Real Estate Investments

3 Months Ended

Mar. 31, 2017

Real Estate Investments

Real Estate Investments

2.Real Estate Investments

Assisted living communities, independent living communities, memory care communities and combinations thereof are included in the assisted living property classification (or collectively ALF). Historically, we had a property classification identified as range of care communities (or ROC) which consisted of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services. Since we only have seven ROC remaining and given that these properties derive materially all of their revenue from skilled nursing services, we elected to reclassify them into the SNF property classification.

Any reference to the number of properties, 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, 2017 (dollar amounts in thousands):

								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investments		Investments		Properties(1)	Beds	Units	Bed/Unit
Assisted Living	$	699,004	53.5	%	104	—	5,707	$	122.48
Skilled Nursing(2)		579,627	44.4	%	76	9,245	274	$	60.89
Under Development(3)		17,071	1.3	%	—	—	—		—
Other(4)		10,216	0.8	%	1	118	—		—
Totals	$	1,305,918	100.0	%	181	9,363	5,981

⁽¹⁾ We own properties in 28 states that are leased to 27 different operators.

⁽²⁾ Includes seven SNFs with ALF units.

⁽³⁾ Represents three development projects consisting of two MC with a total of 132 units and a 143-bed SNF.

⁽⁴⁾ Includes three parcels of land held-for-use, and one behavioral health care hospital. The behavioral health care hospital has two licensed skilled nursing beds and 116 acute care licensed hospital beds which represents an investment of $78.39 per bed.

Owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years. Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other 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.

During the three months ended March 31, 2017 and 2016, we invested the following in development and improvement projects (in thousands):

	Three months ended  March 31, 2017				Three months ended  March 31, 2016
	Development		Improvements		Development		Improvements
Assisted Living Communities	$	2,941	$	41	$	13,439	$	1,135
Skilled Nursing Centers		502		701		-		2,118
	$	3,443	$	742	$	13,439	$	3,253

During the three months ended March 31, 2016, we sold a 48-unit assisted living community located in Florida for $1,750,000 and we acquired a newly constructed 126-bed skilled nursing center in Texas for $16,000,000.  

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2017 (dollar amounts in thousands):

			Percentage		Number	Number	Number of		Investment
	Gross		of		of	of	SNF	ALF	per
Type of Property	Investments		Investments		Loans	Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	219,671	97.4	%	5	21	2,828	—	$	77.68
Assisted Living(2)		4,664	2.1	%	1	1	—	70	$	66.63
Other(3)		1,206	0.5	%	1	—	—	—		—
Totals	$	225,541	100.0	%	7	22	2,828	70

⁽¹⁾ We have investments in properties located in four states that include mortgages to four different operators.

⁽²⁾ Represents a first mortgage on a 70-unit assisted living community. Subsequent to March 31, 2017, we received the payoff from this mortgage loan.

⁽³⁾ Includes a parcel of land secured under a short-term mortgage loan. Subsequent to March 31, 2017, we received the payoff from this mortgage loan. 

At March 31, 2017, the mortgage loans had interest rates ranging from 7.4% to 11.2% and maturities ranging from 2017 to 2045. In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20-year to 30-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.

The following table summarizes our mortgage loan activity for the three months ended March 31, 2017 and 2016 (in thousands):

	2017		2016
Origination/Funding	$	4,384	$	6,599
Pay-offs		10,796		513
Scheduled principal payments received		162		502