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Real Estate Investments (Tables)

3 Months Ended

Mar. 31, 2023

Summary of investments in owned properties

The following table summarizes our investments in owned properties at March 31, 2023 (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	$	785,912	56.5	%	98	—	5,437	$	144.55
Skilled Nursing		591,305	42.6	%	50	6,113	236	$	93.13
Other ⁽²⁾		12,005	0.9	%	1	118	—		—
Total	$	1,389,222	100.0	%	149	6,231	5,673

(1)	We own properties in 26 states that are leased to 23 different operators.

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

Summary of components of our rental income

The following table summarizes components of our rental income for the three months ended March 31, 2023 and 2022 (in thousands):


	March 31,
Rental Income		2023			2022
Contractual cash rental income	$	29,125	⁽¹⁾	$	26,915	⁽¹⁾
Variable cash rental income		3,284	⁽²⁾		4,039	⁽²⁾
Straight-line rent		(465)	⁽³⁾		(234)	⁽³⁾
Adjustment for collectability of lease incentives and rental income		—			(173)	⁽⁴⁾
Amortization of lease incentives		(209)			(223)
Total	$	31,735		$	30,324

(1)	Increased primarily due to transitioned portfolios, rental income from acquisitions during the second quarter of 2022, completed development projects and annual rent escalations, partially offset by sold properties.

(2)

The variable rental income for the three months ended March 31, 2023, includes reimbursement of real estate taxes by our lessees of $3,284. 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. Decreased primarily due to property tax reassessment and sold properties partially offset by the 2022 second quarter acquisition.

(3)	Primarily due to normal amortization.

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

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	$	33,483	2023-2029
Florida	MC	1		15,201		12,386	2029
Florida	SNF	3		76,756		76,756	2025-2027	⁽¹⁾
Nebraska	ALF	3		7,633		2,889	TBD	⁽²⁾
North Carolina	ALF/MC	11		121,321		121,321	2025-2028	⁽³⁾
Ohio	MC	1		16,160		13,816	2024-2025
South Carolina	ALF/MC	1		11,680		8,908	2029
Texas	SNF	4		51,837		50,518	2027-2029	⁽⁴⁾
Total			$	339,483	$	320,077

(1)	During 2022, we entered into a joint venture (“JV”) to purchase three skilled nursing centers with a total of 299 beds. The JV leased the properties under a 10-year master lease. For more information regarding this transaction see Financing Receivables below.

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

(3)

During 2023, we entered into a JV that purchased 11 ALFs and MCs with a total of 523 units and leased the communities under a 10-year master lease. The master lease provides the operator with the option to buy up to 50% of the properties at the beginning of the third lease year, and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.00% on any portion of the properties being purchased. For more information regarding this transaction see Financing Receivables below.

(4)

During 2022, we purchased four skilled nursing centers and leased these properties under a 10-year lease with an existing operator. The lease allows the operator to elect either an earn-out payment or purchase option. If neither option is elected within the timeframe defined in the lease, both elections are terminated. For more information regarding the earn-out see Note 8. Commitments and Contingencies.

Schedule of properties held-for-sale

Properties Held -for-Sale. The following summarizes our held-for-sale properties as of March 31, 2023 (dollar amounts in thousands):

Type

Number

Gross

Accumulated

State

Property

Properties

Beds/units

Investment

Depreciation

ALF

7,163

⁽¹⁾

3,088

(1)	Represents our gross investment after $1,656 of impairment losses.

Schedule of development and improvement projects

Improvements. During the three months ended March 31, 2023 and 2022, we invested the following in improvements projects (in thousands):


	Three Months Ended March 31,
Type of Property		2023		2022
Assisted Living Communities	$	1,548	$	694
Skilled Nursing Centers		973		177
Other		87		197
Total	$	2,608	$	1,068

Schedule of property sold

The following table summarizes property sales during the three months ended March 31, 2023 and 2022 (dollar amounts in thousands):


		Type	Number	Number
		of	of	of		Sales		Carrying		Net
Year	State	Properties	Properties	Beds/Units		Price		Value		Gain ⁽²⁾
2023 ⁽¹⁾	Kentucky	ALF	1	60	$	11,000	$	10,710	$	72
	New Mexico	SNF	2	235		21,250		5,379		15,301
Total 2023			3	295	$	32,250	$	16,089	$	15,373

2022	n/a	n/a	—	—	$	—	$	—	$	102	⁽³⁾

(

(1)	Subsequent to March 31, 2023, we sold a 70-unit assisted living community located in Florida for $4,850.

(2)	Calculation of net gain includes cost of sales and write-off of straight-line receivable and lease incentives, when applicable.

(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 ASC Topic 606, Contracts with Customers (“ASC 606”).

Summary of investments in mortgage loans secured by first mortgages

Mortgage Loans. The following table sets forth information regarding our investments in mortgage loans secured by first mortgages at March 31, 2023 (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%	2023	MO	$	1,886		OTH	0.4	%	1	—	⁽³⁾	—	—	$	n/a
7.5%	2024	LA		29,346		SNF	6.4	%	1	1		189	—	$	155.27
7.5%	2024	GA		51,111	⁽⁴⁾	ALF	11.2	%	1	1		—	203	$	251.78
7.8%	2025	FL		15,260		ALF	3.4	%	1	1		—	68	$	224.41
7.3%	2025	NC		10,750	⁽⁴⁾	ALF	2.4	%	1	1		—	45	$	238.89
7.3% ⁽⁵⁾	2025	NC/SC		56,855		ALF	12.4	%	1	13		—	523	$	108.71
7.3% ⁽⁵⁾	2026	NC		33,598		ALF	7.3	%	1	4		—	217	$	154.83
7.3% ⁽⁵⁾	2026	NC		812		OTH	0.2	%	1	—	⁽⁶⁾	—	—	$	—
10.6% ⁽⁷⁾	2043	MI		184,349		SNF	40.3	%	1	15		1,875	—	$	98.32
9.6% ⁽⁷⁾	2045	MI		38,957		SNF	8.5	%	1	4		480	—	$	81.16
9.8%⁽⁷⁾	2045	MI		19,750		SNF	4.3	%	1	2		201	—	$	98.26
10.3% ⁽⁷⁾	2045	MI		14,850		SNF	3.2	%	1	1		146	—	$	101.71
Total			$	457,524			100.0	%	12	43		2,891	1,056	$	115.92

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

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

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

(4)

We originated a $10,750 mortgage loan secured by a 45-unit MC located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%. Additionally, we invested $51,111 in an existing mortgage loan secured by a 203-unit ILF, ALF and MC located in Georgia by acquiring a participating interest owned by existing lenders for $42,251 in addition to converting our $7,461 mezzanine loan in the property into a participating interest in the mortgage loan. The mortgage loan matures in October 2024 and our investment is at an initial rate of 7.5% with an IRR of 7.75%. We recorded $1,380 of additional interest income in connection with the effective prepayment of the mezzanine loan in the first quarter of 2023.

(5)	Represents the initial rate with an IRR of 8%.

(6)	Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community.

(7)	Mortgage loans provide for 2.25% annual increases in the interest rate.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31,
	2023			2022
Originations and funding under mortgage loans receivable	$	62,844	⁽¹⁾	$	1,026
Application of interest reserve		1,149			1,223
Scheduled principal payments received		(125)			(125)
Mortgage loan premium amortization		(2)			(2)
Provision for loan loss reserve		(639)			(21)
Net increase in mortgage loans receivable	$	63,227		$	2,101

(1)