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Commitments And Contingencies
3 Months Ended
Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES

Bickford

In February 2015 our joint venture with Bickford announced the development of five senior housing facilities in Illinois and Virginia. Each community will consist of 60 private-pay assisted living and memory care units managed by Bickford. These five properties will represent the culmination of plans announced in 2012 between NHI and Bickford to construct a total of eight facilities. Construction on the five is expected to start in mid-2015 with openings planned for 2016. The total estimated project cost is $55,000,000. The first three communities, all in Indiana, opened in 2013 and 2014. Upon completion, the NHI-Bickford joint venture will be comprised of 36 properties in eight states. As of March 31, 2015, pre-development costs incurred on the project totaled $941,000.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore which holds a minority interest in PropCo. At March 31, 2015 our commitment on the letter of credit totaled $3,550,000.

In June 2014 we entered into a $500,000 revolving loan with Sycamore to fund pre-development expenses related to potential future projects. Interest is payable monthly at 10% and the note matures in August 2015. At March 31, 2015, the revolving loan had an outstanding balance of $359,000.

Chancellor

In October 2013, we entered into a $7,500,000 commitment to build a 46-unit free-standing assisted living and memory care community on our Linda Valley senior living campus in Loma Linda, California. We began construction during the first quarter of 2014 and had funded $5,945,000 as of March 31, 2015. The initial lease term is for 15 years at an annual rate of 9% plus a fixed annual escalator. NHI purchased the Linda Valley campus in 2012 and leased it to Chancellor Health Care ("Chancellor"), who has been operating the campus since 1993. We also committed to provide up to $1,150,000 for renovations and improvements related to our recent acquisitions of senior housing communities in Oregon and Maryland, which we have leased to Chancellor. We began renovations during the first quarter of 2014 and had funded $750,000 as of March 31, 2015. We receive rent income on funds advanced for each construction project.

Discovery

As a lease inducement, we have a contingent commitment to fund a series of payments up to $2,500,000 in connection with our September 2013 lease to Discovery Senior Living ("Discovery") of a senior living campus in Rainbow City, Alabama. Discovery would earn the contingent payments upon obtaining, and maintaining, a specified lease coverage ratio. Remaining payments will be assessed for funding in an amount of $750,000 in September 2015 with the residual potentially due in 2016. As of March 31, 2015, incurring the contingent payments was not considered probable. Accordingly, no provision for these payments is reflected in the condensed consolidated financial statements.

Holiday Retirement

In connection with our lease with Holiday Retirement, we collected escrow deposits of $1,500,000 for capital improvements to the leased facilities. As of March 31, 2015, we had funded $1,500,000 toward this commitment.

Kentucky River

In March 2012, we entered into a long-term lease extension and construction commitment to an affiliate of Community Health Systems to provide up to $8,000,000 for extensive renovations and additions to our Kentucky River Medical Center, a general acute care hospital in Jackson, Kentucky. Funding for this investment is added to the basis on which the lease amount is calculated. The construction project commenced during the first quarter of 2013 and is expected to be completed in 2015. Total construction costs incurred as of March 31, 2015 were $7,423,000. The 10-year lease extension began July 1, 2012, with an additional 5-year renewal option.

Prestige

We have agreed to fund capital improvements of up to $2,000,000 in connection with two of the skilled nursing facilities we lease to Prestige Senior Living. The capital improvements will be an addition to our original investment in the properties when funded and will be included in the lease base. As of March 31, 2015, we had funded $1,941,000 of this commitment. Additionally, we have committed to fund contingent earn out payments up to a maximum of $6,390,000 based on the achievement of certain financial metrics as measured periodically through December 31, 2015. At acquisition, we estimated probable contingent payments of $3,000,000 to be likely and have reflected that amount in the condensed consolidated financial statements. Contingent payments earned will be included in the lease base when funded.

Santé

We have a $2,000,000 loan commitment to our borrower, Santé Partners, LLC (“Santé”). This additional loan amount becomes available to the borrower when the 70-bed transitional rehabilitation hospital, completed in March 2011, achieves certain operating metrics. NHI also has the option to purchase and lease back the hospital when it achieves a predetermined level of stabilized net operating income.

We are committed to fund a $3,500,000 expansion and renovation program at our Silverdale, Washington senior living campus and as of March 31, 2015 had funded $2,621,000, which was added to the basis on which the lease amount is calculated. In addition, we have a contingent commitment to fund two lease inducement payments of $1,000,000 each. Santé would earn the payments upon attaining and sustaining a specified lease coverage ratio. If earned, the first payment would be due following calendar year 2015 and the second payment would be due following calendar year 2016. At acquisition, incurring the contingent payments was not considered probable. Accordingly, no provision for these payments is reflected in the condensed consolidated financial statements.

Senior Living Communities

In connection with our December 2014 Senior Living acquisition, we have provided a $15,000,000 revolving line of credit to Senior Living, the maturity of which will mirror the term of the master lease. Borrowings will be used to finance construction projects within the Senior Living Portfolio, including building additional units. Up to $5,000,000 of the facility may be used to meet general working capital needs. Amounts outstanding under the facility, $3,725,000 at March 31, 2015, bear interest at an annual rate equal to the 10-year U.S. Treasury rate, 1.94% at March 31, 2015, plus 6%.

Senior Living Management

We have entered into agreements with our current tenant, Senior Living Management, to fund up to $920,000 for renovations to our facilities in Georgia and Louisiana. As amounts are funded, they are added to the lease base. As of March 31, 2015, we had funded $220,000 toward this commitment.

Signature India

In 2012 we entered into a revolving loan facility of $1,500,000, bearing interest at a current rate of 10%, with a U.S. entity to fund pre-development activities internationally. With the extension of $250,000 in funding on March 31, 2015, the facility is fully drawn.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from both the operation of the facilities and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of our facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.