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Table of Contents
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, 2021
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 001-08895
Healthpeak Properties, Inc.
(Exact name of registrant as specified in its charter)
Maryland 33-0091377
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
5050 South Syracuse Street, Suite 800
Denver, CO 80237
(Address of principal executive offices) (Zip code)
(720) 428-5050
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par valuePEAKNew York Stock Exchange
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  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  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 FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
  Emerging Growth Company
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 
As of May 3, 2021, there were 538,930,065 shares of the registrant’s $1.00 par value common stock outstanding.


Table of Contents
HEALTHPEAK PROPERTIES, INC.
INDEX
PART I. FINANCIAL INFORMATION

2

Table of Contents
Healthpeak Properties, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 March 31,
2021
December 31,
2020
ASSETS  
Real estate:  
Buildings and improvements$11,149,249 $11,048,433 
Development costs and construction in progress642,879 613,182 
Land1,865,806 1,867,278 
Accumulated depreciation and amortization(2,508,986)(2,409,135)
Net real estate11,148,948 11,119,758 
Net investment in direct financing leases44,706 44,706 
Loans receivable, net of reserves of $14,134 and $10,280
740,142 195,375 
Investments in and advances to unconsolidated joint ventures399,841 402,871 
Accounts receivable, net of allowance of $3,884 and $3,994
38,879 42,269 
Cash and cash equivalents34,007 44,226 
Restricted cash68,033 67,206 
Intangible assets, net495,919 519,917 
Assets held for sale and discontinued operations, net1,374,507 2,626,306 
Right-of-use asset, net198,426 192,349 
Other assets, net650,518 665,106 
Total assets$15,193,926 $15,920,089 
LIABILITIES AND EQUITY  
Bank line of credit and commercial paper$1,038,150 $129,590 
Term loan249,243 249,182 
Senior unsecured notes4,255,697 5,697,586 
Mortgage debt219,959 221,621 
Intangible liabilities, net138,617 144,199 
Liabilities related to assets held for sale and discontinued operations, net328,167 415,737 
Lease liability184,425 179,895 
Accounts payable, accrued liabilities, and other liabilities697,040 763,391 
Deferred revenue765,946 774,316 
Total liabilities7,877,244 8,575,517 
Commitments and contingencies
Common stock, $1.00 par value: 750,000,000 shares authorized; 538,885,793 and 538,405,393 shares issued and outstanding
538,886 538,405 
Additional paid-in capital10,223,711 10,229,857 
Cumulative dividends in excess of earnings(3,994,562)(3,976,232)
Accumulated other comprehensive income (loss)(3,497)(3,685)
Total stockholders’ equity6,764,538 6,788,345 
Joint venture partners352,986 357,069 
Non-managing member unitholders199,158 199,158 
Total noncontrolling interests552,144 556,227 
Total equity7,316,682 7,344,572 
Total liabilities and equity$15,193,926 $15,920,089 
See accompanying Notes to the Unaudited Consolidated Financial Statements.

3

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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
March 31,
 20212020
Revenues:  
Rental and related revenues$327,972 $282,317 
Resident fees and services116,128 91,780 
Income from direct financing leases2,163 3,269 
Interest income9,013 3,688 
Total revenues455,276 381,054 
Costs and expenses:  
Interest expense46,843 55,691 
Depreciation and amortization157,538 125,112 
Operating181,761 237,377 
General and administrative24,902 22,349 
Transaction costs798 14,563 
Impairments and loan loss reserves (recoveries), net3,242 11,107 
Total costs and expenses415,084 466,199 
Other income (expense):  
Gain (loss) on sales of real estate, net 2,069 
Gain (loss) on debt extinguishments (164,292)833 
Other income (expense), net2,200 210,653 
Total other income (expense), net(162,092)213,555 
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures(121,900)128,410 
Income tax benefit (expense)(8)29,868 
Equity income (loss) from unconsolidated joint ventures1,323 (11,146)
Income (loss) from continuing operations(120,585)147,132 
Income (loss) from discontinued operations270,008 135,408 
Net income (loss)149,423 282,540 
Noncontrolling interests’ share in continuing operations(3,306)(3,463)
Noncontrolling interests’ share in discontinued operations(329)3 
Net income (loss) attributable to Healthpeak Properties, Inc.145,788 279,080 
Participating securities’ share in earnings(2,451)(1,616)
Net income (loss) applicable to common shares$143,337 $277,464 
Basic earnings (loss) per common share:
Continuing operations$(0.23)$0.28 
Discontinued operations0.50 0.27 
Net income (loss) applicable to common shares$0.27 $0.55 
Diluted earnings (loss) per common share:
Continuing operations$(0.23)$0.28 
Discontinued operations0.50 0.26 
Net income (loss) applicable to common shares$0.27 $0.54 
Weighted average shares outstanding:
Basic538,679 506,476 
Diluted538,679 515,045 
See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 Three Months Ended
March 31,
 20212020
Net income (loss)$149,423 $282,540 
Other comprehensive income (loss):
Net unrealized gains (losses) on derivatives332 301 
Change in Supplemental Executive Retirement Plan obligation and other107 61 
Reclassification adjustment realized in net income (loss)(251) 
Total other comprehensive income (loss)188 362 
Total comprehensive income (loss)149,611 282,902 
Total comprehensive (income) loss attributable to noncontrolling interests’ share in continuing operations(3,306)(3,463)
Total comprehensive (income) loss attributable to noncontrolling interests’ share in discontinued operations(329)3 
Total comprehensive income (loss) attributable to Healthpeak Properties, Inc.$145,976 $279,442 
See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share data)
(Unaudited)

For the three months ended March 31, 2021:
 Common StockAdditional Paid-In CapitalCumulative Dividends In Excess Of EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ EquityTotal Noncontrolling InterestsTotal
Equity
 SharesAmount
January 1, 2021538,405 $538,405 $10,229,857 $(3,976,232)$(3,685)$6,788,345 $556,227 $7,344,572 
Net income (loss) — — — 145,788 — 145,788 3,635 149,423 
Other comprehensive income (loss) — — — — 188 188 — 188 
Issuance of common stock 879 879 208 — — 1,087 — 1,087 
Repurchase of common stock(398)(398)(11,767)— — (12,165)— (12,165)
Amortization of stock-based compensation— — 5,413 — — 5,413 — 5,413 
Common dividends ($0.30 per share)
— — — (164,118)— (164,118)— (164,118)
Distributions to noncontrolling interest— — — — — — (7,718)(7,718)
March 31, 2021538,886 $538,886 $10,223,711 $(3,994,562)$(3,497)$6,764,538 $552,144 $7,316,682 

For the three months ended March 31, 2020:
 Common StockAdditional Paid-In CapitalCumulative Dividends In Excess Of EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ EquityTotal Noncontrolling InterestsTotal
Equity
 SharesAmount
December 31, 2019505,222 $505,222 $9,183,892 $(3,601,199)$(2,857)$6,085,058 $582,416 $6,667,474 
Impact of adoption of ASU No. 2016-13(1)
— — — (1,524)— (1,524)— (1,524)
January 1, 2020505,222 $505,222 $9,183,892 $(3,602,723)$(2,857)$6,083,534 $582,416 $6,665,950 
Net income (loss)— — — 279,080 — 279,080 3,460 282,540 
Other comprehensive income (loss)— — — — 362 362 — 362 
Issuance of common stock, net33,104 33,104 1,031,518 — — 1,064,622 — 1,064,622 
Conversion of DownREIT units to common stock23 23 486 — — 509 (509) 
Repurchase of common stock(268)(268)(9,469)— — (9,737)— (9,737)
Exercise of stock options54 54 1,752 — — 1,806 — 1,806 
Amortization of stock-based compensation— — 4,832 — — 4,832 — 4,832 
Common dividends ($0.37 per share)
— — — (188,500)— (188,500)— (188,500)
Distributions to noncontrolling interest— — — — — — (8,432)(8,432)
March 31, 2020538,135 $538,135 $10,213,011 $(3,512,143)$(2,495)$7,236,508 $576,935 $7,813,443 
_______________________________________
(1)On January 1, 2020, the Company adopted a series of Accounting Standards Updates (“ASUs”) related to accounting for credit losses and recognized the cumulative-effect of adoption to beginning retained earnings. Refer to Note 2 for a detailed impact of adoption.
See accompanying Notes to the Unaudited Consolidated Financial Statements.
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Healthpeak Properties, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended
March 31,
 20212020
Cash flows from operating activities:
Net income (loss)$149,423 $282,540 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of real estate, in-place lease, and other intangibles157,538 189,276 
Amortization of stock-based compensation4,364 4,832 
Amortization of deferred financing costs2,213 2,582 
Straight-line rents(9,135)(6,229)
Amortization of nonrefundable entrance fees and above/below market lease intangibles(23,764)(15,943)
Equity loss (income) from unconsolidated joint ventures(1,008)11,979 
Distributions of earnings from unconsolidated joint ventures237 9,513 
Loss (gain) on sale of real estate under direct financing leases (41,707)
Deferred income tax expense (benefit)(1,148)(24,911)
Impairments and loan loss reserves (recoveries), net3,242 39,123 
Loss (gain) on debt extinguishments164,292 (833)
Loss (gain) on sales of real estate, net(259,662)(164,869)
Loss (gain) upon change of control, net(1,042)(167,434)
Casualty-related loss (recoveries), net859  
Other non-cash items(726)502 
Changes in:
Decrease (increase) in accounts receivable and other assets, net11,567 (5,036)
Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue(74,524)(18,343)
Net cash provided by (used in) operating activities122,726 95,042 
Cash flows from investing activities:
Acquisitions of real estate(14,914)(20,018)
Development, redevelopment, and other major improvements of real estate(135,339)(209,418)
Leasing costs, tenant improvements, and recurring capital expenditures(20,710)(21,791)
Proceeds from sales of real estate, net937,492 419,381 
Acquisition of CCRC Portfolio (396,352)
Contributions to unconsolidated joint ventures(5,924)(1,722)
Distributions in excess of earnings from unconsolidated joint ventures10,825 2,639 
Proceeds from sales/principal repayments on debt investments and direct financing leases 84,336 
Investments in loans receivable and other(3,704)(8,066)
Net cash provided by (used in) investing activities767,726 (151,011)
Cash flows from financing activities:
Borrowings under bank line of credit and commercial paper3,437,200 2,025,600 
Repayments under bank line of credit and commercial paper(2,528,640)(2,118,600)
Repayments and repurchase of debt, excluding bank line of credit and commercial paper(1,491,754)(5,338)
Payments for debt extinguishment and deferred financing costs(158,011) 
Issuance of common stock and exercise of options1,087 1,066,428 
Repurchase of common stock(12,165)(9,737)
Dividends paid on common stock(164,118)(188,500)
Distributions to and purchase of noncontrolling interests(7,718)(8,432)
Net cash provided by (used in) financing activities(924,119)761,421 
Effect of foreign exchanges on cash, cash equivalents and restricted cash (10)
Net increase (decrease) in cash, cash equivalents and restricted cash(33,667)705,442 
Cash, cash equivalents and restricted cash, beginning of period181,685 184,657 
Cash, cash equivalents and restricted cash, end of period$148,018 $890,099 
See accompanying Notes to the Unaudited Consolidated Financial Statements.
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Healthpeak Properties, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 
NOTE 1.  Business
Overview
Healthpeak Properties, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) which, together with its consolidated entities (collectively, “Healthpeak” or the “Company”), invests primarily in real estate serving the healthcare industry in the United States (“U.S.”). HealthpeakTM acquires, develops, leases, owns, and manages healthcare real estate. The Company’s diverse portfolio is comprised of investments in the following reportable healthcare segments: (i) life science; (ii) medical office; and (iii) continuing care retirement community (“CCRC”).
The Company’s corporate headquarters are in Denver, Colorado and it has additional offices in Irvine, California and Franklin, Tennessee.
Senior Housing Triple-Net and Senior Housing Operating Portfolio Dispositions
During 2020, the Company established and began executing a plan to dispose of its senior housing triple-net and Senior Housing Operating (“SHOP”) properties. As of December 31, 2020, the Company concluded the planned dispositions represented a strategic shift that has and will have a major effect on the Company’s operations and financial results. Therefore, assets meeting the held for sale criteria on or before March 31, 2021 are classified as discontinued operations in all periods presented herein. See Note 5 for further information.
COVID-19 Update
While the Coronavirus (“COVID-19”) continues to evolve daily and its ultimate outcome is uncertain, it has caused significant disruption to individuals, governments, financial markets, and businesses, including the Company. Global health concerns and increased efforts to reduce the spread of the COVID-19 pandemic prompted federal, state, and local governments to restrict normal daily activities, and resulted in travel bans, quarantines, school closings, “shelter-in-place” orders requiring individuals to remain in their homes other than to conduct essential services or activities, as well as business limitations and shutdowns, which resulted in closure of many businesses deemed to be non-essential. Although most of these restrictions have since been lifted or scaled back, certain restrictions remain in place or have been re-imposed and any future surges of COVID-19 may lead to other restrictions being re-implemented in response to efforts to reduce the spread. In addition, the Company’s tenants, operators and borrowers have faced significant cost increases as a result of increased health and safety measures, including increased staffing demands for patient care and sanitation, as well as increased usage and inventory of critical medical supplies and personal protective equipment. These health and safety measures, which have been in place since the onset of the pandemic, continue to place a substantial strain on the business operations of many of the Company’s tenants, operators, and borrowers. The Company evaluated the impacts of COVID-19 on its business thus far and incorporated information concerning the impact of COVID-19 into its assessments of liquidity, impairments, and collectibility from tenants, residents, and borrowers as of March 31, 2021. The Company will continue to monitor such impacts and will adjust its estimates and assumptions based on the best available information.
NOTE 2.  Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.
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The consolidated financial statements include the accounts of Healthpeak Properties, Inc., its wholly-owned subsidiaries, joint ventures (“JVs”), and variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations, and cash flows have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).
Government Grant Income
On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide financial aid to individuals, businesses, and state and local governments. During the three months ended March 31, 2021, the Company received government grants under the CARES Act primarily to cover increased expenses and lost revenue during the COVID-19 pandemic. Grant income is recognized when there is reasonable assurance that the grant will be received and the Company will comply with all conditions attached to the grant. Additionally, grants are recognized over the periods in which the Company recognizes the increased expenses and lost revenue the grants are intended to defray. As of March 31, 2021, the amount of qualifying expenditures and lost revenue exceeded grant income recognized and the Company had complied or will continue to comply with all grant conditions.
The following table summarizes information related to government grant income received and recognized by the Company (in thousands):
Three Months Ended
March 31,
20212020
Government grant income recorded in other income (expense), net$1,310 $ 
Government grant income recorded in equity income (loss) from unconsolidated joint ventures426  
Government grant income recorded in income (loss) from discontinued operations3,232  
Total government grants received$4,968 $ 
Recent Accounting Pronouncements
Adopted
Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amendments in ASU 2016-13 eliminate the “probable” initial threshold for recognition of credit losses in previous accounting guidance and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. Historically, when credit losses were measured under previous accounting guidance, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss.
As a result of adopting ASU 2016-13 on January 1, 2020 using the modified retrospective transition approach, the Company recognized a cumulative-effect adjustment to equity of $2 million as of January 1, 2020. Under ASU 2016-13, the Company began using a loss model that relies on future expected credit losses, rather than incurred losses, as was required under historical GAAP. Under the new model, the Company is required to recognize future credit losses expected to be incurred over the life of its finance receivables, including loans receivable, direct financing leases (“DFLs”), and certain accounts receivable, at inception of those instruments. The model emphasizes historical experience and future market expectations to determine a loss to be recognized at inception. However, the model continues to be applied on an individual basis and rely on counter-party specific information to ensure the most accurate estimate is recognized. The Company reassesses its reserves on finance receivables at each balance sheet date to determine if an adjustment to the previous reserve is necessary.
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Accounting for Lease Concessions Related to COVID-19. In April 2020, the FASB staff issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under ASC 842, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease-by-lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. During the year ended December 31, 2020, the Company provided rent deferrals (to be repaid before the end of 2020) to certain tenants in its life science and medical office segments that were impacted by COVID-19 (discussed in further detail in Note 6). No such rent deferrals were provided to tenants during the three months ended March 31, 2021 and 2020. As it relates to these deferrals, the Company elected to not assess them on a lease-by-lease basis and to continue recognizing rent revenue on a straight-line basis.
While the Company’s election for rent deferrals will be applied consistently to future deferrals of a similar nature, if the Company grants future lease concessions of a different type (such as rent abatements), it will make an election related to those concessions at that time.
NOTE 3.  Master Transactions and Cooperation Agreement with Brookdale
2019 Master Transactions and Cooperation Agreement with Brookdale
In October 2019, the Company and Brookdale Senior Living Inc. (“Brookdale”) entered into a Master Transactions and Cooperation Agreement (the “2019 MTCA”), which includes a series of transactions related to its previously jointly owned 15-campus CCRC portfolio (the “CCRC JV”) and the portfolio of senior housing properties Brookdale triple-net leased from the Company, which, at the time, included 43 properties.
In connection with the 2019 MTCA, the Company and Brookdale, and certain of their respective subsidiaries, closed the following transactions related to the CCRC JV on January 31, 2020:
The Company, which owned a 49% interest in the CCRC JV, purchased Brookdale’s 51% interest in 13 of the 15 communities in the CCRC JV based on a valuation of $1.06 billion (the “CCRC Acquisition”);
The management agreements related to the CCRC Acquisition communities were terminated and management transitioned (under new management agreements) from Brookdale to Life Care Services LLC (“LCS”); and
The Company paid a $100 million management termination fee to Brookdale.
In addition, pursuant to the 2019 MTCA, the Company and Brookdale closed the following transactions related to properties Brookdale triple-net leased from the Company on January 31, 2020:
Brookdale acquired 18 of the properties from the Company (the “Brookdale Acquisition Assets”) for cash proceeds of $385 million;
The remaining 24 properties (excludes one property to be transitioned or sold to a third party, as discussed below) were restructured into a single master lease with 2.4% annual rent escalators and a maturity date of December 31, 2027 (the “2019 Amended Master Lease”);
A portion of annual rent (amount in excess of 6.5% of sales proceeds) related to 14 of the 18 Brookdale Acquisition Assets was reallocated to the remaining properties under the 2019 Amended Master Lease; and
Brookdale paid down $20 million of future rent under the 2019 Amended Master Lease.
As agreed to by the Company and Brookdale under the 2019 MTCA, in December 2020, the Company terminated the triple-net lease related to one property and converted it to a structure permitted by the Housing and Economic Recovery Act of 2008, and includes most of the provisions previously proposed in the REIT Investment Diversification and Empowerment Act of 2007 (commonly referred to as “RIDEA”). The 24 assets under the 2019 Amended Master Lease were sold in January 2021 (see Note 5).
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Additionally, under the 2019 MTCA, the Company and Brookdale agreed to the following transactions which have not yet been completed:
The CCRC JV will sell the remaining two CCRCs, which are being marketed for sale to third parties; and
The Company will provide up to $35 million of capital investment in the 2019 Amended Master Lease properties over a five-year term, which will increase rent by 7% of the amount spent, per annum. As of December 31, 2020, the Company had funded $5 million of this capital investment. Upon selling the 24 assets under the 2019 Amended Master Lease in January 2021, the remaining capital investment obligation was transferred to the buyer.
As a result of the above transactions, on January 31, 2020, the Company began consolidating the 13 CCRCs in which it acquired Brookdale’s interest. Accordingly, the Company derecognized its investment in the CCRC JV of $323 million and recognized a gain upon change of control of $170 million, which is included in other income (expense), net. In connection with consolidating the 13 CCRCs during the first quarter of 2020, the Company recognized real estate and intangible assets of $1.8 billion, refundable entrance fee liabilities of $308 million, contractual liabilities associated with previously collected non-refundable entrance fees of $436 million, debt assumed of $215 million, other net assets of $48 million, and cash paid of $396 million.
Upon sale of the 18 senior housing triple-net assets to Brookdale, the Company recognized an aggregate gain on sales of real estate of $164 million, which is recorded within income (loss) from discontinued operations.
Fair Value Measurement Techniques and Quantitative Information
At January 31, 2020, the Company performed a fair value assessment of each of the 2019 MTCA components that provided measurable economic benefit or detriment to the Company. Each fair value calculation was based on an income or market approach and relied on historical and forecasted net operating income, actuarial assumptions about the expected resident length of stay, and market data, including, but not limited to, discount rates ranging from 10% to 12%, annual rent escalators ranging from 2% to 3%, and real estate capitalization rates ranging from 7% to 9%. All assumptions were considered to be Level 3 measurements within the fair value hierarchy.
NOTE 4.  Real Estate Transactions
2021 Real Estate Investments
South San Francisco Land Site Acquisition
In October 2020, the Company executed a definitive agreement to acquire approximately 12 acres of land for $128 million. The acquisition site is located in South San Francisco, California, adjacent to two sites currently held by the Company as land for future development. The Company paid a $10 million nonrefundable deposit upon completing due diligence in November 2020. The first phase, with a purchase price of $61 million, closed in April 2021.
Westview Medical Plaza Acquisition
In February 2021, the Company acquired one medical office building (“MOB”) in Nashville, Tennessee for $13 million.
Pinnacle at Ridgegate Acquisition
In April 2021, the Company acquired one MOB in Denver, Colorado for $38 million.
MOB Portfolio Acquisition
In April 2021, the Company acquired 14 MOBs for $371 million (the “MOB Portfolio”). In conjunction with the acquisition, the Company issued $142 million of secured mortgage debt.
2020 Real Estate Investments
The Post Acquisition
In April 2020, the Company acquired a life science campus in Waltham, Massachusetts for $320 million.
Scottsdale Gateway Acquisition
In July 2020, the Company acquired one MOB in Scottsdale, Arizona for $27 million.
Midwest MOB Portfolio Acquisition
In October 2020, the Company acquired a portfolio of seven MOBs located in Indiana, Missouri, and Illinois for $169 million.
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Cambridge Discovery Park Acquisition
In December 2020, the Company acquired three life science facilities in Cambridge, Massachusetts for $610 million and a 49% unconsolidated joint venture interest in a fourth property on the same campus for $54 million. If the fourth property is sold in a taxable transaction, the Company is generally obligated to indemnify its joint venture partner for its federal and state income taxes associated with the gain that existed at the time of the contribution to the joint venture.
Waldwick JV Interest Purchase
In October 2020, the Company acquired the remaining 15% equity interest of a senior housing joint venture structure (which owned one senior housing facility), in which the Company previously held an unconsolidated equity investment, for $4 million. Subsequent to acquisition, the Company owned 100% of the equity, began consolidating the facility, and recognized a gain upon change of control of $6 million, which is recorded in other income (expense), net within income (loss) from discontinued operations. In December 2020, the Company sold the property as part of the Atria SHOP Portfolio disposition (see Note 5).
MBK JV Dissolution
In November 2020, as part of the dissolution of a senior housing joint venture, the Company was distributed one property, one land parcel, and $11 million in cash. Upon consolidating the property and land parcel at the time of distribution, the Company recognized a loss upon change of control of $16 million, which is recorded in other income (expense), net within income (loss) from discontinued operations. In conjunction with the distribution of the property, the Company assumed $36 million of secured mortgage debt, which was recorded at its fair value through asset acquisition accounting. The property is classified as discontinued operations as of March 31, 2021.
Other Real Estate Acquisitions
In December 2020, the Company acquired one hospital in Dallas, Texas for $34 million.
Development Activities
The Company’s commitments related to development and redevelopment projects increased by $9 million, to $315 million at March 31, 2021, when compared to December 31, 2020, primarily as a result of increased commitments on existing projects and new projects started during the first quarter of 2021.
In March 2021, management reviewed the estimated useful lives of certain Life Science properties in connection with future plans of densification and related demolition. These changes in the planned use of the properties resulted in the Company updating their estimated useful lives, which differ from the Company’s previous estimates. The estimated useful lives of these assets was reduced from a weighted average remaining useful life of 15 years to 6 years to reflect the timing of the planned demolitions. This change in estimate increased depreciation expense by $3 million in the current quarter, resulting in a corresponding decrease to income (loss) from continuing operations and net income (loss) as well as a decrease of approximately $0.01 to basic and diluted earnings per share for the three months ended March 31, 2021.
NOTE 5.  Dispositions of Real Estate and Discontinued Operations
2021 Dispositions of Real Estate
Sunrise Senior Housing Portfolio
In January 2021, the Company sold a portfolio of 32 SHOP assets (the “Sunrise Senior Housing Portfolio”) for $664 million, resulting in an immaterial loss on sale, which is recognized in income (loss) from discontinued operations, and provided the buyer with: (i) financing of $410 million and (ii) a commitment to finance up to $92 million of additional debt for capital expenditures, none of which has been funded as of March 31, 2021 (see Note 7). Under the Company’s definitive agreement, there are two remaining senior housing triple-net assets that are expected to be sold during the remainder of 2021, upon completion of the license transfer process.
Brookdale Triple-Net Portfolio
In January 2021, the Company sold 24 senior housing assets in a triple-net lease with Brookdale for $510 million, resulting in total gain on sale of $169 million, which is recognized in income (loss) from discontinued operations.
Additional SHOP Portfolio
In January 2021, the Company sold a portfolio of 16 SHOP assets for $230 million, resulting in total gain on sale of $59 million, which is recognized in income (loss) from discontinued operations, and provided the buyer with financing of $150 million (see Note 7).
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HRA Triple-Net Portfolio
In February 2021, the Company sold eight senior housing assets in a triple-net lease with Harbor Retirement Associates for $132 million, resulting in total gain on sale of $33 million, which is recognized in income (loss) from discontinued operations.
2021 Other Dispositions
In addition to the sales discussed above, during the three months ended March 31, 2021, the Company sold one SHOP asset for $5 million, resulting in an immaterial gain on sale, which is recognized in income (loss) from discontinued operations.
SLC SHOP Portfolio
In October 2020, the Company entered into a definitive agreement to sell seven SHOP assets for $115 million. The Company received a $3 million nonrefundable deposit and expects to close the transaction during the remainder of 2021.
Oakmont SHOP Portfolio
In April 2021, the Company sold a portfolio of 12 SHOP assets for $564 million.
Discovery SHOP Portfolio
In April 2021, the Company sold a portfolio of 10 SHOP assets for $334 million. Also included in this transaction was the sale of two mezzanine loans and two preferred equity investments for $21 million (collectively, “the Discovery SHOP Portfolio”).
Sonata SHOP Portfolio
In April 2021, the Company sold a portfolio of five SHOP assets for $64 million.
Other Subsequent Dispositions
In April 2021, the Company sold two SHOP assets for $13 million, two senior housing triple-net assets for $7 million, and one MOB for $10 million.
2020 Dispositions of Real Estate
During the three months ended March 31, 2020, the Company sold 7 SHOP assets for $36 million and 18 senior housing triple-net assets for $385 million (representative of the 18 facilities sold to Brookdale under the 2019 MTCA - see Note 3), resulting in total gain on sales of $165 million, which is recognized in income (loss) from discontinued operations.
Aegis NNN Portfolio
In December 2020, the Company sold 10 senior housing triple-net assets (the “Aegis NNN Portfolio”) for $358 million, resulting in total gain on sale of $228 million, which is recognized in income (loss) from discontinued operations.
Atria SHOP Portfolio
In December 2020, the Company sold 12 SHOP assets (the “Atria SHOP Portfolio”) for $312 million, resulting in total gain on sale of $39 million, which is recognized in income (loss) from discontinued operations. The Company provided the buyer with financing of $61 million on four of the assets sold (see Note 7).
2020 Other Dispositions
In addition to the sales discussed above, during the year ended December 31, 2020, the Company sold the following: (i) 23 SHOP assets for $190 million, (ii) 21 senior housing triple-net assets for $428 million (inclusive of the 18 facilities sold to Brookdale under the 2019 MTCA - see Note 3), (iii) 11 MOBs for $136 million (inclusive of the exercise of a purchase option by a tenant to acquire 3 MOBs in San Diego, California), (iv) 2 MOB land parcels for $3 million, and (v) 1 asset from other non-reportable segments for $1 million, resulting in total gain on sales of $283 million ($193 million of which is reported in income (loss) from discontinued operations).
Held for Sale and Discontinued Operations
At March 31, 2021, 9 senior housing triple-net facilities, 8 MOBs, 48 SHOP facilities, and 1 SHOP joint venture were classified as held for sale and/or discontinued operations.
At December 31, 2020, 41 senior housing triple-net facilities, 6 MOBs, 97 SHOP facilities, and 1 SHOP joint venture were classified as held for sale and/or discontinued operations.
During 2020, the Company established and began executing a plan to dispose of its senior housing triple-net and SHOP properties. As of December 31, 2020, the Company concluded the planned dispositions represented a strategic shift that has and will have a major effect on the Company’s operations and financial results. Therefore, assets meeting the held for sale criteria on or before March 31, 2021 are classified as discontinued operations in all periods presented herein.
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The following summarizes the assets and liabilities classified as discontinued operations at March 31, 2021 and December 31, 2020, which are included in assets held for sale and discontinued operations, net and liabilities related to assets held for sale and discontinued operations, net, respectively, on the consolidated balance sheets (in thousands):
March 31,
2021
December 31,
2020
ASSETS
Real estate:
Buildings and improvements$1,174,263 $2,553,254 
Development costs and construction in progress11,136 21,509 
Land201,699 355,803 
Accumulated depreciation and amortization(221,246)(615,708)
Net real estate1,165,852 2,314,858 
Investments in and advances to unconsolidated joint ventures5,776 5,842 
Accounts receivable, net of allowance of $5,132 and $5,873
13,976 20,500 
Cash and cash equivalents40,161 53,085 
Restricted cash5,817 17,168 
Intangible assets, net8,539 24,541 
Right-of-use asset, net937 4,109 
Other assets, net(1)
43,224 103,965 
Total assets of discontinued operations, net1,284,2822,544,068
Total medical office assets held for sale, net(2)
90,225 82,238 
Assets held for sale and discontinued operations, net$1,374,507 $2,626,306 
LIABILITIES
Mortgage debt278,172 318,876 
Lease liability935 3,189 
Accounts payable, accrued liabilities, and other liabilities41,977 79,411 
Deferred revenue3,985 11,442 
Total liabilities of discontinued operations, net325,069 412,918 
Total liabilities related to medical office assets held for sale, net(2)
3,098 2,819 
Liabilities related to assets held for sale and discontinued operations, net$328,167 $415,737 
_______________________________________
(1)Includes goodwill of $29 million as of March 31, 2021 and December 31, 2020.
(2)Primarily comprised of eight MOBs with net real estate assets of $81 million and deferred revenue of $2 million as of March 31, 2021 and six MOBs with net estate assets of $73 million and deferred revenue of $2 million as of December 31, 2020.
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The results of discontinued operations through March 31, 2021, or the disposal date of each asset or portfolio of assets if they have been sold, are included in the consolidated results for the three months ended March 31, 2021 and 2020. Summarized financial information for discontinued operations for the three months ended March 31, 2021 and 2020 are as follows (in thousands):
Three Months Ended March 31,
20212020
Revenues:
Rental and related revenues$5,228 $32,371 
Resident fees and services72,998 171,726 
Total revenues78,226 204,097 
Costs and expenses:
Interest expense2,676 2,685 
Depreciation and amortization 64,164 
Operating71,519 138,637 
Transaction costs76 285 
Impairments and loan loss reserves (recoveries), net 28,016 
Total costs and expenses74,271 233,787 
Other income (expense):
Gain (loss) on sales of real estate, net259,662 162,800 
Other income (expense), net5,885 (45)
Total other income (expense), net265,547 162,755 
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures269,502 133,065 
Income tax benefit (expense)821 3,176 
Equity income (loss) from unconsolidated joint ventures(315)(833)
Income (loss) from discontinued operations$270,008 $135,408 
Impairments of Real Estate
2021
During the three months ended March 31, 2021, the Company did not recognize any impairment charges.
2020
During the three months ended March 31, 2020, the Company recognized an aggregate impairment charge of $31 million ($28 million of which is reported in income (loss) from discontinued operations) related to 15 SHOP assets, 2 senior housing triple-net assets, and 2 MOBs as a result of being classified as held for sale and wrote down their aggregate carrying value of $200 million to their aggregate fair value, less estimated costs to sell, of $169 million.
The fair value of the impaired assets was based on forecasted sales prices, which are considered to be Level 3 measurements within the fair value hierarchy. Forecasted sales prices were determined using an income approach and/or a market approach (comparable sales model), which rely on certain assumptions by management, including: (i) market capitalization rates, (ii) comparable market transactions, (iii) estimated prices per unit, (iv) negotiations with prospective buyers, and (v) forecasted cash flow streams (lease revenue rates, expense rates, growth rates, etc.). There are inherent uncertainties in making these assumptions. For the Company’s impairment calculations during and as of the three months ended March 31, 2020, the Company estimated the fair value of each asset using either (i) market capitalization rates ranging from 7.16% to 9.92%, with a weighted average rate of 9.32% or (ii) prices per unit ranging from $38,000 to $95,000, with a weighted average price of $68,000.
Deferred Tax Asset Valuation Allowance
In conjunction with the Company establishing a plan during the year ended December 31, 2020 to dispose of all its SHOP assets and classifying such assets as discontinued operations, the Company concluded it was more likely than not that it would no longer realize the future value of certain deferred tax assets generated by the net operating losses of its taxable REIT subsidiary entities. Accordingly, the Company recognized a deferred tax asset valuation allowance of $33 million as of December 31, 2020.
As of March 31, 2021, the Company had a deferred tax asset valuation allowance of $35 million.
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NOTE 6.  Leases
Lease Income
The following table summarizes the Company’s lease income, excluding discontinued operations (in thousands):
Three Months Ended
March 31,
20212020
Fixed income from operating leases$262,937 $226,226 
Variable income from operating leases65,035 56,091 
Interest income from direct financing leases2,163 3,269 
Direct Financing Leases
Net investment in DFLs consists of the following (dollars in thousands):
 March 31,
2021
December 31,
2020
Present value of minimum lease payments receivable$7,758 $9,804 
Present value of estimated residual value44,706 44,706 
Less deferred selling profits(7,758)(9,804)
Net investment in direct financing leases$44,706 $44,706 
Properties subject to direct financing leases