Real Estate Investments (Tables)

3 Months Ended

Mar. 31, 2022

Summary of investments in owned properties

The following table summarizes our investments in owned properties at March 31, 2022 (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	$	844,995	59.9	%	102	—	5,798	$	145.74
Skilled Nursing		553,073	39.3	%	50	6,154	212	$	86.88
Other ⁽²⁾		11,557	0.8	%	1	118	—		—
Total	$	1,409,625	100.0	%	153	6,272	6,010

(1)	We own properties in 26 states that are leased to 28 different operators.

(2)	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⁾
2022	$	85,484
2023		101,561
2024		96,676
2025		88,161
2026		71,761
Thereafter		276,323

(1)	Represents contractual cash rent, except for certain master leases which are based on estimated cash payments. Includes rent from subsequent acquisitions and excludes rent from subsequent dispositions. See Footnote 12 for more information.

Summary of components of our rental income

The following table summarizes components of our rental income for the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended
	March 31,
Rental Income		2022			2021
Base cash rental income	$	26,915	⁽¹⁾	$	28,623
Variable cash rental income		4,039	⁽²⁾		3,538	⁽²⁾
Straight-line rent		(234)	⁽³⁾		682	⁽³⁾
Adjustment for collectability of rental income and lease incentives		(173)	⁽⁴⁾		(758)	⁽⁵⁾
Amortization of lease incentives		(223)			(112)
Total	$	30,324		$	31,973

(1)

Decreased primarily due to Senior Care and Abri Health portfolio transitions, abated and deferred rent, and reduced income from a sold SNF in Washington. The decrease was partially offset by rent increase increases from properties transitioned from Senior Lifestyle, the one-time 50% reduction of 2021 rent escalations provided to the majority of our operating partners, and increases from completed projects, annual rent escalations and capital improvement fundings.

(2)

The variable rental income for the three months ended March 31, 2022, includes reimbursement of real estate taxes by our lessees of $3,982 and contingent rental income of $57. The variable rental income for the three months ended March 31, 2021, only includes reimbursement of real estate taxes by our lessees of $3,538. Increased primarily due to properties transitioned from Senior Lifestyle.

(3)	Decreased primarily due to the impact of prior year’s 50% reduction of 2021 rent escalations for those leases accounted for on a straight-line basis.

(4)	Represents a lease incentive balance write-off related to a closed property and subsequent lease termination.

(5)	Represents a straight-line rent receivable write-off due to transitioning rental revenue recognition to cash basis for one lease in accordance with Accounting Standard Codification Topic 842, Leases.

Summary of information about purchase options included in our lease agreements

The following table summarizes information about purchase options included in our lease agreements (dollar amounts in thousands):


	Type	Number
	of	of		Gross		Carrying	Option
State	Property	Properties		Investments		Value	Window
California	ALF/MC	2	$	38,895	$	34,425	2024-2029
California	ALF	2		31,814		16,765	2022-2023	⁽¹⁾
Florida	MC	1		15,201		12,842	2029
Kentucky and Ohio	MC	2		30,421		26,393	2025
Nebraska	ALF	3		7,633		3,128	TBD	⁽²⁾
South Carolina	ALF/MC	1		11,680		9,486	2029
Total			$	135,644	$	103,039

(1)

The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies. During the three months ended March 31, 2022, the current operator exercised the purchase option under their lease to buy both properties for approximately $43,700. The exercise of the option does not legally obligate the operator to complete the acquisition of the properties. We currently expect to complete the sale in the second quarter of 2022.

(2)	Subject to the properties achieving certain coverage ratios.

(3)

Subsequent to March 31, 2022, we purchased four skilled nursing centers for $51,534 and leased these properties under a 10-year lease with an existing operator. The lease provides either an earn-out payment or purchase option but not both. The purchase option is available at the end of the fifth lease year through the end of the seventh lease year. If neither option is elected within the timeframe defined in the lease, both elections are terminated. For more information regarding the earn-out see Footnote 8.

Schedule of development and improvement projects

During the three months ended March 31, 2022 and 2021, we invested the following in development and improvement projects (in thousands):


	Three Months Ended March 31,
	2022				2021
Type of Property	Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	—	$	694	$	—	$	1,044
Skilled Nursing Centers		—		177		—		—
Other		—		197		—		—
Total	$	—	$	1,068	$	—	$	1,044

Schedule of property sold

Properties Sold. The following table summarizes property sales during the three months ended March 31, 2022 and 2021 (dollar amounts in thousands):


		Type	Number	Number
		of	of	of		Sales		Carrying		Net
Year ⁽¹⁾	State	Properties	Properties	Beds/Units		Price		Value		Gain (loss)⁽²⁾
2022	n/a	n/a	—	—	$	—	$	—	$	102	⁽³⁾

2021	Florida	ALF	1	—	$	2,000	$	2,625	$	(861)
	n/a	n/a	—	—		—		—		88	⁽³⁾
Total 2021			1	—	$	2,000	$	2,625	$	(773)

(

(1)

Subsequent to March 31, 2022, we sold a 74-unit ALF in Virginia for $16,895. The ALF has a gross book value of $16,895 and a net book value of $15,549. We anticipate recognizing a gain on sale of approximately $1,300 in the second quarter of 2022. In connection with the sale, the current operator paid us a lease termination fee of approximately $1,200.

(2)	Calculation of net gain (loss) includes cost of sales.

(3)	We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold during 2019 and 2020.

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 March 31, 2022 (dollar amounts in thousands):


					Type	Percentage		Number of					Investment
			Gross		of	of					SNF	ALF	per
Interest Rate	Maturity	State	Investment		Property	Investment		Loans ⁽¹⁾	Properties ⁽²⁾		Beds	Units	Bed/Unit
7.5%	2022	MO	$	1,780	OTH	0.5	%	1	—	⁽³⁾	—	—	$	n/a
7.5%	2024	LA		27,277	SNF	7.8	%	1	1		189	—	$	144.32
7.8%	2025	FL		12,126	ALF	3.5	%	1	1		—	68	$	178.32
7.3% ⁽⁴⁾	2025	NC/SC		49,834	ALF	14.2	%	1	13		—	523	$	95.28
10.4% ⁽⁵⁾	2043	MI		185,356	SNF	53.0	%	1	15		1,875	—	$	98.86
9.5% ⁽⁵⁾	2045	MI		39,039	SNF	11.2	%	1	4		501	—	$	77.92
9.6%⁽⁵⁾	2045	MI		19,750	SNF	5.6	%	1	2		205	—	$	96.34
10.0% ⁽⁵⁾	2045	MI		14,875	SNF	4.2	%	1	1		146	—	$	101.88
Total			$	350,037		100.0	%	8	37		2,916	591	$	99.81

(1)	Some loans contain certain guarantees and provide for certain facility fees.

(2)	Our mortgage loans are secured by properties located in six states with five borrowers.

(3)	Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF.

(4)	Represents the initial rate. This loan has an IRR of 8%.

(5)	Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended March 31,
	2022		2021
Originations and funding under mortgage loans receivable	$	1,026	$	158
Application of interest reserve		1,223		—
Scheduled principal payments received		(125)		(125)
Mortgage loan premium amortization		(2)		(2)
Provision for credit losses		(21)		—
Net increase in mortgage loans receivable	$	2,101	$	31