Leases and Management Agreements with DHC | Leases and Management Agreements with DHC As of December 31, 2019, we leased 166 senior living communities from DHC pursuant to five master leases and we managed for DHC's account 78 senior living communities pursuant to management agreements. Effective as of January 1, 2020, we restructured our business arrangements with DHC as further described below, and after giving effect to the Restructuring Transactions, all the senior living communities owned by DHC that we operate are pursuant to management agreements. As of June 30, 2020 , we managed 241 senior living communities for the account of DHC pursuant to the New Management Agreements. Restructuring our Business Arrangements with DHC . Pursuant to the Transaction Agreement as of the Conversion Time: • our five then existing master leases with DHC as well as our then existing management and pooling agreements with DHC were terminated and replaced with the New Management Agreements; • we completed the Share Issuances pursuant to which we issued 10,268,158 of our common shares to DHC and an aggregate of 16,118,849 of our common shares to DHC’s shareholders of record as of December 13, 2019; and • as consideration for the Share Issuances, DHC provided to us $75,000 by assuming certain of our working capital liabilities and through cash payments; we recognized $22,899 in loss on termination of leases, representing the excess of the fair value of the Share Issuances of $97,899 compared to the consideration of $75,000 paid by DHC. As of June 30, 2020 , DHC assumed $51,547 of our working capital liabilities as part of the $75,000 it provided to us for the Share Issuances. We received cash of $23,453 from DHC during the three months ended June 30, 2020 . Also pursuant to the Transaction Agreement: (1) commencing February 1, 2019, the aggregate amount of monthly minimum rent payable to DHC by us under our master leases with DHC was reduced to $11,000 , subject to adjustment, and subsequently reduced in accordance with the Transaction Agreement as a result of DHC’s subsequent sales of certain of the leased senior living communities, and no additional rent was payable to DHC by us from such date through the Conversion Time; and (2) as of April 1, 2019, DHC purchased from us $49,155 of unencumbered Qualifying PP&E (as defined in the Transaction Agreement) related to DHC's senior living communities leased and operated by us. In accordance with ASC Topic 842, the reduction in the monthly minimum rent payable to DHC under our then- existing master leases with DHC pursuant to the Transaction Agreement was determined to be a modification of these master leases, and we reassessed the classification of these master leases based on the modified terms and determined that these master leases continued to be classified as long-term operating leases until certain contingent events were achieved. The remaining contingent events were achieved and accordingly, we remeasured the lease liability and right of use asset recorded in our condensed consolidated balance sheets as of December 31, 2019, to zero. Pursuant to the New Management Agreements, we receive a management fee equal to 5% of the gross revenues realized at the applicable senior living communities plus reimbursement for our direct costs and expenses related to such communities. Commencing with the 2021 calendar year, we may receive an annual incentive fee equal to 15% of the amount by which the annual EBITDA, of all communities on a combined basis exceeds the target EBITDA for all communities on a combined basis for such calendar year, provided that in no event shall the incentive fee be greater than 1.5% of the gross revenues realized at all communities on a combined basis for such calendar year. The target EBITDA for those communities on a combined basis is increased annually based on the greater of the annual increase of the Consumer Price Index, or CPI, or 2% , plus 6% of any capital investments funded at the managed communities on a combined basis in excess of the target capital investment. Unless otherwise agreed, the target capital investment increases annually based on the greater of the annual increase of CPI or 2% . The New Management Agreements expire in 2034, subject to our right to extend them for two consecutive five-year terms if we achieve certain performance targets for the combined managed communities portfolio, unless earlier terminated or timely notice of nonrenewal is delivered. The New Management Agreements provide DHC with the right to terminate any New Management Agreement for a community that does not earn 90% of the target EBITDA for such community for two consecutive calendar years or in any two of three consecutive calendar years, with the measurement period commencing January 1, 2021 (and the first termination not possible until the beginning of calendar year 2023); provided DHC may not in any calendar year terminate communities representing more than 20% of the combined revenues for all communities for the calendar year prior to such termination. Pursuant to a guaranty agreement dated as of January 1, 2020, made by us in favor of DHC’s applicable subsidiaries, we have guaranteed the payment and performance of each of our applicable subsidiary’s obligations under the applicable New Management Agreements. We recognized transaction costs of $175 and $1,133 related to the Transaction Agreement for the three months ended June 30, 2020 and 2019 , respectively, and $1,270 and $8,808 for the six months ended June 30, 2020 and 2019 , respectively. Senior Living Communities Formerly Leased from DHC . Prior to the Conversion Time, we were DHC's largest tenant and DHC was our largest landlord. Under our prior master leases with DHC, we paid DHC annual rent plus percentage rent equal to 4.0% of the increase in gross revenues at the applicable senior living communities over base year gross revenues as specified in the applicable lease. Pursuant to the Transaction Agreement, we were no longer required to pay any additional rent to DHC beginning February 1, 2019. Our total rent expense under all of our leases with DHC was $32,490 and $86,272 for the three and six months ended June 30, 2019 , respectively, which amount included estimated percentage rent of $0 and $1,547 for the three and six months ended June 30, 2019 , respectively. Pursuant to the Transaction Agreement, our rent payable to DHC was reduced by a total of $13,840 in aggregate for February and March 2019 and we did not pay such amount to DHC. However, as the Transaction Agreement was not entered into until April 1, 2019, our rent expense for the three months ended March 31, 2019 was not adjusted for the rent reduction for February and March 2019. Instead, the rent reduction for February and March 2019 was determined to be a lease inducement, for which a liability for the $13,840 was recorded as a reduction of the right of use asset on our condensed consolidated balance sheets as of March 31, 2019, and was amortized as a reduction of rent expense over the remaining terms of our master leases. As of December 31, 2019 , we had no outstanding rent obligation to DHC. Our previously existing leases with DHC were “triple net” leases, which generally required us to pay rent and all property operating expenses, to obtain, maintain and comply with all applicable permits and licenses necessary to operate the leased communities, to indemnify DHC from liability which may arise by reason of its ownership of the communities, to maintain the communities at our expense, to remove and dispose of hazardous substances at the communities in compliance with applicable laws and to maintain insurance on the communities for DHC’s and our benefit. Prior to the Transaction Agreement, under our previously existing leases with DHC, we could request that DHC purchase certain improvements to the leased communities in return for increases in annual rent in accordance with a formula specified in the applicable lease. Pursuant to the Transaction Agreement, the $56,342 and $78,920 , respectively, of capital improvements to the leased communities that we sold to DHC during the three and six months ended June 30, 2019 , did not result in increased rent. In accordance with ASC Topic 840, Leases , the sale and leaseback transaction we completed in June 2016 with DHC qualified for sale-leaseback accounting and we classified the related lease as an operating lease. Accordingly, the gain generated from the sale of $82,644 was deferred and was being amortized as a reduction of rent expense over the initial term of the related lease. Upon our adoption of ASC Topic 842 on January 1, 2019, we recorded a cumulative effect adjustment through retained earnings of $67,473 , eliminating our remaining deferred gain. Senior Living Communities Managed for the Account of DHC and its Related Entities . As of June 30, 2020 and 2019 , we managed 241 and 77 senior living communities, respectively, for the account of DHC. We earned management fees of $15,135 and $3,802 from the senior living communities we managed for the account of DHC for the three months ended June 30, 2020 and 2019 , respectively, and $31,597 and $7,521 for the six months ended June 30, 2020 and 2019 , respectively. In addition, we earned fees for our management of capital expenditure projects at the communities we managed for the account of DHC of $444 and $153 for the three months ended June 30, 2020 and 2019 , respectively, and $906 and $346 for the six months ended June 30, 2020 and 2019 , respectively. These amounts are included in management fee revenue in our condensed consolidated statements of operations. In connection with the completion of the Restructuring Transactions, effective as of January 1, 2020, we and DHC terminated the long-term management and pooling agreements and replaced them with the New Management Agreements, the terms of which are discussed above. We also provide certain other services to residents at some of the senior living communities we manage for the account of DHC, such as rehabilitation and wellness services. At senior living communities we manage for the account of DHC where we provide rehabilitation and wellness services on an outpatient basis, the residents, third party payers or government programs pay us for those rehabilitation and wellness services. At senior living communities we manage for the account of DHC where we provide inpatient rehabilitation and wellness services, DHC generally pays us for these services and charges for such services are included in amounts charged to residents, third party payers or government programs. We earned revenues of $5,814 and $1,513 for the three months ended June 30, 2020 and 2019 , respectively, and $13,871 and $3,188 for the six months ended June 30, 2020 and 2019 , respectively, for rehabilitation and wellness services we provided at senior living communities we manage for the account of DHC and that are payable by DHC. These amounts are included in rehabilitation and wellness services in our condensed consolidated statements of operations. Consistent with our historical accounting for these services at our managed communities, the revenues earned at these clinics that were previously located at senior living communities that we leased from DHC but as of the Conversion Time, we now manage, no longer constitute intercompany revenues and thus will not be eliminated in consolidation and will be recognized and reported as rehabilitation and wellness services revenues in our condensed consolidated statements of operations. We earned management fees of $126 and $69 for the three months ended June 30, 2020 and 2019 , respectively, and $253 and $140 for the six months ended June 30, 2020 and 2019 , respectively, for management services at a part of a senior living community DHC subleases to an affiliate, which amounts are included in management fee revenues in our condensed consolidated statements of operations. We lease space from DHC at certain of the senior living communities that we manage for DHC. We use this leased space for inpatient and outpatient rehabilitation and wellness services clinics. We recognized rent expense of $488 and $782 for the three and six months ended June 30, 2020 with respect to these leases. |