We acquired or invested in the following net assets (in thousands):


	For the Three Months Ended March 31,
	2022			2021

Land and land improvements	$	9,671		$	—
Buildings		204,526			—
Intangible lease assets — subject to amortization (weighted-average useful life of 13.2 years for 2022)		5,461			—
Mortgage loans		—			1,090,400
Investments in unconsolidated real estate joint ventures		399,456			—
Investments in unconsolidated operating entities		131,105			688,017
Liabilities assumed		(25,424	)		—
Total net assets acquired	$	724,795		$	1,778,417

On March 14, 2022, we completed a transaction with Macquarie Asset Management (“MAM”) to form a partnership (the “Macquarie Transaction”), pursuant to which we contributed eight Massachusetts-based general acute care hospitals that are leased to Steward Health Care System LLC ("Steward") and a fund managed by MAM has acquired, for cash consideration, a 50% interest in the partnership. The transaction valued the portfolio at approximately $1.7 billion, and we recognized a gain on real estate of approximately $600 million from this transaction, partially offset by the write-off of unbilled straight-line rent receivables. The partnership raised nonrecourse secured debt of 55% of asset value, and we received proceeds, including from the secured debt, of approximately $1.3 billion, virtually all of which was used to repay debt. We obtained a 50% interest in the real estate partnership valued at approximately $400 million (included in the "Investments in unconsolidated real estate joint ventures" line of the condensed consolidated balance sheets), which is being accounted for under the equity method of accounting.

On March 11, 2022, we acquired four general acute care hospitals in Finland for €178 million. These hospitals are leased to Pihlajalinna pursuant to a long-term lease with annual inflation-based escalators. We acquired these facilities by the share purchase of real estate holding entities that included deferred income tax and other liabilities of approximately $25.4 million.

On February 16, 2022, we agreed to participate in an existing syndicated term loan with a term of six years originated on behalf of Priory Group ("Priory"). We funded £96.5 million towards a £100 million participation level in the variable rate loan, reflecting a 3.5% discount.

On January 19, 2021, we completed the first of two phases in the Priory transaction in which we funded an £800 million interim mortgage loan on an identified portfolio of Priory real estate assets in the United Kingdom. On June 25, 2021, we completed the second phase of the transaction in which we converted this interim mortgage loan to fee simple ownership in a portfolio of 35 select real estate assets from Priory (which is currently majority-owned by Waterland Private Equity Fund VII C.V. (“Waterland VII”)) in individual sale-and-leaseback transactions. Therefore, the net aggregate purchase price for the real estate assets we acquired from Priory was approximately £800 million, plus customary stamp duty, tax, and other transaction costs.

In addition to the real estate investment, on January 19, 2021, we made a £250 million acquisition loan to Waterland VII, in connection with the closing of Waterland VII’s acquisition of Priory, which was repaid in full plus interest on October 22, 2021.

In addition, we acquired a 9.9% equity interest in the Waterland VII affiliate that indirectly owns Priory.

On January 8, 2021, we made a $335 million loan to affiliates of Steward, all of the proceeds of which were used to pay to and redeem a similarly sized convertible loan from Steward’s former private equity sponsor. This loan now carries a four percent interest rate with possible additional returns based on the increase in the value of Steward. The initial term of the loan is seven years.

During the 2022 first quarter, we completed construction and began recording rental income on an inpatient rehabilitation facility located in Bakersfield, California. This facility commenced rent on March 1, 2022 and is being leased to Ernest Health, Inc. ("Ernest") pursuant to an existing long-term master lease.

See table below for a status summary of our current development projects (in thousands):


Property	Commitment		Costs Incurred as of March 31, 2022		Estimated Rent Commencement Date
Ernest (Stockton, California)	$	47,700	$	37,104	3Q 2022
Steward (Texarkana, Texas)		169,408		56,890	2Q 2024
	$	217,108	$	93,994

On March 14, 2022, we completed the previously described partnership with MAM, in which we sold the real estate of eight Massachusetts-based general acute care hospitals, with a fair value of approximately $1.7 billion. See "New Investments" in this Note 3 for further details on this transaction.

During the first three months of 2022, we also completed the sale of two other facilities and an ancillary property for approximately $48 million, resulting in a gain on real estate of approximately $15 million.

The properties sold during 2022 do not meet the definition of discontinued operations. However, the following represents the operating results from these properties for the periods presented (in thousands):


	For the Three Months Ended March 31,
	2022			2021
Revenues(1)	$	20,093		$	30,991
Real estate depreciation and amortization(2)		(100	)		(7,403	)
Property-related expenses		(204	)		(351	)
Other income(3)		451,609			72
Income from real estate dispositions, net	$	471,398		$	23,309

(1)

Includes $4.5 million of straight-line rent write-offs associated with the non-Macquarie disposal transactions for the three months ended March 31, 2022.

(2)

Lower in 2022 as we stopped depreciating the properties making up the Macquarie Transaction once deemed held for sale in September 2021.

(3)

Includes $451.6 million of gains (net of $125 million write-off of straight-line rent receivables related to the Macquarie Transaction) for the three months ended March 31, 2022.

During the first three months of 2021, we completed the sale of one facility and an ancillary property for approximately $11 million, resulting in a net gain on real estate of approximately $1.0 million.

We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases (typical initial fixed terms of at least 15 years) and most include renewal options at the election of our tenants, generally in five year increments. Over 99% of our leases provide annual rent escalations based on increases in the Consumer Price Index (or similar indices outside the U.S.) and/or fixed minimum annual rent escalations. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total investment. For five properties with a carrying value of $231 million, our leases require a residual value guarantee from the tenant. Our leases typically require the tenant to handle and bear most of the costs associated with our properties including repair/maintenance, property taxes, and insurance. We routinely inspect our properties to ensure the residual value of each of our assets is being maintained. Except for leases classified as financing leases as noted below, all of our leases are classified as operating leases.

At March 31, 2022, leases on 13 Ernest facilities and five Prime Healthcare Services, Inc. facilities are accounted for as direct financing leases and leases on 13 of our Prospect Medical Holdings, Inc. (“Prospect”) facilities and five of our Ernest facilities are accounted for as a financing. The components of our total investment in financing leases consisted of the following (in thousands):


	As of March 31, 2022			As of December 31, 2021
Minimum lease payments receivable	$	1,172,338		$	1,183,855
Estimated residual values		203,818			203,818
Less: Unearned income and allowance for credit loss		(905,874	)		(918,584	)
Net investment in direct financing leases		470,282			469,089
Other financing leases (net of allowance for credit loss)		1,592,945			1,584,238
Total investment in financing leases	$	2,063,227		$	2,053,327

Due to the COVID-19 pandemic and its impact on our tenants' business, we agreed to defer collection of a certain amount of rent for a few tenants. Pursuant to our agreements with these tenants, we expect repayments of previously deferred rent to continue, with the remaining outstanding deferred rent balance of approximately $12.4 million as of March 31, 2022, to be paid over specified periods in the future with interest.

As noted in previous filings, we originally leased four acute care facilities to and had a mortgage loan on a fifth property (Olympia Medical Center) with Alecto Healthcare Services LLC (“Alecto”), along with working capital loans. Three of the four leased acute care facilities were sold in prior periods. In the first quarter of 2021, Alecto completed the sale of Olympia Medical Center to the UCLA Health System. Our proceeds of approximately $51 million from this sale were used to pay off the mortgage and working capital loans in full, with the remaining proceeds used to recover certain previously reserved past due receivables. In the first quarter of 2022, we signed a lease amendment on the remaining facility leased to Alecto, and all rent and other payment obligations have been made in accordance with the amended terms. At March 31, 2022, this acute care facility leased to Alecto represents less than 0.1% of our total assets.

On September 30, 2019, we acquired the real estate of Watsonville Community Hospital in Watsonville, California for $40 million, which was then leased to Halsen Healthcare. In addition, we made a working capital loan to Halsen Healthcare. The hospital operator faced significant financial challenges over a two-year period that were worsened by revenue losses during the COVID-19 pandemic. During this time, we increased the loan in an effort to support the operator of this facility. On December 5, 2021, Halsen Healthcare filed Chapter 11 bankruptcy in order to reorganize, while keeping the hospital open. As such, we have recorded a credit loss reserve and have written off approximately $2.5 million of billed and straight-line rent receivables.

On February 23, 2022, the bankruptcy court approved the Pajaro Valley Healthcare District's bid to purchase the operations of the Watsonville Community Hospital and lease the real estate from us. Although there are regulatory and other hurdles still to be met, this transaction is otherwise expected to close by August 31, 2022. At March 31, 2022, we believe our total investment in the Watsonville property, representing less than 0.5% of total assets, is fully recoverable, but no assurances can be given that we will not have any further write-offs or impairments in future periods.

At March 31, 2022, 99% of our properties are occupied by tenants, leaving only six properties as vacant, representing less than 0.5% of total assets. One of these vacant facilities was sold in April 2022 for $45 million.

Our primary business strategy is to acquire real estate and lease to providers of healthcare services. Typically, we directly own 100% of such fee simple real estate. However, from time-to-time, we will co-invest with other investors that share a similar view that hospital real estate is a necessary infrastructure-type asset in communities. In these types of investments, we will own undivided interests of less than 100% of the real estate and share control over the assets through unconsolidated real estate joint ventures. The underlying real estate and leases in these unconsolidated real estate joint ventures are structured similarly to the rest of our real estate portfolio.

The following is a summary of our investments in unconsolidated real estate joint ventures by operator (amounts in thousands):


Operator	As of March 31, 2022		As of December 31, 2021
Median Kliniken S.á.r.l ("MEDIAN")	$	505,883	$	517,648
Swiss Medical Network		473,235		476,193
Steward (Macquarie Transaction)		400,367		—
Policlinico di Monza		93,833		95,468
HM Hospitales		61,196		63,618
Total	$	1,534,514	$	1,152,927

Investments in Unconsolidated Operating Entities

Our investments in unconsolidated operating entities are noncontrolling investments that are typically made in conjunction with larger real estate transactions in which the operators are vetted as part of our overall underwriting process. We make these investments from time-to-time in order to enhance our overall return and provide for certain minority rights and protections.

The following is a summary of our investments in unconsolidated operating entities (amounts in thousands):


Operator	As of March 31, 2022		As of December 31, 2021
Steward (loan investment)	$	363,236	$	360,164
International joint venture		231,403		219,387
Springstone, LLC ("Springstone")		192,958		187,450
Priory		167,478		42,315
Swiss Medical Network		157,431		159,208
Steward (equity investment)		139,000		139,000
Prospect		112,319		112,283
Aevis Victoria SA ("Aevis")		76,029		61,271
Aspris Children's Services ("Aspris")		15,988		8,356
Total	$	1,455,842	$	1,289,434

The increase during the 2022 first quarter is primarily due to our investment in the Priory syndicated term loan as described under "New Investments" in this Note 3.

Upon the adoption of Accounting Standards Update ("ASU") No. 2016-13 "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, we began applying a forward-looking "expected loss" model to all of our financing receivables, including financing leases and loans. We are using ASU 2016-13 to establish credit loss reserves on all outstanding loans based on historical credit losses of similar instruments.

The following table summarizes the activity in our credit loss reserves (in thousands):


	For the Three Months Ended March 31,
	2022			2021
Balance at beginning of the year	$	48,527		$	8,726
Provision for credit loss		5,412			—
Expected credit losses related to financial instruments sold or repaid		(6	)		(4	)
Balance at end of the period	$	53,933		$	8,722

Pursuant to our approximate 5% stake in Aevis and other investments marked to fair value, we recorded an $8.0 million favorable non-cash fair value adjustment during the first quarter of 2022; whereas, this was a $4.1 million favorable non-cash fair value adjustment for the same period of 2021.

Pursuant to our existing 9.9% equity interest in Steward, we received an $11 million cash distribution during the first quarter of 2021, which was accounted for as a return of capital.

We monitor concentration risk in several ways due to the nature of our real estate assets that are vital to the communities in which they are located and given our history of being able to replace inefficient operators of our facilities, if needed, with more effective operators: