Real Estate Investments (Tables)
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6 Months Ended |
Jun. 30, 2022 |
Real Estate Investments |
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Summary of investments in owned properties |
The following table summarizes our investments in owned properties at June 30, 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 | | $ | 797,556 | | 56.6 | % | 99 | | — | | 5,492 | | $ | 145.22 | | Skilled Nursing | | | 600,701 | | 42.6 | % | 53 | | 6,348 | | 236 | | $ | 91.24 | | Other (2) | | | 11,680 | | 0.8 | % | 1 | | 118 | | — | | | — | | Total | | $ | 1,409,937 | | 100.0 | % | 153 | | 6,466 | | 5,728 | | | | |
(1) | We own properties in 26 states that are leased to 25 different operators. |
(2) | Includes three parcels of land held-for-use, and one behavioral health care hospital. |
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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 | | $ | 57,820 | | 2023 | | | 113,626 | | 2024 | | | 93,786 | | 2025 | | | 85,214 | | 2026 | | | 68,753 | | Thereafter | | | 269,038 | |
(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. |
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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, 2022 and 2021 (in thousands): | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | Rental Income | | | 2022 | | | 2021 | | | 2022 | | | 2021 | | Base cash rental income | | $ | 28,108 | (1) | $ | 26,410 | | $ | 55,023 | (1) | $ | 55,033 | | Variable cash rental income | | | 4,019 | (2) | | 3,529 | (2) | | 8,058 | (2) | | 7,067 | (2) | Straight-line rent | | | (293) | (3) | | (19) | (3) | | (527) | (3) | | 663 | (3) | Adjustment for collectability of rental income and lease incentives | | | — | | | — | | | (173) | (4) | | (758) | (5) | Amortization of lease incentives | | | (206) | | | (116) | | | (429) | | | (228) | | Total | | $ | 31,628 | | $ | 29,804 | | $ | 61,952 | | $ | 61,777 | |
(1) | Increased primarily due to a $1,181 lease termination fee received in connection with the sale of a 74-unit ALF, rent received from properties transitioned from the former Senior Care Centers, LLC (“Senior Care”) and Senior Lifestyle Corporation (“Senior Lifestyle”) portfolios and rental income from completed development projects and annual rent escalations. |
(2) | The variable rental income for the three and six months ended June 30, 2022, includes reimbursement of real estate taxes by our lessees of $4,019 and $8,001, respectively and contingent rental income of $0 and $57, respectively. The variable rental income for the three and six months ended June 30, 2021, only includes reimbursement of real estate taxes by our lessees of $3,529 and $7,067. Increased primarily due to properties transitioned from Senior Care and new acquisitions. |
(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. |
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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 | | $ | 34,189 | | 2024-2029 | | Florida | | MC | | 1 | | | 15,201 | | | 12,728 | | 2029 | | Kentucky and Ohio | | MC | | 2 | | | 30,421 | | | 26,191 | | 2025 | | Nebraska | | ALF | | 3 | | | 7,633 | | | 3,067 | | TBD | (1) | South Carolina | | ALF/MC | | 1 | | | 11,680 | | | 9,341 | | 2029 | | Texas | | SNF | | 4 | | | 51,815 | | | 51,485 | | 2027-2029 | (2) | Total | | | | | | $ | 155,645 | | $ | 137,001 | | | |
(1) | Subject to the properties achieving certain coverage ratios. |
(2) | During the second quarter of 2022, we purchased four skilled nursing centers 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. 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. |
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Summary of acquisitions |
| | | | | | | | | | | | | | | | | | | | | | | | | Total | | Number | | Number | | | | | Purchase | | Transaction | | Acquisition | | of | | of | Year | | Type of Property | | Price | | Costs | | Costs | | Properties | | Beds/Units | 2022 | | SNF (1) | | $ | 51,534 | | $ | 281 | | $ | 51,815 | | 4 | | 339 | | | | | | | | | | | | | | | | | 2021 | | n/a | | $ | — | | $ | — | | $ | — | | — | | — | | | | | | | | | | | | | | | | |
(1) | The properties are located in Texas and are leased to an affiliate of an existing operator under a 10-year lease with two 5-year renewal options. Additionally, the lease provides either an earn-out payment or purchase option but not both. If neither option is elected within the timeframe defined in the lease, both elections are terminated. The earn-out payment is available, contingent on achieving certain thresholds per the lease, beginning at the end of the second lease year through the end of the fifth lease year. The purchase option is available beginning in the sixth lease year through the end of the seventh lease year. The initial cash yield is 8% for the first year, increasing to 8.25% for the second year, then increases annually by 2.0% to 4.0% based on the change in the Medicare Market Basket Rate. In connection with the transaction, we provided the lessee a 10-year working capital loan for up to $2,000, of which $1,867 has been funded, at 8% for first year, increasing to 8.25% for the second year, then increasing annually with the lease rate. |
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Schedule of improvement projects |
During the six months ended June 30, 2022 and 2021, we invested the following in improvement projects (in thousands): | | | | | | | | | | | | | | | | Type of Property | | | 2022 | | | 2021 | | Assisted Living Communities | | $ | 1,964 | | $ | 2,046 | | Skilled Nursing Centers | | | 620 | | | — | | Other | | | 321 | | | — | | Total | | $ | 2,905 | | $ | 2,046 | |
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Schedule of property sold |
Properties Sold. The following table summarizes property sales during the six months ended June 30, 2022 and 2021 (dollar amounts in thousands): | | | | | | | | | | | | | | | | | | | | | | | Type | | Number | | Number | | | | | | | | | | | | | | | of | | of | | of | | | Sales | | | Carrying | | | Net | | Year | | State | | Properties | | Properties | | Beds/Units | | | Price | | | Value | | | Gain (loss) (1) | | 2022 | | California | | ALF | | 2 | | 232 | | $ | 43,715 | | $ | 17,832 | | $ | 25,867 | | | | California | | SNF | | 1 | | 121 | | | 13,250 | | | 1,846 | | | 10,849 | | | | Virginia | | ALF | | 1 | | 74 | | | 16,895 | | | 15,549 | | | 1,336 | (2) | | | n/a | | n/a | | — | | — | | | — | | | — | | | 144 | (3) | Total 2022 | | | | | | 4 | | 427 | | $ | 73,860 | | $ | 35,227 | | $ | 38,196 | | | | | | | | | | | | | | | | | | | | | 2021 | | Florida | | ALF | | 1 | | — | | $ | 2,000 | | $ | 2,625 | | $ | (858) | | | | Nebraska | | ALF | | 1 | | 40 | | | 900 | | | 1,079 | | | (205) | | | | Wisconsin | | ALF | | 3 | | 263 | | | 35,000 | | | 28,295 | | | 5,594 | | | | n/a | | n/a | | — | | — | | | — | | | — | | | 159 | (3) | Total 2021 | | | | | | 5 | | 303 | | $ | 37,900 | | $ | 31,999 | | $ | 4,690 | | | | | | | | | | | | | | | | | | | | |
( (1) | Calculation of net gain (loss) includes cost of sales. |
(2) | In connection with this sale, the former operator paid us a lease termination fee of $1,181 which is not included in the gain on sale. |
(3) | We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold during 2019 and 2020, under the expected value model per Accounting Standard Codification (“ASC”) Topic 606, Contracts with Customers (“ASC 606”). |
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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, 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 | | | 27,347 | | SNF | | 7.1 | % | 1 | | 1 | | 189 | | — | | $ | 144.69 | 7.8% | | 2025 | | FL | | | 12,779 | | ALF | | 3.3 | % | 1 | | 1 | | — | | 68 | | $ | 187.93 | 7.3% (4) | | 2025 | | NC/SC | | | 50,889 | | ALF | | 13.3 | % | 1 | | 13 | | — | | 523 | | $ | 97.30 | 7.3% | | 2026 | | NC | | | 31,539 | | ALF | | 8.2 | % | 1 | | 4 | | — | | 217 | | $ | 145.34 | 7.3% | | 2026 | | NC | | | 766 | | OTH | | 0.2 | % | 1 | | — | (5) | — | | — | | $ | — | 10.4% (6) | | 2043 | | MI | | | 184,854 | | SNF | | 48.2 | % | 1 | | 15 | | 1,875 | | — | | $ | 98.59 | 9.5% (6) | | 2045 | | MI | | | 39,068 | | SNF | | 10.2 | % | 1 | | 4 | | 501 | | — | | $ | 77.98 | 9.8% (6) | | 2045 | | MI | | | 19,750 | | SNF | | 5.1 | % | 1 | | 2 | | 205 | | — | | $ | 96.34 | 10% (6) | | 2045 | | MI | | | 14,875 | | SNF | | 3.9 | % | 1 | | 1 | | 146 | | — | | $ | 101.88 | Total | | | | | | $ | 383,647 | | | | 100.0 | % | 10 | | 41 | | 2,916 | | 808 | | $ | 103.02 |
(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) | Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community. |
(6) | Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period. |
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Schedule of mortgage loan activity |
The following table summarizes our mortgage loan activity for the six months ended June 30, 2022 and 2021 (in thousands): | | | | | | | | | | | Six Months Ended June 30, | | | 2022 | | | 2021 | | Originations and funding under mortgage loans receivable | | $ | 33,910 | (1) | | $ | 426 | | Application of interest reserve | | | 2,451 | | | | — | | Scheduled principal payments received | | | (625) | | | | (625) | | Mortgage loan premium amortization | | | (3) | | | | (3) | | (Provision) recovery for loan loss reserve | | | (358) | | | | 2 | | Net increase (decrease) in mortgage loans receivable | | $ | 35,375 | | | $ | (200) | |
(1) | We originated two senior mortgage loans, secured by four ALFs operated by an existing operator, as well as a land parcel in North Carolina. The communities have a combined total of 217 units, with an average age of less than four years. The land parcel is approximately 7.6 acres adjacent to one of the ALFs and is being held for the future development of a seniors housing community. The mortgage loans have a four-year term, an interest rate of 7.25% and an IRR of 8%. |
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