Real Estate Investments

3 Months Ended

Mar. 31, 2013

Real Estate Investments

Real Estate Investments

2. Real Estate Investments

Assisted living properties, independent living properties, memory care properties, and combinations thereof are included in the assisted living property type. Range of care properties (or ROC) property type consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.

Any reference to the number of properties, number of schools, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Owned Properties. The following table summarizes our investments in owned properties at March 31, 2013 (dollar amounts in thousands):

			Number	Number of		Investment per Bed/Unit
Type of Property	Gross Investments	Percentage of Investments	of Properties (1)	SNF Beds	ALF Units
Skilled Nursing	$448,010	49.4%	73	8,435	—	$53.11
Assisted Living	379,874	41.9%	96	—	4,502	$84.38
Range of Care	43,907	4.8%	8	634	274	$48.36
Under Development (2)	22,347	2.5%	—	—	—	—
Schools	12,444	1.4%	2	—	—	—
Totals	$906,582	100.0%	179	9,069	4,776

(1) We have investments in 26 states leased to 35 different operators.

(2) Includes a MC development with 60 units and two combination ALF and MC developments with a total of 158 units, a 143-bed SNF development and a 120-bed SNF redevelopment project.

All of our owned properties are leased to our operators pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years.  Each lease is a triple net lease covering one or more properties which requires the operator/lessee to pay all costs necessary in the operations of the facilities.  Many of the leases contain renewal options.  The leases provide for fixed minimum base rent during the initial and renewal periods.  The majority of our leases contain provisions for specified annual increases over the rents of the prior year that are generally computed in one of four ways depending on specific provisions of each lease:

(i)	a specified percentage increase over the prior year’s rent, generally between 2.0% and 3.0%;
(ii)	a calculation based on the Consumer Price Index;
(iii)	as a percentage of facility net patient revenues in excess of base amounts; or
(iv)	specific dollar increases.

As of March 31, 2013, we have a commitment to provide, under certain conditions, up to $5,000,000 per year through December 2014 to an existing operator for expansion of the 37 properties they lease from us.  The estimated yield of this commitment is 9.5% plus the positive difference, if any, between the average yields on the U.S. Treasury 10-year note for the five days prior to funding, minus 420 basis points. In addition, the following table summarizes our investment commitments as of March 31, 2013, excluding the $5,000,000 per year commitment, and year to date funding on our development, redevelopment, renovation and expansion projects (excludes capitalized interest, dollar amounts in thousands):

Type of Property	Investment Commitment	2013 Funding (2)	Commitment Funded	Remaining Commitment	Number of Properties	Number of Beds/Units
Skilled Nursing	$36,644	$2,313	$11,418	$25,226	6	785
Assisted Living (1)	40,927	3,880	12,122	28,805	7	494
Totals	$77,571	$6,193 (3)	$23,540	$54,031	13	1,279

(1) Includes the development of a 60-unit memory care property for $9,817 and two assisted living and memory care combination properties for a total of $16,385, the expansion of three assisted living properties for a total $14,600 and the renovation of a 140-unit independent living property for $125.

(2) Excludes $117 of capital improvement on a completed project with no remaining commitments.

(3) In April of 2013, we funded $1,398 under investment commitments.

During the three months ended March 31, 2012, we purchased a 144-bed skilled nursing property located in Texas for an aggregate purchase price of $18,600,000.  Additionally, we sold a 140-bed skilled nursing property located in Texas for $1,248,000 and recognized a gain, net of selling expenses, of $16,000. This property was leased under a master lease and the economic terms of this master lease did not change as a result of this sale.

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2013 (dollar amounts in thousands):

		Percentage		Number	Number of		Investment
Type of Property	Gross Investments	of Investments	Number  of Loans	of Properties(1)	SNF  Beds	ALF Units	per Bed/Unit
Skilled Nursing (2)	$25,097	62.5%	15	17	1,861	—	$13.49
Assisted Living	12,245	30.5%	3	8	—	211	$58.03
Range of Care	2,800	7.0%	1	1	99	74	$16.18
Totals	$40,142	100.0%	19	26	1,960	285

(1) We have investments in 8 states that include mortgages to 11 different operators.

(2) Includes a mortgage and construction loan secured by a currently operating skilled nursing property and parcel of land upon which a 106-bed replacement facility will be constructed. The agreement gives us the right to purchase the replacement facility for $13,500 during an 18 month period beginning on the first anniversary of the issuance of the certificate of occupancy.

At March 31, 2013, the mortgage loans had interest rates ranging from 7.0% to 13.5% and maturities ranging from 2014 to 2022.  In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20-year to 25-year amortization schedules.  The majority of the mortgage loans provide for annual increases in the interest rate based upon a specified increase of 10 to 25 basis points. During the three months ended March 31, 2013 and 2012, we received $462,000 and $718,000, respectively, in regularly scheduled principal payments. During the three months ended March 31, 2013, we funded $910,000 under a $10,600,000 mortgage and construction loan and we have a remaining commitment of $7,070,000.