Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

7. Commitments and Contingencies

As part of an acquisition in 2011, we committed to provide a contingent payment if certain operational thresholds are met.  The contingent payment was recorded at fair value, which was estimated using a discounted cash flow analysis, and we are accreting the contingent liability to the estimated settlement amount as of the payment date.  The fair value of such contingent liability is re-evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. Any changes in estimated fair value are recognized in our results of operations. During each of the three and six months ended June 30, 2013 and 2012, we recorded non-cash interest expense of $110,000 and $220,000 related to the contingent liability. At June 30, 2013 and December 31, 2012, the contingent liability had a carrying value of $6,963,000 and $6,744,000, respectively.

At June 30, 2013, we made outstanding commitments totaling $70,352,000 to develop, re-develop, renovate or expand six skilled nursing properties with a total of 640 beds, a memory care property with 60 units, two assisted living and memory care combination properties with a total of 158 units, and three assisted living properties with a total of 136 units.  As of June 30, 2013, we have funded $23,869,000 under these commitments and have a remaining commitment of $46,483,000. We also 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.  See Note 2. Real Estate Investments for further discussion of these commitments. Additionally at June 30, 2013, we had a $10,600,000 mortgage and construction commitment. As of June 30, 2013, we funded $3,533,000 under this commitment and have a remaining commitment of $7,067,000. See Note 2. Real Estate Investments for further discussion of this mortgage and construction loan.  We also committed to provide $1,850,000 in loan and line of credit agreements to certain operators. As of June 30, 2013, we had funded $655,000 under these commitments and have a remaining commitment of $1,195,000. See Note 3. Notes Receivables for further discussion of these commitments.