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Real Estate Investments (Tables)

6 Months Ended

Jun. 30, 2020

Summary of investments in owned properties

The following table summarizes our investments in owned properties at June 30, 2020 (dollar amounts in thousands):


								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investment		Investment		Properties ⁽¹⁾	Beds	Units	Bed/Unit
Assisted Living	$	880,343	60.9	%	107	—	6,164	$	142.82
Skilled Nursing		543,825	37.6	%	50	6,283	212	$	83.73
Under Development ⁽²⁾		10,163	0.7	%	—	—	—		—
Other ⁽³⁾		11,360	0.8	%	1	118	—		—
Total	$	1,445,691	100.0	%	158	6,401	6,376

(1)	We own properties in 27 states that are leased to 29 different operators.

(2)	Represents a 90-bed SNF development project located in Missouri.

(3)	Includes three parcels of land held-for-use, and one behavioral health care hospital.

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 receivable, amortization of lease incentives and renewal options are as follows (in thousands):


	Cash
	Rent ⁽¹⁾
2020	$	68,001
2021		141,369
2022		128,751
2023		129,931
2024		126,406
Thereafter		623,574

(1)	Represents contractual cash rent, except for Anthem Memory Care (“Anthem”) lease which is based on projected cash to be received as agreed upon with the operator.

Summary of components of our rental income

The following table summarizes components of our rental income for the three and six months ended June 30, 2020 and 2019 (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Rental Income		2020			2019			2020			2019
Base cash rental income	$	33,336		$	33,019		$	66,351		$	66,933
Variable cash rental income		4,155	⁽¹⁾		4,077	⁽¹⁾		8,437	⁽¹⁾		8,562	⁽¹⁾
Straight-line rent		634			1,275			1,473			2,513
Change in straight-line rent receivable and lease incentives due to collectibility		(17,742)	⁽²⁾		—			(17,742)	⁽²⁾		(1,926)
Amortization of lease incentives		(108)			(94)			(209)			(181)
Total	$	20,275		$	38,277		$	58,310		$	75,901

(1)

The variable rental income for the three and six months ended June 30, 2020, includes contingent rental income of $44 and $104, respectively, and reimbursement of real estate taxes by our lessees of $4,111 and $8,333, respectively. The variable rental income for the three and six months ended June 30, 2019 includes contingent rental income of $167 and $317, respectively, and reimbursement of real estate taxes by our lessees of $3,910 and $8,245, respectively.

(2)

During the second quarter of 2020, Senior Lifestyle Corporation (“Senior Lifestyle”) failed to pay full rent for May and June 2020. In accordance with ASC 842, we evaluated the collectibility of receiving substantially all of our lease payments from the Senior Lifestyle master lease through maturity and determined that we did not have the level of certainty required by the standard. Accordingly, we wrote-off $17,557 of Senior Lifestyle’s straight-line rent receivable and $185 of Senior Lifestyle’s lease incentives related to this master lease.

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	$	36,072	2024-2029
California	ALF	2		30,372		17,082	2021-TBD	⁽¹⁾
Florida	MC	1		14,340		12,720	2028-2029
Kentucky and Ohio	MC	2		30,152		27,509	2028-2029
Texas	MC	2		25,265		24,025	2025-2027
South Carolina	ALF/MC	1		11,680		10,503	2028-2029
Total			$	150,704	$	127,911

(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

Acquisitions and Developments: The following table summarizes our acquisitions for the six months ended June 30, 2020 and 2019 (dollar amounts in thousands):


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year	Type of Property	Price		Costs ⁽¹⁾		Costs		Properties	Beds/Units
2020	Skilled Nursing ⁽²⁾	$	13,500	$	81	$	13,581	1	140

2019	Assisted Living ⁽³⁾	$	16,719	$	176	$	16,895	1	74
	Land ⁽⁴⁾		110		26		136	—	—
Total		$	16,829	$	202	$	17,031	1	74

(1)

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 our Consolidated Statements of Income and Comprehensive Income represents current and prior year transaction costs due to timing and terminated transactions.

(2)	We acquired a SNF located in Texas.

(3)

We entered into a joint venture (“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 $15,971 in cash. Our economic interest in the real estate JV is approximately 95%.

(4)	We acquired a parcel of land adjacent to an existing SNF in California.

Schedule of investment in development and improvement projects

During the six months ended June 30, 2020 and 2019, we invested the following in development and improvement projects (in thousands):


	2020				2019
Type of Property	Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	4,487	$	3,039	$	8,520	$	893
Skilled Nursing Centers		5,861		14		4,492		—
Other		—		—		—		175
Total	$	10,348	$	3,053	$	13,012	$	1,068

Schedule of completed projects

Completed Developments. The following table summarizes our completed developments during the six months ended June 30, 2020 and 2019 (dollar amounts in thousands):


		Number	Type	Number
		of	of	of				Total
Year	Type of Project	Properties	Property	Beds/Units	State		Investment
2020	Development	1	ALF/MC	78	Oregon	⁽¹⁾	$	18,443
Total		1		78			$	18,443

2019	Development	1	SNF	143	Kentucky		$	24,493
	Development	1	ILF/ALF/MC	110	Wisconsin			21,872
Total		2		253			$	46,365

(1)	Certificate of occupancy was received in March 2020, however, due to the COVID-19 pandemic, we have consented to delay the opening of this community to a later date to be determined.

Schedule of real estate investment property sold

Properties Sold. The following table summarizes property sales during the six months ended June 30, 2020 and 2019 (dollar amounts in thousands):


		Type		Number	Number
		of		of	of		Sales		Carrying		Net
Year	State	Properties		Properties	Beds/Units		Price		Value		Gain
2020	N/A	N/A		—	—	$	—	$	—	$	102	⁽¹⁾
	Arizona	SNF		1	194		12,550		2,229		10,292
	Colorado	SNF		3	275		15,000		4,271		10,364
	Iowa	SNF	⁽²⁾	7	544		14,500		4,886		9,005
	Kansas	SNF		3	250		9,750		7,438		1,993
	Texas	SNF		7	1,148		23,000		10,260		12,287
Total 2020 ⁽³⁾				21	2,411	$	74,800	$	29,084	$	44,043

2019	N/A	N/A		—	—	$	—	$	—	$	500	⁽⁴⁾

(

(1)	Gain recognized from the $90 repayment of a holdback related to a property sold during the fourth quarter of 2019 and the reassessment adjustment of $12 from the holdback under the expected value model per ASC Topic 606, Contracts with Customers (“ASC 606”).

(2)

This transaction includes a holdback of $838 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 $471. During the six months ended June 30, 2020, we received $150 of the holdback. We reassessed the holdback under the expected value model and recorded an additional gain of $91.

(3)	Properties sold within the Preferred Care portfolio.

(4)	Gain recognized from the repayment of a holdback related to a portfolio of six ALFs sold during the second quarter of 2018.

Summary of investments in mortgage loans secured by first mortgages

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at June 30, 2020 (dollar amounts in thousands):


				Type	Percentage		Number of			Investment
		Gross		of	of				SNF	per
Interest Rate ⁽¹⁾	Maturity	Investment		Property	Investment		Loans ⁽²⁾	Properties ⁽³⁾	Beds	Bed/Unit
9.9%	2043	$	185,657	SNF	71.8	%	1	15	1,941	$	95.65
9.2%	2045		38,443	SNF	14.8	%	1	4	501	$	76.73
9.4%	2045		19,624	SNF	7.6	%	1	2	205	$	95.73
9.6%	2045		14,925	SNF	5.8	%	1	1	157	$	95.06
Total		$	258,649		100.0	%	4	22	2,804	$	92.24

(1)	The majority of the mortgage loans provide for annual increases in the interest rate after a certain time period increasing by 2.25%.

(2)	Some loans contain certain guarantees, provide for certain facility fees and the majority of the mortgage loans have a 30-year term.

(3)	The properties securing these mortgage loans are located in one state and are operated by one operator.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the six months ended June 30, 2020 and 2019 (in thousands):



	2020		2019
Originations and funding under mortgage loans receivable	$	2,557	$	9,736
Scheduled principal payments received		(565)		(565)
Mortgage loan premium amortization		(2)		(2)
Provision for loan loss reserve		(20)		(92)
Net increase in mortgage loans receivable	$	1,970	$	9,077