686 | (2,734) | 1992 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2027 | Scottsdale | AZ | — | — | 7,168 | 2,119 | — | 9,287 | 9,287 | (4,289) | 1995 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2028 | Scottsdale | AZ | — | — | 6,659 | 5,065 | — | 11,724 | 11,724 | (5,306) | 1998 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2696 | Scottsdale | AZ | — | 10,151 | 14,925 | 3,195 | 10,211 | 18,060 | 28,271 | (5,217) | 1998 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1041 | Brentwood | CA | — | — | 30,864 | 9,237 | 183 | 39,918 | 40,101 | (14,995) | 2004 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1200 | Encino | CA | — | 6,151 | 10,438 | 6,043 | 6,388 | 16,244 | 22,632 | (8,073) | 1973 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1038 | Fresno | CA | — | 3,652 | 29,113 | 21,935 | 3,652 | 51,048 | 54,700 | (23,741) | 1984 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 436 | Murrieta | CA | — | 400 | 9,266 | 2,855 | 608 | 11,913 | 12,521 | (7,909) | 1991 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 239 | Poway | CA | — | 2,700 | 10,839 | 3,172 | 2,944 | 13,767 | 16,711 | (8,922) | 1990 | 1997 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2654 | Riverside | CA | — | 2,758 | 9,908 | 529 | 2,266 | 10,929 | 13,195 | (2,233) | 2008 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 318 | Sacramento | CA | — | 2,860 | 37,566 | 24,613 | 2,911 | 62,128 | 65,039 | (26,629) | 1989/2016 | 1998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2404 | Sacramento | CA | — | 1,268 | 5,109 | 1,652 | 1,299 | 6,730 | 8,029 | (2,581) | 1999 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 421 | San Diego | CA | — | 2,910 | 19,984 | 15,146 | 2,964 | 35,076 | 38,040 | (17,632) | 1986/2013 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 564 | San Jose | CA | — | 1,935 | 1,728 | 2,213 | 1,935 | 3,941 | 5,876 | (1,596) | 1968 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 565 | San Jose | CA | — | 1,460 | 7,672 | 2,175 | 1,492 | 9,815 | 11,307 | (4,641) | 1995 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 659 | Los Gatos | CA | — | 1,718 | 3,124 | 1,515 | 1,796 | 4,561 | 6,357 | (2,028) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 439 | Valencia | CA | — | 2,300 | 6,967 | 3,080 | 2,314 | 10,033 | 12,347 | (6,726) | 1990 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 440 | West Hills | CA | — | 2,100 | 11,595 | 11,851 | 2,203 | 23,343 | 25,546 | (8,502) | 1992/2023 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3008 | West Hills | CA | 12,093 | 5,795 | 13,933 | 2,897 | 5,823 | 16,802 | 22,625 | (1,645) | 1965 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 728 | Aurora | CO | — | — | 8,764 | 1,620 | — | 10,384 | 10,384 | (3,927) | 2005 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1196 | Aurora | CO | — | 210 | 12,362 | 6,172 | 210 | 18,534 | 18,744 | (7,855) | 1981/2018 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1197 | Aurora | CO | — | 200 | 8,414 | 5,673 | 285 | 14,002 | 14,287 | (6,527) | 1994/2018 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 127 | Colorado Springs | CO | — | 690 | 8,338 | 367 | 690 | 8,705 | 9,395 | (6,071) | 1990 | 1989 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 882 | Colorado Springs | CO | — | — | 12,933 | 9,106 | — | 22,039 | 22,039 | (10,586) | 2007 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1199 | Denver | CO | — | 493 | 7,897 | 1,789 | 604 | 9,575 | 10,179 | (5,226) | 1993 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 808 | Englewood | CO | — | — | 8,616 | 8,886 | — | 17,502 | 17,502 | (9,595) | 1981 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 809 | Englewood | CO | — | — | 8,449 | 19,042 | — | 27,491 | 27,491 | (6,442) | 1990 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 810 | Englewood | CO | — | — | 8,040 | 15,564 | — | 23,604 | 23,604 | (9,606) | 1989 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 811 | Englewood | CO | — | — | 8,472 | 11,904 | — | 20,376 | 20,376 | (7,895) | 1993/2020 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2658 | Highlands Ranch | CO | — | 1,637 | 10,063 | 95 | 1,732 | 10,063 | 11,795 | (2,334) | 2015 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 812 | Littleton | CO | — | — | 4,562 | 2,775 | 177 | 7,160 | 7,337 | (3,465) | 1987 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 813 | Littleton | CO | — | — | 4,926 | 2,072 | 246 | 6,752 | 6,998 | (3,092) | 1990 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 570 | Lone Tree | CO | — | — | — | 22,171 | — | 22,171 | 22,171 | (10,271) | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 666 | Lone Tree | CO | — | — | 23,274 | 3,843 | 17 | 27,100 | 27,117 | (12,486) | 2003 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2233 | Lone Tree | CO | — | — | 6,734 | 34,696 | — | 41,430 | 41,430 | (11,074) | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2965 | Aurora | CO | — | — | — | 2,251 | — | 2,251 | 2,251 | — | — | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3000 | Lone Tree | CO | — | 4,393 | 31,643 | 9,516 | 4,552 | 41,000 | 45,552 | (3,772) | 2020 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 510 | Thornton | CO | — | 236 | 10,206 | 13,728 | 455 | 23,715 | 24,170 | (8,016) | 2001/2021 | 2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 434 | Atlantis | FL | — | — | 2,027 | 171 | — | 2,198 | 2,198 | (1,493) | 1997 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 435 | Atlantis | FL | — | — | 2,000 | 608 | — | 2,608 | 2,608 | (1,568) | 1997 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 602 | Atlantis | FL | — | 455 | 2,231 | 744 | 455 | 2,975 | 3,430 | (1,357) | 1984 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2963 | Brooksville | FL | — | — | — | 11,558 | — | 11,558 | 11,558 | (1,526) | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 604 | Englewood | FL | — | 170 | 1,134 | 1,021 | 197 | 2,128 | 2,325 | (823) | 1986 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2962 | Orange Park | FL | — | — | — | 17,657 | — | 17,657 | 17,657 | (1,571) | 2022 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 609 | Kissimmee | FL | — | 788 | 174 | 1,135 | 788 | 1,309 | 2,097 | (655) | 1978 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 610 | Kissimmee | FL | — | 481 | 347 | 258 | 488 | 598 | 1,086 | (336) | 1978 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 671 | Kissimmee | FL | — | — | 7,574 | 818 | — | 8,392 | 8,392 | (3,727) | 1998 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 603 | Lake Worth | FL | — | 1,507 | 2,894 | 534 | 1,507 | 3,428 | 4,935 | (1,459) | 1997 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 612 | Margate | FL | — | 1,553 | 6,898 | 2,984 | 1,553 | 9,882 | 11,435 | (4,880) | 1994 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 613 | Miami | FL | — | 4,392 | 11,841 | 11,366 | 4,454 | 23,145 | 27,599 | (8,513) | 1995/2020 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2202 | Miami | FL | — | — | 13,123 | 10,907 | — | 24,030 | 24,030 | (10,231) | 1973 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2203 | Miami | FL | — | — | 8,877 | 4,890 | — | 13,767 | 13,767 | (5,359) | 1986 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1067 | Milton | FL | — | — | 8,566 | 1,662 | — | 10,228 | 10,228 | (4,057) | 2003 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2577 | Naples | FL | — | — | 29,186 | 1,805 | — | 30,991 | 30,991 | (6,953) | 1999 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2578 | Naples | FL | — | — | 18,819 | 667 | — | 19,486 | 19,486 | (3,709) | 2007 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2964 | Okeechobee | FL | — | — | — | 16,951 | — | 16,951 | 16,951 | (1,266) | 2022 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 563 | Orlando | FL | — | 2,144 | 5,136 | 13,507 | 12,022 | 8,765 | 20,787 | (6,599) | 1985 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 833 | Pace | FL | — | — | 10,309 | 1,628 | 28 | 11,909 | 11,937 | (4,541) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 834 | Pensacola | FL | — | — | 11,166 | 428 | — | 11,594 | 11,594 | (4,506) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 673 | Plantation | FL | — | 1,091 | 7,176 | 2,623 | 1,091 | 9,799 | 10,890 | (4,461) | 2001 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 674 | Plantation | FL | — | — | 8,273 | 1,560 | — | 9,833 | 9,833 | (1,042) | 2015 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2579 | Punta Gorda | FL | — | — | 9,379 | — | — | 9,379 | 9,379 | (1,957) | 2006 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
129
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 1954 | Sugar Land | TX | — | 3,420 | 36,846 | 5,097 | 3,420 | 41,242 | 44,662 | (11,131 | ) | 2011 | |||||||||||||||||||||||||||
| 2510 | Temple | TX | — | 2,354 | 52,859 | 1,144 | 2,354 | 54,004 | 56,358 | (3,819 | ) | 2015 | |||||||||||||||||||||||||||
| 2400 | Victoria | TX | — | 1,032 | 7,743 | 339 | 1,032 | 7,186 | 8,218 | (906 | ) | 2015 | |||||||||||||||||||||||||||
| 2605 | Victoria | TX | — | 175 | 4,290 | 3,642 | 175 | 6,477 | 6,652 | (2,661 | ) | 1995 | |||||||||||||||||||||||||||
| 1953 | Webster | TX | — | 4,780 | 30,854 | 4,628 | 4,780 | 29,464 | 34,244 | (8,264 | ) | 2011 | |||||||||||||||||||||||||||
| 2534 | Wichita Falls | TX | — | 430 | 2,856 | 804 | 430 | 3,745 | 4,175 | (642 | ) | 2015 | |||||||||||||||||||||||||||
| 2582 | Fredericksburg | VA | — | 2,370 | 19,725 | 87 | 2,370 | 19,811 | 22,181 | (689 | ) | 2016 | |||||||||||||||||||||||||||
| 2581 | Leesburg | VA | 12,345 | 1,340 | 17,605 | 907 | 1,340 | 18,512 | 19,852 | (664 | ) | 2016 | |||||||||||||||||||||||||||
| 2514 | Richmond | VA | — | 2,981 | 54,203 | 1,894 | 2,981 | 56,097 | 59,078 | (3,675 | ) | 2015 | |||||||||||||||||||||||||||
| 2737 | Moses Lake | WA | — | 429 | 4,417 | 189 | 429 | 4,606 | 5,035 | (1,328 | ) | 2012 | |||||||||||||||||||||||||||
| 2732 | Spokane | WA | — | 903 | 5,363 | 171 | 903 | 5,228 | 6,131 | (1,073 | ) | 2012 | |||||||||||||||||||||||||||
| 2734 | Yakima | WA | — | 721 | 8,872 | 1,518 | 721 | 10,390 | 11,111 | (2,168 | ) | 2012 | |||||||||||||||||||||||||||
| 2745 | Madison | WI | — | 834 | 10,050 | 445 | 834 | 10,495 | 11,329 | (1,732 | ) | 2012 | |||||||||||||||||||||||||||
| $ | 78,594 | $ | 194,278 | $ | 1,866,536 | $ | 216,811 | $ | 194,551 | $ | 2,024,260 | $ | 2,218,811 | $ | (359,316 | ) | |||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2833 | St. Petersburg | FL | — | — | 13,754 | 10,299 | — | 24,053 | 24,053 | (9,609) | 1995/2019 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 887 | Atlanta | GA | — | 4,300 | 13,690 | (1,800) | 4,300 | 11,890 | 16,190 | (10,007) | 1966/1996 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3214 | Savannah | GA | — | — | — | 10,178 | — | 10,178 | 10,178 | — | — | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2576 | Statesboro | GA | — | — | 10,234 | 1,430 | — | 11,664 | 11,664 | (2,973) | 1999 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3006 | Arlington Heights | IL | 4,861 | 3,011 | 9,651 | 1,857 | 3,187 | 11,332 | 14,519 | (1,299) | 1975/2013 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2702 | Bolingbrook | IL | — | — | 21,237 | 3,884 | — | 25,121 | 25,121 | (3,025) | 2008 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3004 | Highland Park | IL | 5,853 | 2,767 | 11,495 | 572 | 2,767 | 12,067 | 14,834 | (1,226) | 2008 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3005 | Lockport | IL | 11,011 | 3,106 | 22,645 | — | 3,106 | 22,645 | 25,751 | (2,256) | 2010 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1065 | Marion | IL | — | 99 | 11,538 | 2,005 | 100 | 13,542 | 13,642 | (5,978) | 2002 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2719 | Marion | IL | — | — | — | 5,098 | — | 5,098 | 5,098 | (452) | 2021 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2697 | Indianapolis | IN | — | — | 59,746 | 954 | — | 60,700 | 60,700 | (5,797) | 2002 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2699 | Indianapolis | IN | — | — | 23,211 | 737 | — | 23,948 | 23,948 | (2,364) | 2002 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2698 | Mooresville | IN | — | — | 20,646 | 922 | — | 21,568 | 21,568 | (2,080) | 2004 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1057 | Newburgh | IN | — | — | 14,019 | 4,149 | — | 18,168 | 18,168 | (8,511) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2700 | Zionsville | IN | — | 2,969 | 7,281 | 804 | 3,040 | 8,014 | 11,054 | (1,204) | 2005 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2039 | Kansas City | KS | — | 440 | 2,173 | 390 | 440 | 2,563 | 3,003 | (740) | 2006 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 112 | Overland Park | KS | — | 2,316 | 10,681 | 116 | 2,316 | 10,797 | 13,113 | (8,176) | 1989 | 1988 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2043 | Overland Park | KS | — | — | 7,668 | 2,000 | — | 9,668 | 9,668 | (2,732) | 2009 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3062 | Overland Park | KS | — | 872 | 11,813 | 59 | 992 | 11,752 | 12,744 | (2,570) | 2007 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 483 | Wichita | KS | — | 530 | 3,341 | 437 | 605 | 3,703 | 4,308 | (1,738) | 2000 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3018 | Wichita | KS | — | 3,946 | 39,795 | — | 3,946 | 39,795 | 43,741 | (3,933) | 1973/2017 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1064 | Lexington | KY | — | — | 12,726 | 2,213 | — | 14,939 | 14,939 | (6,642) | 2003 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 735 | Louisville | KY | — | 936 | 8,426 | 13,840 | 661 | 22,541 | 23,202 | (12,657) | 1971/2019 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 737 | Louisville | KY | — | 835 | 27,627 | 7,477 | 560 | 35,379 | 35,939 | (16,906) | 2002 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 738 | Louisville | KY | — | 780 | 8,582 | 4,544 | 585 | 13,321 | 13,906 | (10,521) | 1978 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 739 | Louisville | KY | — | 826 | 13,814 | 3,542 | 602 | 17,580 | 18,182 | (7,444) | 2003 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2834 | Louisville | KY | — | 2,983 | 13,171 | 5,433 | 2,983 | 18,604 | 21,587 | (10,498) | 1990 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1945 | Louisville | KY | — | 3,255 | 28,644 | 2,678 | 3,365 | 31,212 | 34,577 | (13,208) | 2009 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1946 | Louisville | KY | — | 430 | 6,125 | 230 | 430 | 6,355 | 6,785 | (2,769) | 2002 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2237 | Louisville | KY | — | 1,519 | 15,386 | 7,130 | 1,672 | 22,363 | 24,035 | (8,330) | 1991 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2238 | Louisville | KY | — | 1,334 | 12,172 | 3,049 | 1,558 | 14,997 | 16,555 | (5,429) | 1996 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2239 | Louisville | KY | — | 1,644 | 10,832 | 9,879 | 2,043 | 20,312 | 22,355 | (7,588) | 1988 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3023 | Covington | LA | — | 9,490 | 21,918 | 128 | 9,507 | 22,029 | 31,536 | (2,254) | 2014 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3121 | Cambridge | MA | — | 40,663 | 23,102 | — | 40,663 | 23,102 | 63,765 | (1,776) | 1983 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1213 | Ellicott City | MD | — | 1,115 | 3,206 | 3,013 | 1,357 | 5,977 | 7,334 | (2,657) | 1988 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1052 | Towson | MD | — | — | 14,233 | 1,231 | — | 15,464 | 15,464 | (6,004) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2650 | Biddeford | ME | — | 1,341 | 17,376 | 388 | 1,341 | 17,764 | 19,105 | (4,251) | 2007 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3002 | Burnsville | MN | 7,737 | 2,801 | 17,779 | 1,151 | 2,861 | 18,870 | 21,731 | (3,424) | 1988 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3003 | Burnsville | MN | 5,158 | 516 | 13,200 | 462 | 533 | 13,645 | 14,178 | (2,225) | 1992 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3009 | Burnsville | MN | 19,046 | 4,640 | 38,064 | 333 | 4,664 | 38,373 | 43,037 | (3,990) | 2007 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 240 | Minneapolis | MN | — | 117 | 13,213 | 5,337 | 117 | 18,550 | 18,667 | (11,776) | 1986 | 1997 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 300 | Minneapolis | MN | — | 160 | 10,131 | 5,086 | 214 | 15,163 | 15,377 | (9,547) | 1987 | 1998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2703 | Columbia | MO | — | 4,141 | 20,364 | — | 4,141 | 20,364 | 24,505 | (2,696) | 1997 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2032 | Independence | MO | — | — | 48,025 | 1,872 | — | 49,897 | 49,897 | (12,858) | 2006 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2863 | Lee's Summit | MO | — | — | — | 16,470 | — | 16,470 | 16,470 | (2,633) | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1078 | Flowood | MS | — | — | 8,413 | 1,472 | — | 9,885 | 9,885 | (4,097) | 2003 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1059 | Jackson | MS | — | — | 8,868 | 668 | — | 9,536 | 9,536 | (4,090) | 2002 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1060 | Jackson | MS | — | — | 7,187 | 2,038 | — | 9,225 | 9,225 | (3,797) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1068 | Omaha | NE | — | — | 16,243 | 2,667 | 24 | 18,886 | 18,910 | (8,250) | 2005 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2651 | Charlotte | NC | — | 1,032 | 6,196 | 253 | 1,032 | 6,449 | 7,481 | (1,252) | 2007 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2695 | Charlotte | NC | — | 844 | 5,021 | 266 | 844 | 5,287 | 6,131 | (960) | 2007 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2655 | Wilmington | NC | — | 1,949 | 12,244 | — | 1,949 | 12,244 | 14,193 | (2,749) | 2003 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2656 | Wilmington | NC | — | 2,071 | 11,592 | — | 2,071 | 11,592 | 13,663 | (2,575) | 2006 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2657 | Shallotte | NC | — | 918 | 3,609 | — | 918 | 3,609 | 4,527 | (1,106) | 2017 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2647 | Concord | NH | — | 1,961 | 23,516 | (614) | 1,032 | 23,831 | 24,863 | (3,577) | 2004 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2648 | Concord | NH | — | 815 | 8,902 | 172 | 408 | 9,481 | 9,889 | (2,073) | 2008 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2649 | Epsom | NH | — | 919 | 5,868 | (513) | 304 | 5,970 | 6,274 | (1,174) | 2010 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3011 | Cherry Hill | NJ | — | 5,235 | 21,731 | — | 5,235 | 21,731 | 26,966 | (2,695) | 2014 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3012 | Morristown | NJ | — | 21,703 | 32,517 | 5,472 | 21,703 | 37,989 | 59,692 | (4,413) | 1983/2013 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3013 | Morristown | NJ | — | 14,567 | 20,548 | 8,647 | 14,567 | 29,195 | 43,762 | (2,439) | 1990 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3014 | Morristown | NJ | — | 20,563 | 31,849 | 1,721 | 20,563 | 33,570 | 54,133 | (2,591) | 1981 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 729 | Albuquerque | NM | — | — | 5,380 | 1,944 | — | 7,324 | 7,324 | (2,828) | 2006 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 571 | Las Vegas | NV | — | — | — | 23,267 | — | 23,267 | 23,267 | (9,353) | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 660 | Las Vegas | NV | — | 1,121 | 4,363 | 9,560 | 1,147 | 13,897 | 15,044 | (4,967) | 1973 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 661 | Las Vegas | NV | — | 2,305 | — | 1,371 | 3,676 | — | 3,676 | — | — | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 662 | Las Vegas | NV | — | 1,000 | — | — | 1,000 | — | 1,000 | — | — | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 663 | Las Vegas | NV | — | 1,717 | 3,597 | 12,799 | 1,724 | 16,389 | 18,113 | (6,718) | 1974/2018 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 664 | Las Vegas | NV | — | 1,172 | — | 633 | 1,805 | — | 1,805 | (433) | — | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 691 | Las Vegas | NV | — | 3,073 | 18,339 | 8,001 | 3,116 | 26,297 | 29,413 | (16,290) | 1989/2015 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2037 | Mesquite | NV | — | — | 5,559 | 988 | 34 | 6,513 | 6,547 | (2,148) | 2004 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 400 | Harrison | OH | — | — | 4,561 | 366 | — | 4,927 | 4,927 | (3,149) | 1995 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1054 | Durant | OK | — | 619 | 9,256 | 3,111 | 666 | 12,320 | 12,986 | (5,294) | 1998 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 817 | Owasso | OK | — | — | 6,582 | (443) | — | 6,139 | 6,139 | (2,789) | 2006 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 404 | Roseburg | OR | — | — | 5,707 | 895 | — | 6,602 | 6,602 | (3,892) | 1999 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3010 | Springfield | OR | 20,732 | — | 51,998 | 416 | — | 52,414 | 52,414 | (5,426) | 2011 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2570 | Limerick | PA | — | 925 | 20,072 | (119) | 755 | 20,123 | 20,878 | (5,075) | 1999 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
130
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| Life science | |||||||||||||||||||||||||||||||||||||||
| 1482 | Brisbane | CA | — | 31,160 | 1,789 | 20,319 | 31,160 | 22,103 | 53,263 | — | 2007 | ||||||||||||||||||||||||||||
| 1486 | Brisbane | CA | — | 11,331 | — | 20,529 | 11,331 | 20,529 | 31,860 | — | 2007 | ||||||||||||||||||||||||||||
| 1487 | Brisbane | CA | — | 8,498 | — | 6,812 | 8,498 | 6,812 | 15,310 | — | 2007 | ||||||||||||||||||||||||||||
| 1401 | Hayward | CA | — | 900 | 7,100 | 1,045 | 900 | 8,145 | 9,045 | (2,705 | ) | 2007 | |||||||||||||||||||||||||||
| 1402 | Hayward | CA | — | 1,500 | 6,400 | 3,682 | 1,719 | 9,863 | 11,582 | (4,280 | ) | 2007 | |||||||||||||||||||||||||||
| 1403 | Hayward | CA | — | 1,900 | 7,100 | 4,666 | 1,900 | 11,512 | 13,412 | (2,709 | ) | 2007 | |||||||||||||||||||||||||||
| 1404 | Hayward | CA | — | 2,200 | 17,200 | 1,434 | 2,200 | 18,634 | 20,834 | (4,485 | ) | 2007 | |||||||||||||||||||||||||||
| 1405 | Hayward | CA | — | 1,000 | 3,200 | 7,478 | 1,000 | 10,678 | 11,678 | (6,391 | ) | 2007 | |||||||||||||||||||||||||||
| 1549 | Hayward | CA | — | 1,006 | 4,259 | 3,463 | 1,055 | 6,409 | 7,464 | (2,493 | ) | 2007 | |||||||||||||||||||||||||||
| 1550 | Hayward | CA | — | 677 | 2,761 | 5,583 | 710 | 4,954 | 5,664 | (3,401 | ) | 2007 | |||||||||||||||||||||||||||
| 1551 | Hayward | CA | — | 661 | 1,995 | 4,264 | 693 | 6,227 | 6,920 | (4,220 | ) | 2007 | |||||||||||||||||||||||||||
| 1552 | Hayward | CA | — | 1,187 | 7,139 | 1,346 | 1,222 | 8,094 | 9,316 | (3,385 | ) | 2007 | |||||||||||||||||||||||||||
| 1553 | Hayward | CA | — | 1,189 | 9,465 | 7,361 | 1,225 | 16,791 | 18,016 | (5,675 | ) | 2007 | |||||||||||||||||||||||||||
| 1554 | Hayward | CA | — | 1,246 | 5,179 | 1,867 | 1,283 | 6,133 | 7,416 | (2,739 | ) | 2007 | |||||||||||||||||||||||||||
| 1555 | Hayward | CA | — | 1,521 | 13,546 | 6,401 | 1,566 | 19,889 | 21,455 | (7,177 | ) | 2007 | |||||||||||||||||||||||||||
| 1556 | Hayward | CA | — | 1,212 | 5,120 | 3,049 | 1,249 | 5,216 | 6,465 | (2,098 | ) | 2007 | |||||||||||||||||||||||||||
| 1424 | La Jolla | CA | — | 9,600 | 25,283 | 8,220 | 9,719 | 31,414 | 41,133 | (9,072 | ) | 2007 | |||||||||||||||||||||||||||
| 1425 | La Jolla | CA | — | 6,200 | 19,883 | 152 | 6,276 | 19,958 | 26,234 | (5,264 | ) | 2007 | |||||||||||||||||||||||||||
| 1426 | La Jolla | CA | — | 7,200 | 12,412 | 5,493 | 7,291 | 15,961 | 23,252 | (6,509 | ) | 2007 | |||||||||||||||||||||||||||
| 1427 | La Jolla | CA | — | 8,700 | 16,983 | 6,177 | 8,767 | 21,859 | 30,626 | (7,302 | ) | 2007 | |||||||||||||||||||||||||||
| 1949 | La Jolla | CA | — | 2,686 | 11,045 | 743 | 2,686 | 11,458 | 14,144 | (2,690 | ) | 2011 | |||||||||||||||||||||||||||
| 2229 | La Jolla | CA | — | 8,753 | 32,528 | 6,228 | 8,777 | 38,732 | 47,509 | (3,923 | ) | 2014 | |||||||||||||||||||||||||||
| 1488 | Mountain View | CA | — | 7,300 | 25,410 | 1,901 | 7,567 | 27,044 | 34,611 | (7,597 | ) | 2007 | |||||||||||||||||||||||||||
| 1489 | Mountain View | CA | — | 6,500 | 22,800 | 1,866 | 6,500 | 24,666 | 31,166 | (7,030 | ) | 2007 | |||||||||||||||||||||||||||
| 1490 | Mountain View | CA | — | 4,800 | 9,500 | 442 | 4,800 | 9,942 | 14,742 | (2,746 | ) | 2007 | |||||||||||||||||||||||||||
| 1491 | Mountain View | CA | — | 4,200 | 8,400 | 1,249 | 4,209 | 8,998 | 13,207 | (2,458 | ) | 2007 | |||||||||||||||||||||||||||
| 1492 | Mountain View | CA | — | 3,600 | 9,700 | 862 | 3,600 | 9,835 | 13,435 | (2,527 | ) | 2007 | |||||||||||||||||||||||||||
| 1493 | Mountain View | CA | — | 7,500 | 16,300 | 2,142 | 7,500 | 17,842 | 25,342 | (4,942 | ) | 2007 | |||||||||||||||||||||||||||
| 1494 | Mountain View | CA | — | 9,800 | 24,000 | 203 | 9,800 | 24,203 | 34,003 | (6,362 | ) | 2007 | |||||||||||||||||||||||||||
| 1495 | Mountain View | CA | — | 6,900 | 17,800 | 3,245 | 6,900 | 21,045 | 27,945 | (6,313 | ) | 2007 | |||||||||||||||||||||||||||
| 1496 | Mountain View | CA | — | 7,000 | 17,000 | 6,364 | 7,000 | 17,332 | 24,332 | (4,595 | ) | 2007 | |||||||||||||||||||||||||||
| 1497 | Mountain View | CA | — | 14,100 | 31,002 | 10,111 | 14,100 | 31,487 | 45,587 | (8,280 | ) | 2007 | |||||||||||||||||||||||||||
| 1498 | Mountain View | CA | — | 7,100 | 25,800 | 8,101 | 7,100 | 33,901 | 41,001 | (14,611 | ) | 2007 | |||||||||||||||||||||||||||
| 2017 | Mountain View | CA | — | — | 20,240 | 1,117 | — | 21,255 | 21,255 | (4,000 | ) | 2013 | |||||||||||||||||||||||||||
| 1470 | Poway | CA | — | 5,826 | 12,200 | 6,048 | 5,826 | 12,542 | 18,368 | (3,199 | ) | 2007 | |||||||||||||||||||||||||||
| 1471 | Poway | CA | — | 5,978 | 14,200 | 4,253 | 5,978 | 18,453 | 24,431 | (7,951 | ) | 2007 | |||||||||||||||||||||||||||
| 1472 | Poway | CA | — | 8,654 | — | 11,906 | 8,654 | 11,906 | 20,560 | (1,286 | ) | 2007 | |||||||||||||||||||||||||||
| 1473 | Poway | CA | — | 11,024 | 2,405 | 9,148 | 11,024 | 11,553 | 22,577 | — | 2007 | ||||||||||||||||||||||||||||
| 1474 | Poway | CA | — | 5,051 | — | 5,522 | 5,051 | 5,522 | 10,573 | — | 2007 | ||||||||||||||||||||||||||||
| 1475 | Poway | CA | — | 5,655 | — | 5,697 | 5,655 | 5,697 | 11,352 | — | 2007 | ||||||||||||||||||||||||||||
| 1477 | Poway | CA | — | 25,359 | 2,475 | 14,835 | 25,359 | 17,310 | 42,669 | — | 2007 | ||||||||||||||||||||||||||||
| 1478 | Poway | CA | — | 6,700 | 14,400 | 6,145 | 6,700 | 14,400 | 21,100 | (3,750 | ) | 2007 | |||||||||||||||||||||||||||
| 1499 | Redwood City | CA | — | 3,400 | 5,500 | 2,564 | 3,407 | 7,177 | 10,584 | (2,476 | ) | 2007 | |||||||||||||||||||||||||||
| 1500 | Redwood City | CA | — | 2,500 | 4,100 | 1,220 | 2,506 | 4,563 | 7,069 | (1,508 | ) | 2007 | |||||||||||||||||||||||||||
| 1501 | Redwood City | CA | — | 3,600 | 4,600 | 860 | 3,607 | 5,024 | 8,631 | (1,722 | ) | 2007 | |||||||||||||||||||||||||||
| 1502 | Redwood City | CA | �� | — | 3,100 | 5,100 | 954 | 3,107 | 5,801 | 8,908 | (1,937 | ) | 2007 | ||||||||||||||||||||||||||
| 1503 | Redwood City | CA | — | 4,800 | 17,300 | 3,300 | 4,818 | 20,582 | 25,400 | (6,253 | ) | 2007 | |||||||||||||||||||||||||||
| 1504 | Redwood City | CA | — | 5,400 | 15,500 | 949 | 5,418 | 16,431 | 21,849 | (4,246 | ) | 2007 | |||||||||||||||||||||||||||
| 1505 | Redwood City | CA | — | 3,000 | 3,500 | 826 | 3,006 | 4,115 | 7,121 | (1,646 | ) | 2007 | |||||||||||||||||||||||||||
| 1506 | Redwood City | CA | — | 6,000 | 14,300 | 7,503 | 6,018 | 21,178 | 27,196 | (4,637 | ) | 2007 | |||||||||||||||||||||||||||
| 1507 | Redwood City | CA | — | 1,900 | 12,800 | 13,559 | 1,912 | 26,347 | 28,259 | (7,202 | ) | 2007 | |||||||||||||||||||||||||||
| 1508 | Redwood City | CA | — | 2,700 | 11,300 | 12,120 | 2,712 | 23,409 | 26,121 | (5,871 | ) | 2007 | |||||||||||||||||||||||||||
| 1509 | Redwood City | CA | — | 2,700 | 10,900 | 10,476 | 2,712 | 20,840 | 23,552 | (7,349 | ) | 2007 | |||||||||||||||||||||||||||
| 1510 | Redwood City | CA | — | 2,200 | 12,000 | 5,395 | 2,212 | 13,501 | 15,713 | (3,543 | ) | 2007 | |||||||||||||||||||||||||||
| 1511 | Redwood City | CA | — | 2,600 | 9,300 | 1,828 | 2,612 | 10,561 | 13,173 | (2,708 | ) | 2007 | |||||||||||||||||||||||||||
| 1512 | Redwood City | CA | — | 3,300 | 18,000 | 12,361 | 3,300 | 30,361 | 33,661 | (8,155 | ) | 2007 | |||||||||||||||||||||||||||
| 1513 | Redwood City | CA | — | 3,300 | 17,900 | 14,839 | 3,326 | 32,713 | 36,039 | (9,544 | ) | 2007 | |||||||||||||||||||||||||||
| 0678 | San Diego | CA | — | 2,603 | 11,051 | 3,143 | 2,603 | 14,194 | 16,797 | (4,623 | ) | 2002 | |||||||||||||||||||||||||||
| 0679 | San Diego | CA | — | 5,269 | 23,566 | 16,072 | 5,669 | 35,937 | 41,606 | (12,274 | ) | 2002 | |||||||||||||||||||||||||||
| 0837 | San Diego | CA | — | 4,630 | 2,028 | 8,982 | 4,630 | 11,010 | 15,640 | (6,567 | ) | 2006 | |||||||||||||||||||||||||||
| 0838 | San Diego | CA | — | 2,040 | 903 | 5,111 | 2,040 | 6,014 | 8,054 | (2,208 | ) | 2006 | |||||||||||||||||||||||||||
| 0839 | San Diego | CA | — | 3,940 | 3,184 | 5,733 | 4,047 | 5,591 | 9,638 | (1,769 | ) | 2006 | |||||||||||||||||||||||||||
| 0840 | San Diego | CA | — | 5,690 | 4,579 | 720 | 5,830 | 4,734 | 10,564 | (1,566 | ) | 2006 | |||||||||||||||||||||||||||
| 1418 | San Diego | CA | — | 11,700 | 31,243 | 6,403 | 11,700 | 37,646 | 49,346 | (12,927 | ) | 2007 | |||||||||||||||||||||||||||
| 1420 | San Diego | CA | — | 6,524 | — | 4,986 | 6,524 | 4,986 | 11,510 | — | 2007 | ||||||||||||||||||||||||||||
| 1421 | San Diego | CA | — | 7,000 | 33,779 | 1,209 | 7,000 | 34,988 | 41,988 | (9,021 | ) | 2007 | |||||||||||||||||||||||||||
| 1422 | San Diego | CA | — | 7,179 | 3,687 | 4,521 | 7,184 | 8,202 | 15,386 | (2,287 | ) | 2007 | |||||||||||||||||||||||||||
| 1423 | San Diego | CA | — | 8,400 | 33,144 | 18 | 8,400 | 33,162 | 41,562 | (8,637 | ) | 2007 | |||||||||||||||||||||||||||
| 1514 | San Diego | CA | — | 5,200 | — | — | 5,200 | — | 5,200 | — | 2007 | ||||||||||||||||||||||||||||
| 1558 | San Diego | CA | — | 7,740 | 22,654 | 2,371 | 7,888 | 23,645 | 31,533 | (6,279 | ) | 2007 | |||||||||||||||||||||||||||
| 1947 | San Diego | CA | — | 2,581 | 10,534 | 3,952 | 2,581 | 14,486 | 17,067 | (3,154 | ) | 2011 | |||||||||||||||||||||||||||
| 1948 | San Diego | CA | — | 5,879 | 25,305 | 2,559 | 5,879 | 27,861 | 33,740 | (7,790 | ) | 2011 | |||||||||||||||||||||||||||
| 2197 | San Diego | CA | — | 7,621 | 3,913 | 6,549 | 7,626 | 9,167 | 16,793 | (2,459 | ) | 2007 | |||||||||||||||||||||||||||
| 2476 | San Diego | CA | — | 7,661 | 9,918 | 3,359 | 7,661 | 13,277 | 20,938 | (189 | ) | 2016 | |||||||||||||||||||||||||||
| 2477 | San Diego | CA | — | 9,207 | 14,613 | 6,484 | 9,207 | 21,097 | 30,304 | (649 | ) | 2016 | |||||||||||||||||||||||||||
| 2478 | San Diego | CA | — | 6,000 | — | — | 6,000 | — | 6,000 | — | 2016 | ||||||||||||||||||||||||||||
| 2617 | San Diego | CA | — | 2,734 | 5,195 | 777 | 2,734 | 5,971 | 8,705 | — | 2017 | ||||||||||||||||||||||||||||
| 2618 | San Diego | CA | — | 4,100 | 12,395 | — | 4,100 | 12,395 | 16,495 | (317 | ) | 2017 | |||||||||||||||||||||||||||
| 2622 | San Diego | CA | — | — | — | 1,070 | — | 1,070 | 1,070 | — | 2004 | ||||||||||||||||||||||||||||
| 1407 | South San Francisco | CA | — | 7,182 | 12,140 | 9,612 | 7,182 | 17,860 | 25,042 | (8,032 | ) | 2007 | |||||||||||||||||||||||||||
| 1408 | South San Francisco | CA | — | 9,000 | 17,800 | 1,260 | 9,000 | 19,060 | 28,060 | (5,588 | ) | 2007 | |||||||||||||||||||||||||||
| 1409 | South San Francisco | CA | — | 18,000 | 38,043 | 4,692 | 18,000 | 42,735 | 60,735 | (10,828 | ) | 2007 | |||||||||||||||||||||||||||
| 1410 | South San Francisco | CA | — | 4,900 | 18,100 | 157 | 4,900 | 18,257 | 23,157 | (4,793 | ) | 2007 | |||||||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2234 | Philadelphia | PA | — | 24,264 | 99,904 | 50,137 | 24,288 | 150,017 | 174,305 | (43,316) | 1973/2019 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2403 | Philadelphia | PA | — | 26,063 | 97,646 | 39,404 | 26,134 | 136,979 | 163,113 | (49,725) | 2000 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2571 | Wilkes-Barre | PA | — | — | 9,138 | — | — | 9,138 | 9,138 | (2,550) | 2001 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2694 | Anderson | SC | — | 405 | 1,211 | — | 405 | 1,211 | 1,616 | (352) | 2012 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2573 | Florence | SC | — | — | 12,090 | 90 | — | 12,180 | 12,180 | (2,712) | 1998 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2574 | Florence | SC | — | — | 12,190 | 87 | — | 12,277 | 12,277 | (2,729) | 1998 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2575 | Florence | SC | — | — | 11,243 | 56 | — | 11,299 | 11,299 | (3,076) | 1995 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2841 | Greenville | SC | — | 634 | 38,386 | 1,277 | 13 | 40,284 | 40,297 | (9,241) | 1991 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2842 | Greenville | SC | — | 794 | 41,293 | 211 | — | 42,298 | 42,298 | (9,320) | 1999 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2843 | Greenville | SC | — | 626 | 22,210 | (368) | — | 22,468 | 22,468 | (5,258) | 1996 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2844 | Greenville | SC | — | 806 | 18,889 | 259 | — | 19,954 | 19,954 | (4,349) | 1998 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2845 | Greenville | SC | — | 932 | 40,879 | (3,557) | — | 38,254 | 38,254 | (5,148) | 2005 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2846 | Greenville | SC | — | 896 | 38,486 | 205 | — | 39,587 | 39,587 | (8,339) | 2007 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2847 | Greenville | SC | — | 600 | 26,472 | 4,750 | — | 31,822 | 31,822 | (8,164) | 1996 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2850 | Greenville | SC | — | 211 | 6,503 | 153 | 211 | 6,656 | 6,867 | (1,920) | 2008 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2853 | Greenville | SC | — | 534 | 6,430 | (1,388) | — | 5,576 | 5,576 | (1,038) | 1998 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2854 | Greenville | SC | — | 824 | 13,645 | (512) | — | 13,957 | 13,957 | (3,785) | 1992 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2848 | Greer | SC | — | 318 | 5,816 | 97 | 318 | 5,913 | 6,231 | (1,512) | 2008 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2849 | Greer | SC | — | 319 | 5,836 | (777) | — | 5,378 | 5,378 | (734) | 2008 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2851 | Travelers Rest | SC | — | 498 | 1,015 | 3 | 299 | 1,217 | 1,516 | (611) | 1998 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2862 | Myrtle Beach | SC | — | — | — | 28,496 | — | 28,496 | 28,496 | (6,051) | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2865 | Brentwood | TN | — | — | — | 35,219 | 52 | 35,167 | 35,219 | (3,870) | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 624 | Hendersonville | TN | — | 256 | 1,530 | 2,383 | 256 | 3,913 | 4,169 | (1,991) | 1985 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 559 | Hermitage | TN | — | 830 | 5,036 | 13,157 | 837 | 18,186 | 19,023 | (6,882) | 1999/2019 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 561 | Hermitage | TN | — | 596 | 9,698 | 4,262 | 596 | 13,960 | 14,556 | (7,331) | 1993 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 562 | Hermitage | TN | — | 317 | 6,528 | 2,979 | 317 | 9,507 | 9,824 | (4,491) | 1994 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 625 | Nashville | TN | — | 955 | 14,289 | 7,675 | 955 | 21,964 | 22,919 | (9,756) | 2000 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 626 | Nashville | TN | — | 2,050 | 5,211 | 5,198 | 2,050 | 10,409 | 12,459 | (3,987) | 1987 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 627 | Nashville | TN | — | 1,007 | 181 | 986 | 1,113 | 1,061 | 2,174 | (555) | 1975 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 628 | Nashville | TN | — | 2,980 | 7,164 | 3,046 | 2,980 | 10,210 | 13,190 | (4,235) | 1988 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 630 | Nashville | TN | — | 515 | 848 | 339 | 515 | 1,187 | 1,702 | (536) | 1975 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 631 | Nashville | TN | — | 266 | 1,305 | 1,266 | 266 | 2,571 | 2,837 | (1,450) | 1980 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 632 | Nashville | TN | — | 827 | 7,642 | 3,034 | 827 | 10,676 | 11,503 | (5,283) | 1988 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 633 | Nashville | TN | — | 5,425 | 12,577 | 5,720 | 5,425 | 18,297 | 23,722 | (8,059) | 1971 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 634 | Nashville | TN | — | 3,818 | 15,185 | 12,266 | 3,818 | 27,451 | 31,269 | (11,240) | 1992 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 636 | Nashville | TN | — | 583 | 450 | 424 | 604 | 853 | 1,457 | (372) | 1974 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2967 | Nashville | TN | — | — | — | 52,503 | — | 52,503 | 52,503 | (4,519) | 2021 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2720 | Nashville | TN | — | 102 | 10,925 | 1,058 | 102 | 11,983 | 12,085 | (2,038) | 1986 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2611 | Allen | TX | — | 1,330 | 5,960 | 1,245 | 1,374 | 7,161 | 8,535 | (1,868) | 2004 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2612 | Allen | TX | — | 1,310 | 4,165 | 1,516 | 1,310 | 5,681 | 6,991 | (1,540) | 2005 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 573 | Arlington | TX | — | 769 | 12,355 | 26,097 | 769 | 38,452 | 39,221 | (8,657) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2621 | Cedar Park | TX | — | 1,617 | 11,640 | 950 | 1,617 | 12,590 | 14,207 | (2,144) | 2007 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 576 | Conroe | TX | — | 324 | 4,842 | 4,171 | 324 | 9,013 | 9,337 | (3,998) | 1983 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 577 | Conroe | TX | — | 397 | 7,966 | 2,981 | 397 | 10,947 | 11,344 | (4,740) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 578 | Conroe | TX | — | 388 | 7,975 | 2,576 | 388 | 10,551 | 10,939 | (4,587) | 1997/2012 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 579 | Conroe | TX | — | 188 | 3,618 | 1,045 | 188 | 4,663 | 4,851 | (2,423) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 581 | Corpus Christi | TX | — | 717 | 8,181 | 4,253 | 717 | 12,434 | 13,151 | (5,699) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 600 | Corpus Christi | TX | — | 328 | 3,210 | 1,913 | 328 | 5,123 | 5,451 | (2,851) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 601 | Corpus Christi | TX | — | 313 | 1,771 | 2,014 | 325 | 3,773 | 4,098 | (1,886) | 1985 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2839 | Cypress | TX | — | — | — | 37,639 | 11 | 37,628 | 37,639 | (12,404) | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 582 | Dallas | TX | — | 1,664 | 6,785 | 4,342 | 1,718 | 11,073 | 12,791 | (5,040) | 1979 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1314 | Dallas | TX | — | 15,230 | 162,970 | 29,075 | 23,630 | 183,645 | 207,275 | (88,337) | 1974 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1315 | Dallas | TX | — | — | — | 4,083 | 17 | 4,066 | 4,083 | (1,663) | 1978 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1316 | Dallas | TX | — | — | — | 9,691 | 64 | 9,627 | 9,691 | (1,720) | 1985 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1317 | Dallas | TX | — | — | — | 12,061 | 166 | 11,895 | 12,061 | (2,256) | 1995 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1319 | Dallas | TX | — | 18,840 | 155,659 | 6,539 | 18,840 | 162,198 | 181,038 | (76,716) | 1974 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2721 | Dallas | TX | — | 31,707 | 2,000 | 347 | 31,707 | 2,347 | 34,054 | (1,998) | 1983 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3007 | Denton | TX | 5,654 | 2,298 | 9,502 | 97 | 2,338 | 9,559 | 11,897 | (1,298) | 2014 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3020 | Frisco | TX | — | — | 27,201 | 1,214 | — | 28,415 | 28,415 | (2,394) | 2004 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3021 | Frisco | TX | — | — | 26,181 | 2,186 | — | 28,367 | 28,367 | (2,700) | 2004 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 583 | Fort Worth | TX | — | 898 | 4,866 | 4,115 | 898 | 8,981 | 9,879 | (4,168) | 1995 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 805 | Fort Worth | TX | — | — | 2,481 | 1,316 | 45 | 3,752 | 3,797 | (2,458) | 1985 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 806 | Fort Worth | TX | — | — | 6,070 | 1,206 | 5 | 7,271 | 7,276 | (3,310) | 1985 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2619 | Fort Worth | TX | — | 1,180 | 13,432 | 1,910 | 1,180 | 15,342 | 16,522 | (2,149) | 2006 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2620 | Fort Worth | TX | — | 1,961 | 14,155 | 1,521 | 2,000 | 15,637 | 17,637 | (2,272) | 2005 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2982 | Fort Worth | TX | — | 2,720 | 6,225 | 5,959 | 2,719 | 12,185 | 14,904 | (3,194) | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1061 | Granbury | TX | — | — | 6,863 | 1,321 | — | 8,184 | 8,184 | (3,667) | 2001 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 430 | Houston | TX | — | 1,927 | 33,140 | 20,350 | 2,388 | 53,029 | 55,417 | (31,358) | 1985/2018 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 446 | Houston | TX | — | 2,200 | 19,585 | 13,593 | 2,936 | 32,442 | 35,378 | (23,431) | 1976/2018 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 589 | Houston | TX | — | 1,676 | 12,602 | 15,520 | 1,676 | 28,122 | 29,798 | (8,121) | 1985/2022 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 702 | Houston | TX | — | — | 7,414 | 2,570 | — | 9,984 | 9,984 | (4,628) | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1044 | Houston | TX | — | — | 4,838 | 6,971 | 1,321 | 10,488 | 11,809 | (3,602) | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2542 | Houston | TX | — | 304 | 17,764 | (304) | — | 17,764 | 17,764 | (4,314) | 1990 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2543 | Houston | TX | — | 116 | 6,555 | (116) | — | 6,555 | 6,555 | (1,857) | 1970 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2544 | Houston | TX | — | 312 | 12,094 | (312) | — | 12,094 | 12,094 | (3,427) | 1987 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2545 | Houston | TX | — | 316 | 13,931 | (300) | — | 13,947 | 13,947 | (2,960) | 2005 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
131
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 1411 | South San Francisco | CA | — | 8,000 | 27,700 | 313 | 8,000 | 28,013 | 36,013 | (7,288 | ) | 2007 | |||||||||||||||||||||||||||
| 1412 | South San Francisco | CA | — | 10,100 | 22,521 | 2,156 | 10,100 | 24,437 | 34,537 | (6,066 | ) | 2007 | |||||||||||||||||||||||||||
| 1413 | South San Francisco | CA | — | 8,000 | 28,299 | 3,743 | 8,000 | 32,042 | 40,042 | (7,468 | ) | 2007 | |||||||||||||||||||||||||||
| 1414 | South San Francisco | CA | — | 3,700 | 20,800 | 2,248 | 3,700 | 22,845 | 26,545 | (5,965 | ) | 2007 | |||||||||||||||||||||||||||
| 1430 | South San Francisco | CA | — | 10,700 | 23,621 | 3,519 | 10,700 | 27,140 | 37,840 | (7,606 | ) | 2007 | |||||||||||||||||||||||||||
| 1431 | South San Francisco | CA | — | 7,000 | 15,500 | 876 | 7,000 | 16,375 | 23,375 | (4,109 | ) | 2007 | |||||||||||||||||||||||||||
| 1435 | South San Francisco | CA | — | 13,800 | 42,500 | 37,029 | 13,800 | 79,529 | 93,329 | (19,435 | ) | 2008 | |||||||||||||||||||||||||||
| 1436 | South San Francisco | CA | — | 14,500 | 45,300 | 36,865 | 14,500 | 82,165 | 96,665 | (19,964 | ) | 2008 | |||||||||||||||||||||||||||
| 1437 | South San Francisco | CA | — | 9,400 | 24,800 | 46,308 | 9,400 | 69,539 | 78,939 | (14,428 | ) | 2008 | |||||||||||||||||||||||||||
| 1439 | South San Francisco | CA | — | 11,900 | 68,848 | 48 | 11,900 | 68,896 | 80,796 | (17,948 | ) | 2007 | |||||||||||||||||||||||||||
| 1440 | South San Francisco | CA | — | 10,000 | 57,954 | 10 | 10,000 | 57,964 | 67,964 | (15,094 | ) | 2007 | |||||||||||||||||||||||||||
| 1441 | South San Francisco | CA | — | 9,300 | 43,549 | 8 | 9,300 | 43,557 | 52,857 | (11,342 | ) | 2007 | |||||||||||||||||||||||||||
| 1442 | South San Francisco | CA | — | 11,000 | 47,289 | 91 | 11,000 | 47,380 | 58,380 | (12,371 | ) | 2007 | |||||||||||||||||||||||||||
| 1443 | South San Francisco | CA | — | 13,200 | 60,932 | 2,645 | 13,200 | 63,576 | 76,776 | (15,600 | ) | 2007 | |||||||||||||||||||||||||||
| 1444 | South San Francisco | CA | — | 10,500 | 33,776 | 360 | 10,500 | 34,135 | 44,635 | (8,995 | ) | 2007 | |||||||||||||||||||||||||||
| 1445 | South San Francisco | CA | — | 10,600 | 34,083 | 9 | 10,600 | 34,092 | 44,692 | (8,877 | ) | 2007 | |||||||||||||||||||||||||||
| 1458 | South San Francisco | CA | — | 10,900 | 20,900 | 8,294 | 10,909 | 23,962 | 34,871 | (7,082 | ) | 2007 | |||||||||||||||||||||||||||
| 1459 | South San Francisco | CA | — | 3,600 | 100 | 223 | 3,600 | 323 | 3,923 | (94 | ) | 2007 | |||||||||||||||||||||||||||
| 1460 | South San Francisco | CA | — | 2,300 | 100 | 118 | 2,300 | 218 | 2,518 | (100 | ) | 2007 | |||||||||||||||||||||||||||
| 1461 | South San Francisco | CA | — | 3,900 | 200 | 221 | 3,900 | 421 | 4,321 | (200 | ) | 2007 | |||||||||||||||||||||||||||
| 1462 | South San Francisco | CA | — | 7,117 | 600 | 4,927 | 7,117 | 5,179 | 12,296 | (2,140 | ) | 2007 | |||||||||||||||||||||||||||
| 1463 | South San Francisco | CA | — | 10,381 | 2,300 | 20,527 | 10,381 | 22,827 | 33,208 | (5,749 | ) | 2007 | |||||||||||||||||||||||||||
| 1464 | South San Francisco | CA | — | 7,403 | 700 | 11,638 | 7,403 | 7,987 | 15,390 | (1,479 | ) | 2007 | |||||||||||||||||||||||||||
| 1468 | South San Francisco | CA | — | 10,100 | 24,013 | 4,774 | 10,100 | 26,642 | 36,742 | (7,801 | ) | 2007 | |||||||||||||||||||||||||||
| 1480 | South San Francisco | CA | — | 32,210 | 3,110 | 11,217 | 32,210 | 14,327 | 46,537 | — | 2007 | ||||||||||||||||||||||||||||
| 1559 | South San Francisco | CA | — | 5,666 | 5,773 | 12,966 | 5,695 | 18,641 | 24,336 | (10,250 | ) | 2007 | |||||||||||||||||||||||||||
| 1560 | South San Francisco | CA | — | 1,204 | 1,293 | 517 | 1,210 | 1,789 | 2,999 | (1,456 | ) | 2007 | |||||||||||||||||||||||||||
| 1983 | South San Francisco | CA | — | 8,648 | — | 95,860 | 8,648 | 95,860 | 104,508 | (6,072 | ) | 2016 | |||||||||||||||||||||||||||
| 1984 | South San Francisco | CA | — | 7,845 | — | 84,569 | 7,844 | 84,569 | 92,413 | (1,692 | ) | 2017 | |||||||||||||||||||||||||||
| 1985 | South San Francisco | CA | — | 6,708 | — | 98,300 | 6,708 | 98,301 | 105,009 | (1,212 | ) | 2017 | |||||||||||||||||||||||||||
| 1986 | South San Francisco | CA | — | 6,708 | — | 107,084 | 6,708 | 107,084 | 113,792 | — | 2011 | ||||||||||||||||||||||||||||
| 1987 | South San Francisco | CA | — | 8,544 | — | 47,227 | 8,544 | 47,228 | 55,772 | — | 2011 | ||||||||||||||||||||||||||||
| 1988 | South San Francisco | CA | — | 10,120 | — | 414 | 10,120 | 414 | 10,534 | — | 2011 | ||||||||||||||||||||||||||||
| 1989 | South San Francisco | CA | — | 9,169 | — | 3,649 | 9,169 | 3,649 | 12,818 | — | 2011 | ||||||||||||||||||||||||||||
| 2553 | South San Francisco | CA | — | 2,897 | 8,691 | 1,160 | 2,897 | 9,852 | 12,749 | (735 | ) | 2015 | |||||||||||||||||||||||||||
| 2554 | South San Francisco | CA | — | 995 | 2,754 | 50 | 995 | 2,804 | 3,799 | (166 | ) | 2015 | |||||||||||||||||||||||||||
| 2555 | South San Francisco | CA | — | 2,202 | 10,776 | 589 | 2,202 | 11,365 | 13,567 | (675 | ) | 2015 | |||||||||||||||||||||||||||
| 2556 | South San Francisco | CA | — | 2,962 | 15,108 | 168 | 2,962 | 15,276 | 18,238 | (908 | ) | 2015 | |||||||||||||||||||||||||||
| 2557 | South San Francisco | CA | — | 2,453 | 13,063 | 128 | 2,453 | 13,191 | 15,644 | (783 | ) | 2015 | |||||||||||||||||||||||||||
| 2558 | South San Francisco | CA | — | 1,163 | 5,925 | 58 | 1,163 | 5,983 | 7,146 | (356 | ) | 2015 | |||||||||||||||||||||||||||
| 2614 | South San Francisco | CA | — | 5,079 | 8,584 | 1,330 | 5,079 | 9,914 | 14,993 | (3,383 | ) | 2007 | |||||||||||||||||||||||||||
| 2615 | South San Francisco | CA | — | 7,984 | 13,495 | 3,243 | 7,984 | 16,739 | 24,723 | (5,481 | ) | 2007 | |||||||||||||||||||||||||||
| 2616 | South San Francisco | CA | — | 8,355 | 14,121 | 1,876 | 8,355 | 15,998 | 24,353 | (5,598 | ) | 2007 | |||||||||||||||||||||||||||
| 2624 | South San Francisco | CA | — | 25,502 | 41,293 | 181 | 25,502 | 41,474 | 66,976 | (382 | ) | 2017 | |||||||||||||||||||||||||||
| 9999 | Denton | TX | — | 100 | — | — | 100 | — | 100 | — | 2016 | ||||||||||||||||||||||||||||
| 2630 | Lexington | MA | — | 15,966 | 48,444 | — | 15,966 | 48,444 | 64,410 | (187 | ) | 2017 | |||||||||||||||||||||||||||
| 2631 | Lexington | MA | — | 10,940 | 139,201 | 28 | 10,940 | 139,229 | 150,169 | (367 | ) | 2017 | |||||||||||||||||||||||||||
| 2011 | Durham | NC | 6,118 | 448 | 6,152 | 21,379 | 448 | 27,494 | 27,942 | (5,000 | ) | 2011 | |||||||||||||||||||||||||||
| 2030 | Durham | NC | — | 1,920 | 5,661 | 34,120 | 1,920 | 39,781 | 41,701 | (7,054 | ) | 2012 | |||||||||||||||||||||||||||
| 0464 | Salt Lake City | UT | — | 630 | 6,921 | 2,562 | 630 | 9,483 | 10,113 | (3,123 | ) | 2001 | |||||||||||||||||||||||||||
| 0465 | Salt Lake City | UT | — | 125 | 6,368 | 68 | 125 | 6,436 | 6,561 | (2,379 | ) | 2001 | |||||||||||||||||||||||||||
| 0466 | Salt Lake City | UT | — | — | 14,614 | 7 | — | 14,621 | 14,621 | (4,872 | ) | 2001 | |||||||||||||||||||||||||||
| 0507 | Salt Lake City | UT | — | 280 | 4,345 | 226 | 280 | 4,572 | 4,852 | (1,694 | ) | 2002 | |||||||||||||||||||||||||||
| 0799 | Salt Lake City | UT | — | — | 14,600 | 90 | — | 14,690 | 14,690 | (3,976 | ) | 2005 | |||||||||||||||||||||||||||
| 1593 | Salt Lake City | UT | — | — | 23,998 | — | — | 23,998 | 23,998 | (5,393 | ) | 2010 | |||||||||||||||||||||||||||
| $ | 6,118 | $ | 880,878 | $ | 2,044,568 | $ | 1,131,979 | $ | 883,075 | $ | 3,094,702 | $ | 3,977,777 | $ | (635,314 | ) | |||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2546 | Houston | TX | — | 408 | 18,332 | 740 | — | 19,480 | 19,480 | (6,233) | 1977 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2547 | Houston | TX | — | 470 | 18,197 | (250) | — | 18,417 | 18,417 | (5,156) | 1985 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2548 | Houston | TX | — | 313 | 7,036 | (140) | — | 7,209 | 7,209 | (2,392) | 1979 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2549 | Houston | TX | — | 530 | 22,711 | 68 | 530 | 22,779 | 23,309 | (4,740) | 2006 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2966 | Houston | TX | — | — | — | 39,448 | — | 39,448 | 39,448 | (2,576) | 2022 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 590 | Irving | TX | — | 828 | 6,160 | 5,455 | 828 | 11,615 | 12,443 | (4,835) | 1997 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 700 | Irving | TX | — | — | 8,550 | 3,091 | 8 | 11,633 | 11,641 | (5,109) | 2004 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1207 | Irving | TX | — | 1,955 | 12,793 | 4,699 | 2,032 | 17,415 | 19,447 | (6,471) | 2001 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2840 | Kingwood | TX | — | 3,035 | 28,373 | 464 | 3,422 | 28,450 | 31,872 | (6,005) | 2003 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 591 | Lewisville | TX | — | 561 | 8,043 | 1,102 | 561 | 9,145 | 9,706 | (4,487) | 1976 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 144 | Longview | TX | — | 102 | 7,998 | 988 | 102 | 8,986 | 9,088 | (5,735) | 1993 | 1992 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 143 | Lufkin | TX | — | 338 | 2,383 | 219 | 338 | 2,602 | 2,940 | (1,648) | 1993 | 1992 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 568 | McKinney | TX | — | 541 | 6,217 | 3,371 | 541 | 9,588 | 10,129 | (4,892) | 1999 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 569 | McKinney | TX | — | — | 636 | 8,319 | — | 8,955 | 8,955 | (4,506) | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3216 | McKinney | TX | — | — | — | 1,415 | — | 1,415 | 1,415 | — | — | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 596 | North Richland Hills | TX | — | 812 | 8,883 | 4,524 | 812 | 13,407 | 14,219 | (5,619) | 1999 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2048 | North Richland Hills | TX | — | 1,385 | 10,213 | 1,849 | 1,400 | 12,047 | 13,447 | (5,367) | 2007 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2835 | Pearland | TX | — | — | 4,014 | 4,238 | 29 | 8,223 | 8,252 | (3,217) | 2006 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2838 | Pearland | TX | — | — | — | 18,363 | — | 18,363 | 18,363 | (5,422) | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 597 | Plano | TX | — | 1,210 | 9,588 | 7,506 | 1,225 | 17,079 | 18,304 | (6,930) | 1997 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 672 | Plano | TX | — | 1,389 | 12,768 | 3,922 | 1,389 | 16,690 | 18,079 | (6,958) | 2004 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1384 | Plano | TX | — | 6,290 | 22,686 | 7,966 | 6,290 | 30,652 | 36,942 | (24,603) | 1997 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2653 | Rockwall | TX | — | 788 | 9,020 | 2 | 788 | 9,022 | 9,810 | (1,847) | 2015 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 815 | San Antonio | TX | — | — | 9,193 | 3,285 | 75 | 12,403 | 12,478 | (5,948) | 1997 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 816 | San Antonio | TX | 1,552 | — | 8,699 | 13,192 | 175 | 21,716 | 21,891 | (6,649) | 1992/2022 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2837 | San Antonio | TX | — | — | 26,191 | 4,115 | — | 30,306 | 30,306 | (12,352) | 2006 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2852 | Shenandoah | TX | — | — | — | 29,980 | — | 29,980 | 29,980 | (8,235) | 2017 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 598 | Sugar Land | TX | — | 1,078 | 5,158 | 3,261 | 1,164 | 8,333 | 9,497 | (3,579) | 1982 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 599 | Texas City | TX | — | — | 9,519 | 1,971 | — | 11,490 | 11,490 | (4,972) | 2003 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 152 | Victoria | TX | — | 125 | 8,977 | 535 | 125 | 9,512 | 9,637 | (5,842) | 1994 | 1992 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2198 | Webster | TX | — | 2,220 | 9,602 | 142 | 2,220 | 9,744 | 11,964 | (3,920) | 1991 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3024 | Webster | TX | — | 3,196 | 12,911 | (28) | 3,212 | 12,867 | 16,079 | (892) | 2007 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3025 | Webster | TX | — | 3,209 | 23,782 | 114 | 3,225 | 23,880 | 27,105 | (1,571) | 2007 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2550 | The Woodlands | TX | — | 115 | 5,141 | (115) | — | 5,141 | 5,141 | (1,249) | 1984 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2551 | The Woodlands | TX | — | 296 | 18,282 | (296) | — | 18,282 | 18,282 | (3,885) | 1997 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2552 | The Woodlands | TX | — | 374 | 25,125 | (374) | — | 25,125 | 25,125 | (4,746) | 2004 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3215 | Wylie | TX | — | 874 | 4,122 | (64) | 874 | 4,058 | 4,932 | (180) | 2005 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1592 | Bountiful | UT | — | 999 | 7,426 | 1,963 | 1,019 | 9,369 | 10,388 | (3,953) | 2005 | 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 169 | Bountiful | UT | — | 276 | 5,237 | 4,602 | 599 | 9,516 | 10,115 | (4,262) | 1995 | 1994 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2035 | Draper | UT | 3,952 | — | 10,803 | 561 | — | 11,364 | 11,364 | (2,826) | 2010 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 469 | Kaysville | UT | — | 530 | 4,493 | 426 | 530 | 4,919 | 5,449 | (2,245) | 2001 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 456 | Layton | UT | — | 371 | 7,073 | 2,191 | 401 | 9,234 | 9,635 | (5,132) | 1998 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2042 | Layton | UT | — | — | 10,975 | 1,831 | 44 | 12,762 | 12,806 | (3,379) | 2006 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2864 | Washington Terrace | UT | — | — | — | 19,898 | — | 19,898 | 19,898 | (3,091) | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 357 | Orem | UT | — | 337 | 8,744 | 1,177 | 306 | 9,952 | 10,258 | (6,286) | 1998 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 353 | Salt Lake City | UT | — | 190 | 779 | 238 | 273 | 934 | 1,207 | (628) | 1991 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 354 | Salt Lake City | UT | — | 220 | 10,732 | 4,186 | 220 | 14,918 | 15,138 | (8,926) | 1999 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 355 | Salt Lake City | UT | — | 180 | 14,792 | 5,141 | 180 | 19,933 | 20,113 | (11,708) | 1993 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 467 | Salt Lake City | UT | — | 3,000 | 7,541 | 2,459 | 3,019 | 9,981 | 13,000 | (5,598) | 1998 | 2001 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 566 | Salt Lake City | UT | — | 509 | 4,044 | 3,763 | 509 | 7,807 | 8,316 | (3,555) | 1974 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2041 | Salt Lake City | UT | — | — | 12,326 | 877 | — | 13,203 | 13,203 | (3,406) | 2007 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2033 | Sandy | UT | — | 867 | 3,513 | 2,919 | 1,356 | 5,943 | 7,299 | (3,380) | 1989 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 351 | Washington Terrace | UT | — | — | 4,573 | 1,317 | 17 | 5,873 | 5,890 | (3,724) | 1989 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 352 | Washington Terrace | UT | — | — | 2,692 | 641 | 15 | 3,318 | 3,333 | (2,231) | 1990 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2034 | West Jordan | UT | — | — | 12,021 | (177) | — | 11,844 | 11,844 | (3,016) | 2006 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2036 | West Jordan | UT | — | — | 1,383 | 1,328 | — | 2,711 | 2,711 | (1,655) | 1982 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1208 | Fairfax | VA | — | 8,396 | 16,710 | 12,121 | 8,781 | 28,446 | 37,227 | (15,291) | 1974/2018 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2230 | Fredericksburg | VA | — | 1,101 | 8,570 | 156 | 1,113 | 8,714 | 9,827 | (2,308) | 2008 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3001 | Leesburg | VA | 10,217 | 3,549 | 24,059 | 4,826 | 3,549 | 28,885 | 32,434 | (3,912) | 2010 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3015 | Midlothian | VA | 12,688 | — | 21,442 | 10 | 59 | 21,393 | 21,452 | (1,653) | 2012 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3016 | Midlothian | VA | 11,994 | — | 20,610 | (137) | 32 | 20,441 | 20,473 | (1,766) | 2013 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3017 | Midlothian | VA | 13,878 | — | 22,531 | 176 | — | 22,707 | 22,707 | (2,846) | 2014 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 572 | Reston | VA | — | — | 11,902 | (864) | — | 11,038 | 11,038 | (5,515) | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 448 | Renton | WA | — | — | 18,724 | 3,750 | — | 22,474 | 22,474 | (13,933) | 1993 | 1999 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 781 | Seattle | WA | — | — | 52,703 | 10,129 | — | 62,832 | 62,832 | (31,470) | 1994 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 782 | Seattle | WA | — | — | 24,382 | 22,413 | 104 | 46,691 | 46,795 | (16,953) | 1990/2022 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 783 | Seattle | WA | — | — | 5,625 | 1,607 | 211 | 7,021 | 7,232 | (6,247) | 1984 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 785 | Seattle | WA | — | — | 7,293 | 1,475 | — | 8,768 | 8,768 | (5,205) | 1982 | 2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1385 | Seattle | WA | — | — | 45,027 | 17,489 | — | 62,516 | 62,516 | (26,972) | 1986/2019 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3022 | Seattle | WA | — | 35,624 | 4,176 | 1 | 35,625 | 4,176 | 39,801 | (1,898) | 1963/2012 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2038 | Evanston | WY | — | — | 4,601 | 1,204 | — | 5,805 | 5,805 | (1,953) | 2002 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 146,426 | $ | 529,287 | $ | 3,887,576 | $ | 1,467,286 | $ | 546,448 | $ | 5,337,701 | $ | 5,884,149 | $ | (1,796,189) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
132
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| Medical office | |||||||||||||||||||||||||||||||||||||||
| 0638 | Anchorage | AK | — | 1,456 | 10,650 | 12,309 | 1,456 | 22,907 | 24,363 | (6,114 | ) | 2006 | |||||||||||||||||||||||||||
| 2572 | Springdale | AR | — | — | 27,714 | — | — | 27,714 | 27,714 | (916 | ) | 2016 | |||||||||||||||||||||||||||
| 0520 | Chandler | AZ | — | 3,669 | 13,503 | 2,538 | 3,669 | 15,751 | 19,420 | (5,883 | ) | 2002 | |||||||||||||||||||||||||||
| 2040 | Mesa | AZ | — | — | 17,314 | 896 | — | 18,181 | 18,181 | (2,567 | ) | 2012 | |||||||||||||||||||||||||||
| 0468 | Oro Valley | AZ | — | 1,050 | 6,774 | 925 | 1,050 | 7,124 | 8,174 | (2,857 | ) | 2001 | |||||||||||||||||||||||||||
| 0356 | Phoenix | AZ | — | 780 | 3,199 | 2,271 | 780 | 4,550 | 5,330 | (1,884 | ) | 1999 | |||||||||||||||||||||||||||
| 0470 | Phoenix | AZ | — | 280 | 877 | 120 | 280 | 961 | 1,241 | (351 | ) | 2001 | |||||||||||||||||||||||||||
| 1066 | Scottsdale | AZ | — | 5,115 | 14,064 | 3,553 | 4,839 | 17,035 | 21,874 | (5,539 | ) | 2006 | |||||||||||||||||||||||||||
| 2021 | Scottsdale | AZ | — | — | 12,312 | 1,818 | — | 14,046 | 14,046 | (3,839 | ) | 2012 | |||||||||||||||||||||||||||
| 2022 | Scottsdale | AZ | — | — | 9,179 | 1,222 | — | 10,270 | 10,270 | (2,942 | ) | 2012 | |||||||||||||||||||||||||||
| 2023 | Scottsdale | AZ | — | — | 6,398 | 1,570 | — | 7,848 | 7,848 | (1,871 | ) | 2012 | |||||||||||||||||||||||||||
| 2024 | Scottsdale | AZ | — | — | 9,522 | 663 | — | 10,184 | 10,184 | (2,438 | ) | 2012 | |||||||||||||||||||||||||||
| 2025 | Scottsdale | AZ | — | — | 4,102 | 1,482 | — | 5,492 | 5,492 | (1,650 | ) | 2012 | |||||||||||||||||||||||||||
| 2026 | Scottsdale | AZ | — | — | 3,655 | 1,211 | — | 4,826 | 4,826 | (1,118 | ) | 2012 | |||||||||||||||||||||||||||
| 2027 | Scottsdale | AZ | — | — | 7,168 | 1,455 | — | 8,605 | 8,605 | (2,140 | ) | 2012 | |||||||||||||||||||||||||||
| 2028 | Scottsdale | AZ | — | — | 6,659 | 1,285 | — | 7,944 | 7,944 | (1,937 | ) | 2012 | |||||||||||||||||||||||||||
| 0453 | Tucson | AZ | — | 215 | 6,318 | 1,390 | 326 | 7,073 | 7,399 | (3,414 | ) | 2000 | |||||||||||||||||||||||||||
| 0556 | Tucson | AZ | — | 215 | 3,940 | 1,285 | 267 | 4,745 | 5,012 | (1,541 | ) | 2003 | |||||||||||||||||||||||||||
| 1041 | Brentwood | CA | — | — | 30,864 | 3,002 | 187 | 33,138 | 33,325 | (9,716 | ) | 2006 | |||||||||||||||||||||||||||
| 1200 | Encino | CA | — | 6,151 | 10,438 | 4,583 | 6,646 | 13,736 | 20,382 | (5,095 | ) | 2006 | |||||||||||||||||||||||||||
| 0436 | Murietta | CA | — | 400 | 9,266 | 4,140 | 638 | 11,876 | 12,514 | (5,682 | ) | 1999 | |||||||||||||||||||||||||||
| 0239 | Poway | CA | — | 2,700 | 10,839 | 3,710 | 2,887 | 12,438 | 15,325 | (6,698 | ) | 1997 | |||||||||||||||||||||||||||
| 2654 | Riverside | CA | — | 2,758 | 9,908 | — | 2,758 | 9,908 | 12,666 | — | 2017 | ||||||||||||||||||||||||||||
| 0318 | Sacramento | CA | — | 2,860 | 37,566 | 27,137 | 2,911 | 63,801 | 66,712 | (10,335 | ) | 1998 | |||||||||||||||||||||||||||
| 2404 | Sacramento | CA | — | 1,268 | 5,109 | 374 | 1,299 | 5,453 | 6,752 | (649 | ) | 2015 | |||||||||||||||||||||||||||
| 0234 | San Diego | CA | — | 2,848 | 5,879 | 1,450 | 3,009 | 5,053 | 8,062 | (3,231 | ) | 1997 | |||||||||||||||||||||||||||
| 0235 | San Diego | CA | — | 2,863 | 8,913 | 2,913 | 3,068 | 8,297 | 11,365 | (5,276 | ) | 1997 | |||||||||||||||||||||||||||
| 0236 | San Diego | CA | — | 4,619 | 19,370 | 4,023 | 4,711 | 16,760 | 21,471 | (10,173 | ) | 1997 | |||||||||||||||||||||||||||
| 0421 | San Diego | CA | — | 2,910 | 19,984 | 16,343 | 2,964 | 34,954 | 37,918 | (8,524 | ) | 1999 | |||||||||||||||||||||||||||
| 0564 | San Jose | CA | — | 1,935 | 1,728 | 2,616 | 1,935 | 3,302 | 5,237 | (1,348 | ) | 2003 | |||||||||||||||||||||||||||
| 0565 | San Jose | CA | — | 1,460 | 7,672 | 527 | 1,460 | 7,721 | 9,181 | (3,004 | ) | 2003 | |||||||||||||||||||||||||||
| 0659 | Los Gatos | CA | — | 1,718 | 3,124 | 622 | 1,758 | 3,592 | 5,350 | (1,336 | ) | 2000 | |||||||||||||||||||||||||||
| 1209 | Sherman Oaks | CA | — | 7,472 | 10,075 | 5,915 | 7,943 | 14,851 | 22,794 | (7,274 | ) | 2006 | |||||||||||||||||||||||||||
| 0439 | Valencia | CA | — | 2,300 | 6,967 | 3,761 | 2,404 | 8,727 | 11,131 | (3,716 | ) | 1999 | |||||||||||||||||||||||||||
| 1211 | Valencia | CA | — | 1,344 | 7,507 | 733 | 1,383 | 7,969 | 9,352 | (2,377 | ) | 2006 | |||||||||||||||||||||||||||
| 0440 | West Hills | CA | — | 2,100 | 11,595 | 4,182 | 2,259 | 12,225 | 14,484 | (5,826 | ) | 1999 | |||||||||||||||||||||||||||
| 0728 | Aurora | CO | — | — | 8,764 | 2,807 | — | 8,997 | 8,997 | (3,157 | ) | 2005 | |||||||||||||||||||||||||||
| 1196 | Aurora | CO | — | 210 | 12,362 | 6,074 | 210 | 17,720 | 17,930 | (4,037 | ) | 2006 | |||||||||||||||||||||||||||
| 1197 | Aurora | CO | — | 200 | 8,414 | 5,398 | 200 | 13,482 | 13,682 | (3,541 | ) | 2006 | |||||||||||||||||||||||||||
| 0882 | Colorado Springs | CO | — | — | 12,933 | 10,716 | — | 22,506 | 22,506 | (7,988 | ) | 2006 | |||||||||||||||||||||||||||
| 1199 | Denver | CO | — | 493 | 7,897 | 1,865 | 622 | 9,401 | 10,023 | (3,494 | ) | 2006 | |||||||||||||||||||||||||||
| 0808 | Englewood | CO | — | — | 8,616 | 9,322 | 11 | 16,830 | 16,841 | (6,146 | ) | 2005 | |||||||||||||||||||||||||||
| 0809 | Englewood | CO | — | — | 8,449 | 3,767 | — | 10,997 | 10,997 | (4,304 | ) | 2005 | |||||||||||||||||||||||||||
| 0810 | Englewood | CO | — | — | 8,040 | 7,711 | — | 14,746 | 14,746 | (5,510 | ) | 2005 | |||||||||||||||||||||||||||
| 0811 | Englewood | CO | — | — | 8,472 | 4,743 | — | 11,614 | 11,614 | (3,760 | ) | 2005 | |||||||||||||||||||||||||||
| 2658 | Highlands Ranch | CO | — | 1,637 | 10,063 | — | 1,637 | 10,063 | 11,700 | — | 2017 | ||||||||||||||||||||||||||||
| 0812 | Littleton | CO | — | — | 4,562 | 2,405 | 257 | 5,803 | 6,060 | (2,317 | ) | 2005 | |||||||||||||||||||||||||||
| 0813 | Littleton | CO | — | — | 4,926 | 1,910 | 106 | 6,089 | 6,195 | (2,126 | ) | 2005 | |||||||||||||||||||||||||||
| 0570 | Lone Tree | CO | — | — | — | 20,096 | — | 19,400 | 19,400 | (6,614 | ) | 2003 | |||||||||||||||||||||||||||
| 0666 | Lone Tree | CO | — | — | 23,274 | 2,663 | — | 25,414 | 25,414 | (8,551 | ) | 2000 | |||||||||||||||||||||||||||
| 2233 | Lone Tree | CO | — | — | 6,734 | 27,690 | — | 34,424 | 34,424 | (1,641 | ) | 2014 | |||||||||||||||||||||||||||
| 1076 | Parker | CO | — | — | 13,388 | 1,048 | 8 | 14,215 | 14,223 | (4,262 | ) | 2006 | |||||||||||||||||||||||||||
| 0510 | Thornton | CO | — | 236 | 10,206 | 3,648 | 454 | 13,289 | 13,743 | (5,213 | ) | 2002 | |||||||||||||||||||||||||||
| 0434 | Atlantis | FL | — | — | 2,027 | 352 | 5 | 2,219 | 2,224 | (1,141 | ) | 1999 | |||||||||||||||||||||||||||
| 0435 | Atlantis | FL | — | — | 2,000 | 931 | — | 2,566 | 2,566 | (1,346 | ) | 1999 | |||||||||||||||||||||||||||
| 0602 | Atlantis | FL | — | 455 | 2,231 | 991 | 455 | 2,958 | 3,413 | (984 | ) | 2000 | |||||||||||||||||||||||||||
| 0604 | Englewood | FL | — | 170 | 1,134 | 486 | 198 | 1,398 | 1,596 | (522 | ) | 2000 | |||||||||||||||||||||||||||
| 0609 | Kissimmee | FL | — | 788 | 174 | 649 | 788 | 721 | 1,509 | (217 | ) | 2000 | |||||||||||||||||||||||||||
| 0610 | Kissimmee | FL | — | 481 | 347 | 793 | 494 | 975 | 1,469 | (452 | ) | 2000 | |||||||||||||||||||||||||||
| 0671 | Kissimmee | FL | — | — | 7,574 | 2,521 | — | 8,525 | 8,525 | (2,817 | ) | 2000 | |||||||||||||||||||||||||||
| 0603 | Lake Worth | FL | — | 1,507 | 2,894 | 1,807 | 1,507 | 4,569 | 6,076 | (1,962 | ) | 2000 | |||||||||||||||||||||||||||
| 0612 | Margate | FL | — | 1,553 | 6,898 | 1,499 | 1,553 | 8,204 | 9,757 | (2,827 | ) | 2000 | |||||||||||||||||||||||||||
| 0613 | Miami | FL | — | 4,392 | 11,841 | 4,300 | 4,392 | 14,622 | 19,014 | (5,453 | ) | 2000 | |||||||||||||||||||||||||||
| 2202 | Miami | FL | — | — | 13,123 | 4,193 | — | 17,207 | 17,207 | (2,767 | ) | 2014 | |||||||||||||||||||||||||||
| 2203 | Miami | FL | — | — | 8,877 | 2,793 | — | 11,671 | 11,671 | (1,607 | ) | 2014 | |||||||||||||||||||||||||||
| 1067 | Milton | FL | — | — | 8,566 | 269 | — | 8,816 | 8,816 | (2,544 | ) | 2006 | |||||||||||||||||||||||||||
| 2577 | Naples | FL | — | — | 29,186 | — | — | 29,186 | 29,186 | (903 | ) | 2016 | |||||||||||||||||||||||||||
| 2578 | Naples | FL | — | — | 18,819 | — | — | 18,819 | 18,819 | (494 | ) | 2016 | |||||||||||||||||||||||||||
| 0563 | Orlando | FL | — | 2,144 | 5,136 | 6,662 | 2,343 | 10,110 | 12,453 | (3,982 | ) | 2003 | |||||||||||||||||||||||||||
| 0833 | Pace | FL | — | — | 10,309 | 3,217 | 26 | 11,206 | 11,232 | (2,918 | ) | 2006 | |||||||||||||||||||||||||||
| 0834 | Pensacola | FL | — | — | 11,166 | 478 | — | 11,644 | 11,644 | (3,316 | ) | 2006 | |||||||||||||||||||||||||||
| 0614 | Plantation | FL | — | 969 | 3,241 | 1,595 | 1,017 | 4,151 | 5,168 | (1,475 | ) | 2000 | |||||||||||||||||||||||||||
| 0673 | Plantation | FL | — | 1,091 | 7,176 | 1,979 | 1,091 | 8,714 | 9,805 | (2,579 | ) | 2002 | |||||||||||||||||||||||||||
| 2579 | Punta Gorda | FL | — | — | 9,379 | — | — | 9,379 | 9,379 | (280 | ) | 2016 | |||||||||||||||||||||||||||
| 0701 | St. Petersburg | FL | — | — | 13,754 | 8,866 | — | 21,181 | 21,181 | (5,713 | ) | 2006 | |||||||||||||||||||||||||||
| 1210 | Tampa | FL | — | 1,967 | 6,602 | 6,482 | 2,194 | 10,646 | 12,840 | (4,722 | ) | 2006 | |||||||||||||||||||||||||||
| 1058 | Blue Ridge | GA | — | — | 3,231 | 228 | — | 3,459 | 3,459 | (934 | ) | 2006 | |||||||||||||||||||||||||||
| 2576 | Statesboro | GA | — | — | 10,234 | — | — | 10,234 | 10,234 | (412 | ) | 2016 | |||||||||||||||||||||||||||
| 1065 | Marion | IL | — | 99 | 11,484 | 775 | 100 | 12,090 | 12,190 | (3,723 | ) | 2006 | |||||||||||||||||||||||||||
| 1057 | Newburgh | IN | — | — | 14,019 | 4,265 | — | 18,278 | 18,278 | (5,266 | ) | 2006 | |||||||||||||||||||||||||||
| 2039 | Kansas City | KS | — | 440 | 2,173 | 17 | 448 | 2,181 | 2,629 | (369 | ) | 2012 | |||||||||||||||||||||||||||
| 2043 | Overland Park | KS | — | — | 7,668 | 366 | — | 8,034 | 8,034 | (1,283 | ) | 2012 | |||||||||||||||||||||||||||
| 0483 | Wichita | KS | — | 530 | 3,341 | 716 | 530 | 3,620 | 4,150 | (1,214 | ) | 2001 | |||||||||||||||||||||||||||
| Encumbrances at December 31, 2023 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition(3) | Gross Amount at Which Carried As of December 31, 2023 | Accumulated Depreciation(5) | Year Constructed(6) | Year Acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| City | State | Land and improvements(1) | Buildings and Improvements(2) | Land and improvements | Buildings and Improvements | Total(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Continuing care retirement community | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3089 | Birmingham | AL | $ | — | $ | 6,193 | $ | 32,146 | $ | 6,411 | $ | 6,670 | $ | 38,080 | $ | 44,750 | $ | (7,612) | 1991 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3090 | Bradenton | FL | — | 5,496 | 95,671 | 27,694 | 6,228 | 122,633 | 128,861 | (21,444) | 1985 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2997 | Clearwater | FL | 66,436 | 6,680 | 132,521 | 20,619 | 7,195 | 152,625 | 159,820 | (21,252) | 1991 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3086 | Jacksonville | FL | — | 19,660 | 167,860 | 22,367 | 21,042 | 188,845 | 209,887 | (29,940) | 1989 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2996 | Leesburg | FL | — | 8,941 | 65,698 | 16,620 | 9,779 | 81,480 | 91,259 | (14,936) | 1990 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2995 | Port Charlotte | FL | — | 5,344 | 159,612 | 16,205 | 6,008 | 175,153 | 181,161 | (23,576) | 1987 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2998 | Seminole | FL | 43,235 | 14,080 | 77,485 | 13,228 | 15,030 | 89,763 | 104,793 | (11,367) | 1990 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3085 | Seminole | FL | — | 13,915 | 125,796 | 16,519 | 14,698 | 141,532 | 156,230 | (23,135) | 1982 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3092 | Sun City Center | FL | — | 25,254 | 175,535 | 21,862 | 26,460 | 196,191 | 222,651 | (36,004) | 1992 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3087 | The Villages | FL | — | 7,091 | 120,493 | 16,363 | 7,331 | 136,616 | 143,947 | (21,450) | 2009 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3084 | Holland | MI | — | 1,572 | 88,960 | 10,401 | 1,898 | 99,035 | 100,933 | (15,129) | 1991 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2991 | Coatesville | PA | — | 16,443 | 126,243 | 17,270 | 17,064 | 142,892 | 159,956 | (20,601) | 1998 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3080 | Haverford | PA | — | 16,461 | 108,816 | 24,097 | 16,461 | 132,913 | 149,374 | (52,714) | 1989 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3088 | Spring | TX | — | 3,210 | 30,085 | 11,821 | 3,524 | 41,592 | 45,116 | (5,695) | 2008 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3081 | Fort Belvoir | VA | — | 11,594 | 99,528 | 19,948 | 11,594 | 119,476 | 131,070 | (51,408) | 1990 | 2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 109,671 | $ | 161,934 | $ | 1,606,449 | $ | 261,425 | $ | 170,982 | $ | 1,858,826 | $ | 2,029,808 | $ | (356,263) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total real estate assets held for sale | — | (9,125) | (10,213) | (103,849) | (9,154) | (114,033) | (123,187) | 5,365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total, excluding held for sale | $ | 256,097 | $ | 2,618,324 | $ | 8,722,627 | $ | 5,279,363 | $ | 2,647,633 | $ | 13,972,681 | $ | 16,620,314 | $ | (3,591,951) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Assets with no initial land costs to the Company represent land that the Company leases from a third party (i.e., ground leases).
(2)Assets with no initial buildings and improvements costs to the Company represent development projects in process or completed.
(3)Includes adjustments for disposals, casualty events, and costs capitalized subsequent to acquisition, net of incidental income, if applicable.
(4)At December 31, 2023, the tax basis of the Company’s net real estate assets is less than the reported amounts by$900 million.
(5)Buildings and improvements are depreciated over useful lives ranging up to approximately 50 years.
(6)Year of original construction/year of last major renovation, if applicable.
133
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 1064 | Lexington | KY | — | — | 12,726 | 1,323 | — | 13,835 | 13,835 | (4,443 | ) | 2006 | |||||||||||||||||||||||||||
| 0735 | Louisville | KY | — | 936 | 8,426 | 5,714 | 936 | 11,622 | 12,558 | (9,574 | ) | 2005 | |||||||||||||||||||||||||||
| 0737 | Louisville | KY | — | 835 | 27,627 | 6,376 | 878 | 32,459 | 33,337 | (11,571 | ) | 2005 | |||||||||||||||||||||||||||
| 0738 | Louisville | KY | — | 780 | 8,582 | 5,857 | 851 | 12,321 | 13,172 | (7,304 | ) | 2005 | |||||||||||||||||||||||||||
| 0739 | Louisville | KY | — | 826 | 13,814 | 1,842 | 832 | 14,195 | 15,027 | (4,774 | ) | 2005 | |||||||||||||||||||||||||||
| 0740 | Louisville | KY | — | 2,983 | 13,171 | 4,853 | 2,991 | 16,849 | 19,840 | (7,188 | ) | 2005 | |||||||||||||||||||||||||||
| 1944 | Louisville | KY | — | 788 | 2,414 | — | 788 | 2,414 | 3,202 | (676 | ) | 2010 | |||||||||||||||||||||||||||
| 1945 | Louisville | KY | — | 3,255 | 28,644 | 971 | 3,291 | 29,278 | 32,569 | (7,073 | ) | 2010 | |||||||||||||||||||||||||||
| 1946 | Louisville | KY | — | 430 | 6,125 | 152 | 430 | 6,277 | 6,707 | (1,461 | ) | 2010 | |||||||||||||||||||||||||||
| 2237 | Louisville | KY | — | 1,519 | 15,386 | 2,941 | 1,542 | 18,304 | 19,846 | (2,233 | ) | 2014 | |||||||||||||||||||||||||||
| 2238 | Louisville | KY | — | 1,334 | 12,172 | 1,660 | 1,511 | 13,654 | 15,165 | (1,896 | ) | 2014 | |||||||||||||||||||||||||||
| 2239 | Louisville | KY | — | 1,644 | 10,832 | 4,947 | 1,718 | 15,704 | 17,422 | (1,762 | ) | 2014 | |||||||||||||||||||||||||||
| 1324 | Haverhill | MA | — | 800 | 8,537 | 2,191 | 869 | 9,373 | 10,242 | (2,817 | ) | 2007 | |||||||||||||||||||||||||||
| 1213 | Ellicott City | MD | — | 1,115 | 3,206 | 2,692 | 1,222 | 4,979 | 6,201 | (2,094 | ) | 2006 | |||||||||||||||||||||||||||
| 0361 | GlenBurnie | MD | — | 670 | 5,085 | — | 670 | 5,085 | 5,755 | (2,712 | ) | 1999 | |||||||||||||||||||||||||||
| 1052 | Towson | MD | — | — | 14,233 | 3,611 | — | 15,132 | 15,132 | (6,086 | ) | 2006 | |||||||||||||||||||||||||||
| 2650 | Biddeford | ME | — | 1,949 | 12,244 | — | 1,949 | 12,244 | 14,193 | — | 2017 | ||||||||||||||||||||||||||||
| 0240 | Minneapolis | MN | — | 117 | 13,213 | 3,095 | 117 | 15,773 | 15,890 | (8,465 | ) | 1997 | |||||||||||||||||||||||||||
| 0300 | Minneapolis | MN | — | 160 | 10,131 | 4,653 | 160 | 13,649 | 13,809 | (6,940 | ) | 1997 | |||||||||||||||||||||||||||
| 2032 | Independence | MO | — | — | 48,025 | 1,220 | — | 49,245 | 49,245 | (6,371 | ) | 2012 | |||||||||||||||||||||||||||
| 1078 | Flowood | MS | — | — | 8,413 | 762 | — | 9,148 | 9,148 | (3,005 | ) | 2006 | |||||||||||||||||||||||||||
| 1059 | Jackson | MS | — | — | 8,868 | 122 | — | 8,990 | 8,990 | (2,534 | ) | 2006 | |||||||||||||||||||||||||||
| 1060 | Jackson | MS | — | — | 7,187 | 2,189 | — | 9,376 | 9,376 | (3,271 | ) | 2006 | |||||||||||||||||||||||||||
| 1068 | Omaha | NE | — | — | 16,243 | 1,309 | 17 | 17,465 | 17,482 | (5,270 | ) | 2006 | |||||||||||||||||||||||||||
| 2651 | Charlotte | NC | — | 2,001 | 11,217 | — | 2,001 | 11,217 | 13,218 | — | 2017 | ||||||||||||||||||||||||||||
| 2655 | Wilmington | NC | — | 1,341 | 17,376 | — | 1,341 | 17,376 | 18,717 | — | 2017 | ||||||||||||||||||||||||||||
| 2656 | Wilmington | NC | — | 2,071 | 11,592 | — | 2,071 | 11,592 | 13,663 | — | 2017 | ||||||||||||||||||||||||||||
| 2657 | Shallotte | NC | — | 918 | 3,609 | — | 918 | 3,609 | 4,527 | — | 2017 | ||||||||||||||||||||||||||||
| 2647 | Concord | NH | — | 1,961 | 23,018 | — | 1,961 | 23,018 | 24,979 | — | 2017 | ||||||||||||||||||||||||||||
| 2648 | Concord | NH | — | 815 | 8,749 | — | 815 | 8,749 | 9,564 | — | 2017 | ||||||||||||||||||||||||||||
| 2649 | Epsom | NH | — | 919 | 5,758 | — | 919 | 5,758 | 6,677 | — | 2017 | ||||||||||||||||||||||||||||
| 0729 | Albuquerque | NM | — | — | 5,380 | 700 | — | 5,758 | 5,758 | (1,750 | ) | 2005 | |||||||||||||||||||||||||||
| 0348 | Elko | NV | — | 55 | 2,637 | 12 | 55 | 2,649 | 2,704 | (1,432 | ) | 1999 | |||||||||||||||||||||||||||
| 0571 | Las Vegas | NV | — | — | — | 19,276 | — | 17,895 | 17,895 | (6,235 | ) | 2003 | |||||||||||||||||||||||||||
| 0660 | Las Vegas | NV | — | 1,121 | 4,363 | 5,809 | 1,328 | 7,991 | 9,319 | (3,289 | ) | 2000 | |||||||||||||||||||||||||||
| 0661 | Las Vegas | NV | — | 2,305 | 4,829 | 5,304 | 2,447 | 8,897 | 11,344 | (3,992 | ) | 2000 | |||||||||||||||||||||||||||
| 0662 | Las Vegas | NV | — | 3,480 | 12,305 | 5,502 | 3,480 | 15,360 | 18,840 | (5,449 | ) | 2000 | |||||||||||||||||||||||||||
| 0663 | Las Vegas | NV | — | 1,717 | 3,597 | 10,833 | 1,724 | 12,732 | 14,456 | (2,176 | ) | 2000 | |||||||||||||||||||||||||||
| 0664 | Las Vegas | NV | — | 1,172 | — | 631 | 1,803 | — | 1,803 | (53 | ) | 2000 | |||||||||||||||||||||||||||
| 0691 | Las Vegas | NV | — | 3,244 | 18,339 | 7,583 | 3,273 | 24,434 | 27,707 | (9,610 | ) | 2004 | |||||||||||||||||||||||||||
| 2037 | Mesquite | NV | — | — | 5,559 | 470 | 34 | 5,983 | 6,017 | (875 | ) | 2012 | |||||||||||||||||||||||||||
| 1285 | Cleveland | OH | — | 823 | 2,726 | 925 | 853 | 2,713 | 3,566 | (1,105 | ) | 2006 | |||||||||||||||||||||||||||
| 0400 | Harrison | OH | — | — | 4,561 | 300 | — | 4,861 | 4,861 | (2,577 | ) | 1999 | |||||||||||||||||||||||||||
| 1054 | Durant | OK | — | 619 | 9,256 | 1,925 | 659 | 11,120 | 11,779 | (3,115 | ) | 2006 | |||||||||||||||||||||||||||
| 0817 | Owasso | OK | — | — | 6,582 | 1,521 | — | 5,592 | 5,592 | (1,450 | ) | 2005 | |||||||||||||||||||||||||||
| 0404 | Roseburg | OR | — | — | 5,707 | 700 | — | 6,407 | 6,407 | (3,180 | ) | 1999 | |||||||||||||||||||||||||||
| 2570 | Limerick | PA | — | 925 | 20,072 | 51 | 925 | 20,123 | 21,048 | (779 | ) | 2016 | |||||||||||||||||||||||||||
| 2234 | Philadelphia | PA | — | 24,264 | 99,904 | 20,524 | 24,288 | 120,324 | 144,612 | (9,466 | ) | 2014 | |||||||||||||||||||||||||||
| 2403 | Philadelphia | PA | — | 26,063 | 97,646 | 10,578 | 26,110 | 108,177 | 134,287 | (11,345 | ) | 2015 | |||||||||||||||||||||||||||
| 2571 | Wilkes-Barre | PA | — | — | 9,138 | — | — | 9,138 | 9,138 | (364 | ) | 2016 | |||||||||||||||||||||||||||
| 2573 | Florence | SC | — | — | 12,090 | 91 | — | 12,181 | 12,181 | (380 | ) | 2016 | |||||||||||||||||||||||||||
| 2574 | Florence | SC | — | — | 12,190 | 88 | — | 12,278 | 12,278 | (383 | ) | 2016 | |||||||||||||||||||||||||||
| 2575 | Florence | SC | — | — | 11,243 | 56 | — | 11,299 | 11,299 | (435 | ) | 2016 | |||||||||||||||||||||||||||
| 0252 | Clarksville | TN | — | 203 | 841 | 60 | 210 | 893 | 1,103 | (495 | ) | 1998 | |||||||||||||||||||||||||||
| 2634 | Clarksville | TN | — | 259 | 1,555 | — | 259 | 1,555 | 1,814 | (877 | ) | 2017 | |||||||||||||||||||||||||||
| 0624 | Hendersonville | TN | — | 256 | 1,530 | 1,827 | 256 | 2,864 | 3,120 | (1,093 | ) | 2000 | |||||||||||||||||||||||||||
| 0559 | Hermitage | TN | — | 830 | 5,036 | 6,314 | 851 | 10,014 | 10,865 | (4,011 | ) | 2003 | |||||||||||||||||||||||||||
| 0561 | Hermitage | TN | — | 596 | 9,698 | 5,893 | 596 | 14,332 | 14,928 | (5,958 | ) | 2003 | |||||||||||||||||||||||||||
| 0562 | Hermitage | TN | — | 317 | 6,528 | 2,925 | 317 | 8,579 | 8,896 | (3,891 | ) | 2003 | |||||||||||||||||||||||||||
| 0154 | Knoxville | TN | — | 700 | 4,559 | 4,984 | 700 | 9,087 | 9,787 | (4,349 | ) | 1994 | |||||||||||||||||||||||||||
| 0625 | Nashville | TN | — | 955 | 14,289 | 3,901 | 955 | 16,560 | 17,515 | (5,510 | ) | 2000 | |||||||||||||||||||||||||||
| 0626 | Nashville | TN | — | 2,050 | 5,211 | 4,334 | 2,055 | 8,695 | 10,750 | (3,334 | ) | 2000 | |||||||||||||||||||||||||||
| 0627 | Nashville | TN | — | 1,007 | 181 | 724 | 1,060 | 791 | 1,851 | (427 | ) | 2000 | |||||||||||||||||||||||||||
| 0628 | Nashville | TN | — | 2,980 | 7,164 | 2,756 | 2,980 | 9,506 | 12,486 | (4,166 | ) | 2000 | |||||||||||||||||||||||||||
| 0630 | Nashville | TN | — | 515 | 848 | 400 | 528 | 1,048 | 1,576 | (334 | ) | 2000 | |||||||||||||||||||||||||||
| 0631 | Nashville | TN | — | 266 | 1,305 | 1,552 | 266 | 2,441 | 2,707 | (922 | ) | 2000 | |||||||||||||||||||||||||||
| 0632 | Nashville | TN | — | 827 | 7,642 | 4,072 | 827 | 10,270 | 11,097 | (3,912 | ) | 2000 | |||||||||||||||||||||||||||
| 0633 | Nashville | TN | — | 5,425 | 12,577 | 6,113 | 5,425 | 18,199 | 23,624 | (7,312 | ) | 2000 | |||||||||||||||||||||||||||
| 0634 | Nashville | TN | — | 3,818 | 15,185 | 9,661 | 3,818 | 23,722 | 27,540 | (9,437 | ) | 2000 | |||||||||||||||||||||||||||
| 0636 | Nashville | TN | — | 583 | 450 | 309 | 583 | 759 | 1,342 | (296 | ) | 2000 | |||||||||||||||||||||||||||
| 2611 | Allen | TX | — | 1,330 | 5,960 | 76 | 1,330 | 6,036 | 7,366 | (231 | ) | 2016 | |||||||||||||||||||||||||||
| 2612 | Allen | TX | — | 1,310 | 4,165 | 84 | 1,310 | 4,249 | 5,559 | (173 | ) | 2016 | |||||||||||||||||||||||||||
| 0573 | Arlington | TX | — | 769 | 12,355 | 4,310 | 769 | 15,677 | 16,446 | (5,592 | ) | 2003 | |||||||||||||||||||||||||||
| 2621 | Cedar Park | TX | — | 1,617 | 11,640 | — | 1,617 | 11,640 | 13,257 | (142 | ) | 2017 | |||||||||||||||||||||||||||
| 0576 | Conroe | TX | — | 324 | 4,842 | 2,528 | 324 | 6,139 | 6,463 | (2,117 | ) | 2000 | |||||||||||||||||||||||||||
| 0577 | Conroe | TX | — | 397 | 7,966 | 2,461 | 397 | 9,924 | 10,321 | (3,702 | ) | 2000 | |||||||||||||||||||||||||||
| 0578 | Conroe | TX | — | 388 | 7,975 | 4,103 | 388 | 10,549 | 10,937 | (3,375 | ) | 2006 | |||||||||||||||||||||||||||
| 0579 | Conroe | TX | — | 188 | 3,618 | 1,337 | 188 | 4,807 | 4,995 | (1,721 | ) | 2000 | |||||||||||||||||||||||||||
| 0581 | Corpus Christi | TX | — | 717 | 8,181 | 5,663 | 717 | 11,673 | 12,390 | (4,090 | ) | 2000 | |||||||||||||||||||||||||||
| 0600 | Corpus Christi | TX | — | 328 | 3,210 | 3,945 | 328 | 6,632 | 6,960 | (3,044 | ) | 2000 | |||||||||||||||||||||||||||
| 0601 | Corpus Christi | TX | — | 313 | 1,771 | 1,923 | 325 | 3,193 | 3,518 | (1,173 | ) | 2000 | |||||||||||||||||||||||||||
| 2244 | Cypress | TX | — | — | 7,705 | 25,335 | — | 33,039 | 33,039 | (2,054 | ) | 2015 | |||||||||||||||||||||||||||
| 0582 | Dallas | TX | — | 1,664 | 6,785 | 4,053 | 1,746 | 9,839 | 11,585 | (3,861 | ) | 2000 | |||||||||||||||||||||||||||
| 1314 | Dallas | TX | — | 15,230 | 162,971 | 33,595 | 23,882 | 185,238 | 209,120 | (54,567 | ) | 2006 | |||||||||||||||||||||||||||
A summary of activity for real estate and accumulated depreciation, excluding assets classified as discontinued operations, is as follows (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Real estate: | |||||||||||||||||
| Balances at beginning of year | $ | 16,211,621 | $ | 15,506,658 | $ | 13,528,893 | |||||||||||
| Acquisition of real estate and development and improvements | 754,225 | 1,102,593 | 2,157,539 | ||||||||||||||
| Sales and/or transfers to assets held for sale | (137,731) | (82,350) | (72,819) | ||||||||||||||
| Deconsolidation of real estate | — | (189,605) | — | ||||||||||||||
| Impairments | — | — | (21,294) | ||||||||||||||
Other(1) | (207,801) | (125,675) | (85,661) | ||||||||||||||
| Balances at end of year | $ | 16,620,314 | $ | 16,211,621 | $ | 15,506,658 | |||||||||||
| Accumulated depreciation: | |||||||||||||||||
| Balances at beginning of year | $ | 3,188,138 | $ | 2,839,229 | $ | 2,409,135 | |||||||||||
| Depreciation expense | 609,461 | 575,125 | 548,063 | ||||||||||||||
| Sales and/or transfers to assets held for sale | (12,711) | (30,428) | (32,692) | ||||||||||||||
| Deconsolidation of real estate | — | (89,766) | — | ||||||||||||||
Other(1) | (192,937) | (106,022) | (85,277) | ||||||||||||||
| Balances at end of year | $ | 3,591,951 | $ | 3,188,138 | $ | 2,839,229 | |||||||||||
(1)Primarily represents real estate and accumulated depreciation related to fully depreciated assets and reductions to net real estate due to casualty events.
A summary of activity for real estate and accumulated depreciation for assets classified as discontinued operations is as follows (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Real estate: | |||||||||||||||||
| Balances at beginning of year | $ | — | $ | — | $ | 2,930,566 | |||||||||||
| Acquisition of real estate and development and improvements | — | — | 8,238 | ||||||||||||||
| Sales and/or transfers to assets classified as discontinued operations | — | — | (2,929,713) | ||||||||||||||
| Impairments | — | — | (5,315) | ||||||||||||||
| Other | — | — | (3,776) | ||||||||||||||
| Balances at end of year | $ | — | $ | — | $ | — | |||||||||||
| Accumulated depreciation: | |||||||||||||||||
| Balances at beginning of year | $ | — | $ | — | $ | 615,708 | |||||||||||
| Sales and/or transfers to assets classified as discontinued operations | — | — | (615,708) | ||||||||||||||
| Balances at end of year | $ | — | $ | — | $ | — | |||||||||||
134
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 0583 | Fort Worth | TX | — | 898 | 4,866 | 2,334 | 898 | 6,607 | 7,505 | (2,403 | ) | 2000 | |||||||||||||||||||||||||||
| 0805 | Fort Worth | TX | — | — | 2,481 | 1,211 | 2 | 3,290 | 3,292 | (1,625 | ) | 2005 | |||||||||||||||||||||||||||
| 0806 | Fort Worth | TX | — | — | 6,070 | 690 | 5 | 6,566 | 6,571 | (2,065 | ) | 2005 | |||||||||||||||||||||||||||
| 2231 | Fort Worth | TX | — | 902 | — | 44 | 946 | — | 946 | (12 | ) | 2014 | |||||||||||||||||||||||||||
| 2619 | Fort Worth | TX | — | 1,180 | 13,432 | 6 | 1,180 | 13,437 | 14,617 | (153 | ) | 2017 | |||||||||||||||||||||||||||
| 2620 | Fort Worth | TX | — | 1,961 | 14,139 | 72 | 1,961 | 14,211 | 16,172 | (166 | ) | 2017 | |||||||||||||||||||||||||||
| 1061 | Granbury | TX | — | — | 6,863 | 1,090 | — | 7,882 | 7,882 | (2,083 | ) | 2006 | |||||||||||||||||||||||||||
| 0430 | Houston | TX | — | 1,927 | 33,140 | 13,211 | 2,151 | 44,381 | 46,532 | (18,994 | ) | 1999 | |||||||||||||||||||||||||||
| 0446 | Houston | TX | — | 2,200 | 19,585 | 18,770 | 2,209 | 32,783 | 34,992 | (18,259 | ) | 1999 | |||||||||||||||||||||||||||
| 0589 | Houston | TX | — | 1,676 | 12,602 | 5,972 | 1,706 | 15,878 | 17,584 | (5,555 | ) | 2000 | |||||||||||||||||||||||||||
| 0670 | Houston | TX | — | 257 | 2,884 | 1,378 | 318 | 3,659 | 3,977 | (1,406 | ) | 2000 | |||||||||||||||||||||||||||
| 0702 | Houston | TX | — | — | 7,414 | 2,005 | 7 | 8,410 | 8,417 | (2,880 | ) | 2004 | |||||||||||||||||||||||||||
| 1044 | Houston | TX | — | — | 4,838 | 3,339 | — | 6,481 | 6,481 | (1,929 | ) | 2006 | |||||||||||||||||||||||||||
| 2542 | Houston | TX | — | 304 | 17,764 | — | 304 | 17,764 | 18,068 | (1,364 | ) | 2015 | |||||||||||||||||||||||||||
| 2543 | Houston | TX | — | 116 | 6,555 | — | 116 | 6,555 | 6,671 | (595 | ) | 2015 | |||||||||||||||||||||||||||
| 2544 | Houston | TX | — | 312 | 12,094 | — | 312 | 12,094 | 12,406 | (1,105 | ) | 2015 | |||||||||||||||||||||||||||
| 2545 | Houston | TX | — | 316 | 13,931 | — | 316 | 13,931 | 14,247 | (970 | ) | 2015 | |||||||||||||||||||||||||||
| 2546 | Houston | TX | — | 408 | 18,332 | — | 408 | 18,332 | 18,740 | (2,003 | ) | 2015 | |||||||||||||||||||||||||||
| 2547 | Houston | TX | — | 470 | 18,197 | — | 470 | 18,197 | 18,667 | (1,684 | ) | 2015 | |||||||||||||||||||||||||||
| 2548 | Houston | TX | — | 313 | 7,036 | — | 313 | 7,036 | 7,349 | (834 | ) | 2015 | |||||||||||||||||||||||||||
| 2549 | Houston | TX | — | 530 | 22,711 | — | 530 | 22,711 | 23,241 | (1,394 | ) | 2015 | |||||||||||||||||||||||||||
| 0590 | Irving | TX | — | 828 | 6,160 | 2,834 | 828 | 8,600 | 9,428 | (3,351 | ) | 2000 | |||||||||||||||||||||||||||
| 0700 | Irving | TX | — | — | 8,550 | 3,620 | 8 | 11,154 | 11,162 | (4,592 | ) | 2006 | |||||||||||||||||||||||||||
| 1202 | Irving | TX | — | 1,604 | 16,107 | 1,030 | 1,633 | 17,007 | 18,640 | (5,268 | ) | 2006 | |||||||||||||||||||||||||||
| 1207 | Irving | TX | — | 1,955 | 12,793 | 1,904 | 1,986 | 14,617 | 16,603 | (4,520 | ) | 2006 | |||||||||||||||||||||||||||
| 2613 | Kingwood | TX | — | 3,035 | 28,373 | 212 | 3,035 | 28,584 | 31,619 | (1,161 | ) | 2016 | |||||||||||||||||||||||||||
| 1062 | Lancaster | TX | — | 172 | 2,692 | 1,119 | 185 | 3,733 | 3,918 | (1,550 | ) | 2006 | |||||||||||||||||||||||||||
| 2195 | Lancaster | TX | — | — | 1,138 | 679 | 131 | 1,686 | 1,817 | (387 | ) | 2006 | |||||||||||||||||||||||||||
| 0591 | Lewisville | TX | — | 561 | 8,043 | 2,120 | 561 | 9,727 | 10,288 | (3,315 | ) | 2000 | |||||||||||||||||||||||||||
| 0144 | Longview | TX | — | 102 | 7,998 | 715 | 102 | 8,270 | 8,372 | (4,258 | ) | 1992 | |||||||||||||||||||||||||||
| 0143 | Lufkin | TX | — | 338 | 2,383 | 80 | 338 | 2,423 | 2,761 | (1,239 | ) | 1992 | |||||||||||||||||||||||||||
| 0568 | Mckinney | TX | — | 541 | 6,217 | 2,364 | 541 | 7,876 | 8,417 | (2,842 | ) | 2003 | |||||||||||||||||||||||||||
| 0569 | Mckinney | TX | — | — | 636 | 8,418 | — | 8,174 | 8,174 | (2,665 | ) | 2003 | |||||||||||||||||||||||||||
| 1079 | Nassau Bay | TX | — | — | 8,942 | 1,384 | — | 10,116 | 10,116 | (3,279 | ) | 2006 | |||||||||||||||||||||||||||
| 0596 | N Richland Hills | TX | — | 812 | 8,883 | 3,050 | 812 | 11,487 | 12,299 | (3,998 | ) | 2000 | |||||||||||||||||||||||||||
| 2048 | North Richland Hills | TX | — | 1,385 | 10,213 | 2,135 | 1,400 | 12,150 | 13,550 | (2,613 | ) | 2012 | |||||||||||||||||||||||||||
| 1048 | Pearland | TX | — | — | 4,014 | 4,306 | — | 7,326 | 7,326 | (2,395 | ) | 2006 | |||||||||||||||||||||||||||
| 2232 | Pearland | TX | — | — | 3,374 | 13,919 | — | 17,293 | 17,293 | (713 | ) | 2014 | |||||||||||||||||||||||||||
| 0447 | Plano | TX | — | 1,700 | 7,810 | 6,394 | 1,792 | 13,329 | 15,121 | (6,390 | ) | 1999 | |||||||||||||||||||||||||||
| 0597 | Plano | TX | — | 1,210 | 9,588 | 4,693 | 1,224 | 13,176 | 14,400 | (4,565 | ) | 2000 | |||||||||||||||||||||||||||
| 0672 | Plano | TX | — | 1,389 | 12,768 | 2,545 | 1,389 | 13,984 | 15,373 | (4,617 | ) | 2002 | |||||||||||||||||||||||||||
| 1284 | Plano | TX | — | 2,049 | 18,793 | 2,377 | 2,101 | 18,958 | 21,059 | (7,525 | ) | 2006 | |||||||||||||||||||||||||||
| 1286 | Plano | TX | — | 3,300 | — | — | 3,300 | — | 3,300 | — | 2006 | ||||||||||||||||||||||||||||
| 2653 | Rockwall | TX | — | 788 | 9,020 | — | 788 | 9,020 | 9,808 | — | 2017 | ||||||||||||||||||||||||||||
| 0815 | San Antonio | TX | — | — | 9,193 | 2,654 | 12 | 11,039 | 11,051 | (3,584 | ) | 2006 | |||||||||||||||||||||||||||
| 0816 | San Antonio | TX | 3,376 | — | 8,699 | 2,872 | 175 | 10,675 | 10,850 | (3,770 | ) | 2006 | |||||||||||||||||||||||||||
| 1591 | San Antonio | TX | — | — | 7,309 | 641 | 12 | 7,906 | 7,918 | (2,086 | ) | 2010 | |||||||||||||||||||||||||||
| 1977 | San Antonio | TX | — | — | 26,191 | 1,536 | — | 27,482 | 27,482 | (6,622 | ) | 2011 | |||||||||||||||||||||||||||
| 2559 | Shenandoah | TX | — | — | — | 27,194 | — | 27,194 | 27,194 | (401 | ) | 2016 | |||||||||||||||||||||||||||
| 0598 | Sugarland | TX | — | 1,078 | 5,158 | 2,774 | 1,170 | 7,077 | 8,247 | (2,729 | ) | 2000 | |||||||||||||||||||||||||||
| 0599 | Texas City | TX | — | — | 9,519 | 169 | — | 9,532 | 9,532 | (2,864 | ) | 2000 | |||||||||||||||||||||||||||
| 0152 | Victoria | TX | — | 125 | 8,977 | 394 | 125 | 9,370 | 9,495 | (4,846 | ) | 1994 | |||||||||||||||||||||||||||
| 2550 | The Woodlands | TX | — | 115 | 5,141 | — | 115 | 5,141 | 5,256 | (403 | ) | 2015 | |||||||||||||||||||||||||||
| 2551 | The Woodlands | TX | — | 296 | 18,282 | — | 296 | 18,282 | 18,578 | (1,235 | ) | 2015 | |||||||||||||||||||||||||||
| 2552 | The Woodlands | TX | — | 374 | 25,125 | — | 374 | 25,125 | 25,499 | (1,513 | ) | 2015 | |||||||||||||||||||||||||||
| 1592 | Bountiful | UT | — | 999 | 7,426 | 674 | 999 | 8,101 | 9,100 | (1,991 | ) | 2010 | |||||||||||||||||||||||||||
| 0169 | Bountiful | UT | — | 276 | 5,237 | 1,447 | 363 | 6,159 | 6,522 | (2,940 | ) | 1995 | |||||||||||||||||||||||||||
| 0346 | Castle Dale | UT | — | 50 | 1,818 | 73 | 50 | 1,828 | 1,878 | (983 | ) | 1998 | |||||||||||||||||||||||||||
| 0347 | Centerville | UT | — | 300 | 1,288 | 276 | 300 | 1,394 | 1,694 | (704 | ) | 1999 | |||||||||||||||||||||||||||
| 2035 | Draper | UT | 5,088 | — | 10,803 | 183 | — | 10,879 | 10,879 | (1,455 | ) | 2012 | |||||||||||||||||||||||||||
| 0469 | Kaysville | UT | — | 530 | 4,493 | 226 | 530 | 4,719 | 5,249 | (1,786 | ) | 2001 | |||||||||||||||||||||||||||
| 0456 | Layton | UT | — | 371 | 7,073 | 1,265 | 389 | 8,034 | 8,423 | (3,704 | ) | 2001 | |||||||||||||||||||||||||||
| 2042 | Layton | UT | — | — | 10,975 | 412 | — | 11,388 | 11,388 | (1,503 | ) | 2012 | |||||||||||||||||||||||||||
| 0359 | Ogden | UT | — | 180 | 1,695 | 240 | 180 | 1,814 | 1,994 | (993 | ) | 1999 | |||||||||||||||||||||||||||
| 0357 | Orem | UT | — | 337 | 8,744 | 2,041 | 306 | 8,268 | 8,574 | (4,302 | ) | 1999 | |||||||||||||||||||||||||||
| 0371 | Providence | UT | — | 240 | 3,876 | 618 | 282 | 4,163 | 4,445 | (2,057 | ) | 1999 | |||||||||||||||||||||||||||
| 0353 | Salt Lake City | UT | — | 190 | 779 | 164 | 201 | 885 | 1,086 | (477 | ) | 1999 | |||||||||||||||||||||||||||
| 0354 | Salt Lake City | UT | — | 220 | 10,732 | 2,204 | 220 | 12,421 | 12,641 | (6,638 | ) | 1999 | |||||||||||||||||||||||||||
| 0355 | Salt Lake City | UT | — | 180 | 14,792 | 2,647 | 180 | 16,688 | 16,868 | (8,675 | ) | 1999 | |||||||||||||||||||||||||||
| 0467 | Salt Lake City | UT | — | 3,000 | 7,541 | 2,274 | 3,145 | 9,323 | 12,468 | (3,784 | ) | 2001 | |||||||||||||||||||||||||||
| 0566 | Salt Lake City | UT | — | 509 | 4,044 | 2,510 | 509 | 6,121 | 6,630 | (2,320 | ) | 2003 | |||||||||||||||||||||||||||
| 2041 | Salt Lake City | UT | — | — | 12,326 | 335 | — | 12,661 | 12,661 | (1,682 | ) | 2012 | |||||||||||||||||||||||||||
| 2033 | Sandy | UT | — | 867 | 3,513 | 842 | 1,153 | 4,069 | 5,222 | (1,245 | ) | 2012 | |||||||||||||||||||||||||||
| 0482 | Stansbury | UT | — | 450 | 3,201 | 1,147 | 529 | 3,944 | 4,473 | (1,245 | ) | 2001 | |||||||||||||||||||||||||||
| 0351 | Washington Terrace | UT | — | — | 4,573 | 2,493 | 17 | 6,279 | 6,296 | (3,509 | ) | 1999 | |||||||||||||||||||||||||||
| 0352 | Washington Terrace | UT | — | — | 2,692 | 1,309 | 15 | 3,306 | 3,321 | (1,657 | ) | 1999 | |||||||||||||||||||||||||||
| 2034 | West Jordan | UT | — | — | 12,021 | 264 | — | 12,285 | 12,285 | (1,604 | ) | 2012 | |||||||||||||||||||||||||||
| 2036 | West Jordan | UT | 547 | — | 1,383 | 1,522 | — | 2,905 | 2,905 | (610 | ) | 2012 | |||||||||||||||||||||||||||
| 0495 | West Valley City | UT | — | 410 | 8,266 | 1,002 | 410 | 9,268 | 9,678 | (4,567 | ) | 2002 | |||||||||||||||||||||||||||
| 0349 | West Valley City | UT | — | 1,070 | 17,463 | 128 | 1,036 | 17,581 | 18,617 | (9,488 | ) | 1999 | |||||||||||||||||||||||||||
| 1208 | Fairfax | VA | — | 8,396 | 16,710 | 10,434 | 8,494 | 26,168 | 34,662 | (8,694 | ) | 2006 | |||||||||||||||||||||||||||
| 2230 | Fredericksburg | VA | — | 1,101 | 8,570 | — | 1,101 | 8,570 | 9,671 | (837 | ) | 2014 | |||||||||||||||||||||||||||
| 0572 | Reston | VA | — | — | 11,902 | 967 | — | 12,026 | 12,026 | (4,458 | ) | 2003 | |||||||||||||||||||||||||||
| 0448 | Renton | WA | — | — | 18,724 | 3,092 | — | 20,685 | 20,685 | (10,299 | ) | 1999 | |||||||||||||||||||||||||||
Schedule IV: Mortgage Loans on Real Estate
(in thousands)
| Location | Segment | Interest Rate | Fixed / Variable | Maturity Date | Periodic Payment Terms | Prior Liens | Face Amount of Mortgages | Carrying Amount of Mortgages | Principal Amount Subject to Delinquent Principal or Interest | |||||||||||||||||||||||||||||||||||||||||||||||||||||
First mortgages relating to 10 properties: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multiple | Other | 4.0% + (SOFR + 10 bps) | Variable | 2/1/2024(1) | Interest only | $ | — | $ | 130,678 | $ | 128,027 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||
First mortgages relating to 10 properties: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multiple | Other | 7.0% + (SOFR + 11 bps) | Variable | 1/21/2024(2) | Interest only | — | 48,000 | 47,690 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | — | $ | 178,678 | $ | 175,717 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)In February 2024, the loan reached its maturity. The Company provided a short-term extension to the borrower, and the Company and the borrower are currently negotiating long-term refinance and extension terms (see Note 7 to the Consolidated Financial Statements for additional information).
(2)In January 2024, this loan was refinanced with the Company. In connection with the refinance, the maturity date of the loan was extended to January 2025 (see Note 7 to the Consolidated Financial Statements for additional information).
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Reconciliation of mortgage loans | |||||||||||||||||
| Balance at beginning of year | $ | 341,749 | $ | 390,291 | $ | 157,572 | |||||||||||
| Additions: | |||||||||||||||||
| New mortgage loans | — | — | 310,338 | ||||||||||||||
| Draws and additions to existing mortgage loans | 11,602 | 5,525 | 9,370 | ||||||||||||||
| Total additions | 11,602 | 5,525 | 319,708 | ||||||||||||||
| Deductions: | |||||||||||||||||
| Principal repayments | (183,084) | (47,591) | (84,486) | ||||||||||||||
Recoveries (reserves) for loan losses(1) | 5,450 | (6,476) | (2,503) | ||||||||||||||
| Total deductions | (177,634) | (54,067) | (86,989) | ||||||||||||||
| Balance at end of year | $ | 175,717 | $ | 341,749 | $ | 390,291 | |||||||||||
(1)Excludes reserves and recoveries for expected loan losses associated with unfunded loan commitments which are included in accounts payable, accrued liabilities, and other liabilities on the Consolidated Balance Sheets.
135
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| 0781 | Seattle | WA | — | — | 52,703 | 15,806 | — | 64,279 | 64,279 | (22,985 | ) | 2004 | |||||||||||||||||||||||||||
| 0782 | Seattle | WA | — | — | 24,382 | 12,686 | 126 | 34,881 | 35,007 | (13,765 | ) | 2004 | |||||||||||||||||||||||||||
| 0783 | Seattle | WA | — | — | 5,625 | 1,375 | 183 | 6,690 | 6,873 | (6,322 | ) | 2004 | |||||||||||||||||||||||||||
| 0785 | Seattle | WA | — | — | 7,293 | 6,215 | — | 12,213 | 12,213 | (4,804 | ) | 2004 | |||||||||||||||||||||||||||
| 1385 | Seattle | WA | — | — | 45,027 | 3,619 | — | 48,471 | 48,471 | (15,524 | ) | 2007 | |||||||||||||||||||||||||||
| 2038 | Evanston | WY | — | — | 4,601 | 222 | — | 4,823 | 4,823 | (681 | ) | 2012 | |||||||||||||||||||||||||||
| $ | 9,011 | $ | 279,168 | $ | 2,785,660 | $ | 822,680 | $ | 295,620 | $ | 3,434,989 | $ | 3,730,609 | $ | (924,333 | ) | |||||||||||||||||||||||
| Encumbrances at December 31, 2017 | Initial Cost to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried As of December 31, 2017 | Accumulated Depreciation | Year Acquired/ Constructed | ||||||||||||||||||||||||||||||||||
| City | State | Land | Buildings and Improvements | Land | Buildings and Improvements | Total(1) | |||||||||||||||||||||||||||||||||
| Other non-reportable segments | |||||||||||||||||||||||||||||||||||||||
| Other-Hospitals | |||||||||||||||||||||||||||||||||||||||
| 0126 | Sherwood | AR | — | 709 | 9,604 | — | 709 | 9,587 | 10,296 | (5,723 | ) | 1989 | |||||||||||||||||||||||||||
| 0113 | Glendale | AZ | — | 1,565 | 7,050 | 20 | 1,565 | 7,050 | 8,615 | (4,277 | ) | 1988 | |||||||||||||||||||||||||||
| 1038 | Fresno | CA | — | 3,652 | 29,113 | 21,935 | 3,652 | 51,048 | 54,700 | (16,338 | ) | 2006 | |||||||||||||||||||||||||||
| 0423 | Irvine | CA | — | 18,000 | 70,800 | — | 18,000 | 70,800 | 88,800 | (36,755 | ) | 1999 | |||||||||||||||||||||||||||
| 0127 | Colorado Springs | CO | — | 690 | 8,338 | — | 690 | 8,338 | 9,028 | (4,960 | ) | 1989 | |||||||||||||||||||||||||||
| 0887 | Atlanta | GA | — | 4,300 | 13,690 | — | 4,300 | 11,890 | 16,190 | (6,440 | ) | 2007 | |||||||||||||||||||||||||||
| 0112 | Overland Park | KS | — | 2,316 | 10,681 | 24 | 2,316 | 10,680 | 12,996 | (6,712 | ) | 1988 | |||||||||||||||||||||||||||
| 1383 | Baton Rouge | LA | — | 690 | 8,545 | 87 | 690 | 8,496 | 9,186 | (4,139 | ) | 2007 | |||||||||||||||||||||||||||
| 2031 | Slidell | LA | — | 3,000 | — | 643 | 3,643 | — | 3,643 | — | 2012 | ||||||||||||||||||||||||||||
| 0886 | Dallas | TX | — | 1,820 | 8,508 | 26 | 1,820 | 7,454 | 9,274 | (2,019 | ) | 2007 | |||||||||||||||||||||||||||
| 1319 | Dallas | TX | — | 18,840 | 155,659 | 1,557 | 18,840 | 157,216 | 176,056 | (48,404 | ) | 2007 | |||||||||||||||||||||||||||
| 1384 | Plano | TX | — | 6,290 | 22,686 | 5,706 | 6,290 | 28,203 | 34,493 | (13,334 | ) | 2007 | |||||||||||||||||||||||||||
| 2198 | Webster | TX | — | 2,220 | 9,602 | — | 2,220 | 9,602 | 11,822 | (1,850 | ) | 2013 | |||||||||||||||||||||||||||
| Other-Post-acute/skilled nursing | |||||||||||||||||||||||||||||||||||||||
| 2469 | Rural Retreat | VA | — | 1,876 | 14,720 | — | 1,876 | 14,720 | 16,596 | (1,064 | ) | 2013 | |||||||||||||||||||||||||||
| Other-United Kingdom | |||||||||||||||||||||||||||||||||||||||
| 2210 | Adlington | EG | — | 548 | 7,108 | 1,951 | 650 | 8,961 | 9,611 | (757 | ) | 2014 | |||||||||||||||||||||||||||
| 2211 | Adlington | EG | — | 568 | 4,318 | — | 568 | 4,318 | 4,886 | (359 | ) | 2014 | |||||||||||||||||||||||||||
| 2216 | Alderley Edge | EG | — | 1,252 | 8,719 | — | 1,252 | 8,719 | 9,971 | (656 | ) | 2014 | |||||||||||||||||||||||||||
| 2217 | Alderley Edge | EG | — | 1,218 | 6,827 | — | 1,218 | 6,828 | 8,046 | (539 | ) | 2014 | |||||||||||||||||||||||||||
| 2340 | Altrincham | EG | — | 1,745 | 18,693 | — | 1,745 | 18,694 | 20,439 | (1,218 | ) | 2015 | |||||||||||||||||||||||||||
| 2312 | Armley | EG | — | 447 | 2,670 | — | 447 | 2,670 | 3,117 | (278 | ) | 2015 | |||||||||||||||||||||||||||
| 2313 | Armley | EG | — | 1,001 | 3,114 | — | 1,001 | 3,114 | 4,115 | (335 | ) | 2015 | |||||||||||||||||||||||||||
| 2309 | Ashton under Lyne | EG | — | 649 | 4,507 | — | 649 | 4,507 | 5,156 | (472 | ) | 2015 | |||||||||||||||||||||||||||
| 2206 | Bangor | EG | — | 386 | 2,064 | — | 385 | 2,064 | 2,449 | (213 | ) | 2014 | |||||||||||||||||||||||||||
| 2207 | Batley | EG | — | 649 | 3,203 | — | 649 | 3,203 | 3,852 | (454 | ) | 2014 | |||||||||||||||||||||||||||
| 2336 | Birmingham | EG | — | 677 | 2,451 | 601 | 677 | 3,052 | 3,729 | (522 | ) | 2015 | |||||||||||||||||||||||||||
| 2320 | Bishopbriggs | EG | — | 907 | 4,166 | — | 907 | 4,166 | 5,073 | (452 | ) | 2015 | |||||||||||||||||||||||||||
| 2323 | Bonnyrigg | EG | — | 947 | 6,239 | — | 947 | 6,239 | 7,186 | (644 | ) | 2015 | |||||||||||||||||||||||||||
| 2335 | Cardiff | EG | — | 1,434 | 4,838 | 744 | 1,434 | 5,581 | 7,015 | (771 | ) | 2015 | |||||||||||||||||||||||||||
| 2223 | Catterick Garrison | EG | — | 798 | 1,467 | — | 798 | 1,467 | 2,265 | (294 | ) | 2014 | |||||||||||||||||||||||||||
| 2226 | Christleton | EG | — | 528 | 5,103 | — | 528 | 5,103 | 5,631 | (401 | ) | 2014 | |||||||||||||||||||||||||||
| 2327 | Croydon | EG | — | 1,597 | 2,494 | 17 | 1,596 | 2,511 | 4,107 | (296 | ) | 2015 | |||||||||||||||||||||||||||
| 2221 | Disley | EG | — | 345 | 1,621 | — | 345 | 1,620 | 1,965 | (175 | ) | 2014 | |||||||||||||||||||||||||||
| 2227 | Disley | EG | — | 690 | 3,964 | — | 690 | 3,964 | 4,654 | (319 | ) | 2014 | |||||||||||||||||||||||||||
| 2306 | Dukinfield | EG | — | 758 | 4,054 | — | 758 | 4,053 | 4,811 | (412 | ) | 2015 | |||||||||||||||||||||||||||
| 2316 | Dukinfield | EG | — | 392 | 2,491 | — | 392 | 2,491 | 2,883 | (236 | ) | 2015 | |||||||||||||||||||||||||||
| 2317 | Dukinfield | EG | — | 528 | 2,811 | — | 528 | 2,811 | 3,339 | (309 | ) | 2015 | |||||||||||||||||||||||||||
| 2318 | Dumbarton | EG | — | 920 | 3,825 | — | 920 | 3,825 | 4,745 | (429 | ) | 2015 | |||||||||||||||||||||||||||
| 2303 | Eckington | EG | — | 501 | 1,638 | — | 500 | 1,638 | 2,138 | (213 | ) | 2015 | |||||||||||||||||||||||||||
| 2333 | Edinburgh | EG | — | 4,533 | 24,135 | 558 | 4,533 | 24,693 | 29,226 | (2,431 | ) | 2015 | |||||||||||||||||||||||||||
| 2208 | Elstead | EG | — | 893 | 3,061 | — | 893 | 3,060 | 3,953 | (346 | ) | 2014 | |||||||||||||||||||||||||||
| 2328 | Forfar | EG | — | 852 | 6,200 | 427 | 853 | 6,626 | 7,479 | (746 | ) | 2015 | |||||||||||||||||||||||||||
| 2214 | Gilroyd | EG | — | 998 | 1,691 | — | 998 | 1,691 | 2,689 | (322 | ) | 2014 | |||||||||||||||||||||||||||
| 2330 | Glasgow | EG | — | 1,854 | 6,645 | 1,207 | 1,854 | 7,853 | 9,707 | (1,136 | ) | 2015 | |||||||||||||||||||||||||||
| 2307 | Hyde | EG | — | 1,394 | 5,144 | — | 1,394 | 5,144 | 6,538 | (581 | ) | 2015 | |||||||||||||||||||||||||||
| 2324 | Lewisham | EG | — | 1,921 | 7,113 | 604 | 1,922 | 7,717 | 9,639 | (933 | ) | 2015 | |||||||||||||||||||||||||||
| 2332 | Linlithgow | EG | — | 1,448 | 7,434 | 599 | 1,448 | 8,033 | 9,481 | (933 | ) | 2015 | |||||||||||||||||||||||||||
| 2213 | Ilkley | EG | — | 954 | 2,518 | — | 954 | 2,518 | 3,472 | (403 | ) | 2014 | |||||||||||||||||||||||||||
| 2209 | Kingswood | EG | — | 1,042 | 3,884 | — | 1,042 | 3,884 | 4,926 | (405 | ) | 2014 | |||||||||||||||||||||||||||
| 2212 | Kirk Hammerton | EG | — | 438 | 561 | — | 438 | 561 | 999 | (131 | ) | 2014 | |||||||||||||||||||||||||||
| 2310 | Kirkby | EG | — | 568 | 2,712 | — | 568 | 2,712 | 3,280 | (302 | ) | 2015 | |||||||||||||||||||||||||||
| 2304 | Knotty Ash | EG | — | 649 | 2,275 | — | 649 | 2,274 | 2,923 | (270 | ) | 2015 | |||||||||||||||||||||||||||
| 2322 | Laindon | EG | — | 1,191 | 2,771 | — | 1,191 | 2,771 | 3,962 | (329 | ) | 2015 | |||||||||||||||||||||||||||
| 2215 | Leeds | EG | — | 503 | 795 | — | 504 | 795 | 1,299 | (196 | ) | 2014 | |||||||||||||||||||||||||||
| 2326 | Limehouse | EG | — | 2,219 | 3,168 | 23 | 2,219 | 3,191 | 5,410 | (409 | ) | 2015 | |||||||||||||||||||||||||||
| 2321 | Luton | EG | — | 1,069 | 3,169 | — | 1,069 | 3,169 | 4,238 | (336 | ) | 2015 | |||||||||||||||||||||||||||
| 2339 | Manchester | EG | — | 1,685 | 15,136 | — | 1,685 | 15,136 | 16,821 | (1,004 | ) | 2015 | |||||||||||||||||||||||||||
| 2225 | N Wadebridge | EG | — | 298 | 6,158 | — | 298 | 6,159 | 6,457 | (518 | ) | 2014 | |||||||||||||||||||||||||||
| 2331 | Paisley | EG | — | 1,231 | 3,995 | 13 | 1,232 | 4,007 | 5,239 | (444 | ) | 2015 | |||||||||||||||||||||||||||
| 2308 | Prescot | EG | — | 541 | 1,934 | — | 541 | 1,934 | 2,475 | (248 | ) | 2015 | |||||||||||||||||||||||||||
| 2305 | Prescot | EG | — | 636 | 2,382 | — | 636 | 2,382 | 3,018 | (284 | ) | 2015 | |||||||||||||||||||||||||||
| 2219 | Ripon | EG | — | 189 | 906 | — | 189 | 906 | 1,095 | (130 | ) | 2014 | |||||||||||||||||||||||||||
| 2319 | Sheffield | EG | — | 744 | 2,705 | — | 745 | 2,704 | 3,449 | (303 | ) | 2015 | |||||||||||||||||||||||||||
| 2314 | Stalybridge | EG | — | 704 | 3,608 | — | 704 | 3,608 | 4,312 | (380 | ) | 2015 | |||||||||||||||||||||||||||
| 2315 | Stalybridge | EG | — | 555 | 1,887 | — | 555 | 1,887 | 2,442 | (212 | ) | 2015 | |||||||||||||||||||||||||||
| 2218 | Stapeley | EG | — | 995 | 6,491 | — | 994 | 6,491 | 7,485 | (567 | ) | 2014 | |||||||||||||||||||||||||||
| 2325 | Stirling | EG | — | 907 | 4,929 | 451 | 907 | 5,380 | 6,287 | (640 | ) | 2015 | |||||||||||||||||||||||||||
| 2329 | Stirling | EG | — | 1,110 | 4,041 | 646 | 1,109 | 4,687 | 5,796 | (673 | ) | 2015 | |||||||||||||||||||||||||||
| 2224 | Stockton-on-Tees | EG | — | 292 | 2,086 | — | 292 | 2,086 | 2,378 | (240 | ) | 2014 | |||||||||||||||||||||||||||
| 2220 | Thornton-Cleveleys | EG | — | 913 | 4,566 | — | 913 | 4,566 | 5,479 | (482 | ) | 2014 | |||||||||||||||||||||||||||
| 2228 | Upper Wortley | EG | — | 455 | 3,366 | — | 454 | 3,366 | 3,820 | (334 | ) | 2014 | |||||||||||||||||||||||||||
| 2311 | Wigan | EG | — | 717 | 2,660 | — | 717 | 2,661 | 3,378 | (366 | ) | 2015 | |||||||||||||||||||||||||||
| 2337 | Wigan | EG | — | 541 | 1,820 | 16 | 534 | 1,843 | 2,377 | (247 | ) | 2015 | |||||||||||||||||||||||||||
| 2338 | Wigan | EG | — | 474 | 3,788 | 23 | 474 | 3,811 | 4,285 | (399 | ) | 2015 | |||||||||||||||||||||||||||
| 2222 | Woolmer Green | EG | — | 832 | 6,062 | — | 832 | 6,061 | 6,893 | (577 | ) | 2014 | |||||||||||||||||||||||||||
| 2334 | Wotton under Edge | EG | — | 636 | 2,490 | 164 | 636 | 2,654 | 3,290 | (378 | ) | 2015 | |||||||||||||||||||||||||||
| $ | — | $ | 122,434 | $ | 641,667 | $ | 38,042 | $ | 123,171 | $ | 675,704 | $ | 798,875 | $ | (181,404 | ) | |||||||||||||||||||||||
| Total operations properties | $ | 144,486 | $ | 1,765,938 | $ | 9,726,105 | $ | 2,332,632 | $ | 1,785,865 | $ | 11,687,527 | $ | 13,473,392 | $ | (2,741,537 | ) | ||||||||||||||||||||||
| Corporate and other assets | — | — | — | — | — | 181 | 181 | (158 | ) | ||||||||||||||||||||||||||||||
| Total | $ | 144,486 | $ | 1,765,938 | $ | 9,726,105 | $ | 2,332,632 | $ | 1,785,865 | $ | 11,687,708 | $ | 13,473,573 | $ | (2,741,695 | ) | ||||||||||||||||||||||
| Year ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Real estate: | |||||||||||
| Balances at beginning of year | $ | 13,974,760 | $ | 14,330,257 | $ | 12,931,832 | |||||
| Acquisition of real estate and development and improvements | 995,443 | 987,135 | 1,930,931 | ||||||||
| Sales and/or transfers to assets held for sale and discontinued operations | (589,391 | ) | (1,227,614 | ) | (473,057 | ) | |||||
| Deconsolidation of real estate | (825,074 | ) | (10,306 | ) | — | ||||||
| Impairments | (37,274 | ) | — | (3,118 | ) | ||||||
Other(1) | (44,891 | ) | (104,712 | ) | (56,331 | ) | |||||
| Balances at end of year | $ | 13,473,573 | $ | 13,974,760 | $ | 14,330,257 | |||||
| Accumulated depreciation: | |||||||||||
| Balances at beginning of year | $ | 2,648,930 | $ | 2,476,015 | $ | 2,190,486 | |||||
| Depreciation expense | 436,085 | 465,945 | 418,591 | ||||||||
| Sales and/or transfers to assets held for sale and discontinued operations | (115,195 | ) | (239,112 | ) | (86,001 | ) | |||||
| Deconsolidation of real estate | (152,572 | ) | (5,868 | ) | — | ||||||
Other(1) | (75,553 | ) | (48,050 | ) | (47,061 | ) | |||||
| Balances at end of year | $ | 2,741,695 | $ | 2,648,930 | $ | 2,476,015 | |||||
None.
ITEM 9A. Controls and Procedures
Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officerprincipal executive officer and Principal Financial Officer,principal financial officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officerprincipal executive officer and Principal Financial Officer,principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017.2023. Based upon that evaluation, our Principal Executive Officerprincipal executive officer and Principal Financial Officerprincipal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2017, at the reasonable assurance level.2023.
Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officerprincipal executive officer and Principal Financial Officer,principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2017.2023.
The effectiveness of our internal control over financial reporting as of December 31, 20172023 has been audited by Deloitte & Touche LLP, anthe independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, as stated in their report, which is included herein.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
136
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of HCP,Healthpeak Properties, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of HCP,Healthpeak Properties, Inc. and subsidiaries (the “Company”) as of December 31, 2017,2023, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -— Integrated Framework (2013)issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017,2023, of the Company and our report dated February 13, 2018,9, 2024, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
| /s/ | |||||
February 13, 20189, 2024
137
ITEM 9B. Other Information
Insider Trading Arrangements
During the three months ended December 31, 2023, none of our directors or Section 16 officers adopted, modified, or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
138
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
Except as provided below, the information required under Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders.
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees, including our Chief Executive Officer and all senior financial officers, including ourprincipal executive officer, principal financial officer, principal accounting officer, and controller. We have also adopted a Vendor Code of Business Conduct and Ethics applicable to our vendors and business partners. Current copies of our Code of Business Conduct and Ethics and Vendor Code of Business Conduct and Ethics are posted on our website at www.hcpi.com/codeofconduct.www.healthpeak.com/esg/governance. In addition, waivers from, and amendments to, our Code of Business Conduct and Ethics that apply to our directors and executive officers, including our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, will be timely posted in the Investor RelationsInvestors section of our website at www.hcpi.com.www.healthpeak.com.
ITEM 11. Executive Compensation
The information required under Item 11 is incorporated herein by reference the information appearing under the captions “Proposal No. 1 Election of Directors,” “Our Executive Officers,” “Board of Directors and Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Registrant’sto our definitive proxy statement relating to its 2018be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders to be held on April 26, 2018.Stockholders.
The information required under Item 12 is incorporated herein by reference the information under the caption “Executive Compensation” in the Registrant’sto our definitive proxy statement relating to its 2018be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders to be held on April 26, 2018.Stockholders.
The information required under Item 13 is incorporated herein by reference the information under the captions “Security Ownership of Principal Stockholders, Directors and Management” and “Equity Compensation Plan Information” in the Registrant’sto our definitive proxy statement relating to its 2018be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders to be held on April 26, 2018.Stockholders.
The information required under Item 14 is incorporated herein by reference the information under the caption “Board of Directors and Corporate Governance” in the Registrant’sto our definitive proxy statement relating to its 2018be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2023 in connection with our 2024 Annual Meeting of Stockholders to be held on April 26, 2018.Stockholders.
139
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statement SchedulesStatements
The following Consolidated Financial Statements are included in Part II, Item 8-Financial8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets-DecemberSheets - December 31, 20172023 and 20162022
Consolidated Statements of Operations-forOperations - for the years ended December 31, 2017, 20162023, 2022, and 20152021
Consolidated Statements of Comprehensive Income (Loss)-for - for the years ended December 31, 2017, 20162023, 2022, and 20152021
Consolidated Statements of Equity-forEquity and Redeemable Noncontrolling Interests - for the years ended December 31, 2017, 20162023, 2022, and 20152021
Consolidated Statements of Cash Flows-forFlows - for the years ended December 31, 2017, 20162023, 2022, and 20152021
Notes to the Consolidated Financial Statements
(a) 2. Financial Statement Schedules
The following Consolidated Financial StatementsStatement Schedules are included in Part II, Item 8-Financial8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Schedule II: Valuation and Qualifying Accounts
Schedule III: Real Estate and Accumulated Depreciation
Schedule IV: Mortgage Loans on Real Estate
| (a) 3. Exhibits |
| Exhibit | ||||||||||||||||||||||
| Incorporated by reference herein | ||||||||||||||||||||||
| Number | Description | Form | Date Filed | |||||||||||||||||||
| Current Report on Form 8-K12B | February 10, 2023 | |||||||||||||||||||||
| 2.2+ | Current Report on Form 8-K | October | ||||||||||||||||||||
| 3.1 | ||||||||||||||||||||||
| 3.2 | Current Report on Form 8-K12B | February 10, 2023 | ||||||||||||||||||||
| 3.3 | ||||||||||||||||||||||
| 4.1 | Registration Statement on Form S‑3/A (Registration No. | May 21, 2002 | ||||||||||||||||||||
| 4.1.1 | ||||||||||||||||||||||
Current Report on Form 8‑K | January 24, 2011 | |||||||||||||||||||||
140
Current Report on Form | ||||||||||||||||||||
| February 10, 2023 | ||||||||||||||||||||||
| 4.2 | Registration Statement on Form S-3ASR (Registration No. 333‑269718) | February 13, 2023 | ||||||||||||||||||||
Current Report on Form 8‑K | ||||||||||||||||||||||
Current Report on Form 8‑K | ||||||||||||||||||||||
Current Report on Form 8‑K | ||||||||||||||||||||||
Current Report on Form 8‑K | ||||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||
| Current Report on Form 8-K | January 17, 2023 | |||||||||||||||||||||
| 4.2.9 | Current Report on Form 8-K12B | February 10, 2023 | ||||||||||||||||||||
| 4.2.10 | Current Report on Form 8-K | May 10, 2023 | ||||||||||||||||||||
| 4.3 | Current Report on Form | January 24, 2011 | ||||||||||||||||||||
| Current Report on Form | January 21, 2015 | |||||||||||||||||||||
| Current Report on Form | May 20, 2015 | |||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||
| July 5, 2019 | ||||||||||||||||||||
| 4.8 | ||||||||||||||||||||
| Current Report on Form | November | |||||||||||||||||||
141
| 10.1 | Current Report on Form | |||||||||||||||||||
| Current Report on Form 8-K12B | February 10, 2023 | |||||||||||||||||||
| 10.3 | ||||||||||||||||||||
| Current Report on Form | ||||||||||||||||||||||||
| Current Report on Form 8-K12B | February 10, 2023 | |||||||||||||||||||||||
| 10.4 | Current Report on Form 8-K | August 22, 2022 | ||||||||||||||||||||||
| 10.4.1 | Current Report on Form 8-K12B | February 10, 2023 | ||||||||||||||||||||||
| 10.5 | At-the-Market Equity Offering Sales Agreement, dated | Current Report on Form 8-K | ||||||||||||||||||||||
| Quarterly Report on Form 10‑Q | November 3, 2009 | |||||||||||||||||||||||
| 10.7* | Quarterly Report on Form 10-Q | August 5, 2014 | ||||||||||||||||||||||
| 10.8* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||||||
| 10.9* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||||||
| 10.10* | Annual Report on Form 10-K | February 13, 2020 | ||||||||||||||||||||||
| Current Report on Form 8-K12B | February 10, | 2023 | ||||||||||||||||||||||
| Quarterly Report on Form 10-Q | August 5, 2014 | |||||||||||||||||||||||
| 10.10.3* | Quarterly Report on Form 10-Q | May 3, 2018 | ||||||||||||||||||||||
| 10.10.4* | Quarterly Report on Form 10-Q | May 4, 2022 | ||||||||||||||||||||||
| 10.10.5* | Annual Report on Form 10‑K | February 8, 2023 | ||||||||||||||||||||||
| 10.10.6* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||||||
| 10.10.7* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||||||
142
| 10.10.8* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.10.9* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.10.10* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.10.11* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.11* | Current Report on Form 8-K | April 27, 2023 | ||||||||||||||||||
| 10.11.1* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.11.2* | Quarterly Report on Form 10-Q | April 28, 2023 | ||||||||||||||||||
| 10.12* | Annual Report on Form 10‑K, as amended | February 12, 2008 | ||||||||||||||||||
| 10.13 | Registration Statement on Form S‑3 (Registration No. 333‑49746) | November 13, 2000 | ||||||||||||||||||
| 21.1† | ||||||||||||||||||||
| 23.1† | ||||||||||||||||||||
| 101.INS† | XBRL Instance | |||||||||||||||||||
| XBRL Taxonomy Extension Schema Document. | ||||||||||||||||||||
| XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||||||||||||||||
| XBRL Taxonomy Extension Definition Linkbase Document. | ||||||||||||||||||||
| XBRL Taxonomy Extension | ||||||||||||||||||||
143
| XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL document and contained in Exhibit 101). | |||||||||||||||||||
+ Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2).
† Filed herewith.
†† Furnished herewith.
ITEM 16. Form 10-K Summary
None.
144
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 13, 2018
9, 2024
| Healthpeak Properties, Inc. | |||||
| /s/ SCOTT M. BRINKER | |||||
Scott M. | |||||
President and Chief Executive Officer (Principal Executive Officer) | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | |||||||||||||
| /s/ | President and Chief Executive Officer, Director | February | |||||||||||||
| (Principal Executive Officer) | |||||||||||||||
| /s/ PETER A. SCOTT | February | ||||||||||||||
Peter A. Scott | (Principal Financial Officer) | ||||||||||||||
| /s/ SHAWN G. JOHNSTON | February | ||||||||||||||
| Shawn G. Johnston | (Principal Accounting Officer) | ||||||||||||||
| /s/ KATHERINE M. SANDSTROM | Chair of the Board | February 9, 2024 | |||||||||||||
| Katherine M. Sandstrom | |||||||||||||||
| /s/ BRIAN G. CARTWRIGHT | Director | February 9, 2024 | |||||||||||||
| Brian G. Cartwright | |||||||||||||||
| /s/ JAMES B. CONNOR | Director | February 9, 2024 | |||||||||||||
| James B. Connor | |||||||||||||||
| /s/ CHRISTINE N. GARVEY | Director | February 9, 2024 | |||||||||||||
| Christine N. Garvey | |||||||||||||||
| /s/ R. KENT GRIFFIN, JR. | Director | February 9, 2024 | |||||||||||||
| R. Kent Griffin, Jr. | |||||||||||||||
| /s/ DAVID B. HENRY | Director | February | |||||||||||||
| David B. Henry | |||||||||||||||
| /s/ SARA GROOTWASSINK LEWIS | Director | February 9, 2024 | |||||||||||||
| Sara Grootwassink Lewis | |||||||||||||||