Commitments And Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

In the normal course of business, we enter into a variety of commitments, typically consisting of 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 as of September 30, 2019 according to the nature of their impact on our leasehold or loan portfolios.



	Asset Class	Type	Total		Funded			Remaining
Loan Commitments:
LCS Sagewood Note A	SHO	Construction	$	118,800,000	$	(77,340,000	)	$	41,460,000
LCS Sagewood Note B	SHO	Construction	61,200,000		(32,052,000		)	29,148,000
LCS Timber Ridge Note A	SHO	Construction	60,000,000		(59,349,000		)	651,000
Bickford Senior Living	SHO	Construction	42,700,000		(33,168,000		)	9,532,000
Senior Living Communities	SHO	Revolving Credit	15,000,000		(4,755,000		)	10,245,000
41 Management	SHO	Construction	10,800,000		(3,324,000		)	7,476,000
Discovery Senior Living	SHO	Working Capital	750,000		—			750,000
			$	309,250,000	$	(209,988,000	)	$	99,262,000

See Note 3 to our condensed consolidated financial statements for full details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees.



	Asset Class	Type	Total		Funded			Remaining
Development Commitments:
Ignite Medical Resorts	SNF	Construction	$	25,350,000	$	(13,255,000	)	$	12,095,000
Woodland Village	SHO	Renovation	7,450,000		(7,374,000		)	76,000
Senior Living Communities	SHO	Renovation	6,830,000		(6,004,000		)	826,000
Senior Living Communities	SHO	Renovation	3,100,000		(2,000,000		)	1,100,000
Wingate Healthcare	SHO	Renovation	1,900,000		(212,000		)	1,688,000
Discovery Senior Living	SHO	Renovation	1,400,000		—			1,400,000
Navion Senior Solutions	SHO	Construction	650,000		—			650,000
			$	46,680,000	$	(28,845,000	)	$	17,835,000

In addition to the commitments listed above, Discovery PropCo has committed to Discovery for funding up to $2,000,000 toward the purchase of condominium units located at one of the facilities.



	Asset Class	Type	Total		Funded			Remaining
Contingencies:
Bickford Senior Living	SHO	Lease Inducement	$	10,000,000	$	(10,000,000	)	$	—
Bickford Senior Living	SHO	Incentive Loan Draws	6,000,000		—			6,000,000
Comfort Care Senior Living	SHO	Lease Inducement	6,000,000		—			6,000,000
Wingate Healthcare	SHO	Lease Inducement	5,000,000		—			5,000,000
Navion Senior Solutions	SHO	Lease Inducement	4,850,000		(500,000		)	4,350,000
Discovery Senior Living	SHO	Lease Inducement	4,000,000		—			4,000,000
Ignite Medical Resorts	SNF	Lease Inducement	2,000,000		—			2,000,000
			$	37,850,000	$	(10,500,000	)	$	27,350,000

Contingent lease inducement payments of $10,000,000 related primarily to the five Bickford development properties constructed in 2016 and 2017 which included a licensure incentive of $250,000 per property and a three-tiered operator incentive schedule paying up to an additional $1,750,000, based on the attainment of certain performance metrics. Upon funding, these payments were added to the lease base and are being amortized against rental income. On exercise of our purchase options for additional Bickford development properties, under the 2016 agreement governing the unwind of our joint venture with Bickford, unfunded loan incentives convert to lease inducements on a dollar-for-dollar basis.

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.

In June 2018, East Lake Capital Management LLC and certain related entities, including Regency (for three assisted living facilities in Tennessee, Indiana and North Carolina), filed suit against NHI in Texas seeking injunctive and declaratory relief and unspecified monetary damages. We countered with motions calling for the immediate appointment of a receiver and for pre-judgment possession. Resulting from these claims and counterclaims, on December 6, 2018, the plaintiff parties entered into an agreement resulting in Regency vacating the facilities in December 2018. Litigation is ongoing.

LaSalle defaulted on its rent payment in November 2018. We transitioned the properties to a new operator and on April 16, 2019, we placed the five buildings with a new tenant under similar arrangements to those in place over the former Regency buildings, with NHI to receive operating cash flow, after management fees, generated by the facilities pending stabilization. We also commenced litigation for the recovery of certain funds owed under the lease and against the principal executive, Mitch Warren personally, under a guaranty agreement. In the meantime, Autumn Leaves, the manager, has declared bankruptcy under Chapter 11. The litigation is ongoing.