Last10K.com

Ventas, Inc. (VTR) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

SEC Filings

Ventas Inc

CIK: 740260 Ticker: VTR
Exhibit 99.1

Ventas Reports 2020 First Quarter Results and Provides COVID-19 Business Update

CHICAGO--(BUSINESS WIRE)--May 8, 2020--Ventas, Inc. (NYSE: VTR) (the “Company”) today reported results for the first quarter ended March 31, 2020. The Company also provided an update regarding how its operations and financial condition have been affected in the second quarter 2020 by the pandemic.

“Ventas delivered strong first quarter results, which exceeded our expectations for the enterprise and each of our business segments. At the onset of the COVID-19 pandemic, we took swift and decisive action to ensure the strength and stability of the Company. Our top priority remains the health and safety of all Ventas employees, the residents and caregivers in our senior living communities, and the many others who work in or use our 1,200 healthcare sites. As a result of our unwavering efforts, Ventas will continue to serve as a reliable partner and focused industry leader. To demonstrate our commitment to mitigating the spread of the coronavirus and further enhancing the safety of our senior housing communities, we are providing access to COVID-19 test kits and analysis from Mayo Clinic Laboratories at no charge to certain of our senior housing operators who need them,” said Debra A. Cafaro, Ventas Chairman and CEO.

“Ventas is, and will continue to be, a leading healthcare property owner in the businesses and geographies where we invest, a desirable employer and attractive investment vehicle. We remain well positioned to manage through current conditions and take further action as necessary to sustain our enterprise and protect the Company’s future,” Cafaro concluded.

Decisive Actions Taken to Ensure the Continued Strength and Stability of Ventas

  • Supporting Tenants & Operators: Ventas has taken a leadership role in the COVID-19 crisis by:
    • Establishing financial support programs for tenants and operators who are experiencing financial hardship as a result of the COVID-19 pandemic
    • Providing information and assistance to tenants and partners who may be eligible to obtain relief through various government programs
    • Proactively assisting its tenants and operators in acquiring personal protective equipment (“PPE”) and other scarce supplies by leveraging its national scale
    • Providing COVID-19 testing kits and analysis from Mayo Clinic Laboratories free of charge to certain of Ventas’s senior housing operators who need them to further enhance the safety of Ventas’s senior living communities by accelerating employee testing. Ventas’s accelerated employee testing program initiative is being conducted in conjunction with Atria Senior Living’s comprehensive employee testing program, which is well underway.
  • Continuing Productive and Seamless Business Operations: Ventas’s organization was well prepared to conduct business remotely and it activated its pre-existing business continuity plans in early March. The Company limited travel, established a cross-functional business continuity leadership team, tested its remote work capabilities, expanded its communications and implemented work from home guidelines. As a result of these and other measures, the Company experienced no downtime and maintained a high level of productivity.

The following information was filed by Ventas Inc (VTR) on Friday, May 8, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
 
 
 
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
ACT OF 1934 FOR THE TRANSITION PERIOD FROM 

TO

Commission file number: 1-10989
 
Ventas, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
61-1055020
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
353 N. Clark Street, Suite 3300
Chicago, Illinois
United States
(Address of Principal Executive Offices)
60654 (Zip Code)
Not Applicable (877) 483-6827
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
Accelerated filer ¨
 
Non-accelerated filer

Smaller reporting company 
 
 
 
Emerging growth company  
Securities registered pursuant to Section 12(b) of the Act:
Trading symbol:
 
Class of Common Stock:
 
Name of exchange on which registered:
VTR
 
Common Stock, $0.25 par value
 
New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
 
 
 
Outstanding at May 5, 2020:

 
 
 
373,074,865

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No x



VENTAS, INC.
FORM 10-Q
INDEX

 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019
 
 
 
Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019
 
 
 
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019
 
 
 
Consolidated Statements of Equity for the Three Months Ended March 31, 2020 and 2019
 
 
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A.
 
Risk Factors
 
 
 
Item 5.
 
Other Information
 
 
 




PART I—FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

VENTAS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
As of March 31, 2020
 
As of December 31, 2019
 
(In thousands, except per share amounts)
Assets
 
 
 
Real estate investments:
 

 
 

Land and improvements
$
2,244,526

 
$
2,283,929

Buildings and improvements
23,821,353

 
24,380,440

Construction in progress
505,188

 
461,354

Acquired lease intangibles
1,241,646

 
1,306,152

Operating lease assets
391,908

 
385,225

 
28,204,621

 
28,817,100

Accumulated depreciation and amortization
(7,237,345
)
 
(7,088,013
)
Net real estate property
20,967,276

 
21,729,087

Secured loans receivable and investments, net
623,717

 
704,612

Investments in unconsolidated real estate entities
165,745

 
45,022

Net real estate investments
21,756,738

 
22,478,721

Cash and cash equivalents
2,848,115

 
106,363

Escrow deposits and restricted cash
38,144

 
39,739

Goodwill
1,050,137

 
1,051,161

Assets held for sale
75,039

 
91,433

Deferred income tax assets, net
47,495

 
47,495

Other assets
802,160

 
877,296

Total assets
$
26,617,828

 
$
24,692,208

Liabilities and equity
 
 
 
Liabilities:
 

 
 

Senior notes payable and other debt
$
14,172,279

 
$
12,158,773

Accrued interest
87,245

 
111,115

Operating lease liabilities
250,357

 
251,196

Accounts payable and other liabilities
1,141,309

 
1,145,700

Liabilities related to assets held for sale
5,007

 
5,463

Deferred income tax liabilities
47,533

 
200,831

Total liabilities
15,703,730

 
13,873,078

Redeemable OP unitholder and noncontrolling interests
197,701

 
273,678

Commitments and contingencies

 

Equity:
 
 
 
Ventas stockholders’ equity:
 
 
 
Preferred stock, $1.00 par value; 10,000 shares authorized, unissued

 

Common stock, $0.25 par value; 600,000 shares authorized, 373,094 and 372,811 shares issued at March 31, 2020 and December 31, 2019, respectively
93,256

 
93,185

Capital in excess of par value
14,135,657

 
14,056,453

Accumulated other comprehensive loss
(103,408
)
 
(34,564
)
Retained earnings (deficit)
(3,491,696
)
 
(3,669,050
)
Treasury stock, 22 and 2 shares at March 31, 2020 and December 31, 2019, respectively
(867
)
 
(132
)
Total Ventas stockholders’ equity
10,632,942

 
10,445,892

Noncontrolling interests
83,455

 
99,560

Total equity
10,716,397

 
10,545,452

Total liabilities and equity
$
26,617,828

 
$
24,692,208

See accompanying notes.

1


VENTAS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands, except per share amounts)
Revenues
 
 
 
Rental income:
 
 
 
Triple-net leased
$
194,862

 
$
200,068

Office
208,395

 
201,428

 
403,257

 
401,496

Resident fees and services
576,770

 
521,447

Office building and other services revenue
3,128

 
2,518

Income from loans and investments
24,046

 
17,126

Interest and other income
4,853

 
287

Total revenues
1,012,054

 
942,874

Expenses
 
 
 
Interest
116,696

 
110,619

Depreciation and amortization
248,837

 
235,920

Property-level operating expenses:
 
 
 
Senior living
410,131

 
360,986

Office
64,506

 
62,085

Triple-net leased
6,331

 
7,433

 
480,968

 
430,504

Office building services costs
727

 
633

General, administrative and professional fees
42,535

 
40,760

Loss on extinguishment of debt, net

 
405

Merger-related expenses and deal costs
8,218

 
2,180

Other
3,708

 
23

Total expenses
901,689

 
821,044

Income before unconsolidated entities, real estate dispositions, income taxes and noncontrolling interests
110,365

 
121,830

Loss from unconsolidated entities
(10,876
)
 
(946
)
Gain on real estate dispositions
226,225

 
5,447

Income tax benefit
149,016

 
1,257

Income from continuing operations
474,730

 
127,588

Net income
474,730

 
127,588

Net income attributable to noncontrolling interests
1,613

 
1,803

Net income attributable to common stockholders
$
473,117

 
$
125,785

Earnings per common share
 
 
 
Basic:
 
 
 
Income from continuing operations
$
1.27

 
$
0.36

Net income attributable to common stockholders
1.27

 
0.35

Diluted:
 

 
 

Income from continuing operations
$
1.26

 
$
0.35

Net income attributable to common stockholders
1.26

 
0.35


See accompanying notes.

2


VENTAS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Net income
$
474,730

 
$
127,588

Other comprehensive (loss) income:
 
 
 
Foreign currency translation
(8,540
)
 
3,827

Unrealized (loss) gain on available for sale securities
(51,699
)
 
9,291

Derivative instruments
(18,587
)
 
(5,438
)
Total other comprehensive (loss) income
(78,826
)
 
7,680

Comprehensive income
395,904

 
135,268

Comprehensive (loss) income attributable to noncontrolling interests
(8,369
)
 
1,803

Comprehensive income attributable to common stockholders
$
404,273

 
$
133,465

   

See accompanying notes.

3


VENTAS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)
2019
Common
Stock Par
Value
 
Capital in
Excess of
Par Value
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
(Deficit)
 
Treasury
Stock
 
Total Ventas
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total Equity
2019
(In thousands, except per share amounts)
 
 
Balance at January 1, 2020
$
93,185

 
$
14,056,453

 
$
(34,564
)
 
$
(3,669,050
)
 
$
(132
)
 
$
10,445,892

 
$
99,560

 
$
10,545,452

Net income

 

 

 
473,117

 

 
473,117

 
1,613

 
474,730

Other comprehensive loss

 

 
(68,844
)
 

 

 
(68,844
)
 
(9,982
)
 
(78,826
)
Net change in noncontrolling interests

 
761

 

 

 

 
761

 
(7,736
)
 
(6,975
)
Dividends to common stockholders—$0.7925 per share

 

 

 
(296,482
)
 

 
(296,482
)
 

 
(296,482
)
Issuance of common stock for stock plans, restricted stock grants and other
71

 
10,894

 

 
719

 
(735
)
 
10,949

 

 
10,949

Adjust redeemable OP unitholder interests to current fair value

 
67,811

 

 

 

 
67,811

 

 
67,811

Redemption of OP Units

 
(262
)
 

 

 

 
(262
)
 

 
(262
)
Balance at March 31, 2020
$
93,256

 
$
14,135,657

 
$
(103,408
)
 
$
(3,491,696
)
 
$
(867
)
 
$
10,632,942

 
$
83,455

 
$
10,716,397

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
$
89,125

 
$
13,076,528

 
$
(19,582
)
 
$
(2,930,214
)
 
$

 
$
10,215,857

 
$
55,737

 
$
10,271,594

Net income

 

 

 
125,785

 

 
125,785

 
1,803

 
127,588

Other comprehensive income

 

 
7,680

 

 

 
7,680

 

 
7,680

Net change in noncontrolling interests

 
(1,690
)
 

 

 

 
(1,690
)
 
(1,190
)
 
(2,880
)
Dividends to common stockholders—$0.7925 per share

 

 

 
(284,772
)
 

 
(284,772
)
 

 
(284,772
)
Issuance of common stock
390

 
98,048

 

 

 

 
98,438

 

 
98,438

Issuance of common stock for stock plans, restricted stock grants and other
64

 
6,732

 

 

 

 
6,796

 

 
6,796

Adjust redeemable OP unitholder interests to current fair value

 
(19,068
)
 

 

 

 
(19,068
)
 

 
(19,068
)
Cumulative effect of change in accounting principle

 

 
(163
)
 
800

 

 
637

 

 
637

Balance at March 31, 2019
$
89,579

 
$
13,160,550

 
$
(12,065
)
 
$
(3,088,401
)
 
$

 
$
10,149,663

 
$
56,350

 
$
10,206,013


See accompanying notes.

4


VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
474,730

 
$
127,588

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
248,837

 
235,920

Amortization of deferred revenue and lease intangibles, net
(2,973
)
 
(2,846
)
Other non-cash amortization
3,851

 
6,131

Stock-based compensation
10,514

 
8,405

Straight-lining of rental income
(6,788
)
 
(8,489
)
Loss on extinguishment of debt, net

 
405

Gain on real estate dispositions
(226,225
)
 
(5,447
)
Gain on real estate loan investments
(167
)
 

Income tax benefit
(150,273
)
 
(1,715
)
Loss from unconsolidated entities
10,876

 
946

Distributions from unconsolidated entities
1,600

 
1,200

Other
3,805

 
2,283

Changes in operating assets and liabilities:
 
 
 
Increase in other assets
(13,768
)
 
(13,704
)
Decrease in accrued interest
(23,032
)
 
(18,047
)
(Decrease) increase in accounts payable and other liabilities
(16,535
)
 
3,490

Net cash provided by operating activities
314,452

 
336,120

Cash flows from investing activities:
 
 
 
Net investment in real estate property
(79,539
)
 
(13,097
)
Investment in loans receivable
(1,051
)
 
(4,257
)
Proceeds from real estate disposals
625,439

 
17,551

Proceeds from loans receivable
99,117

 
1,275

Development project expenditures
(94,229
)
 
(49,652
)
Capital expenditures
(26,789
)
 
(21,955
)
Investment in unconsolidated entities
(5,809
)
 
(687
)
Insurance proceeds for property damage claims
42

 
2,998

Net cash provided by (used in) investing activities
517,181

 
(67,824
)
Cash flows from financing activities:
 
 
 
Net change in borrowings under revolving credit facilities
2,762,153

 
(700,775
)
Net change in borrowings under commercial paper program
(565,524
)
 
194,498

Proceeds from debt
82,759

 
706,591

Repayment of debt
(62,973
)
 
(262,570
)
Payment of deferred financing costs
(1,963
)
 
(6,837
)
Issuance of common stock, net

 
98,378

Cash distribution to common stockholders
(296,304
)
 
(282,874
)
Cash distribution to redeemable OP unitholders
(2,325
)
 
(2,216
)
Cash issued for redemption of OP Units
(570
)
 

Contributions from noncontrolling interests
155

 
1,223

Distributions to noncontrolling interests
(2,543
)
 
(2,623
)
Proceeds from stock option exercises
3,389

 
4,316

Other
(4,954
)
 
(6,874
)
Net cash provided by (used in) financing activities
1,911,300

 
(259,763
)
Net increase in cash, cash equivalents and restricted cash
2,742,933

 
8,533

Effect of foreign currency translation
(2,776
)
 
234

Cash, cash equivalents and restricted cash at beginning of period
146,102

 
131,464

Cash, cash equivalents and restricted cash at end of period
$
2,886,259

 
$
140,231


See accompanying notes.

5


VENTAS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands)
Supplemental schedule of non-cash activities:
 
 
 
Assets acquired and liabilities assumed from acquisitions and other:
 
 
 
Real estate investments
$
533

 
$

Other assets
56

 

Other liabilities
398

 

Noncontrolling interests
191

 


See accompanying notes.


6

VENTAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



NOTE 1—DESCRIPTION OF BUSINESS

Ventas, Inc. (together with its subsidiaries, unless otherwise indicated or except where the context otherwise requires, “we,” “us” or “our”), an S&P 500 company, is a real estate investment trust (“REIT”) with a highly diversified portfolio of senior housing, research and innovation, and healthcare properties located throughout the United States, Canada and the United Kingdom. As of March 31, 2020, we owned or managed through unconsolidated joint ventures approximately 1,200 properties (including properties classified as held for sale), consisting of senior housing communities, medical office buildings (“MOBs”), research and innovation centers, inpatient rehabilitation facilities (“IRFs”) and long-term acute care facilities (“LTACs”), and health systems. We also had 22 properties under development, including four properties that are owned by unconsolidated real estate entities. Our company was originally founded in 1983 and is headquartered in Chicago, Illinois.

We primarily invest in senior housing, research and innovation, and healthcare properties through acquisitions and lease our properties to unaffiliated tenants or operate them through independent third-party managers.

As of March 31, 2020, we leased a total of 412 properties (excluding properties within our office operations reportable business segment) to various healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures. Our three largest tenants, Brookdale Senior Living Inc. (together with its subsidiaries, “Brookdale Senior Living”), Ardent Health Partners, LLC (together with its subsidiaries, “Ardent”) and Kindred Healthcare, LLC (formerly Kindred Healthcare, Inc., together with its subsidiaries, “Kindred”) leased from us 122 properties (excluding two properties managed by Brookdale Senior Living pursuant to long-term management agreements), 11 properties and 32 properties, respectively, as of March 31, 2020.

As of March 31, 2020, pursuant to long-term management agreements, we engaged independent operators, such as Atria Senior Living, Inc. (“Atria”) and Sunrise Senior Living, LLC (together with its subsidiaries, “Sunrise”), to manage 405 senior housing communities for us.
 
Through our Lillibridge Healthcare Services, Inc. subsidiary and our ownership interest in PMB Real Estate Services LLC, we also provide MOB management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States. In addition, from time to time, we make secured and non-mortgage loans and other investments relating to senior housing and healthcare operators or properties.

COVID-19 Update

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak has now spread to the United States and infections have been reported globally.

Starting in March, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways. In our senior living operating portfolio, March occupancy trended lower in the second half of the month as government policies and implementation of infection control best practices began to materially limit or close communities to new resident move-ins. In addition, starting in mid-March, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as our operators took appropriate actions to protect residents and caregivers. These trends accelerated in April, and are expected to continue through at least May, impacting revenues and net operating income in the second quarter.
    
Our triple-net senior housing tenants experienced similar trends, which has put them under increased operational and financial pressure. While we collected substantially all triple-net senior housing rent we expected to receive in March and April, we have given and may continue to provide financial support to these tenants in the form of rent deferrals and application of portions of lease deposits to fulfill payment obligations. Without financial support or other government assistance, certain of our triple-net senior housing tenants will likely experience worsening financial conditions through the second quarter, which would pressure their rent coverage ratios and may affect their ability to pay us contractual rent in full on a timely basis.

In our office operations segment and healthcare triple-net leased properties business, we collected substantially all rent due in the first quarter. In April, we collected substantially all rent due from our healthcare triple-net leased tenants. This cohort of tenants has benefitted from significant government financial support to partially offset the direct financial impact of

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


the COVID-19 pandemic on healthcare providers. In our office operations segment, we received 96% of anticipated rent in April. We expect the majority of remaining unpaid April rent to ultimately be collectible. In our office operations segment, most markets have transitioned to virtual tours and our tenant retention increased in April as many tenants have delayed or canceled move-outs as a result of the COVID-19 pandemic.

In March, we took precautionary steps to increase liquidity and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic. On March 12, 2020, we provided notice to the lenders under our $3.0 billion unsecured revolving credit facility to borrow $2.75 billion under the facility. A total of $2.9 billion is currently outstanding under the facility. In March 2020, we added to this liquidity by issuing $500.0 million aggregate principal amount of 4.75% senior notes due 2030. The notes were settled and proceeds were received in April 2020.

We had approximately $3.2 billion in cash and cash equivalents on hand as of May 6, 2020, with negligible near-term debt maturing and no pending, unfunded or unannounced acquisitions. In order to conserve capital, we have reduced expected capital expenditures for 2020 by $0.3 billion to a new expected total of $0.5 billion, mainly through pausing certain ground-up developments that were not yet substantially underway. We are also reviewing our general and administrative expenses to identify additional opportunities to reduce operating costs.

The federal government, as well as state and local governments, have implemented or announced programs to provide financial and other support to businesses affected by the COVID-19 pandemic, some of which benefit or could benefit our company, tenants, operators, borrowers and managers.  While these government assistance programs are not expected to fully offset the negative financial impact of the pandemic, and there can be no assurance that these programs will continue or the extent to which they will be expanded, we are monitoring them closely and have been in active dialogue with our tenants, operators, borrowers and managers regarding ways in which these programs could benefit them or us.

We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic’s continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows but it could be material.

We have utilized all available information as described above in consistently applying our critical accounting policies that affect our more significant estimates and judgments used in preparation of our Consolidated Financial Statements for the quarter ended March 31, 2020, including impairment of long-lived and intangible assets and revenue recognition.

NOTE 2—ACCOUNTING POLICIES

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The accompanying Consolidated Financial Statements and related notes should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 24, 2020. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned subsidiaries and the joint venture entities over which we exercise control. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; and (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We consolidate our investment in a VIE when we determine that we are its primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

As it relates to investments in joint ventures, GAAP may preclude consolidation by the sole general partner in certain circumstances based on the type of rights held by the limited partner or partners. We assess limited partners’ rights and their impact on our consolidation conclusions, and we reassess if there is a change to the terms or in the exercisability of the rights of the limited partners, the sole general partner increases or decreases its ownership of limited partnership (“LP”) interests or there is an increase or decrease in the number of outstanding LP interests. We also apply this guidance to managing member interests in limited liability companies (“LLCs”).

We consolidate several VIEs that share the following common characteristics:

the VIE is in the legal form of an LP or LLC;
the VIE was designed to own and manage its underlying real estate investments;
we are the general partner or managing member of the VIE;
we own a majority of the voting interests in the VIE;
a minority of voting interests in the VIE are owned by external third parties, unrelated to us;
the minority owners do not have substantive kick-out or participating rights in the VIE; and
we are the primary beneficiary of the VIE.

We have separately identified certain special purpose entities that were established to allow investments in research and innovation projects by tax credit investors (“TCIs”). We have determined that these special purpose entities are VIEs, we are a holder of variable interests and that we are the primary beneficiary of the VIEs, and therefore we consolidate these special purpose entities. Our primary beneficiary determination is based upon several factors, including but not limited to the rights we have in directing the activities which most significantly impact the VIEs’ economic performance as well as certain guarantees which protect the TCIs from losses should a tax credit recapture event occur.

In general, the assets of consolidated VIEs are available only for the settlement of the obligations of the respective entities. Unless otherwise required by the LP or LLC agreement, any mortgage loans of the consolidated VIEs are non-recourse to us. The table below summarizes the total assets and liabilities of our consolidated VIEs as reported on our Consolidated Balance Sheets.
 
 
March 31, 2020
 
December 31, 2019
 
 
Total Assets
 
Total Liabilities
 
Total Assets
 
Total Liabilities
 
 
(In thousands)
NHP/PMB L.P.
 
$
661,649

 
$
240,099

 
$
666,404

 
$
244,934

Other identified VIEs
 
3,727,402

 
1,386,629

 
4,075,821

 
1,459,830

Tax credit VIEs
 
887,976

 
343,825

 
845,229

 
333,809



Investments in Unconsolidated Entities

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We adjust our investment in unconsolidated entities for additional contributions made, distributions received as well as our share of the investee's earnings or losses which is included in our Consolidated Statements of Income.


9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


We base the initial carrying value of investments in unconsolidated entities on the fair value of the assets at the time we acquired the joint venture interest. We estimate initial fair values for our equity method investments 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. The capitalization rates, discount rates and credit spreads we use in these models are based upon assumptions that we believe to be within a reasonable range of current market rates for the respective investments.

We generally amortize any difference between our cost basis and the basis reflected at the joint venture level, if any, over the lives of the related assets and liabilities and include that amortization in our share of income or loss from unconsolidated entities. For earnings of equity method investments with pro rata distribution allocations, net income or loss is allocated between the partners in the joint venture based on their respective stated ownership percentages. In other instances, net income or loss is allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the joint venture at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the joint venture is calculated as the amount that the partner would receive if the joint venture were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under the HLBV method, in any given period, we could record more or less income than the joint venture has generated, than actual cash distributions we receive or than the amount we may receive in the event of an actual liquidation.

Redeemable OP Unitholder and Noncontrolling Interests

We own a majority interest in NHP/PMB L.P. (“NHP/PMB”), a limited partnership formed in 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC (“PMB”). Given our wholly owned subsidiary is the general partner and the primary beneficiary of NHP/PMB, we consolidate it as a VIE. As of March 31, 2020, third party investors owned 3.3 million Class A limited partnership units in NHP/PMB (“OP Units”), which represented 31% of the total units then outstanding, and we owned 7.3 million Class B limited partnership units in NHP/PMB, representing the remaining 69%. At any time following the first anniversary of the date of their issuance, the OP Units may be redeemed at the election of the holder for cash or, at our option, 0.9051 shares of our common stock per OP Unit, subject to further adjustment in certain circumstances. We are party by assumption to a registration rights agreement with the holders of the OP Units that requires us, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of our common stock upon redemption of OP Units.

As redemption rights are outside of our control, the redeemable OP Units are classified outside of permanent equity on our Consolidated Balance Sheets. We reflect the redeemable OP Units at the greater of cost or redemption value. As of March 31, 2020 and December 31, 2019, the fair value of the redeemable OP Units was $100.8 million and $171.2 million, respectively. We recognize changes in fair value through capital in excess of par value, net of cash distributions paid and purchases by us of any OP Units. Our diluted earnings per share includes the effect of any potential shares outstanding from redemption of the OP Units.

Certain noncontrolling interests of other consolidated joint ventures were also classified as redeemable at March 31, 2020 and December 31, 2019. Accordingly, we record the carrying amount of these noncontrolling interests at the greater of their initial carrying amount (increased or decreased for the noncontrolling interests’ share of net income or loss and distributions) or the redemption value, which is primarily based on the fair value of the underlying real estate asset. Our joint venture partners have certain redemption rights with respect to their noncontrolling interests in these joint ventures that are outside of our control, and the redeemable noncontrolling interests are classified outside of permanent equity on our Consolidated Balance Sheets. We recognize changes in the carrying value of redeemable noncontrolling interests through capital in excess of par value.

Accounting for Historic and New Markets Tax Credits

For certain of our research and innovation centers, we are party to contractual arrangements with TCIs that were established to enable the TCIs to receive benefits of historic tax credits (“HTCs”) and/or new markets tax credits (“NMTCs”). As of March 31, 2020, we owned 11 properties, including two properties in development, that had syndicated HTCs or NMTCs, or both, to TCIs.

In general, TCIs invest cash into special purpose entities that invest in entities that own the subject property and generate the tax credits. The TCIs receive substantially all of the tax credits and hold only a nominal interest in the economic risk and benefits of the special purpose entities.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


HTCs are delivered to the TCIs upon substantial completion of the project. NMTCs are allowed for up to 39% of a qualified investment and are delivered to the TCIs after the investment has been funded and spent on a qualified business. HTCs are subject to 20% recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to 100% recapture until the end of the seventh year following the qualifying investment. We have provided the TCIs with certain guarantees which protect the TCIs from losses should a tax credit recapture event occur. The contractual arrangements with the TCIs include a put/call provision whereby we may be obligated or entitled to repurchase the interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. We anticipate that either the TCIs will exercise their put rights or we will exercise our call rights prior to the applicable tax credit recapture periods.

The portion of the TCI’s investment that is attributed to the put is recorded at fair value at inception in accounts payable and other liabilities on our Consolidated Balance Sheets, and is accreted to the expected put price as interest expense in our Consolidated Statements of Income over the recapture period. The remaining balance of the TCI’s investment is initially recorded in accounts payable and other liabilities on our Consolidated Balance Sheets and will be relieved upon delivery of the tax credit to the TCI, as a reduction in the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above.

Impairment of Long-Lived and Intangible Assets

We periodically evaluate our long-lived assets, primarily consisting of investments in real estate, for impairment indicators. If indicators of impairment are present, we evaluate the carrying value of the related real estate investments in relation to the future undiscounted cash flows of the underlying operations. In performing this evaluation, we consider market conditions and our current intentions with respect to holding or disposing of the asset. We adjust the net book value of leased properties and other long-lived assets to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. We recognize an impairment loss at the time we make any such determination.

If impairment indicators arise with respect to intangible assets with finite useful lives, we evaluate impairment by comparing the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, then we estimate the fair value of the asset and compare the estimated fair value to the intangible asset’s carrying value. We recognize any shortfall from carrying value as an impairment loss in the current period.

We evaluate our investments in unconsolidated entities for impairment at least annually, and whenever events or changes in circumstances indicate that the carrying value of our investment may exceed its fair value. If we determine that a decline in the fair value of our investment in an unconsolidated entity is other-than-temporary, and if such reduced fair value is below the carrying value, we record an impairment.

We test goodwill for impairment at least annually, and more frequently if indicators arise. We first assess qualitative factors, such as current macroeconomic conditions, state of the equity and capital markets and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we proceed with estimating the fair value of the reporting unit. On January 1, 2020 we adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes the traditional “Step 2” of the goodwill impairment test that required a hypothetical purchase price allocation. A goodwill impairment, if any, will be recognized in the period it is determined and now measured as the amount by which a reporting unit’s carrying value exceeds its fair value.

Estimates of fair value used in our evaluation of goodwill (if necessary based on our qualitative assessment), investments in real estate, investments in unconsolidated entities and intangible assets are based upon discounted future cash flow projections or other acceptable valuation techniques that are based, in turn, upon all available evidence including level three inputs, such as revenue and expense growth rates, estimates of future cash flows, capitalization rates, discount rates, general economic conditions and trends, or other available market data. Our ability to accurately predict future operating results and cash flows and to estimate and determine 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.


11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Fair Values of Financial Instruments

Fair value is a market-based measurement, not an entity-specific measurement, and we determine fair value based on the assumptions that we expect market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

Level one inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access. Level two inputs are inputs other than quoted prices included in level one that are directly or indirectly observable for the asset or liability. Level two inputs may include quoted prices for similar assets and liabilities in active markets and other inputs for the asset or liability that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates and yield curves. Level three inputs are unobservable inputs for the asset or liability, which typically are based on our own assumptions, because there is little, if any, related market activity. If the determination of the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. If the volume and level of market activity for an asset or liability has decreased significantly relative to the normal market activity for such asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that a transaction for an asset or liability is not orderly, little, if any, weight is placed on that transaction price as an indicator of fair value. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

We use the following methods and assumptions in estimating the fair value of our financial instruments.

Cash and cash equivalents - The carrying amount of unrestricted cash and cash equivalents reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

Escrow deposits and restricted cash - The carrying amount of escrow deposits and restricted cash reported on our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.

Loans receivable - We estimate the fair value of loans receivable using level two and level three inputs. We discount future cash flows using current interest rates at which similar loans with the same terms and length to maturity would be made to borrowers with similar credit ratings.

Available for sale securities - We estimate the fair value of marketable debt securities using level two inputs. We observe quoted prices for similar assets or liabilities in active markets that we have the ability to access. We estimate the fair value of certain government-sponsored pooled loan investments using level three inputs. We consider credit spreads, underlying asset performance and credit quality, and default rates.

Derivative instruments - With the assistance of a third party, we estimate the fair value of derivative instruments, including interest rate caps, interest rate swaps, and foreign currency forward contracts, using level two inputs.
Interest rate caps - We observe forward yield curves and other relevant information.

Interest rate swaps - We observe alternative financing rates derived from market-based financing rates, forward yield curves and discount rates.

Foreign currency forward contracts - We estimate the future values of the two currency tranches using forward exchange rates that are based on traded forward points and calculate a present value of the net amount using a discount factor based on observable traded interest rates.

Senior notes payable and other debt - We estimate the fair value of senior notes payable and other debt using level two inputs. We discount the future cash flows using current interest rates at which we could obtain similar borrowings. For mortgage debt, we may estimate fair value using level three inputs, similar to those used in determining fair value of loans receivable (above).

Redeemable OP unitholder interests - We estimate the fair value of our redeemable OP unitholder interests using level one inputs. We base fair value on the closing price of our common stock, as OP Units may be redeemed at

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


the election of the holder for cash or, at our option, shares of our common stock, subject to adjustment in certain circumstances.

Revenue Recognition

Triple-Net Leased Properties and Office Operations

Certain of our triple-net leases and most of our MOB and research and innovation center (collectively, “office operations”) leases provide for periodic and determinable increases in base rent. We recognize base rental revenues under these leases on a straight-line basis over the applicable lease term when collectability of substantially all rents is probable. Recognizing rental income on a straight-line basis generally results in recognized revenues during the first half of a lease term exceeding the cash amounts contractually due from our tenants, creating a straight-line rent receivable that is included in other assets on our Consolidated Balance Sheets. At March 31, 2020 and December 31, 2019, this cumulative excess totaled $277.1 million and $278.8 million, respectively (excluding properties classified as held for sale).

Certain of our leases provide for periodic increases in base rent only if certain revenue parameters or other substantive contingencies are met. We recognize the increased rental revenue under these leases as the related parameters or contingencies are met, rather than on a straight-line basis over the applicable lease term.

We assess the probability of collecting substantially all rents under our leases based on several factors, including, among other things, payment history, the financial strength of the tenant and any guarantors, the historical operations and operating trends of the property, the historical payment pattern of the tenant, the type of property, the value of the underlying collateral, if any, expected future performance of the property and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be able to collect substantially all rents, we recognize a charge to rental income. If we change our conclusions regarding the probability of collecting rent payments required by a lease, we may recognize adjustments to rental income in the period we make such change in our conclusions.

Senior Living Operations

Our resident agreements are accounted for as leases and we recognize resident fees and services, other than move-in fees, monthly as services are provided. We recognize move-in fees on a straight-line basis over the average resident stay.

Other

We recognize interest income from loans and investments, including discounts and premiums, using the effective interest method when collectability is reasonably assured. We apply the effective interest method on a loan-by-loan basis and recognize discounts and premiums as yield adjustments over the related loan term. We recognize interest income on an impaired loan to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loan, other receivables and all related accrued interest. When the balance of the loan, other receivables and all related accrued interest is equal to or less than our estimate of the fair value of the collateral, we recognize interest income on a cash basis.

On January 1, we adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require us to evaluate a current estimate of all expected credit losses over the life of a financial instrument, which may result in earlier recognition of credit losses on loans and other financial instruments. Under prior guidance, we generally only considered past events and current conditions in measuring an incurred loss. We will establish a reserve for any estimated credit losses using this model with a corresponding charge to net income. We adopted ASU 2016-13 using the modified retrospective method and we established no reserve upon adoption.

Lease Accounting

We lease real property, primarily land and corporate office space, and equipment, primarily vehicles at our senior housing communities. At lease inception, we establish an operating lease asset and operating lease liability calculated as the present value of future minimum lease payments. As our leases do not provide an implicit rate, we use a discount rate that approximates our incremental borrowing rate available at lease commencement to determine the present value. Our lease expense primarily consists of ground and corporate office leases. Ground lease expense is included in interest expense and corporate office lease expense is included in general, administrative and professional fees in the Company's Consolidated Statements of Income.
    

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 3—CONCENTRATION OF CREDIT RISK

As of March 31, 2020, Atria, Sunrise, Brookdale Senior Living, Ardent and Kindred managed or operated approximately 20.8%, 10.6%, 7.9%, 4.9% and 1.1%, respectively, of our consolidated real estate investments based on gross book value (excluding properties classified as held for sale as of March 31, 2020). Because Atria and Sunrise manage our properties in exchange for the receipt of a management fee from us, we are not directly exposed to the credit risk of our managers in the same manner or to the same extent as our triple-net tenants.

Based on gross book value, approximately 44.1% and 19.5% of our consolidated real estate investments were senior housing communities included in the senior living operations and triple-net leased properties reportable business segments, respectively (excluding properties classified as held for sale as of March 31, 2020). MOBs, research and innovation centers, IRFs and LTACs, health systems, skilled nursing facilities (“SNFs”) and secured loans receivable and investments collectively comprised the remaining 36.4%. Our consolidated properties were located in 45 states, the District of Columbia, seven Canadian provinces and the United Kingdom as of March 31, 2020, with properties in one state (California) accounting for more than 10% of our total continuing revenues and net operating income (“NOI,” which is defined as total revenues, excluding interest and other income, less property-level operating expenses and office building services costs) for the three months then ended.

Triple-Net Leased Properties

The following table reflects the concentration risk related to our triple-net leased properties for the periods presented:
 
For the Three Months Ended March 31,
 
2020
 
2019
Revenues(1):
 
 
 
Brookdale Senior Living
4.6
%
 
4.8
%
Ardent
3.0

 
3.1

Kindred
3.2

 
3.4

NOI:
 
 
 
Brookdale Senior Living
8.8
%
 
8.8
%
Ardent
5.8

 
5.7

Kindred
6.2

 
6.2


(1) 
Total revenues include office building and other services revenue, income from loans and investments and interest and other income.

Each of our leases with Brookdale Senior Living, Ardent and Kindred is a triple-net lease that obligates the tenant to pay all property-related expenses, including maintenance, utilities, repairs, taxes, insurance and capital expenditures, and to comply with the terms of the mortgage financing documents, if any, affecting the properties. In addition, each of our Brookdale Senior Living, Ardent and Kindred leases has a corporate guaranty.

The properties we lease to Brookdale Senior Living, Ardent and Kindred accounted for a significant portion of our triple-net leased properties segment revenues and NOI for the three months ended March 31, 2020 and 2019. If Brookdale Senior Living, Ardent or Kindred becomes unable or unwilling to satisfy its obligations to us or to renew its leases with us upon expiration of the terms thereof, our financial condition and results of operations could decline, and our ability to service our indebtedness and to make distributions to our stockholders could be impaired. We cannot assure you that Brookdale Senior Living, Ardent and Kindred will have sufficient assets, income and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by Brookdale Senior Living, Ardent or Kindred to do so could have a material adverse effect on our business, financial condition, results of operations and liquidity, our ability to service our indebtedness and other obligations and our ability to make distributions to our stockholders, as required for us to continue to qualify as a REIT (a “Material Adverse Effect”). We also cannot assure you that Brookdale Senior Living, Ardent and Kindred will elect to renew their respective leases with us upon expiration of the leases or that we will be able to reposition any non-renewed properties on a timely basis or on the same or better economic terms, if at all.


14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Senior Living Operations

As of March 31, 2020, Atria and Sunrise, collectively, provided comprehensive property management and accounting services with respect to 260 of our 400 consolidated senior housing communities, for which we pay annual management fees pursuant to long-term management agreements.

We rely on our managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our senior living operations efficiently and effectively. We also rely on our managers to set appropriate resident fees and otherwise operate our senior housing communities in compliance with the terms of our management agreements and all applicable laws and regulations. Although we have various rights as the property owner under our management agreements, including various rights to terminate and exercise remedies under the agreements as provided therein, Atria’s or Sunrise’s failure, inability or unwillingness to satisfy its respective obligations under those agreements, to efficiently and effectively manage our properties or to provide timely and accurate accounting information with respect thereto could have a Material Adverse Effect on us. In addition, significant changes in Atria’s or Sunrise’s senior management or equity ownership or any adverse developments in their businesses or financial condition could have a Material Adverse Effect on us.
    
Brookdale Senior Living, Kindred, Atria, Sunrise and Ardent Information

Brookdale Senior Living is subject to the reporting requirements of the 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 Senior Living contained or referred to in this Quarterly Report on Form 10-Q has been derived from SEC filings made by Brookdale Senior Living or other publicly available information, or was provided to us by Brookdale Senior Living, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy. We are providing this data for informational purposes only, and you are encouraged to obtain Brookdale Senior Living’s publicly available filings, which can be found at the SEC’s website at www.sec.gov.

Kindred, Atria, Sunrise and Ardent are not currently subject to the reporting requirements of the SEC. The information related to Kindred, Atria, Sunrise and Ardent contained or referred to in this Quarterly Report on Form 10-Q has been derived from publicly available information or was provided to us by Kindred, Atria, Sunrise or Ardent, as the case may be, and we have not verified this information through an independent investigation or otherwise. We have no reason to believe that this information is inaccurate in any material respect, but we cannot assure you of its accuracy.

NOTE 4—DISPOSITIONS

2020 Activity

In March 2020, we formed the Ventas Life Science and Healthcare Real Estate Fund, L.P. (the “Fund”), a perpetual life vehicle that focuses on investments in research and innovation centers, medical office buildings and senior housing communities in North America.  To seed the Fund, we contributed six (two of which are on the same campus) stabilized research and innovation and medical office properties.  We received cash consideration of $620 million and a 21% interest in the Fund. We recognized a gain on the transactions of $223.4 million.

Also, during the three months ended March 31, 2020, we sold one MOB and one senior housing community for aggregate consideration of $9.2 million and we recognized a gain on the sale of these assets of $2.8 million.

Real Estate Impairment

We recognized impairments of $12.2 million and $10.2 million, respectively, for the three months ended March 31, 2020 and 2019, which are recorded in depreciation and amortization in our Consolidated Statements of Income. Our recorded impairments were primarily the result of a change in our intent to hold the impaired assets. In most cases, we recognize an impairment in the periods in which our change in intent is made.


15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Assets Held for Sale

The table below summarizes our real estate assets classified as held for sale, including the amounts reported on our Consolidated Balance Sheets, which may include anticipated post-closing settlements of working capital for disposed properties.
 
 
As of March 31, 2020
 
As of December 31, 2019
 
 
Number of Properties Held for Sale
 
Assets Held for Sale
 
Liabilities Related to Assets
Held for Sale
 
Number of Properties Held for Sale
 
Assets Held for Sale
 
Liabilities Related to Assets
Held for Sale
 
 
(Dollars in thousands)
Triple-Net Leased Properties
 
8

 
$
52,115

 
$
1,512

 
8

 
$
62,098

 
$
1,623

Office Operations
 

 
1,496

 
1,397

 
1

 
5,177

 
499

Senior Living Operations
 
5

 
21,428

 
2,098

 
6

 
24,158

 
3,341

Total
 
13

 
$
75,039

 
$
5,007

 
15

 
$
91,433

 
$
5,463



NOTE 5—LOANS RECEIVABLE AND INVESTMENTS

As of March 31, 2020 and December 31, 2019, we had $857.0 million and $1.0 billion, respectively, of net loans receivable and investments relating to senior housing and healthcare operators or properties. The following is a summary of our loans receivable and investments, net, including amortized cost, fair value and unrealized gains or losses on available for sale investments:    
 
Carrying Amount
 
Amortized Cost
 
Fair Value
 
Unrealized Gain (Loss)
 
(In thousands)
As of March 31, 2020:
 
 
 
 
 
 
 
Secured/mortgage loans and other, net
$
567,247

 
$
567,247

 
$
444,187

 
$

Government-sponsored pooled loan investments, net (1)
56,470

 
52,879

 
56,470

 
3,591

Total investments reported as secured loans receivable and investments, net
623,717

 
620,126

 
500,657

 
3,591

Non-mortgage loans receivable, net
44,301

 
44,301

 
39,915

 

Marketable debt securities (2)
189,024

 
213,128

 
189,024

 
(24,104
)
Total loans receivable and investments, net
$
857,042

 
$
877,555

 
$
729,596

 
$
(20,513
)
 
 
 
 
 
 
 
 
As of December 31, 2019:
 
 
 
 
 
 
 
Secured/mortgage loans and other, net
$
645,546

 
$
645,546

 
$
646,925

 
$

Government-sponsored pooled loan investments, net (1)
59,066

 
52,178

 
59,066

 
6,888

Total investments reported as secured loans receivable and investments, net
704,612

 
697,724

 
705,991

 
6,888

Non-mortgage loans receivable, net
63,724

 
63,724

 
63,538

 

Marketable debt securities (2)
237,360

 
213,062

 
237,360

 
24,298

Total loans receivable and investments, net
$
1,005,696

 
$
974,510

 
$
1,006,889

 
$
31,186



(1) 
Investments in government-sponsored pool loans have contractual maturity dates in 2021 and 2023.
(2) 
Investments in marketable debt securities have contractual maturity dates in 2024 and 2026.

2020 Activity

During the three months ended March 31, 2020, we received aggregate proceeds of $99.0 million for the full repayment of the principal balances of seven loans receivable with a weighted average interest rate of 8.4% that were due to mature between 2020 and 2024, resulting in total gains of $1.4 million.


16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 6—INVESTMENTS IN UNCONSOLIDATED ENTITIES

We report investments in unconsolidated entities over whose operating and financial policies we have the ability to exercise significant influence under the equity method of accounting. We are not required to consolidate these entities because our joint venture partners have significant participating rights, nor are these entities considered VIEs, as they are controlled by equity holders with sufficient capital.

At March 31, 2020, we had a 25% interest in a real estate joint venture that has a majority ownership in six properties and four properties under development.

In March 2020, we formed the Fund in which we are manager, general partner and had a 21% ownership interest. See “Note 4 - Dispositions.”

We account for our interests in real estate joint ventures, including the Fund, as well as our 34% interest in Atria, 34% interest in Eclipse Senior Living (“ESL”) and 9.8% interest in Ardent, which are included within other assets on our Consolidated Balance Sheets, under the equity method of accounting.

Our 34% ownership interest in Atria entitles us to customary rights and minority protections, including the right to appoint two of six members to the Atria Board of Directors.

Our 34% ownership interest in ESL entitles us to customary rights and minority protections, including the right to appoint two of six members to the ESL Board of Directors. ESL management owns the 66% controlling interest.

Our 9.8% ownership interest in Ardent entitles us to certain rights and minority protections, as well as the right to appoint one of 11 members on the Ardent Board of Directors.

With the exception of our interests in Atria, ESL and Ardent, we provide various services to unconsolidated entities in exchange for fees and reimbursements. Total management fees earned in connection with these entities were $1.0 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively, which is included in office building and other services revenue in our Consolidated Statements of Income.

NOTE 7—INTANGIBLES

The following is a summary of our intangibles:
 
As of March 31, 2020
 
As of December 31, 2019
 
Balance
 
Remaining
Weighted Average
Amortization
Period in Years
 
Balance
 
Remaining
Weighted Average
Amortization
Period in Years
 
(Dollars in thousands)
Intangible assets:
 
 
 
 
 
 
 
Above market lease intangibles
$
142,556

 
6.8
 
$
145,891

 
6.9
In-place and other lease intangibles
1,099,090

 
10.8
 
1,160,261

 
10.6
Goodwill
1,050,137

 
N/A
 
1,051,161

 
N/A
Other intangibles
35,712

 
10.7
 
35,837

 
10.9
Accumulated amortization
(910,159
)
 
N/A
 
(920,742
)
 
N/A
Net intangible assets
$
1,417,336

 
10.4
 
$
1,472,408

 
10.2
Intangible liabilities:
 
 
 
 
 
 
 
Below market lease intangibles
$
339,794

 
14.5
 
$
349,357

 
14.5
Other lease intangibles
13,498

 
N/A
 
13,498

 
N/A
Accumulated amortization
(202,017
)
 
N/A
 
(203,834
)
 
N/A
Purchase option intangibles
3,568

 
N/A
 
3,568

 
N/A
Net intangible liabilities
$
154,843

 
14.5
 
$
162,589

 
14.5
N/A—Not Applicable.


17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Above market lease intangibles and in-place and other lease intangibles are included in acquired lease intangibles within real estate investments on our Consolidated Balance Sheets. Other intangibles (including non-compete agreements, trade names and trademarks) are included in other assets on our Consolidated Balance Sheets. Below market lease intangibles, other lease intangibles and purchase option intangibles are included in accounts payable and other liabilities on our Consolidated Balance Sheets.

NOTE 8—OTHER ASSETS

The following is a summary of our other assets:
 
As of March 31, 2020
 
As of December 31, 2019
 
(In thousands)
Straight-line rent receivables
$
277,078

 
$
278,833

Non-mortgage loans receivable, net
44,301

 
63,724

Marketable debt securities
189,024

 
237,360

Other intangibles, net
4,956

 
5,149

Investment in unconsolidated operating entities
45,608

 
59,301

Other
241,193

 
232,929

Total other assets
$
802,160

 
$
877,296




18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 9—SENIOR NOTES PAYABLE AND OTHER DEBT

The following is a summary of our senior notes payable and other debt:
 
As of March 31, 2020
 
As of December 31, 2019
 
(In thousands)
Unsecured revolving credit facility (1)
$
2,888,159

 
$
120,787

Commercial paper notes

 
567,450

Secured revolving construction credit facility due 2022
152,427

 
160,492

Floating Rate Senior Notes, Series F due 2021 (2)
213,386

 
231,018

3.25% Senior Notes due 2022
500,000

 
500,000

3.30% Senior Notes, Series C due 2022 (2)
177,822

 
192,515

Unsecured term loan due 2023
200,000

 
200,000

3.125% Senior Notes due 2023
400,000

 
400,000

3.10% Senior Notes due 2023
400,000

 
400,000

2.55% Senior Notes, Series D due 2023 (2)
195,604

 
211,767

3.50% Senior Notes due 2024
400,000

 
400,000

3.75% Senior Notes due 2024
400,000

 
400,000

4.125% Senior Notes, Series B due 2024 (2)
177,822

 
192,515

2.80% Senior Notes, Series E due 2024 (2)
426,773

 
462,036

Unsecured term loan due 2025 (2)
355,644

 
385,030

3.50% Senior Notes due 2025
600,000

 
600,000

2.65% Senior Notes due 2025
450,000

 
450,000

4.125% Senior Notes due 2026
500,000

 
500,000

3.25% Senior Notes due 2026
450,000

 
450,000

3.85% Senior Notes due 2027
400,000

 
400,000

4.00% Senior Notes due 2028
650,000

 
650,000

4.40% Senior Notes due 2029
750,000

 
750,000

3.00% Senior Notes due 2030
650,000

 
650,000

6.90% Senior Notes due 2037 (3)
52,400

 
52,400

6.59% Senior Notes due 2038 (3)
22,823

 
22,823

5.70% Senior Notes due 2043
300,000

 
300,000

4.375% Senior Notes due 2045
300,000

 
300,000

4.875% Senior Notes due 2049
300,000

 
300,000

Mortgage loans and other
1,943,909

 
1,996,969

Total
14,256,769

 
12,245,802

Deferred financing costs, net
(76,967
)
 
(79,939
)
Unamortized fair value adjustment
17,975

 
20,056

Unamortized discounts
(25,498
)
 
(27,146
)
Senior notes payable and other debt
$
14,172,279

 
$
12,158,773


(1) 
As of March 31, 2020 and December 31, 2019, respectively, $12.4 million and $26.2 million of aggregate borrowings were denominated in Canadian dollars. Aggregate borrowings of $25.7 million and $27.6 million were denominated in British pounds as of March 31, 2020 and December 31, 2019, respectively.
(2) 
Canadian Dollar debt obligations shown in US Dollars.
(3) 
Our 6.90% senior notes due 2037 are subject to repurchase at the option of the holders, at par, on October 1, 2027, and our 6.59% senior notes due 2038 are subject to repurchase at the option of the holders, at par, on July 7 in each of 2023 and 2028.


19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


As of March 31, 2020, our indebtedness had the following maturities:
 
Principal Amount
Due at Maturity
 
Unsecured
Revolving Credit
Facility and Commercial Paper Notes (1)
 
Scheduled Periodic
Amortization
 
Total Maturities
 
(In thousands)
2020
$
198,730

 
$

 
$
30,149

 
$
228,879

2021
379,222

 
2,888,159

 
38,427

 
3,305,808

2022
1,224,542

 

 
33,010

 
1,257,552

2023
1,574,517

 

 
20,059

 
1,594,576

2024
1,520,387

 

 
14,114

 
1,534,501

Thereafter
6,240,467

 

 
94,986

 
6,335,453

Total maturities
$
11,137,865

 
$
2,888,159

 
$
230,745

 
$
14,256,769


(1) 
At March 31, 2020, we had $40.0 million of borrowings outstanding under our unsecured revolving credit facility and commercial paper program, net of $2.8 billion of unrestricted cash and cash equivalents.    

Credit Facilities, Commercial Paper and Unsecured Term Loans

Our unsecured credit facility is comprised of a $3.0 billion unsecured revolving credit facility priced at LIBOR plus 0.875% as of March 31, 2020. The unsecured revolving credit facility matures in April 2021, but may be extended at our option subject to the satisfaction of certain conditions, including all representations and warranties being correct in all material respects with no existing defaults, for two additional periods of six months each to April 2022. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $3.75 billion.

Our wholly-owned subsidiary, Ventas Realty, Limited Partnership (“Ventas Realty”), may issue from time to time unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of $1.0 billion. The notes are sold under customary terms in the United States commercial paper note market and are ranked pari passu with all of Ventas Realty’s other unsecured senior indebtedness. The notes are fully and unconditionally guaranteed by Ventas, Inc. As of March 31, 2020, we had no borrowings outstanding under our commercial paper program.

As of March 31, 2020, $2.9 billion was outstanding under the unsecured revolving credit facility with an additional $24.0 million restricted to support outstanding letters of credit. See “Note 1 - Description Of Business - COVID-19 Update.” We had $87.9 million in available liquidity under the unsecured revolving credit facility as of March 31, 2020.

As of March 31, 2020, we had a $200.0 million unsecured term loan priced at LIBOR plus 0.90% that matures in 2023.  The term loan also includes an accordion feature that effectively permits us to increase our aggregate borrowings thereunder to up to $800.0 million.

As of March 31, 2020, we had a C$500 million unsecured term loan facility priced at Canadian Dollar Offered Rate (“CDOR”) plus 0.90% that matures in 2025.        

As of March 31, 2020, we had a $400.0 million secured revolving construction credit facility with $152.4 million of borrowings outstanding. The secured revolving construction credit facility matures in 2022 and is primarily used to finance the development of research and innovation centers and other construction projects.

Senior Notes

In March 2020, Ventas Realty issued $500.0 million aggregate principal amount of 4.75% senior notes due 2030 at a public offering price equal to 97.86% of par. The notes were settled and proceeds were received in April 2020.


20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 10—FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of our financial instruments were as follows:
 
As of March 31, 2020
 
As of December 31, 2019
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,848,115

 
$
2,848,115

 
$
106,363

 
$
106,363

Escrow deposits and restricted cash
38,144

 
38,144

 
39,739

 
39,739

Secured mortgage loans and other, net
567,247

 
444,187

 
645,546

 
646,925

Non-mortgage loans receivable, net
44,301

 
39,915

 
63,724

 
63,538

Marketable debt securities
189,024

 
189,024

 
237,360

 
237,360

Government-sponsored pooled loan investments, net
56,470

 
56,470

 
59,066

 
59,066

Derivative instruments
1,676

 
1,676

 
738

 
738

Liabilities:
 
 
 
 
 
 
 
Senior notes payable and other debt, gross
14,256,769

 
14,223,577

 
12,245,802

 
12,778,758

Derivative instruments
30,413

 
30,413

 
12,987

 
12,987

Redeemable OP Units
100,763

 
100,763

 
171,178

 
171,178


    
For a discussion of the assumptions considered, refer to “Note 2 - Accounting Policies.” The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the estimates presented above are not necessarily indicative of the amounts we would realize in a current market exchange.

NOTE 11—LITIGATION

Proceedings Arising in Connection with Our Business

From time to time, we are party to various legal actions, regulatory proceedings and claims (some of which may not be fully insured and some of which may allege large damage amounts) arising in connection with our business, including our senior living and office operations. These claims may include, among other things, professional liability and general liability claims, unfair business practices claims, employment claims and regulatory proceedings related to our senior living operations, the risks of which has increased as a result of the COVID-19 pandemic.

It is the opinion of management, except as otherwise set forth in this note, that the disposition of any such actions, investigations and claims that are currently pending will not, individually or in the aggregate, have a Material Adverse Effect on us. However, regardless of their merits, we may be forced to expend significant financial resources to defend and resolve these matters. We are unable to predict the ultimate outcome of these actions, investigations and claims, and if management’s assessment of our liability with respect thereto is incorrect, such actions, investigations and claims could have a Material Adverse Effect on us.

Proceedings against Tenants, Operators and Managers

From time to time, Atria, Sunrise, Brookdale Senior Living, Ardent, Kindred and our other tenants, operators and managers are parties to certain legal actions, regulatory proceedings and claims arising in the conduct of their business and operations, the risk of which has increased as a result of the COVID-19 pandemic. In other circumstances, regardless of whether we are a named party in the legal actions, regulatory proceedings or claims, we may be contractually obligated to indemnify, defend and hold harmless our tenants, operators and managers against such actions, proceedings or claims. The unfavorable resolution of any such actions, proceedings or claims could, individually or in the aggregate, materially adversely affect our or such tenants’, operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.


21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Proceedings Indemnified and Defended by Third Parties

From time to time, we are party to certain legal actions, regulatory proceedings and claims for which our tenants, operators, managers and other third parties are contractually obligated to indemnify, defend and hold us harmless in whole or in part. For instance, managers of our senior living communities and tenants of our triple-net leased properties and, in some cases, their affiliates are required by the terms of their management agreements, leases or other agreements with us to indemnify, defend and hold us harmless against certain actions, investigations and claims. In addition, third parties from whom we acquired certain of our assets and, in some cases, their affiliates are required by the terms of the related conveyance documents to indemnify, defend and hold us harmless against certain actions, investigations and claims related to the acquired assets and arising prior to our ownership or related to excluded assets and liabilities. In some cases, a portion of the purchase price consideration is held in escrow for a specified period of time as collateral for these indemnification obligations.

We are presently being defended by certain third parties in these types of matters. We cannot assure you that these third parties will continue to defend us in these matters, that they will have sufficient assets, income and access to financing to enable them to satisfy their defense and indemnification obligations to us or that any purchase price consideration held in escrow will be sufficient to satisfy claims for which we are entitled to indemnification. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect our tenants’ or other obligated third parties’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to us, which, in turn, could have a Material Adverse Effect on us.

NOTE 12—INCOME TAXES

We have elected to be taxed as a REIT under the applicable provisions of the Internal Revenue Code of 1986, as amended, for every year beginning with the year ended December 31, 1999. We have also elected for certain of our subsidiaries to be treated as taxable REIT subsidiaries (“TRS” or “TRS entities”), which are subject to federal, state and foreign income taxes. All entities other than the TRS entities are collectively referred to as the “REIT” within this note. Certain REIT entities are subject to foreign income tax.

Although the TRS entities and certain other foreign entities have paid minimal cash federal, state and foreign income taxes for the three months ended March 31, 2020, their income tax liabilities may increase in future periods as we exhaust net operating loss (“NOL”) carryforwards and as our senior living and other operations grow. Such increases could be significant.

Our consolidated provisions for income taxes for the three months ended March 31, 2020 and 2019 were a benefit of $149.0 million and $1.3 million, respectively. The income tax benefit for the three months ended March 31, 2020 was primarily due to a $152.9 million net deferred tax benefit related to the internal restructuring of certain US taxable REIT subsidiaries completed within the quarter. The benefit resulted from the transfer of assets subject to certain deferred tax liabilities from taxable REIT subsidiaries to the REIT in this tax-free transaction. The income tax benefit for the three months ended March 31, 2019 was primarily due to operating losses at our TRS entities.

Realization of a deferred tax benefit related to NOLs depends, in part, upon generating sufficient taxable income within the relevant carryforward period. The REIT NOL carryforwards will begin to expire within the current year while TRS NOL carryforwards will begin to expire in 2032.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. Net deferred tax liabilities with respect to our TRS entities totaled $47.5 million and $200.8 million as of March 31, 2020 and December 31, 2019, respectively, and related primarily to differences between the financial reporting and tax bases of fixed and intangible assets, net of loss carryforwards. Net deferred tax assets with respect to our TRS entities totaled $47.5 million as of March 31, 2020 and December 31, 2019 and related primarily to loss carryforwards.
    
Generally, we are subject to audit under the statute of limitations by the Internal Revenue Service for the year ended December 31, 2016 and subsequent years and are subject to audit by state taxing authorities for the year ended December 31, 2015 and subsequent years. We are subject to audit generally under the statutes of limitation by the Canada Revenue Agency and provincial authorities with respect to the Canadian entities for the year ended December 31, 2015 and subsequent years. We are subject to audit in the United Kingdom generally for periods ended in and subsequent to 2018.


22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 13—STOCKHOLDERS' EQUITY

Capital Stock

From time to time, we may sell up to an aggregate of $1.0 billion of our common stock under an “at-the-market” equity offering program (“ATM program”).  During the three months ended March 31, 2020, we sold no shares of common stock under our ATM program.  As of March 31, 2020, $822.1 million of our common stock remained available for sale under our ATM program.

Accumulated Other Comprehensive Loss

The following is a summary of our accumulated other comprehensive loss:
 
As of March 31, 2020
 
As of December 31, 2019
 
(In thousands)
Foreign currency translation
$
(60,283
)
 
$
(51,743
)
Available for sale securities
(20,513
)
 
27,380

Derivative instruments
(22,612
)
 
(10,201
)
Total accumulated other comprehensive loss
$
(103,408
)
 
$
(34,564
)


NOTE 14—EARNINGS PER SHARE

The following table shows the amounts used in computing our basic and diluted earnings per share:
 
For the Three Months Ended March 31,
 
2020
 
2019
 
(In thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
 
 
 
Income from continuing operations
$
474,730

 
$
127,588

Net income
474,730

 
127,588

Net income attributable to noncontrolling interests
1,613

 
1,803

Net income attributable to common stockholders          
$
473,117

 
$
125,785

Denominator:
 
 
 
Denominator for basic earnings per share—weighted average shares
372,829

 
356,853

Effect of dilutive securities:
 
 
 
Stock options
19

 
328

Restricted stock awards
188

 
440

OP unitholder interests
2,961

 
2,998

Denominator for diluted earnings per share—adjusted weighted average shares
375,997

 
360,619

Basic earnings per share:
 
 
 
Income from continuing operations
$
1.27

 
$
0.36

Net income attributable to common stockholders          
1.27

 
0.35

Diluted earnings per share:
 
 
 
Income from continuing operations
$
1.26

 
$
0.35

Net income attributable to common stockholders          
1.26

 
0.35




23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


NOTE 15—SEGMENT INFORMATION

As of March 31, 2020, we operated through three reportable business segments: triple-net leased properties, senior living operations and office operations. In our triple-net leased properties segment, we invest in and own senior housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under “triple-net” or “absolute-net” leases that obligate the tenants to pay all property-related expenses. In our senior living operations segment, we invest in senior housing communities throughout the United States and Canada and engage independent operators, such as Atria and Sunrise, to manage those communities. In our office operations segment, we primarily acquire, own, develop, lease and manage MOBs and research and innovation centers throughout the United States. Information provided for “all other” includes income from loans and investments and other miscellaneous income and various corporate-level expenses not directly attributable to any of our three reportable business segments. Assets included in “all other” consist primarily of corporate assets, including cash, restricted cash, loans receivable and investments, and miscellaneous accounts receivable.

Our chief operating decision makers evaluate performance of the combined properties in each reportable business segment and determine how to allocate resources to those segments, in significant part, based on segment NOI and related measures. We define segment NOI as total revenues, less interest and other income, property-level operating expenses and office building services costs. We consider segment NOI useful because it allows investors, analysts and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies between periods on a consistent basis. In order to facilitate a clear understanding of our historical consolidated operating results, segment NOI should be examined in conjunction with net income attributable to common stockholders as presented in our Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Interest expense, depreciation and amortization, general, administrative and professional fees, income tax expense and other non-property specific revenues and expenses are not allocated to individual reportable business segments for purposes of assessing segment performance. There are no intersegment sales or transfers.

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


Summary information by reportable business segment is as follows:
 
For the Three Months Ended March 31, 2020
 
Triple-Net
Leased
Properties
 
Senior
Living
Operations
 
Office
Operations
 
All
Other
 
Total
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
$
194,862

 
$

 
$
208,395

 
$

 
$
403,257

Resident fees and services

 
576,770

 

 

 
576,770

Office building and other services revenue

 

 
2,174

 
954

 
3,128

Income from loans and investments

 

 

 
24,046

 
24,046

Interest and other income

 

 

 
4,853

 
4,853

Total revenues
$
194,862

 
$
576,770

 
$
210,569

 
$
29,853

 
$
1,012,054

 
 
 
 
 
 
 
 
 
 
Total revenues
$
194,862

 
$
576,770

 
$
210,569

 
$
29,853

 
$
1,012,054

Less:
 
 
 
 
 
 
 
 
 
Interest and other income

 

 

 
4,853

 
4,853

Property-level operating expenses
6,331

 
410,131

 
64,506

 

 
480,968

Office building services costs

 

 
727

 

 
727

Segment NOI
$
188,531

 
$
166,639

 
$
145,336

 
$
25,000

 
525,506

Interest and other income
 

 
 

 
 

 
 

 
4,853

Interest expense
 

 
 

 
 

 
 

 
(116,696
)
Depreciation and amortization
 

 
 

 
 

 
 

 
(248,837
)
General, administrative and professional fees
 

 
 

 
 

 
 

 
(42,535
)
Merger-related expenses and deal costs
 

 
 

 
 

 
 

 
(8,218
)
Other
 

 
 

 
 

 
 

 
(3,708
)
Loss from unconsolidated entities
 
 
 
 
 
 
 
 
(10,876
)
Gain on real estate dispositions
 
 
 
 
 
 
 
 
226,225

Income tax benefit
 

 
 

 
 

 
 

 
149,016

Income from continuing operations
 

 
 

 
 

 
 

 
474,730

Net income
 
 
 
 
 
 
 
 
474,730

Net income attributable to noncontrolling interests
 
 
 
 
 
 
 
 
1,613

Net income attributable to common stockholders
 
 
 
 
 
 
 
 
$
473,117




25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)


 
For the Three Months Ended March 31, 2019
 
Triple-Net
Leased
Properties
 
Senior
Living
Operations
 
Office
Operations
 
All
Other
 
Total
 
(In thousands)
Revenues:
 
 
 
 
 
 
 
 
 
Rental income
$
200,068

 
$

 
$
201,428

 
$

 
$
401,496

Resident fees and services

 
521,447

 

 

 
521,447

Office building and other services revenue

 

 
1,775

 
743

 
2,518

Income from loans and investments

 

 

 
17,126

 
17,126

Interest and other income

 

 

 
287

 
287

Total revenues
$
200,068

 
$
521,447</