All references in this report to "Healthpeak," the "Company," "we," "us" or
"our" mean
Cautionary Language Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q that are not historical factual statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include, among other things, statements regarding our and our officers' intent, belief or expectation as identified by the use of words such as "may," "will," "project," "expect," "believe," "intend," "anticipate," "seek," "target," "forecast," "plan," "potential," "estimate," "could," "would," "should" and other comparable and derivative terms or the negatives thereof. Forward-looking statements reflect our current expectations and views about future events and are subject to risks and uncertainties that could cause actual results, including our future financial condition and results of operations, to differ materially from those expressed or implied by any forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and uncertainties that may affect our business and future financial performance. Forward-looking statements are based on certain assumptions and analysis made in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate under the circumstances. While forward-looking statements reflect our good faith belief and assumptions we believe to be reasonable based upon current information, we can give no assurance that our expectations or forecasts will be attained. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this Quarterly Report on Form 10-Q. As more fully set forth under Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , risks and uncertainties that may cause our actual results to differ materially from the expectations contained in the forward-looking statements include, among other things:
•epidemics, pandemics or other infectious diseases, including the coronavirus disease ("Covid"), and health and safety measures intended to reduce their spread, and how quickly and to what extent normal economic and operating conditions can resume within the markets in which we operate;
•the ability of our existing and future tenants, operators, and borrowers to conduct their respective businesses in a manner sufficient to maintain or increase their revenues and manage their expenses in order to generate sufficient income to make rent and loan payments to us and our ability to recover investments made, if applicable, in their operations;
•increased competition, operating costs, and market changes affecting our tenants, operators, and borrowers;
•the financial condition of our tenants, operators, and borrowers, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings; •our concentration of real estate investments in the healthcare property sector, which makes us more vulnerable to a downturn in a specific sector than if we invested in multiple industries and exposes us to the risks inherent in illiquid investments;
•our ability to identify and secure replacement tenants and operators and the potential renovation costs and regulatory approvals associated therewith;
•our property development, redevelopment, and tenant improvement activity risks, including project abandonments, project delays, and lower profits than expected;
•changes within the life science industry;
•high levels of regulation, funding requirements, expense and uncertainty faced by our life science tenants;
•the ability of the hospitals on whose campuses our medical office buildings ("MOBs") are located and their affiliated healthcare systems to remain competitive or financially viable;
•our ability to maintain or expand our hospital and health system client relationships;
•operational risks associated with third party management contracts, including the additional regulation and liabilities of our properties operated through structures permitted by the Housing and Economic Recovery Act of 2008, which includes most of the provisions previously proposed in theREIT Investment Diversification and Empowerment Act of 2007 (commonly referred to as "RIDEA"); 38
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•economic and other conditions that negatively affect geographic areas from which we recognize a greater percentage of our revenue;
•uninsured or underinsured losses, which could result in significant losses and/or performance declines by us or our tenants and operators;
•our investments in joint ventures and unconsolidated entities, including our lack of sole decision making authority and our reliance on our partners' financial condition and continued cooperation;
•our use of fixed rent escalators, contingent rent provisions and/or rent escalators based on the Consumer Price Index;
•competition for suitable healthcare properties to grow our investment portfolio;
•our ability to foreclose on collateral securing our real estate-related loans;
•our ability to make material acquisitions and successfully integrate them;
•the potential impact on us and our tenants, operators, and borrowers from litigation matters, including rising liability and insurance costs;
•an increase in our borrowing costs, including due to higher interest rates;
•the availability of external capital on acceptable terms or at all, including due to rising interest rates, changes in our credit ratings and the value of our common stock, volatility or uncertainty in the capital markets, and other factors;
•cash available for distribution to stockholders and our ability to make dividend distributions at expected levels;
•our ability to manage our indebtedness level and covenants in and changes to the terms of such indebtedness;
•changes in global, national and local economic and other conditions;
•laws or regulations prohibiting eviction of our tenants;
•the failure of our tenants, operators, and borrowers to comply with federal, state and local laws and regulations, including resident health and safety requirements, as well as licensure, certification, and inspection requirements;
•required regulatory approvals to transfer our senior housing properties;
•compliance with the Americans with Disabilities Act and fire, safety and other regulations;
•the requirements of, or changes to, governmental reimbursement programs such as Medicare or Medicaid;
•legislation to address federal government operations and administration
decisions affecting the
•our participation in the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")Provider Relief Fund and other Covid-related stimulus and relief programs;
•provisions of
•environmental compliance costs and liabilities associated with our real estate investments;
•our ability to maintain our qualification as a real estate investment trust ("REIT");
•changes to
•calculating non-REIT tax earnings and profits distributions;
•ownership limits in our charter that restrict ownership in our stock;
•the loss or limited availability of our key personnel; and
•our reliance on information technology systems and the potential impact of system failures, disruptions or breaches.
Except as required by law, we do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, which speak only as of the date on which they are made.
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Overview
The information set forth in this Item 2 is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations. We will discuss and provide our analysis in the following order: •Executive Summary
•Market Trends and Uncertainties
•Overview of Transactions •Dividends •Results of Operations
•Liquidity and Capital Resources
•Non-GAAP Financial Measures Reconciliations
•Critical Accounting Estimates and Recent Accounting Pronouncements
Executive Summary
Healthpeak Properties, Inc. is aStandard & Poor's ("S&P") 500 company that acquires, develops, owns, leases and manages healthcare real estate acrossthe United States ("U.S."). Our company was originally founded in 1985. We are aMaryland corporation and qualify as a self-administered REIT. Our corporate headquarters are located inDenver, Colorado and we have additional offices inCalifornia ,Tennessee , andMassachusetts . During 2020, we began the process of disposing of our senior housing triple-net and senior housing operating property ("SHOP") portfolios. As ofDecember 31, 2020 , we concluded that the planned dispositions represented a strategic shift that had and will have a major effect on our operations and financial results and, therefore, the assets are classified as discontinued operations in all periods presented herein. InSeptember 2021 , we successfully completed the disposition of both portfolios. See Note 4 to the Consolidated Financial Statements for further information regarding discontinued operations. In conjunction with the disposal of our senior housing triple-net and SHOP portfolios, we focused our strategy on investing in a diversified portfolio of high-quality healthcare properties across our three core asset classes of life science, medical office, and continuing care retirement community ("CCRC") real estate. Under the life science and medical office segments, we invest through the acquisition, development and management of life science facilities, MOBs, and hospitals. Under the CCRC segment, our properties are operated through RIDEA structures. We have other non-reportable segments that are comprised primarily of loans receivable, marketable debt securities, and an interest in an unconsolidated joint venture that owns 19 senior housing assets (our "SWF SH JV"). AtSeptember 30, 2022 , our portfolio of investments, including properties in our unconsolidated joint ventures, consisted of interests in 480 properties. The following table summarizes information for our reportable and other non-reportable segments, excluding discontinued operations, for the three months endedSeptember 30, 2022 (dollars in thousands): Total Portfolio Percentage of Total Segment Adjusted NOI(1) Portfolio Adjusted NOI Number of Properties Life science $ 139,539 51 % 149 Medical office 109,678 40 % 297 CCRC 21,882 8 % 15 Other non-reportable 4,316 1 % 19 Totals $ 275,415 100 % 480
_______________________________________
(1)Total Portfolio metrics include results of operations from disposed properties through the disposition date. See "Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures" for additional information regarding Adjusted NOI and see Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss).
For a description of our significant activities during 2022, see "Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview of Transactions" in this report.
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We invest in and manage our real estate portfolio for the long-term to maximize benefit to our stockholders and support the growth of our dividends. Our strategy consists of four core elements:
(i)Our real estate: Our portfolio is grounded in high-quality properties in desirable locations. We focus on three purposely selected private pay asset classes-life science, medical office, and continuing care retirement community-to provide stability through inevitable market cycles.
(ii)Our financials: We maintain a strong investment-grade balance sheet with ample liquidity as well as long-term fixed-rate debt financing with staggered maturities to reduce our exposure to interest rate volatility and refinancing risk. (iii)Our partnerships: We work with leading healthcare companies, operators, and service providers and are responsive to their space and capital needs. We provide high-quality property management services to encourage tenants to renew, expand, and relocate into our properties, which drives increased occupancy, rental rates, and property values. (iv)Our platform: We have a people-first culture that we believe attracts, develops and retains top talent. We continually strive to create and maintain an industry-leading platform, with systems and tools that allow us to effectively and efficiently manage our assets and investment activity.
Market Trends and Uncertainties
Our operating results have been and will continue to be impacted by global and national economic and market conditions generally and by the local economic conditions where our properties are located, as well as by the Covid pandemic.
Rising interest rates, high inflation, supply chain disruptions, ongoing geopolitical tensions, and increased volatility in public equity and fixed income markets have led to increased costs and limited the availability of capital. To the extent our tenants or operators experience increased costs or financing difficulties due to the foregoing macroeconomic conditions, they may be unable or unwilling to make payments or perform their obligations when due. In addition, increased interest rates could affect our borrowing costs and the fair value of our fixed rate instruments. We have also seen significant inflation in construction costs over the past 15-21 months, which may, together with rising costs of capital, negatively affect the expected yields on our development and redevelopment projects. In addition, labor shortages and global supply chain disruptions, including procurement delays and long lead times on certain materials, have adversely impacted and could continue to adversely impact the scheduled completion and/or costs of these projects. Further, the full, long-term economic impact of the Covid pandemic on the operations of our CCRC communities and the senior housing facilities owned by our SWF SH JV remains uncertain. Many factors cannot be predicted and will remain unpredictable, including the impact, duration, and severity of new variants and outbreaks. In addition, our tenants, operators, and borrowers have experienced significant cost increases as a result of increased health and safety measures, staffing shortages, increased governmental regulation and compliance, vaccine mandates, and other operational changes necessitated either directly or indirectly by the Covid pandemic, as well as due to current inflationary pressures. Labor costs in particular have increased as a result of higher staffing hours, increased hourly wages and bonuses, greater overtime, and increased usage of contract labor. We anticipate that many of these expenses will remain at these higher levels even after the pandemic passes, and are likely to reduce margins in the business. We continuously monitor the effects of domestic and global events, including but not limited to inflation, labor shortages, supply chain matters, rising interest rates, and other current and expected impacts of the Covid pandemic on our operations and financial position, as well as on the operations and financial position of our tenants, operators, and borrowers, to ensure that we remain responsive and adaptable to the dynamic changes in our operating environment. A discussion of potential long-term changes in the industry are more fully set forth under Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Covid Update" in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . See Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 for additional discussion of the risks posed by macroeconomic conditions and the Covid pandemic, as well as the uncertainties we and our tenants, operators, and borrowers may face as a result. 41
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Overview of Transactions
OnAugust 1, 2022 , we sold a 30% interest in seven life science assets inSouth San Francisco, California (the "South San Francisco JVs") to a sovereign wealth fund ("SWF Partner") for cash of$126 million .
Concurrently, we entered into a master equity transaction agreement with the SWF Partner that provides us the opportunity to sell interests of up to 30% in certain future development projects we own.
In
Vista Sorrento Phase II
In
Webster MOB Portfolio
In
In
Other Real Estate Transactions
•During the nine months ended
•During the nine months ended
•During the nine months ended
Financing Activities
•In
•In
•InAugust 2022 , we executed a term loan agreement that provides for two senior unsecured delayed draw term loans in an aggregate principal amount of up to$500 million (the "2022 Term Loan Facilities"). As ofSeptember 30, 2022 , we had no borrowings outstanding under the 2022 Term Loan Facilities. InOctober 2022 , the entirety of the$500 million under the 2022 Term Loan Facilities was drawn.
•In
•InAugust 2022 , our Board of Directors approved a share repurchase program under which we may acquire shares of our common stock in the open market up to an aggregate purchase price of$500 million (the "Share Repurchase Program"). During the three and nine months endedSeptember 30, 2022 , we repurchased 2.1 million shares of our common stock under our Share Repurchase Program at a weighted average price of$27.16 per share for a total of$56 million .
Development Activities
•AtSeptember 30, 2022 , we had five life science development projects in process with an aggregate total estimated cost of approximately$1.03 billion and one MOB development project in process with a total estimated cost of approximately$33 million . •During the nine months endedSeptember 30, 2022 , the following projects were placed in service: (i) three MOB development projects with total costs incurred of$58 million , (ii) two MOB redevelopment projects with total costs incurred of$19 million , (iii) four life science development projects with total costs incurred of$317 million , (iv) one life science redevelopment project with total costs incurred of$60 million , and (v) a portion of one life science development project with total costs incurred of$40 million . 42
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Dividends
The following table summarizes our common stock cash dividends declared in 2022: Amount Dividend Declaration Date Record Date Per Share Payment Date January 27 February 11$ 0.30 February 22 April 28 May 9 0.30 May 20 July 28 August 8 0.30 August 19 October 27 November 7 0.30 November 18 Results of Operations We evaluate our business and allocate resources among our reportable business segments: (i) life science, (ii) medical office, and (iii) CCRC. Under the life science and medical office segments, we invest through the acquisition, development, and management of life science facilities, MOBs, and hospitals, which generally requires a greater level of property management. Our CCRCs are operated through RIDEA structures. We have other non-reportable segments that are comprised primarily of: (i) an interest in our unconsolidated SWF SH JV, (ii) loans receivable, and (iii) marketable debt securities. We evaluate performance based upon property adjusted net operating income ("Adjusted NOI" or "Cash NOI") in each segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 filed with theU.S. Securities and Exchange Commission ("SEC"), as updated by Note 2 to the Consolidated Financial Statements herein.
Non-GAAP Financial Measures
Net Operating Income
NOI and Adjusted NOI are non-U.S. generally accepted accounting principles ("GAAP") supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as real estate revenues (inclusive of rental and related revenues, resident fees and services, income from direct financing leases, and government grant income and exclusive of interest income), less property level operating expenses; NOI excludes all other financial statement amounts included in net income (loss) as presented in Note 13 to the Consolidated Financial Statements. Adjusted NOI is calculated as NOI after eliminating the effects of straight-line rents, DFL non-cash interest, amortization of market lease intangibles, termination fees, actuarial reserves for insurance claims that have been incurred but not reported, and the impact of deferred community fee income and expense. NOI and Adjusted NOI are calculated as NOI and Adjusted NOI from consolidated properties, plus our share of NOI and Adjusted NOI from unconsolidated joint ventures (calculated by applying our actual ownership percentage for the period), less noncontrolling interests' share of NOI and Adjusted NOI from consolidated joint ventures (calculated by applying our actual ownership percentage for the period). Management utilizes its share of NOI and Adjusted NOI in assessing its performance as we have various joint ventures that contribute to its performance. We do not control our unconsolidated joint ventures, and our share of amounts from unconsolidated joint ventures do not represent our legal claim to such items. Our share of NOI and Adjusted NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, our financial information presented in accordance with GAAP. Adjusted NOI is oftentimes referred to as "Cash NOI." Management believes NOI and Adjusted NOI are important supplemental measures because they provide relevant and useful information by reflecting only income and operating expense items that are incurred at the property level and present them on an unlevered basis. We use NOI and Adjusted NOI to make decisions about resource allocations, to assess and compare property level performance, and to evaluate our Same-Store ("SS") performance, as described below. We believe that net income (loss) is the most directly comparable GAAP measure to NOI and Adjusted NOI. NOI and Adjusted NOI should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items. Further, our definitions of NOI and Adjusted NOI may not be comparable to the definitions used by other REITs or real estate companies, as they may use different methodologies for calculating NOI and Adjusted NOI. For a reconciliation of NOI and Adjusted NOI to net income (loss) by segment, refer to Note 13 to the Consolidated Financial Statements. Operating expenses generally relate to leased medical office and life science properties, as well as CCRC facilities. We generally recover all or a portion of our leased medical office and life science property expenses through tenant recoveries. We present expenses as operating or general and administrative based on the underlying nature of the expense. 43
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Same-Store
Same-Store NOI and Adjusted (Cash) NOI information allows us to evaluate the performance of our property portfolio under a consistent population by eliminating changes in the composition of our consolidated portfolio of properties. Same-Store Adjusted NOI excludes amortization of deferred revenue from tenant-funded improvements and certain non-property specific operating expenses that are allocated to each operating segment on a consolidated basis. Properties are included in Same-Store once they are stabilized for the full period in both comparison periods. Newly acquired operating assets are generally considered stabilized at the earlier of lease-up (typically when the tenant(s) control(s) the physical use of at least 80% of the space and rental payments have commenced) or 12 months from the acquisition date. Newly completed developments and redevelopments are considered stabilized at the earlier of lease-up or 24 months from the date the property is placed in service. Properties that experience a change in reporting structure are considered stabilized after 12 months in operations under a consistent reporting structure. A property is removed from Same-Store when it is classified as held for sale, sold, placed into redevelopment, experiences a casualty event that significantly impacts operations, a change in reporting structure or operator transition has been agreed to, or a significant tenant relocates from a Same-Store property to a non Same-Store property and that change results in a corresponding increase in revenue. We do not report Same-Store metrics for our other non-reportable segments. For a reconciliation of Same-Store to total portfolio Adjusted NOI and other relevant disclosures by segment, refer to our Segment Analysis below.
Funds From Operations ("FFO")
FFO encompasses Nareit FFO and FFO as Adjusted, each of which is described in detail below. We believe FFO applicable to common shares, diluted FFO applicable to common shares, and diluted FFO per common share are important supplemental non-GAAP measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue. Nareit FFO. FFO, as defined by theNational Association of Real Estate Investment Trusts ("Nareit"), is net income (loss) applicable to common shares (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, including any current and deferred taxes directly associated with sales of depreciable property, impairments of, or related to, depreciable real estate, plus real estate and other real estate-related depreciation and amortization, and adjustments to compute our share of Nareit FFO and FFO as Adjusted (see below) from joint ventures. Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of Nareit FFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. For consolidated joint ventures in which we do not own 100%, we reflect our share of the equity by adjusting our Nareit FFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods. Our pro rata share information is prepared on a basis consistent with the comparable consolidated amounts, is intended to reflect our proportionate economic interest in the operating results of properties in our portfolio and is calculated by applying our actual ownership percentage for the period. We do not control the unconsolidated joint ventures, and the pro rata presentations of reconciling items included in Nareit FFO do not represent our legal claim to such items. The joint venture members or partners are entitled to profit or loss allocations and distributions of cash flows according to the joint venture agreements, which provide for such allocations generally according to their invested capital. The presentation of pro rata information has limitations, which include, but are not limited to, the following: (i) the amounts shown on the individual line items were derived by applying our overall economic ownership interest percentage determined when applying the equity method of accounting and do not necessarily represent our legal claim to the assets and liabilities, or the revenues and expenses and (ii) other companies in our industry may calculate their pro rata interest differently, limiting the usefulness as a comparative measure. Because of these limitations, the pro rata financial information should not be considered independently or as a substitute for our financial statements as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP financial statements, using the pro rata financial information as a supplement. Nareit FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss). We compute Nareit FFO in accordance with the current Nareit definition; however, other REITs may report Nareit FFO differently or have a different interpretation of the current Nareit definition from ours. 44
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FFO as Adjusted. In addition, we present Nareit FFO on an adjusted basis before the impact of non-comparable items including, but not limited to, transaction-related items, other impairments (recoveries) and other losses (gains), restructuring and severance related charges, prepayment costs (benefits) associated with early retirement or payment of debt, litigation costs (recoveries), casualty-related charges (recoveries), foreign currency remeasurement losses (gains), deferred tax asset valuation allowances, and changes in tax legislation ("FFO as Adjusted"). These adjustments are net of tax, when applicable. Transaction-related items include transaction expenses and gains/charges incurred as a result of mergers and acquisitions and lease amendment or termination activities. Prepayment costs (benefits) associated with early retirement of debt include the write-off of unamortized deferred financing fees, or additional costs, expenses, discounts, make-whole payments, penalties or premiums incurred as a result of early retirement or payment of debt. Other impairments (recoveries) and other losses (gains) include interest income associated with early and partial repayments of loans receivable and other losses or gains associated with non-depreciable assets including goodwill, DFLs, undeveloped land parcels, and loans receivable. Management believes that FFO as Adjusted provides a meaningful supplemental measurement of our FFO run-rate and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. At the same time that Nareit created and defined its FFO measure for the REIT industry, it also recognized that "management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community." We believe stockholders, potential investors, and financial analysts who review our operating performance are best served by an FFO run-rate earnings measure that includes certain other adjustments to net income (loss), in addition to adjustments made to arrive at the Nareit defined measure of FFO. FFO as Adjusted is used by management in analyzing our business and the performance of our properties and we believe it is important that stockholders, potential investors, and financial analysts understand this measure used by management. We use FFO as Adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions, (ii) evaluate the performance of our management, (iii) budget and forecast future results to assist in the allocation of resources, (iv) assess our performance as compared with similar real estate companies and the industry in general, and (v) evaluate how a specific potential investment will impact our future results. Other REITs or real estate companies may use different methodologies for calculating an adjusted FFO measure, and accordingly, our FFO as Adjusted may not be comparable to those reported by other REITs. For a reconciliation of net income (loss) to Nareit FFO and FFO as Adjusted and other relevant disclosure, refer to "Non-GAAP Financial Measures Reconciliations" below. Adjusted FFO ("AFFO"). AFFO is defined as FFO as Adjusted after excluding the impact of the following: (i) amortization of stock-based compensation, (ii) amortization of deferred financing costs, net, (iii) straight-line rents, (iv) deferred income taxes, and (v) other AFFO adjustments, which include: (a) amortization of acquired market lease intangibles, net, (b) non-cash interest related to DFLs and lease incentive amortization (reduction of straight-line rents), (c) actuarial reserves for insurance claims that have been incurred but not reported, and (d) amortization of deferred revenues, excluding amounts amortized into rental income that are associated with tenant funded improvements owned/recognized by us and up-front cash payments made by tenants to reduce their contractual rents. Also, AFFO is computed after deducting recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements, and includes adjustments to compute our share of AFFO from our unconsolidated joint ventures. More specifically, recurring capital expenditures, including second generation leasing costs and second generation tenant and capital improvements ("AFFO capital expenditures") excludes our share from unconsolidated joint ventures (reported in "other AFFO adjustments"). Adjustments for joint ventures are calculated to reflect our pro rata share of both our consolidated and unconsolidated joint ventures. We reflect our share of AFFO for unconsolidated joint ventures by applying our actual ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated joint ventures in which we do not own 100% of the equity by adjusting our AFFO to remove the third party ownership share of the applicable reconciling items based on actual ownership percentage for the applicable periods (reported in "other AFFO adjustments"). See FFO for further disclosure regarding our use of pro rata share information and its limitations. We believe AFFO is an alternative run-rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with: (i) expected results, (ii) results of previous periods, and (iii) results among REITs more meaningful. AFFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period, (ii) transaction-related costs, (iii) litigation settlement expenses, and (iv) restructuring and severance-related charges. Furthermore, AFFO is adjusted for recurring capital expenditures, which are generally not considered when determining cash flows from operations or liquidity. Other REITs or real estate companies may use different methodologies for calculating AFFO, and accordingly, our AFFO may not be comparable to those reported by other REITs. Management believes AFFO provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors, and other interested parties in the evaluation of our performance as a REIT, and by presenting AFFO, we are assisting these parties in their evaluation. AFFO is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP. For a reconciliation of net income (loss) to AFFO and other relevant disclosure, refer to "Non-GAAP Financial Measures Reconciliations" below. 45
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Comparison of the Three and Nine Months Ended
Overview
Three Months Ended
The following table summarizes results for the three months ended
Three Months Ended September 30, 2022 2021 Change Net income (loss) applicable to common shares$ 353,366 $ 54,442 $ 298,924 Nareit FFO 225,074 194,914 30,160 FFO as Adjusted 233,166 217,471 15,695 AFFO 193,314 179,739 13,575
Net income (loss) applicable to common shares increased primarily as a result of the following:
•a gain upon change of control related to the sale of a 30% interest and
deconsolidation of seven previously consolidated life science assets in
•an increase in NOI generated from our life science and medical office segments related to: (i) 2021 and 2022 acquisitions of real estate, (ii) development and redevelopment projects placed in service during 2021 and 2022, and (iii) new leasing activity during 2021 and 2022 (including the impact to straight-line rents).
The increase in net income (loss) applicable to common shares was partially offset by:
•a decrease in gains on sale of depreciable real estate related to lower gains recognized on MOB asset sales during the third quarter of 2022 as compared to 2021;
•an increase in interest expense, primarily as a result of higher borrowings and higher interest rates under the commercial paper program;
•casualty-related charges from a hurricane during the third quarter of 2022;
•an increase in loan loss reserves in 2022 primarily due to macroeconomic conditions; and
•a decrease in income from discontinued operations, primarily as a result of a decrease in gain on sales of real estate from dispositions of our senior housing portfolios, partially offset by lower impairments of depreciable real estate and goodwill.
Nareit FFO increased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:
•gain upon change of control;
•gain on sales of depreciable real estate;
•depreciation and amortization expense; and
•impairment charges related to depreciable real estate.
FFO as Adjusted increased primarily as a result of the aforementioned events impacting Nareit FFO, except for the following, which are excluded from FFO as Adjusted:
•casualty-related charges;
•loan loss reserves; and
•goodwill impairment charges related to the disposition of our senior housing portfolios.
AFFO increased primarily as a result of the aforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO. 46
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Nine Months Ended
The following table summarizes results for the nine months ended
Nine Months Ended September 30, 2022 2021 Change Net income (loss) applicable to common shares$ 491,398 $ 473,778 $ 17,620 Nareit FFO 704,658 384,877 319,781 FFO as Adjusted 704,460 650,166 54,294 AFFO 590,938 553,578 37,360
Net income (loss) applicable to common shares increased primarily as a result of the following:
•a gain upon change of control related to the sale of a 30% interest and
deconsolidation of seven previously consolidated life science assets in
•a decrease in loss on debt extinguishments related to our repurchase and redemption of certain outstanding senior notes in the first and second quarters of 2021;
•an increase in NOI generated from our life science and medical office segments related to: (i) 2021 and 2022 acquisitions of real estate, (ii) development and redevelopment projects placed in service during 2021 and 2022, and (iii) new leasing activity during 2021 and 2022 (including the impact to straight-line rents);
•a gain on sale of a hospital that was classified as a DFL that was sold in the first quarter of 2022; and
•fewer impairment charges on depreciable real estate.
The increase in net income (loss) applicable to common shares was partially offset by:
•a decrease in income from discontinued operations, primarily as a result of a decrease in gain on sales of real estate from dispositions of our senior housing portfolios, partially offset by lower impairments of depreciable real estate and goodwill;
•a decrease in gains on sale of depreciable real estate primarily related to the
•an increase in depreciation, primarily as a result of: (i) 2021 and 2022 acquisitions of real estate and (ii) development and redevelopment projects placed in service during 2021 and 2022;
•a decrease in interest income primarily as a result of principal repayments on and sales of loans receivable in 2021 and 2022;
•expenses incurred for tenant relocation and other costs associated with the demolition of an MOB;
•casualty-related charges from a hurricane during the third quarter of 2022;
•an increase in interest expense, primarily as a result of higher borrowings and higher interest rates under the commercial paper program; and
•an increase in loan loss reserves in 2022 primarily due to macroeconomic conditions.
Nareit FFO increased primarily as a result of the aforementioned events impacting net income (loss) applicable to common shares, except for the following, which are excluded from Nareit FFO:
•gain upon change of control;
•gain on sales of depreciable real estate;
•depreciation and amortization expense; and
•impairment charges related to depreciable real estate.
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FFO as Adjusted increased primarily as a result of the aforementioned events impacting Nareit FFO, except for the following, which are excluded from FFO as Adjusted:
•loss on debt extinguishment;
•the gain on sale of a hospital that was classified as a DFL;
•the expenses for tenant relocation and other costs associated with the demolition of an MOB;
•goodwill impairment charges related to the disposition of our senior housing portfolios;
•casualty-related charges; and
•loan loss reserves.
AFFO increased primarily as a result of the aforementioned events impacting FFO as Adjusted, except for the impact of straight-line rents, which is excluded from AFFO. The increase was partially offset by higher AFFO capital expenditures during the period. Segment Analysis The following tables provide selected operating information for our Same-Store and total property portfolio for each of our reportable segments. For the three months endedSeptember 30, 2022 , our Same-Store consists of 395 properties representing properties acquired or placed in service and stabilized on or prior toJuly 1, 2021 and that remained in operations under a consistent reporting structure throughSeptember 30, 2022 . For the nine months endedSeptember 30, 2022 , our Same-Store consists of 375 properties representing properties acquired or placed in service and stabilized on or prior toJanuary 1, 2021 and that remained in operations under a consistent reporting structure throughSeptember 30, 2022 . Our total property portfolio consisted of 480 properties at each ofSeptember 30, 2022 and 2021, respectively. 48
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Table of Contents Life Science The following table summarizes results at and for the three months endedSeptember 30, 2022 and 2021 (dollars and square feet in thousands, except per square foot data): SS Total Portfolio Three Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Rental and related revenues$ 167,084 $ 153,324 $ 13,760 $ 207,795 $ 184,213 $ 23,582 Healthpeak's share of unconsolidated joint venture total revenues 2,628 3,228 (600) 2,938 1,521 1,417 Noncontrolling interests' share of consolidated joint venture total revenues (33) (31) (2) (55) (82) 27 Operating expenses (44,286) (38,228) (6,058) (55,162) (44,923) (10,239) Healthpeak's share of unconsolidated joint venture operating expenses (668) (705) 37 (777) (463) (314) Noncontrolling interests' share of consolidated joint venture operating expenses 10 9 1 21 25 (4) Adjustments to NOI(1) (10,469) (9,141) (1,328) (15,221) (11,021) (4,200) Adjusted NOI$ 114,266 $ 108,456 $ 5,810 139,539 129,270 10,269 Less: non-SS Adjusted NOI (25,273) (20,814) (4,459) SS Adjusted NOI$ 114,266 $ 108,456 $ 5,810 Adjusted NOI % change 5.4 % Property count(2) 118 118 149 146 End of period occupancy 98.8 % 97.5 % 99.0 % 97.1 % Average occupancy 98.7 % 97.5 % 98.8 % 97.1 % Average occupied square feet 8,910 8,651 10,708 10,021 Average annual total revenues per occupied square foot(3)$ 72 $ 68 $ 74$ 69 Average annual base rent per occupied square foot(4)$ 54 $ 52 $ 56$ 54
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(1)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (2)From our third quarter 2021 presentation of Same-Store, we added: (i) six stabilized developments placed in service, (ii) five stabilized acquisitions, (iii) three stabilized redevelopments placed in service, and (iv) two stabilized properties that previously experienced a significant tenant relocation, and we removed: (i) seven life science facilities that were placed into redevelopment and (ii) two life science facilities that were classified as held for sale. (3)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues). (4)Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•annual rent escalations; •higher occupancy; and •new leasing activity.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts:
•an increase in NOI from (i) increased occupancy in developments and redevelopments placed in service in 2021 and 2022 and (ii) acquisitions in 2021 and 2022.
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The following table summarizes results at and for the nine months endedSeptember 30, 2022 and 2021 (dollars and square feet in thousands, except per square foot data): SS Total Portfolio(1) Nine Months Ended September 30, Nine Months Ended September 30, 2022 2021 Change 2022 2021 Change Rental and related revenues$ 447,719 $ 418,597 $ 29,122 $ 609,620 $ 531,674 $ 77,946 Healthpeak's share of unconsolidated joint venture total revenues 10,175 9,359 816 5,637 4,270 1,367 Noncontrolling interests' share of consolidated joint venture total revenues (76) (73) (3) (174) (222) 48 Operating expenses (110,244) (96,696) (13,548) (152,796) (125,108) (27,688) Healthpeak's share of unconsolidated joint venture operating expenses (2,151) (2,019) (132) (1,744) (1,316) (428) Noncontrolling interests' share of consolidated joint venture operating expenses 24 21 3 59 66 (7) Adjustments to NOI(2) (28,747) (26,961) (1,786) (50,977) (35,197) (15,780) Adjusted NOI$ 316,700 $ 302,228 $ 14,472 409,625 374,167 35,458 Less: non-SS Adjusted NOI (92,925) (71,939) (20,986) SS Adjusted NOI$ 316,700 $ 302,228 $ 14,472 Adjusted NOI % change 4.8 % Property count(3) 114 114 149 146 End of period occupancy 98.8 % 97.4 % 99.0 % 97.1 % Average occupancy 98.7 % 97.7 % 98.6 % 96.9 % Average occupied square feet 8,455 8,221 10,666 10,119 Average annual total revenues per occupied square foot(4)$ 68 $ 65 $ 71 $ 66 Average annual base rent per occupied square foot(5)$ 53 $ 51 $ 55 $ 52
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(1)Total Portfolio includes results of operations from disposed properties through the disposition date. (2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (3)From our third quarter 2021 presentation of Same-Store, we added: (i) six stabilized developments placed in service, (ii) five stabilized acquisitions, and (iii) four stabilized redevelopments placed in service, and we removed: (i) seven life science facilities that were placed into redevelopment and (ii) one life science facility that was classified as held for sale. (4)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues). (5)Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•annual rent escalations; •higher occupancy; and •new leasing activity.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned impacts to Same-Store and the following Non-Same-Store impacts:
•an increase in NOI from (i) increased occupancy in developments and redevelopments placed in service in 2021 and 2022 and (ii) acquisitions in 2021 and 2022.
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Table of Contents Medical Office The following table summarizes results at and for the three months endedSeptember 30, 2022 and 2021 (dollars and square feet in thousands, except per square foot data): SS Total Portfolio(1) Three Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Rental and related revenues$ 156,966 $ 149,864 $ 7,102 $ 184,506 $ 169,303 $ 15,203 Income from direct financing leases - - - - 2,179 (2,179) Healthpeak's share of unconsolidated joint venture total revenues 733 714 19 756 737 19 Noncontrolling interests' share of consolidated joint venture total revenues (8,812) (8,659) (153) (8,968) (8,954) (14) Operating expenses (52,972) (50,120) (2,852) (64,782) (58,430) (6,352) Healthpeak's share of unconsolidated joint venture operating expenses (313) (304) (9) (313) (305) (8) Noncontrolling interests' share of consolidated joint venture operating expenses 2,558 2,592 (34) 2,558 2,659 (101) Adjustments to NOI(2) (2,300) (2,717) 417 (4,079) (3,626) (453) Adjusted NOI$ 95,860 $ 91,370 $ 4,490 109,678 103,563 6,115 Less: non-SS Adjusted NOI (13,818) (12,193) (1,625) SS Adjusted NOI$ 95,860 $ 91,370 $ 4,490 Adjusted NOI % change 4.9 % Property count(3) 262 262 297 300 End of period occupancy 91.2 % 91.2 % 90.0 % 90.1 % Average occupancy 91.2 % 91.1 % 89.9 % 89.9 % Average occupied square feet 19,157 19,123 21,624 21,337 Average annual total revenues per occupied square foot(4) $ 33$ 32 $ 34$ 31 Average annual base rent per occupied square foot(5) $ 27$ 26 $ 27$ 27
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(1)Total Portfolio includes results of operations from disposed properties through the disposition date. (2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (3)From our third quarter 2021 presentation of Same-Store, we added: (i) 25 stabilized acquisitions and (ii) 2 stabilized redevelopments placed in service, and we removed: (i) 5 MOBs that were placed into redevelopment and (ii) 4 MOBs that were sold. (4)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues). (5)Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•mark-to-market lease renewals;
•annual rent escalations; and
•higher parking income and percentage-based rents.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store and the following Non-Same-Store impacts:
•increased NOI from our 2021 and 2022 acquisitions;
•increased occupancy in former redevelopment and development properties that have been placed in service; partially offset by
•decreased NOI from our 2021 and 2022 dispositions.
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The following table summarizes results at and for the nine months endedSeptember 30, 2022 and 2021 (dollars and square feet in thousands, except per square foot data): SS Total Portfolio(1) Nine Months Ended September 30, Nine Months Ended September 30, 2022 2021 Change 2022 2021 Change Rental and related revenues$ 436,724 $ 416,998 $ 19,726 $ 539,910 $ 490,456 $ 49,454 Income from direct financing leases - - - 1,168 6,522 (5,354) Healthpeak's share of unconsolidated joint venture total revenues 2,180 2,095 85 2,249 2,162 87 Noncontrolling interests' share of consolidated joint venture total revenues (26,265) (25,728) (537) (26,732) (26,704) (28) Operating expenses (145,379) (135,663) (9,716) (189,274) (164,198) (25,076) Healthpeak's share of unconsolidated joint venture operating expenses (913) (915) 2 (912) (915) 3 Noncontrolling interests' share of consolidated joint venture operating expenses 7,886 7,500 386 7,886 7,714 172 Adjustments to NOI(2) (5,318) (6,554) 1,236 (10,574) (7,553) (3,021) Adjusted NOI$ 268,915 $ 257,733 $ 11,182 323,721 307,484 16,237 Less: non-SS Adjusted NOI (54,806) (49,751) (5,055) SS Adjusted NOI$ 268,915 $ 257,733 $ 11,182 Adjusted NOI % change 4.3 % Property count(3) 246 246 297 300 End of period occupancy 91.3 % 91.3 % 90.0 % 90.1 % Average occupancy 91.5 % 91.4 % 89.9 % 90.1 % Average occupied square feet 18,368 18,333 21,686 20,827 Average annual total revenues per occupied square foot(4)$ 32 $ 31 $ 34 $ 31 Average annual base rent per occupied square foot(5)$ 27 $ 26 $ 27 $ 27
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(1)Total Portfolio includes results of operations from disposed properties through the disposition date. (2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (3)From our third quarter 2021 presentation of Same-Store, we added: (i) 10 stabilized acquisitions and (ii) 3 stabilized redevelopments placed in service, and we removed: (i) 5 MOBs that were placed into redevelopment and (ii) 4 MOBs that were sold. (4)Average annual total revenues does not include non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues). (5)Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i.e., straight-line rents, amortization of market lease intangibles, DFL non-cash interest, and deferred revenues).
Same-Store Adjusted NOI increased primarily as a result of the following:
•mark-to-market lease renewals;
•annual rent escalations; and
•higher parking income and percentage-based rents.
Total Portfolio Adjusted NOI increased primarily as a result of the aforementioned increases to Same-Store and the following Non-Same-Store impacts:
•increased NOI from our 2021 and 2022 acquisitions;
•increased occupancy in former redevelopment and development properties that have been placed in service; partially offset by
•decreased NOI from our 2021 and 2022 dispositions.
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Continuing Care Retirement Community
The following table summarizes results at and for the three months ended
SS Total Portfolio Three Months Ended September 30, Three Months Ended September 30, 2022 2021 Change 2022 2021 Change Resident fees and services$ 122,142 $ 119,022 $ 3,120 $ 122,142 $ 119,022 $ 3,120 Government grant income(1) 4 15 (11) 4 15 (11) Operating expenses (99,914) (98,405) (1,509) (100,264) (98,799) (1,465) Healthpeak's share of unconsolidated joint venture operating expenses - - - - (32) 32 Adjustments to NOI(2) - 724 (724) - 724 (724) Adjusted NOI$ 22,232 $ 21,356 $ 876 21,882 20,930 952 Plus: non-SS adjustments 350 426 (76) SS Adjusted NOI$ 22,232 $ 21,356 $ 876 Adjusted NOI % change 4.1 % Property count(3) 15 15 15 15 Average occupancy 82.0 % 79.5 % 82.0 % 79.5 % Average occupied units(4) 5,894 5,910 5,894 5,910 Average annual rent per occupied unit$ 82,895 $ 80,566 $ 82,895 $ 80,566
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(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations. (2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (3)From our third quarter 2021 presentation of Same-Store, no properties were added or removed. (4)Represents average occupied units as reported by the operators for the three-month period. The decrease in average occupied units for the period is primarily a result of decommissioned senior nursing facility beds.
Same-Store Adjusted NOI and Total Portfolio Adjusted NOI increased primarily as a result of the following:
•increased rates for resident fees; partially offset by
•higher costs of labor, utilities, and repairs and maintenance.
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The following table summarizes results at and for the nine months ended
SS Total Portfolio Nine Months Ended September 30, Nine Months Ended September 30, 2022 2021 Change 2022 2021 Change Resident fees and services$ 369,062 $ 352,458 $ 16,604 $ 369,062 $ 352,458 $ 16,604 Government grant income(1) 6,765 1,412 5,353 6,765 1,412 5,353 Healthpeak's share of unconsolidated joint venture total revenues - - - - 6,903 (6,903) Healthpeak's share of unconsolidated joint venture government grant income - - - 334 200 134 Operating expenses (299,146) (283,200) (15,946) (300,429) (284,739) (15,690) Healthpeak's share of unconsolidated joint venture operating expenses - - - - (6,985) 6,985 Adjustments to NOI(2) - 1,933 (1,933) - 1,971 (1,971) Adjusted NOI$ 76,681 $ 72,603 $ 4,078 75,732 71,220 4,512 Plus: non-SS adjustments 949 1,383 (434) SS Adjusted NOI$ 76,681 $ 72,603 $ 4,078 Adjusted NOI % change 5.6 % Property count(3) 15 15 15 15 Average occupancy 81.3 % 79.2 % 81.3 % 79.2 % Average occupied units(4) 5,928 5,890 5,928 6,052 Average annual rent per occupied unit$ 84,532 $ 80,107 $ 84,606 $ 79,533
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(1)Represents government grant income received under the CARES Act, which is recorded in other income (expense), net in the Consolidated Statements of Operations. (2)Represents adjustments to NOI in accordance with our definition of Adjusted NOI. Refer to "Non-GAAP Financial Measures" above for definitions of NOI and Adjusted NOI. See Note 13 to the Consolidated Financial Statements for a reconciliation of Adjusted NOI by segment to net income (loss). (3)From our third quarter 2021 presentation of Same-Store, we added 13 properties that previously experienced an operator transition. (4)Represents average occupied units as reported by the respective tenants or operators for the nine-month period. The decrease in average occupied units for the period is primarily a result of decommissioned senior nursing facility beds.
SameStore Adjusted NOI and Total Portfolio Adjusted NOI increased primarily as a result of the following:
•increased rates for resident fees;
•increased government grant income received under the CARES Act; and
•lower Covid-related expenses; partially offset by
•higher costs of labor and repairs and maintenance.
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Other Income and Expense Items
The following table summarizes the results of our other income and expense items for the three and nine months endedSeptember 30, 2022 and 2021 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 Change 2022 2021 Change Interest income$ 5,963 $ 6,748 $ (785) $ 16,950 $ 31,869 $ (14,919) Interest expense 44,078 35,905 8,173 123,531 121,429 2,102 Depreciation and amortization 173,190 177,175 (3,985) 531,412 506,172
25,240
General and administrative 24,549 23,270 1,279 73,161 72,260 901 Transaction costs 728 - 728 1,636 1,417 219 Impairments and loan loss reserves (recoveries), net 3,407 285 3,122 3,678 4,458
(780)
Gain (loss) on sales of real estate, net (4,149) 14,635 (18,784) 10,047 189,873
(179,826)
Gain (loss) on debt extinguishments - (667) 667 - (225,824)
225,824
Other income (expense), net 305,678 1,670 304,008 326,855 5,604
321,251
Income tax benefit (expense) 3,834 649 3,185 3,775 1,404
2,371
Equity income (loss) from unconsolidated joint ventures (325) 2,327 (2,652) 2,141 4,517
(2,376)
Income (loss) from discontinued operations (1,298) 601 (1,899) 2,011 384,569
(382,558)
Noncontrolling interests' share in continuing operations (4,016) (7,195) 3,179 (11,701) (14,036)
2,335
Noncontrolling interests' share in discontinued operations - - - - (2,539) 2,539 Interest income Interest income decreased for the three and nine months endedSeptember 30, 2022 primarily as a result of principal repayments on and sales of loans receivable in 2021 and 2022. Interest expense Interest expense increased for the three and nine months endedSeptember 30, 2022 primarily as a result of higher borrowings and higher interest rates under the commercial paper program. The increase in interest expense for the nine months endedSeptember 30, 2022 was partially offset by senior unsecured notes repurchases and redemptions in the first and second quarters of 2021 and repayment of a term loan in the third quarter of 2021.
Depreciation and amortization expense
Depreciation and amortization expense decreased for the three months endedSeptember 30, 2022 primarily as a result of a decrease in depreciation related to the deconsolidation of seven previously consolidated life science assets inSouth San Francisco, California . Depreciation and amortization expense increased for the nine months endedSeptember 30, 2022 primarily as a result of: (i) assets acquired during 2021 and 2022 and (ii) development and redevelopment projects placed in service during 2021 and 2022, partially offset by dispositions of real estate in 2021 and 2022.
General and administrative
General and administrative expenses increased for the three and nine months endedSeptember 30, 2022 primarily due to higher travel costs and professional fees. We expect to recognize total severance-related charges of approximately$30 million in the fourth quarter of 2022 related to the departures of our former Chief Executive Officer and our former Chief Legal Officer and General Counsel.
Impairments and loan loss reserves (recoveries), net
Impairments and loan loss reserves (recoveries), net increased for the three months endedSeptember 30, 2022 as a result of an increase in loan loss reserves under the current expected credit losses model. The increase in loan loss reserves for the three months endedSeptember 30, 2022 is primarily due to macroeconomic conditions. Impairments and loan loss reserves (recoveries), net decreased for the nine months endedSeptember 30, 2022 primarily as a result of fewer impairment charges on depreciable real estate, partially offset by the aforementioned increase in loan loss reserves. 55
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Gain (loss) on sales of real estate, net
Gain (loss) on sales of real estate, net decreased during the three and nine months endedSeptember 30, 2022 primarily as a result of the$172 million gain on sale ofHoag Hospital inMay 2021 and the gains on sale of other MOB dispositions during the third quarter of 2021. Refer to Note 4 to the Consolidated Financial Statements for additional information regarding dispositions of real estate and the associated gain (loss) on sales recognized.
Gain (loss) on debt extinguishments
Loss on debt extinguishments decreased for the nine months endedSeptember 30, 2022 as a result of the repurchase and redemption of certain outstanding senior notes in the first and second quarters of 2021 with no repurchases or redemptions during the comparable periods of 2022.
Other income (expense), net
Other income increased for the three and nine months endedSeptember 30, 2022 primarily due to a gain upon change of control related to the sale of a 30% interest and deconsolidation of seven previously consolidated life science assets inSouth San Francisco, California , partially offset by casualty losses from a hurricane in the third quarter of 2022. Other income further increased during the nine months endedSeptember 30, 2022 as a result of: (i) a gain on sale of a hospital that was classified as a DFL and (ii) an increase in government grant income received under the CARES Act in 2022, partially offset by expenses incurred for tenant relocation and other costs associated with the demolition of an MOB. Income tax benefit (expense)
Income tax benefit increased for the three and nine months ended
Equity income (loss) from unconsolidated joint ventures
Equity income from unconsolidated joint ventures decreased for the three and nine months endedSeptember 30, 2022 primarily as a result of: (i) operating losses on certain of our unconsolidated joint ventures and (ii) casualty-related losses on certain properties within the SWF SH JV.
Income (loss) from discontinued operations
Income from discontinued operations decreased for the three and nine months endedSeptember 30, 2022 primarily as a result of decreased gain on sales of real estate from the completion of dispositions of our senior housing portfolios. Income from discontinued operations further decreased for the nine months endedSeptember 30, 2022 due to a decline in government grant income received under the CARES Act for the senior housing portfolio. The decrease in income from discontinued operations during the three and nine months endedSeptember 30, 2022 was partially offset by decreased impairment charges on depreciable real estate and goodwill.
Noncontrolling interests' share in continuing operations
Noncontrolling interests' share in continuing operations decreased for the three and nine months endedSeptember 30, 2022 primarily as a result of a gain on sale of an MOB in a consolidated partnership during the third quarter of 2021.
Noncontrolling interests' share in discontinued operations
Noncontrolling interests' share in discontinued operations decreased for the three and nine months endedSeptember 30, 2022 as a result of the completion of our dispositions of our senior housing portfolios.
Liquidity and Capital Resources
We anticipate that our cash flow from operations, available cash balances, and cash from our various financing activities will be adequate for the next 12 months and for the foreseeable future for purposes of: (i) funding recurring operating expenses; (ii) meeting debt service requirements; and (iii) satisfying funding of distributions to our stockholders and non-controlling interest members. Distributions are made using a combination of cash flows from operations, funds available under our bank line of credit (the "Revolving Facility") and commercial paper program, term loans, proceeds from the sale of properties, and other sources of cash available to us.
In addition to funding the activities above, our principal liquidity needs for the next 12 months are to:
•fund capital expenditures, including tenant improvements and leasing costs; and
•fund future acquisition, transactional, and development and redevelopment activities.
Our longer term liquidity needs include the items listed above as well as meeting debt service requirements.
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We anticipate satisfying these future needs using one or more of the following:
•cash flow from operations;
•sale of, or exchange of ownership interests in, properties or other investments;
•borrowings under our Revolving Facility and commercial paper program;
•issuance of additional debt, including unsecured notes, term loans, and mortgage debt; and/or
•issuance of common or preferred stock or its equivalent, including the settlement of forward contracts or other sales of common stock under the ATM Program (as defined below).
Our ability to access the capital markets impacts our cost of capital and ability to refinance maturing indebtedness, as well as our ability to fund future acquisitions and development through the issuance of additional securities or secured debt. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. For example, our Revolving Facility accrues interest at a rate per annum equal to LIBOR plus a margin that depends upon our credit ratings for our senior unsecured long-term debt. Our Revolving Facility includes customary LIBOR replacement language, including, but not limited to, the use of rates based on the secured overnight financing rate administered by theFederal Reserve Bank of New York . We also pay a facility fee on the entire revolving commitment that depends upon our credit ratings. As ofOctober 31, 2022 , we had long-term credit ratings of Baa1 from Moody's and BBB+ from S&P Global and Fitch, and short-term credit ratings of P-2, A-2, and F2 from Moody's, S&P Global, and Fitch, respectively. A downgrade in credit ratings by Moody's, S&P Global, and Fitch may have a negative impact on the interest rates and facility fees for our Revolving Facility and 2022 Term Loan Facilities and may negatively impact the pricing of notes issued under our commercial paper program and senior unsecured notes. While a downgrade in our credit ratings would adversely impact our cost of borrowing, we believe we would continue to have access to the unsecured debt markets, and we could also seek to enter into one or more secured debt financings, issue additional securities, including under our ATM Program, or dispose of certain assets to fund future operating costs, capital expenditures, or acquisitions, although no assurances can be made in this regard. Refer to "Market Trends and Uncertainties" above for a more comprehensive discussion of the potential impact of Covid as well as economic and market conditions on our business.
Changes in Material Cash Requirements and Off-Balance Sheet Arrangements
Our material cash requirements related to debt increased by$421 million to$6.6 billion atSeptember 30, 2022 , when compared toDecember 31, 2021 , primarily as a result of issuances of notes under our commercial paper program. In addition, inOctober 2022 , we elected to draw the$500 million aggregate principal amount under the 2022 Term Loan Facilities, and utilized the proceeds to repay amounts outstanding under our commercial paper program. As ofSeptember 30, 2022 , we had$1.59 billion outstanding under our commercial paper program. See Note 9 to the Consolidated Financial Statements for additional information about our debt commitments. Our material cash requirements related to development and redevelopment projects and tenant improvements decreased by$49 million , to$421 million atSeptember 30, 2022 , when compared toDecember 31, 2021 , primarily as a result of construction spend on existing projects in the first three quarters of 2022 thereby decreasing the remaining commitment. Due to the terms of our SHOP seller financing notes receivable, we are obligated to provide additional loans up to$41 million . Our material cash requirements to provide this additional funding for senior housing redevelopment and capital expenditure projects decreased by$17 million , to$41 million atSeptember 30, 2022 , when compared toDecember 31, 2021 , primarily as a result of reduced commitments from current year principal repayments on our seller financing. See Note 6 to the Consolidated Financial Statements for additional information. Certain of our noncontrolling interest holders have the ability to put their equity interests to us upon specified events or after the passage of a predetermined period of time. Each put option is subject to changes in redemption value in the event that the underlying property generates specified returns for us and meets certain promote thresholds pursuant to the respective agreements. As ofSeptember 30, 2022 , we had$128 million of redeemable noncontrolling interests, none of which met the conditions for redemption as of the balance sheet date. See Note 11 to the Consolidated Financial Statements for additional information.
There have been no changes to our distribution and dividend requirements during
the nine months ended
We own interests in certain unconsolidated joint ventures as described in Note 7
to the Consolidated Financial Statements. Two of these joint ventures have
mortgage debt of
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There have been no other material changes, outside of the ordinary course of business, during the nine months endedSeptember 30, 2022 to the material cash requirements or material off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 under "Material Cash Requirements" and "Off-Balance Sheet Arrangements" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."
Cash Flow Summary
The following summary discussion of our cash flows is based on the Consolidated Statements of Cash Flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
The following table sets forth changes in cash flows (in thousands):
Nine Months Ended
2022 2021 Change
Net cash provided by (used in) operating activities
$ 571,335 $ 121,971 Net cash provided by (used in) investing activities (578,113) 1,203,675 (1,781,788) Net cash provided by (used in) financing activities (165,517) (1,687,889) 1,522,372 Operating Cash Flows The increase in operating cash flow is primarily the result of an increase in income related to: (i) 2021 and 2022 acquisitions, (ii) annual rent increases, (iii) new leasing and renewal activity, and (iv) developments and redevelopments placed in service during 2021 and 2022. The increase in operating cash flow is partially offset by a decrease in income related to assets sold during 2021 and 2022. Our cash flow from operations is dependent upon the occupancy levels of our buildings, rental rates on leases, our tenants' performance on their lease obligations, the level of operating expenses, and other factors.
Investing Cash Flows
The following are significant investing activities for the nine months ended
•made investments of
•received net proceeds of$288 million primarily from the sale of a 30% interest in seven previously consolidated life science assets inSouth San Francisco, California , sales of real estate assets, and repayments on loans receivable and direct financing leases.
The following are significant investing activities for the nine months ended
•made investments of
•received net proceeds of
Financing Cash Flows
The following are significant financing activities for the nine months ended
•made net borrowings of
•paid cash dividends on common stock of
•repurchased
The following are significant financing activities for the nine months ended
•made net borrowings of
•made net repayments of
•paid cash dividends on common stock of
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Discontinued Operations
Operating, investing, and financing cash flows in our Consolidated Statements of Cash Flows are reported inclusive of both cash flows from continuing operations and cash flows from discontinued operations. Certain significant cash flows from discontinued operations are disclosed in Note 14 to the Consolidated Financial Statements. The absence of future cash flows from discontinued operations is not expected to significantly impact our liquidity, as the proceeds from senior housing triple-net and SHOP dispositions were used to pay down debt and invest in additional real estate in our other business lines. Additionally, we have multiple other sources of liquidity that can be utilized in the future, as needed. Refer to the beginning of the Liquidity and Capital Resources section above for additional information regarding our liquidity.
Debt
In
InAugust 2022 , we executed the 2022 Term Loan Agreement that provides for two senior unsecured delayed draw term loans in an aggregate principal amount of up to$500 million . As ofSeptember 30, 2022 , we had no borrowings outstanding under the 2022 Term Loan Facilities. InOctober 2022 , the entirety of the$500 million under the 2022 Term Loan Facilities was drawn.
See Note 9 to the Consolidated Financial Statements for additional information about our outstanding debt.
Approximately 76% and 79% of our consolidated debt, excluding debt classified as liabilities related to assets held for sale and discontinued operations, net, was fixed rate debt as ofSeptember 30, 2022 and 2021, respectively. AtSeptember 30, 2022 , our fixed rate debt and variable rate debt had weighted average interest rates of 3.45% and 3.42%, respectively. AtSeptember 30, 2021 , our fixed rate debt and variable rate debt had weighted average interest rates of 3.52% and 0.52%, respectively. As ofSeptember 30, 2022 , we had$142 million of variable rate debt swapped to fixed through interest rate swap instruments, designated as cash flow hedges, and as ofSeptember 30, 2021 , we had$142 million of variable rate debt subject to interest rate cap instruments. For purposes of classification of the amounts above, variable rate debt with a derivative financial instrument designated as a cash flow hedge is reported as fixed rate debt due to us having effectively established a fixed interest rate for the underlying debt instrument. For a more detailed discussion of our interest rate risk, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 3 below. Equity AtSeptember 30, 2022 , we had 538 million shares of common stock outstanding, equity totaled$7.0 billion , and our equity securities had a market value of$12.5 billion . AtSeptember 30, 2022 , non-managing members held an aggregate of five million units in seven limited liability companies ("DownREITs") for which we are the managing member. The DownREIT units are exchangeable for an amount of cash approximating the then-current market value of shares of our common stock or, at our option, shares of our common stock (subject to certain adjustments, such as stock splits and reclassifications). AtSeptember 30, 2022 , the outstanding DownREIT units were convertible into approximately seven million shares of our common stock. At-The-Market Program Our at-the-market equity offering program (as amended from time to time, the "ATM Program") has a capacity of$1.5 billion . In addition to the issuance and sale of shares of our common stock, we may also enter into one or more forward sales agreements (each, an "ATM forward contract") with sales agents for the sale of our shares of common stock under our ATM Program. During the three and nine months endedSeptember 30, 2021 , we utilized the forward provisions under the ATM Program to allow for the sale of an aggregate of 9.1 million shares of our common stock at an initial weighted average net price of$35.25 per share, after commissions. We did not utilize the forward provisions under the ATM program during the three and nine months endedSeptember 30, 2022 . ThroughSeptember 30, 2022 , no shares were settled under ATM forward contracts. Therefore, atSeptember 30, 2022 , 9.1 million shares remained outstanding under ATM forward contracts. These ATM forward contracts mature in the first quarter of 2023.
During the three and nine months ended
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AtSeptember 30, 2022 ,$1.18 billion of our common stock remained available for sale under the ATM Program. Actual future sales of our common stock will depend upon a variety of factors, including but not limited to market conditions, the trading price of our common stock, and our capital needs. We have no obligation to sell any of the remaining shares under our ATM Program.
See Note 11 to the Consolidated Financial Statements for additional information about our ATM Program.
Share Repurchase Program OnAugust 1, 2022 , our Board of Directors approved the Share Repurchase Program under which we may acquire shares of our common stock in the open market up to an aggregate purchase price of$500 million . Purchases of common stock under the Share Repurchase Program may be exercised at our discretion with the timing and number of shares repurchased depending on a variety of factors, including price, corporate and regulatory requirements, and other corporate liquidity requirements and priorities. The Share Repurchase Program expires inAugust 2024 and may be suspended or terminated at any time without prior notice. During the three and nine months endedSeptember 30, 2022 , we repurchased 2.1 million shares of our common stock at a weighted average price of$27.16 per share for a total of$56 million . Therefore, atSeptember 30, 2022 ,$444 million of our common stock remained available for repurchase under the Share Repurchase Program.
Shelf Registration
InMay 2021 , we filed a prospectus with theSEC as part of a registration statement on Form S-3, using an automatic shelf registration process. This shelf registration statement expires onMay 13, 2024 and at or prior to such time, we expect to file a new shelf registration statement. Under the "shelf" process, we may sell any combination of the securities described in the prospectus through one or more offerings. The securities described in the prospectus include common stock, preferred stock, depositary shares, debt securities, and warrants. 60
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Non-GAAP Financial Measures Reconciliations
The following is a reconciliation from net income (loss) applicable to common shares, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Nareit FFO, FFO as Adjusted, and AFFO (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income (loss) applicable to common shares$ 353,366
173,190 177,175 531,412 506,172
Healthpeak's share of real estate related depreciation and amortization from unconsolidated joint ventures
8,704 4,722 19,049 12,044
Noncontrolling interests' share of real estate related depreciation and amortization
(4,464) (4,849) (14,487) (14,599)
Loss (gain) on sales of depreciable real estate, net(1) 5,280
(41,393) (11,408) (598,531)
Healthpeak's share of loss (gain) on sales of depreciable real estate, net, from unconsolidated joint ventures
239 (1,068) 89 (6,934)
Noncontrolling interests' share of gain (loss) on sales of depreciable real estate, net
- 3,450 12 5,628 Loss (gain) upon change of control, net(2) (311,438) - (311,438) (1,042) Taxes associated with real estate dispositions 197 483 31 2,666 Impairments (recoveries) of depreciable real estate, net - 1,952 - 5,695 Nareit FFO applicable to common shares 225,074 194,914 704,658 384,877 Distributions on dilutive convertible units and other 2,352 1,651 7,055 - Diluted Nareit FFO applicable to common shares$ 227,426
Weighted average shares outstanding - diluted Nareit FFO 546,015
544,889 546,677 539,159 Impact of adjustments to Nareit FFO: Transaction-related items$ 681
2,897 20,073 (5,874) 25,161 Restructuring and severance related charges - - - 2,463 Loss (gain) on debt extinguishments - 667 - 225,824 Casualty-related charges (recoveries), net(4) 4,514 558 4,103 5,203 Total adjustments$ 8,092 $ 22,557 $ (198) $ 265,289 FFO as Adjusted applicable to common shares$ 233,166
2,338 2,313 7,055 6,323
Diluted FFO as Adjusted applicable to common shares
Weighted average shares outstanding - diluted FFO as Adjusted 546,015 546,714 546,677 546,485 61
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Table of Contents Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 FFO as Adjusted applicable to common shares$ 233,166 $ 217,471 $ 704,460 $ 650,166 Stock-based compensation amortization expense 4,614 4,436 14,635 13,895 Amortization of deferred financing costs 2,691 2,343 8,069 6,677 Straight-line rents (12,965) (8,290) (36,837) (23,627) AFFO capital expenditures (24,358) (28,980) (75,103) (72,112) Deferred income taxes (2,814) (1,747) (3,741) (6,240) Other AFFO adjustments (7,020) (5,494) (20,545) (15,181) AFFO applicable to common shares 193,314 179,739 590,938 553,578 Distributions on dilutive convertible units and other 1,649 1,650 4,945 4,512 Diluted AFFO applicable to common shares$ 194,963 $
181,389
Weighted average shares outstanding - diluted AFFO 544,190 544,889 544,852 544,660 Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Diluted earnings per common share$ 0.65 $ 0.10 $ 0.91 $ 0.88 Depreciation and amortization 0.33 0.33 0.98 0.93 Loss (gain) on sales of depreciable real estate, net 0.01 (0.07) (0.02) (1.11) Loss (gain) upon change of control, net(2) (0.57) - (0.57) 0.00 Taxes associated with real estate dispositions 0.00 0.00 0.00 0.00 Impairments (recoveries) of depreciable real estate, net - 0.00 - 0.01 Diluted Nareit FFO per common share$ 0.42 $ 0.36 $ 1.30 $ 0.71 Transaction-related items 0.00 0.00 0.00 0.01
Other impairments (recoveries) and other losses (gains), net(3)
0.00 0.04 (0.01) 0.05 Restructuring and severance related charges - - - 0.00 Loss (gain) on debt extinguishments - 0.00 - 0.42 Casualty-related charges (recoveries), net(4) 0.01 0.00 0.01 0.01 Diluted FFO as Adjusted per common share$ 0.43 $ 0.40 $ 1.30 $ 1.20
_______________________________________
(1)This amount can be reconciled by combining the balances from the corresponding line of the Consolidated Statements of Operations and the detailed financial information for discontinued operations in Note 4 to the Consolidated Financial Statements. (2)The three and nine months endedSeptember 30, 2022 includes a gain upon change of control related to the sale of a 30% interest to a sovereign wealth fund and deconsolidation of seven previously consolidated life science assets inSouth San Francisco, California . The gain upon change of control is included in other income (expense), net in the Consolidated Statements of Operations. (3)The three months endedSeptember 30, 2022 includes reserves for loan losses recognized in impairments and loan loss reserves (recoveries), net in the Consolidated Statements of Operations. The nine months endedSeptember 30, 2022 also includes the following, which are included in other income (expense), net in the Consolidated Statements of Operations: (i) a$23 million gain on sale of a hospital that was in a direct financing lease and (ii)$14 million of expenses incurred for tenant relocation and other costs associated with the demolition of an MOB. The three months endedSeptember 30, 2021 includes the following: (i) a$22 million goodwill impairment charge in connection with our senior housing triple-net and SHOP asset sales which is reported in income (loss) from discontinued operations in the Consolidated Statements of Operations and (ii) recoveries of loan loss reserves recognized in impairments and loan loss reserves (recoveries), net in the Consolidated Statements of Operations. The nine months endedSeptember 30, 2021 also includes the following: (i)$6 million of accelerated recognition of a mark-to-market discount, less loan fees, resulting from prepayments on loans receivable which is included in interest income in the Consolidated Statements of Operations and (ii) an additional$7 million goodwill impairment charge in connection with our senior housing triple-net and SHOP asset sales. (4)Casualty-related charges (recoveries), net are recognized in other income (expense), net and equity income (loss) from unconsolidated joint ventures in the Consolidated Statements of Operations. The amounts are reported net of the associated income tax impact. 62
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Critical Accounting Estimates and Recent Accounting Pronouncements
The preparation of financial statements in conformity withU.S. GAAP requires our management to use judgment in the application of critical accounting estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. A discussion of accounting estimates that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain is included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2 to the Consolidated Financial Statements. There have been no significant changes to our critical accounting estimates during the three and nine months endedSeptember 30, 2022 .
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