Note 8 - Long-term Leases

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note 8 – Long-Term Leases

Operating Leases

At September 30, 2022, we lease from NHI the real property of 28 skilled nursing facilities, five assisted living centers and three independent living centers under one lease agreement. As part of the lease agreement, we sublease four Florida skilled nursing facilities to a third-party operator. The lease includes base rent plus a percentage rent. The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Total facility rent expense to NHI was $9,478,000 and $9,026,000 for the three months ended September 30, 2022 and 2021, respectively. Total facility rent expense to NHI was $28,293,000 and $28,336,000 for the nine months ended September 30, 2022 and 2021, respectively.

On September 1, 2022, we transferred the operations of seven skilled nursing facilities located in Massachusetts and New Hampshire to a third-party operator. We leased the real property of these seven facilities from NHI. In conjunction with the transfer of the operations to a third party, we terminated our lease agreement for the seven skilled nursing facilities and amended our master lease agreement with NHI.  The amendment was accounted for as a lease modification under ASC 842, Leases. The base rent within the amended master lease agreement increased approximately $8,775,000 over the next four and one-third years.  Therefore, for the remainder of 2022 ( September- December), our base rent increased $875,000. The annual base rent in 2023 increased from $30,750,000 to $34,075,000, in 2024 from $30,750,000 to $32,625,000, in 2025 from $30,750,000 to $32,225,000, and in 2026 from $30,750,000 to $31,975,000.  

Finance Leases

At September 30, 2022, we leased and operated three senior healthcare facilities in the state of Missouri under three separate lease agreements. Two of the healthcare facilities are skilled nursing facilities that also include assisted living facilities and the third healthcare facility is a memory care facility. Each of the leases is a ten-year lease with two five–year renewal options. Under the terms of the leases, base rent totals $5,200,000 annually with rent thereafter escalating by 4% of the increase in facility revenue over the 2014 base year.

Minimum Lease Payments

The following table summarizes the maturity of our finance and operating lease liabilities as of September 30, 2022 (in thousands):

	Finance Leases			Operating Leases
2023	$	5,200		$	35,950
2024		2,167			34,353
2025		-			33,278
2026		-			32,613
2027		-			8,148
Thereafter		-			-
Total minimum lease payments		7,367			144,342
Less: amounts representing interest		(322	)		(17,843	)
Present value of future minimum lease payments		7,045			126,499
Less: current portion		(4,911	)		(28,611	)
Noncurrent lease liabilities	$	2,134		$	97,888