Real Estate Investments (Tables)

6 Months Ended

Jun. 30, 2023

Real Estate Investments

Summary of investments in owned properties

The following table summarizes our investments in owned properties at June 30, 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	$	817,781	57.5	%	97	—	5,570	$	146.82
Skilled Nursing		591,474	41.6	%	50	6,113	236	$	93.16
Other (2)		12,005	0.9	%	1	118	—		—
Total	$	1,421,260	100.0	%	148	6,231	5,806

(1) We own properties in 26 states that are leased to 22 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 six months ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Rental Income		2023			2022			2023			2022
Contractual cash rental income	$	29,014	(1)	$	28,108	(1)	$	58,139	(1)	$	55,023	(1)
Variable cash rental income		3,176	(2)		4,019	(2)		6,460	(2)		8,058	(2)
Straight-line rent		(423)			(293)			(888)			(527)
Adjustment for collectability of lease incentives and rental income		(26)			—			(26)			(173)	(3)
Amortization of lease incentives		(204)			(206)			(413)			(429)
Total	$	31,537		$	31,628		$	63,272		$	61,952

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

(2) The variable rental income for the three and six months ended June 30, 2023, includes reimbursement of real estate taxes by our lessees of $3,176 and $6,460, respectively. 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. The variable rental income for the six months ended June 30, 2022 also includes contingent rental income of $57. Decreased primarily due to property tax reassessment and sold properties partially offset by the acquisitions.

(3) 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	$	33,248	2023-2029
Florida	MC	1		7,680		4,750	2029	(1)
Florida	SNF	3		76,734		76,734	2025-2027	(2)
Nebraska	ALF	3		7,633		2,834	TBD	(3)
North Carolina	ALF/MC	11		121,321		121,321	2025-2028	(4)
Ohio	MC	1		16,161		13,708	2024-2025
Ohio	ILF/ALF/MC	1		54,437		54,256	2025-2027
South Carolina	ALF/MC	1		11,680		8,764	2029
Tennessee	SNF	2		5,275		2,333	2023-2024
Texas	SNF	4		51,837		50,188	2027-2029	(5)
Total			$	391,653	$	368,136

(1) During the second quarter of 2023, we recorded an impairment loss of $7,522 during the second quarter of 2023.. See Impairment Loss below for more information.

(2) 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.

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

(4) 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.

(5) 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 June 30, 2023 (dollar amounts in thousands):

	Type	Number	Number
	of	of	of		Gross		Accumulated
State	Property	Properties	Beds/units		Investment		Depreciation
PA	ALF	2	130	$	9,744	$	3,691
		2	130	$	9,744	$	3,691

Summary of acquisitions

Acquisitions. The following table summarizes our acquisitions for the six months ended June 30, 2023 and 2022 (dollar amounts in thousands):

		Cash				Non-						Number	Number
		Paid at	Assumed			Controlling	Transaction			Assets		of	of
Year	Type of Property	Acquisition	Liabilities			Interest	Costs			Acquired		Properties	Beds/Units
2023	ALF (1)	43,759	$	9,767	$	9,133	$	363	$	63,022	(2)	1	242
2022	SNF (3)	51,815	$	—	$	—	$	—	$	51,815		4	339

(1) We entered into a $54,134 Joint Venture (“JV”) and contributed $45,000 into the JV that purchased an ILF/ALF/MC in Ohio. Under the JV agreement, the seller, our JV partner, has the option to purchase the campus between the third and fourth lease years for LTC’s allocation of the JV investment plus an IRR of 9.75%. The campus was leased to Encore Senior Living (“Encore”) under a 10-year term with an initial yield of 8.25% on LTC’s allocation of the JV investment. LTC committed to fund $2,100 of lease incentives under the Encore lease. Rent is expected to be approximately $3,900 per year.

(2) Includes $8,585 tax abatement intangible included in the Prepaid expenses and other assets line item in our Consolidated Balance Sheets.

(3) 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.

Schedule of improvement projects

Improvements. During the six months ended June 30, 2023 and 2022, we invested the following in improvements projects (in thousands):

	Six Months Ended June 30,
Type of Property		2023		2022
Assisted Living Communities	$	2,000	$	1,964
Skilled Nursing Centers		1,143		620
Other		87		321
Total	$	3,230	$	2,905

Schedule of property sold

The following table summarizes property sales during the six months ended June 30, 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 (1)
2023	Florida	ALF	1	70	$	4,850	$	4,082	$	65
	Kentucky	ALF	1	60		11,000		10,710		57
	New Jersey	ALF	1	39		2,000		1,552		266
	New Mexico	SNF	2	235		21,250		5,379		15,287
Total 2023			5	404	$	39,100	$	21,723	$	15,675
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

(

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

(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 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 June 30, 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%	2024	MO	$	1,961		OTH	0.4	%	1	—	(3)	—	—	$	n/a
7.5%	2024	LA		29,346		SNF	6.2	%	1	1		189	—	$	155.27
7.5%	2024	GA		51,111	(4)	ALF	10.7	%	1	1		—	203	$	251.78
7.8%	2025	FL		16,525		ALF	3.5	%	1	1		—	68	$	243.01
7.3%	2025	NC		10,750	(4)	ALF	2.3	%	1	1		—	45	$	238.89
7.3% (5)	2025	NC/SC		56,855		ALF	11.9	%	1	13		—	523	$	108.71
7.3% (5)	2026	NC		34,043		ALF	7.1	%	1	4		—	217	$	156.88
7.3% (5)	2026	NC		826		OTH	0.2	%	1	—	(6)	—	—	$	—
8.8%	2028	IL		16,500	(7)	SNF	3.5	%	1	1		150	—	$	110.00
10.6% (8)	2043	MI		184,222		SNF	38.6	%	1	15		1,875	—	$	98.25
9.6% (8)	2045	MI		40,000		SNF	8.4	%	1	4		480	—	$	83.33
10.1%	2045	MI		19,750		SNF	4.1	%	1	2		201	—	$	98.26
10.3% (8)	2045	MI		14,850		SNF	3.1	%	1	1		146	—	$	101.71
Total			$	476,739			100.0	%	13	44		3,041	1,056	$	116.36

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

(2) Our mortgage loans are secured by properties located in eight states with seven 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) We originated a $16,500 senior loan for the purchase of a 150-bed SNF in Illinois. The mortgage loan matures in June 2028 and our investment is at an interest rate of 8.75%.

(8) 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 six months ended June 30, 2023 and 2022 (in thousands):

	Six Months Ended June 30,
	2023			2022
Originations and funding under mortgage loans receivable	$	81,727	(1)	$	33,910	(2)
Application of interest reserve		1,609			2,451
Scheduled principal payments received		(251)			(625)
Mortgage loan premium amortization		(4)			(3)
Provision for loan loss reserve		(831)			(358)
Net increase in mortgage loans receivable	$	82,250		$	35,375

(1) 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. Also, we originated a $16,500 senior loan for the purchase of a 150-bed SNF in Illinois. The mortgage loan matures in June 2028 and our investment is at an interest rate of 8.75%.

(2) 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%.