COMMITMENTS AND CONTINGENCIES

In the normal course of business, we enter into a variety of commitments, typical of which are those for the funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease. In our leasing operations we offer to our tenants and to sellers of newly-acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded. The tables below summarize our existing, known commitments and contingencies according to the nature of their impact on our leasehold or loan portfolios.



	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
Life Care Services Note A	SHO	Construction	$	60,000,000	$	(53,622,000	)	$	6,378,000
Bickford Senior Living	SHO	Construction	28,000,000		(15,558,000		)	12,442,000
Senior Living Communities	SHO	Revolving Credit	15,000,000		(616,000		)	14,384,000
			$	103,000,000	$	(69,796,000	)	$	33,204,000

See Note 3 for full details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees. We expect to fully fund the Life Care Services Note A during 2018. Funding of the promissory note commitments to Bickford is expected to transpire monthly throughout 2018.



	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Legend/The Ensign Group	SNF	Purchase	$	56,000,000	$	(14,000,000	)	$	42,000,000
East Lake/Watermark Retirement	SHO	Renovation	10,000,000		(5,900,000		)	4,100,000
Santé Partners	SHO	Renovation	3,500,000		(2,621,000		)	879,000
Bickford Senior Living	SHO	Renovation	2,400,000		(122,000		)	2,278,000
East Lake Capital Management	SHO	Renovation	400,000		—			400,000
Senior Living Communities	SHO	Renovation	6,830,000		(970,000		)	5,860,000
Discovery Senior Living	SHO	Renovation	500,000		—			500,000
Woodland Village	SHO	Renovation	7,450,000		(762,000		)	6,688,000
Chancellor Health Care	SHO	Construction	650,000		(62,000		)	588,000
Navion Senior Solutions	SHO	Construction	650,000		—			650,000
			$	88,380,000	$	(24,437,000	)	$	63,943,000

As discussed in Note 2, we remain obligated to purchase, from a developer, three new skilled nursing facilities in Texas for $42,000,000 which are leased to Legend and subleased to Ensign.



	Asset Class	Type	Total		Funded			Remaining
Contingencies:
Bickford / Sycamore	SHO	Lease Inducement	$	14,000,000	$	(2,250,000	)	$	11,750,000
East Lake Capital Management	SHO	Lease Inducement	8,000,000		—			8,000,000
Navion Senior Solutions	SHO	Lease Inducement	4,850,000		—			4,850,000
Prestige Care	SHO	Lease Inducement	1,000,000		—			1,000,000
The LaSalle Group	SHO	Lease Inducement	5,000,000		—			5,000,000
			$	32,850,000	$	(2,250,000	)	$	30,600,000

Contingent payments related to the five Bickford development properties constructed in 2016 and 2017 include a licensure incentive of $250,000 per property. Additionally, each property is subject to a three-tiered operator incentive schedule paying up to an additional $1,750,000, based on the attainment of certain performance metrics. As funded, these payments are added to the lease base and amortized against rental income.

In connection with our July 2015 lease to East Lake of three senior housing properties, NHI has committed to certain lease inducement payments of $8,000,000 contingent on reaching and maintaining certain metrics. The inducements have been assessed as not probable of payment, and we have not recorded them on our balance sheets as of December 31, 2017. We are unaware of circumstances that would change our initial assessment as to the contingent lease incentives. Not included in the above table is a seller earnout of $750,000, which is recorded on our consolidated balance sheets within accounts payable and accrued expenses.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore, an affiliate of Bickford, which previously held a minority interest in PropCo (see Note 2). In the fourth quarter of 2017, Sycamore began to draw on other means to furnish its resource provider the required letter of credit, and our commitment under the 2014 letter was ended. As of December 31, 2017, we furnish no direct support to Sycamore. As an affiliate company of Bickford, Sycamore is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE.

See Note 2 to the consolidated financial statements for further description of contingent lease inducements available to Navion Senior Solutions, LaSalle and Prestige.

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 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 the 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.