Real Estate Investments (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of future minimum base rents receivable

Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent, amortization of lease inducement and renewal options are as follows (in thousands):


	Cash
	Rent ⁽¹⁾
2020	$	135,173
2021		126,914
2022		128,196
2023		129,846
2024		126,320
Thereafter		625,158

(1)

Represents contractual annual cash rent, except for two master leases which are based on agreed upon cash rents. See below for more information. Includes rental income due to lessee reimbursement of our real estate taxes and subsequent acquisitions and excludes properties held-for-sale at December 31, 2019.

Summary of components of our rental income

The following table summarizes components of our rental income for the years ended December 31, 2019, 2018 and 2017 (in thousands):


	Year Ended December 31,
Rental Income		2019			2018			2017
Base cash rental income	$	134,117	⁽¹⁾	$	127,477		$	128,715
Variable cash rental income		16,462	⁽²⁾		470	⁽²⁾		457	⁽²⁾
Straight-line rent		4,487	⁽³⁾		9,550			10,694
Adjustment for collectibility of rental income		(1,926)	⁽⁴⁾		—			—
Amortization of lease incentives		(385)			(2,092)			(2,209)
Total	$	152,755		$	135,405		$	137,657

(1)	Increased due to acquisitions, developments and capital improvements partially offset due to reduced rent from sold properties and properties transitioned to other operators.

(2)

The year ended December 31, 2019 variable rental income includes $464 related to contingent rental income and $15,998 related to real estate taxes which were reimbursed by our operators. Per the provisions of ASC 842, any lessor cost, paid by the lessor and reimbursed by the lessee must be included as a variable lease payment. As discussed above, we adopted ASC 842 using a modified retrospective approach as of the adoption date of January 1, 2019. Accordingly, we are not required to report this revenue stream for periods prior to January 1, 2019. For the year ended December 31, 2018, and 2017, the variable income represents contingent rental income.

(3)

In accordance with ASC 842 lease accounting guidance, we evaluated the collectibility of lease payments through maturity and determined it was not probable that we would collect substantially all of the contractual obligations from Anthem, Thrive, Preferred Care and Senior Care leases through maturity. Decreased due to these leases being accounted for on cash-basis as of January 1, 2019.

(4)

During the first quarter of 2019, we terminated a lease agreement and transitioned two operating seniors housing communities under the lease agreement to a new operator. As a result of the lease termination, we wrote-off $1,926 straight-line rent receivable to contra-revenue in accordance with ASC 842.

Summary of information about purchase options included in our lease agreements

Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. The following table summarizes information about purchase options included in our lease agreements (dollar amount in thousands):


	Type	Number
	of	of		Gross		Carrying	Option
State	Property	Properties		Investments		Value	Window
California	ALF/MC	2	$	38,895	$	36,542	2024-2029
California	ALF	2		28,926		16,056	2021-TBD	⁽¹⁾
Florida	MC	1		14,201		12,757	2028-2029
Kentucky and Ohio	MC	2		30,126		27,859	2028-2029
Texas	MC	2		25,265		24,335	2025-2027
South Carolina	ALF/MC	1		11,680		10,794	2028-2029
Total			$	149,093	$	128,343

(1)	The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies.

Summary of investments acquired


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year ⁽¹⁾	Type of Property	Price		Costs ⁽²⁾		Costs		Properties	Beds/Units
2019	Assisted Living ⁽³⁾	$	35,719	$	315	$	36,034	3	230
	Skilled Nursing ⁽⁴⁾		19,500		97		19,597	1	90
	Land ⁽⁵⁾		2,732		51		2,783	—	—
Total		$	57,951	$	463	$	58,414	4	320

2018	Assisted Living ^{(6) (7)}	$	39,600	$	65	$	39,665	3	177
	Land ⁽⁷⁾		695		48		743	—	—
Total		$	40,295	$	113	$	40,408	3	177

2017	Assisted Living ⁽⁸⁾	$	81,018	$	569	$	81,587	5	400
	Land ⁽⁹⁾		800		18		818	—	—
Total		$	81,818	$	587	$	82,405	5	400

(1)	Subsequent to December 31, 2019, we acquired a 140-bed SNF located in Texas for approximately $13,500 million and entered into a 10-year master lease agreement with an initial cash yield of 8.5%, escalating 2% annually starting in the second year of the lease, with two five-year renewal options.

(2)

Represents cost associated with our acquisitions; however, upon adoption of ASU 2017-01, our acquisitions meet the definition of an asset acquisition resulting in capitalization of transaction costs to the properties’ basis. For our land purchases with forward development commitments, transaction costs are capitalized as part of construction in progress. Transaction costs per Consolidated Statements of Income and Comprehensive Income represent current and prior year transaction costs due to timing and terminated transactions.

(3)

We entered into a JV (consolidated on our financial statements) to purchase an existing operational 74-unit ALF/MC community. The non-controlling partner contributed $919 of equity and we contributed $15,976 in cash. Our economic interest in the real estate JV is approximately 95%. See Note 10. Equity for further discussion related to our partnerships and non-controlling interests. Additionally, we acquired an 80-unit MC and a 76-unit ALF/MC in Michigan for an aggregate purchase price of $19,000.

(4)	We acquired a newly constructed 90-bed SNF located in Missouri.

(5)	We acquired a parcel of land adjacent to an existing SNF in California. Additionally, we acquired a parcel of land and committed to develop a 90-bed SNF in Missouri. The commitment totals approximately $17,400.

(6)	We acquired two MC in Texas.

(7)	We entered into a JV (consolidated on our financial statements) to purchase an existing operational 89-unit ILF for $14,400 and to own the real estate and develop a 78-unit ALF/MC for $18,108 in Oregon

(8)	We acquired an ALF and a MC in California, a MC in Ohio and an ALF/MC in Missouri. Furthermore, we entered into a JV and acquired an ALF/MC community.

(9)	We entered into a JV for the acquisition of land and development of an ILF/ALF/MC community in Wisconsin.

Schedule of investment in development and improvement projects

Developments and Improvements. During the years ended December 31, 2019, 2018 and 2017, we invested the following in development and improvement projects (in thousands):


	2019				2018				2017
Type of Property	Developments		Improvements		Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	14,088	$	2,544	$	27,505	$	2,292	$	17,667	$	1,152
Skilled Nursing Centers		6,436		—		7,774		500		5,234		1,356
Other		—		295		—		457		—		391
Total	$	20,524	$	2,839	$	35,279	$	3,249	$	22,901	$	2,899

Schedule of completed projects

Completed Projects. The following table summarizes our completed projects during the years ended December 31, 2019, 2018 and 2017 (dollar amounts in thousands):


		Number	Type	Number
		of	of	of			Total
Year	Type of Project	Properties	Property	Beds/Units	State	Investment
2019	Development	1	SNF	143	Kentucky	$	24,974
	Development	1	ILF/ALF/MC	110	Wisconsin		21,999
Total		2		253		$	46,973

2018	Development	1	MC	66	Illinois	$	14,998
Total		1		66		$	14,998

2017	Development	1	MC	66	Illinois	$	13,498
Total		1		66		$	13,498

Summary of properties held-for-sale

Properties held-for-sale. The following table summarizes our properties held-for-sale at years ended December 31, 2019 and 2018 (dollar amounts in thousands):


		Type	Number	Number
		of	of	of		Gross		Accumulated
At December 31,	State	Property	Properties	Beds/units		Investment		Depreciation
2019	Colorado	SNF	3	275	$	8,045	$	3,774
	Iowa	SNF	7	544		14,610		9,723
	Kansas	SNF	3	250		14,111		6,674
	Texas	SNF	7	1,148		25,203		14,942
Total			20	2,217	$	61,969	$	35,113

2018	Texas	ILF	1	140	$	5,746	$	1,916
Total			1	140	$	5,746	$	1,916

Schedule of real estate investment property sold

Property Sales. The following table summarizes property sales during the years ended December 31, 2019 through 2017 (dollar amounts in thousands):


		Type		Number	Number						Net
		of		of	of		Sales		Carrying		Gain
Year	State	Properties		Properties	Beds/Units		Price		Value		(Loss)
2019	N/A	N/A		—	—	$	—	$	—	$	500	⁽¹⁾
	Arizona, Georgia and Texas	SNF	⁽²⁾	3	478		15,310		8,995		5,556
	Texas	ALF	⁽³⁾	1	140		1		3,830		(3,950)
Total 2019				4	618	$	15,311	$	12,825	$	2,106

2018	Alabama	SNF		4	454	$	27,975	$	5,695	$	21,987
	Kansas	ALF	⁽⁴⁾	—	—		350		346		—
	Ohio and Pennsylvania	ALF		6	320		67,500		16,352		48,695
Total 2018				10	774	$	95,825	$	22,393	$	70,682

2017	Indiana, Iowa and Oregon	ALF		5	211	$	15,650	$	10,107	$	4,985
	Texas	SNF	⁽⁵⁾	1	85		—		1,170		(1,171)
Total 2017				6	296	$	15,650	$	11,277	$	3,814

(1)	Gain recognized due to the receipt of funds held in escrow related to a portfolio of six ALFs sold during the second quarter of 2018.

(2)

We sold a property, previously operated by Preferred Care, located in Texas with a carrying value of $871 for $140. Additionally, we sold a property, previously operated by Preferred Care, located in Arizona with a carrying value of $6,485 for $7,250. This transaction includes a holdback of $1,091 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC 606, we estimated and recorded the holdback value of $613. Also, we sold a SNF located in Georgia with a carrying value of $1,639 for $7,920.

(3)	We sold an ALF located in Texas with a carrying value of $3,830.

(4)	We sold land adjacent to an existing ALF community in Kansas.

(5)	We donated a SNF located in Texas, with a carrying value of $1,170 to a nonprofit health care provider.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the years ended December 31, 2019, 2018 and 2017 (in thousands):



	2019			2018			2017
Originations and funding under mortgage loans receivable	$	12,342	⁽¹⁾	$	21,364	⁽²⁾	$	11,913
Pay-offs received		—			(1,086)			(16,665)
Scheduled principal payments received		(1,065)			(1,050)			(1,198)
Mortgage loan premium amortization		(4)			(4)			(4)
(Provision for) recovery of loan loss reserve		(113)			(192)			60
Net increase (decrease) in mortgage loans receivable	$	11,160		$	19,032		$	(5,894)

Scheduled principal payments on mortgage loan receivables


	Scheduled
	Principal
2020	$	1,065
2021		1,175
2022		1,175
2023		1,175
2024		1,175
Thereafter		250,894
Total	$	256,659

Schedule of early mortgage loan payoffs

The following table summarizes our early mortgage loan payoffs during the years 2019, 2018 and 2017 (dollar amounts in thousands):



		Early	Number
		Principal	of
		Payoff	Loans	State
2019	$	—	—	N/A
2018	$	1,086	1	UT
2017	$	10,795	4	AZ/MO/TX