REAL ESTATE PROPERTIES HELD FOR INVESTMENT

The Company’s real estate properties held for investment consisted of the following (dollars in thousands):

As of December 31, 2018



Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	335	37,628	$	4,094,484	$	(224,942	)	$	3,869,542
Senior Housing - Leased	90	7,332	1,237,790		(125,902		)	1,111,888
Senior Housing - Managed	23	1,603	301,739		(19,537		)	282,202
Specialty Hospitals and Other	22	1,085	621,236		(31,640		)	589,596
	470	47,648	6,255,249		(402,021		)	5,853,228
Corporate Level			634		(317		)	317
			$	6,255,883	$	(402,338	)	$	5,853,545

As of December 31, 2017



Property Type	Number of Properties	Number of Beds/Units	Total Real Estate at Cost		Accumulated Depreciation			Total Real Estate Investments, Net
Skilled Nursing/Transitional Care	384	43,223	$	4,364,387	$	(209,039	)	$	4,155,348
Senior Housing - Leased	88	8,137	1,166,687		(102,370		)	1,064,317
Senior Housing - Managed	13	1,113	189,120		(12,125		)	176,995
Specialty Hospitals and Other	22	1,085	614,068		(16,620		)	597,448
	507	53,558	6,334,262		(340,154		)	5,994,108
Corporate Level			593		(269		)	324
			$	6,334,855	$	(340,423	)	$	5,994,432



	December 31, 2018			December 31, 2017
Building and improvements	$	5,388,102		$	5,449,415
Furniture and equipment	237,145			232,889
Land improvements	1,254			3,456
Land	629,382			649,095
	6,255,883			6,334,855
Accumulated depreciation	(402,338		)	(340,423		)
	$	5,853,545		$	5,994,432

Operating Leases

As of December 31, 2018, the substantial majority of the Company’s real estate properties (excluding 23 Senior Housing - Managed communities) were leased under triple-net operating leases with expirations ranging from one to 15 years. As of December 31, 2018, the leases had a weighted-average remaining term of nine years. The leases generally include provisions to extend the lease terms and other negotiated terms and conditions. The Company, through its subsidiaries, retains substantially all of the risks and benefits of ownership of the real estate assets leased to the tenants. The Company may receive additional security under these operating leases in the form of letters of credit and security deposits from the lessee or guarantees from the parent of the lessee. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets and totaled $12.4 million and $20.3 million as of December 31, 2018 and 2017, respectively, and letters of credit deposited with the Company totaled approximately $98 million and $96 million as of December 31, 2018 and 2017, respectively. In addition, the Company’s tenants have deposited with the Company $17.5 million and $28.3 million as of December 31, 2018 and 2017, respectively, for future real estate taxes, insurance expenditures and tenant improvements related to our properties and their operations.

As of December 31, 2018, the Company had a $1.3 million reserve for unpaid cash rental income and a $35.8 million reserve associated with accumulated straight-line rental income. As of December 31, 2017, the Company had a $3.2 million reserve for unpaid cash rental income and a $12.4 million reserve associated with accumulated straight-line rental income.

In 2017, the Company entered into memoranda of understanding with Genesis Healthcare, Inc. (“Genesis”) to market for sale up to all of its remaining Genesis facilities and to restructure its lease agreements with Genesis to increase the marketability of these facilities to potential buyers. Effective January 1, 2018, the annual base rent payable under the Genesis leases was reduced by $19.0 million pursuant to a lease restructuring agreement. During the year ended December 31, 2018, the Company completed the sale of 43 facilities leased to Genesis. The Company has entered into agreements to sell three of its remaining 11 Genesis facilities and expects to retain eight facilities. The three facilities are being sold subject to HUD-insured debt, and the sales are expected to close upon approval by HUD.

In addition, on December 5, 2018, the Company entered into a purchase and sale agreement to sell the 36 skilled nursing/transitional care facilities and two senior housing communities currently operated by Senior Care Centers. In January 2019, the agreement was amended to reduce the number of facilities being sold to 26 skilled nursing/transitional care facilities and two senior housing communities (together, the “Senior Care Centers Sale Facilities”) for an aggregate sales price of $282.5 million, all of which is payable in cash by the purchaser at closing. The Company plans to retain the remaining 10 facilities (the “Retained Facilities”) and re-lease those facilities to one or more new operators. The Company expects to complete the sale of the Senior Care Centers Sale Facilities and transition of the Retained Facilities on April 1, 2019, subject to customary closing conditions including approval of operations transfer and related agreements by the bankruptcy court overseeing a petition for relief under Chapter 11 of the United States Bankruptcy Code filed by Senior Care Centers. There can be no assurances that the sale of the Senior Care Centers Sale Facilities or the transition of the Retained Facilities will be consummated, on the foregoing terms or timing or at all. If the closing of the sale occurs, the Company expects to record an impairment equal to the excess of the carrying value of the Senior Care Centers Sale Facilities over the net sales proceeds received at closing. In addition, depending on the terms at which the Company can re-lease the Retained Facilities, the Company may be required to record an impairment related to the Retained Facilities. Accordingly, the Company expects to record an impairment charge of between $60.1 million to $76.0 million during the first quarter of 2019 related to the facilities currently operated by Senior Care Centers. During the third quarter of 2018, the Company issued to Senior Care Centers notices of default and lease termination due to Senior Care Centers’ non-payment of rent under the terms of the master leases. As a result, Senior Care Centers is currently operating the facilities on a month-to-month basis. Deposits were fully exhausted to pay contractual rents and cash rents were recorded through a portion of September 2018. The net shortfall in cash rents from Senior Care Centers through December 31, 2018 was $16.5 million. No straight-line rents have been recorded since May 2018, and during the year ended December 31, 2018, the Company reserved the $5.3 million straight-line rent receivable balance related to the Senior Care Centers master leases. There can be no assurances that the Company will receive any additional rent payments from Senior Care Centers during the pendency of the sale process. Prior to termination of the master leases, the annual lease rate was $58.5 million. On December 4, 2018, Senior Care Centers filed a petition for relief under Chapter 11 of the United States Bankruptcy Code in the Northern District of Texas. Although the sale of the Senior Care Centers Sale Facilities and transition of the Retained Facilities is subject to approval by the bankruptcy court, the Company does not expect Senior Care Centers’ bankruptcy filing to have a substantive impact on the Company’s disposition and transition of the facilities operated by Senior Care Centers. On February 15, 2019, the Company entered into a settlement agreement with Senior Care Centers pursuant to which the Company has agreed to discharge its claims against Senior Care Centers in exchange for certain settlement payments, a portion of which would be applied to pay post-petition rent totaling $5.7 million. The effectiveness of this settlement agreement is subject to bankruptcy court approval.

On December 19, 2018, the Company entered into a non-binding letter of intent to terminate its triple-net master lease with Holiday Retirement (“Holiday”) with respect to all 21 senior housing communities subject to the master lease (the “Holiday Communities”) and concurrently enter into one or more management agreements pursuant to which Holiday will manage the Holiday Communities. In exchange, the Company would receive $57.2 million of total consideration, including $15.1 million of retained security deposits and a $42.1 million termination fee to be paid in cash. During the year ended December 31, 2018, the Company reserved the $28.9 million straight-line rent receivable balance related to the Holiday master lease. The Company expects to terminate the Holiday master lease and enter into the Holiday management agreements in early 2019, though there can be no assurances that the transactions will be completed on the foregoing terms or timing or at all.

The Company monitors the creditworthiness of its tenants by reviewing credit ratings (if available) and evaluating the ability of the tenants to meet their lease obligations to the Company based on the tenants’ financial performance, including the evaluation of any parent guarantees (or the guarantees of other related parties) of tenant lease obligations. As formal credit ratings may not be available for most of the Company’s tenants, the primary basis for the Company’s evaluation of the credit quality of its tenants (and more specifically the tenant’s ability to pay their rent obligations to the Company) is the tenant’s lease coverage ratio or the parent’s fixed charge coverage ratio for those entities with a parent guarantee. These coverage ratios include earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) to rent and earnings before interest, taxes, depreciation, amortization, rent and management fees (“EBITDARM”) to rent at the lease level and consolidated EBITDAR to total fixed charges at the parent guarantor level when such a guarantee exists. The Company obtains various financial and operational information from its tenants each month and reviews this information in conjunction with the above-described coverage metrics to identify financial and operational trends, evaluate the impact of the industry’s operational and financial environment (including the impact of government reimbursement), and evaluate the management of the tenant’s operations. These metrics help the Company identify potential areas of concern relative to its tenants’ credit quality and ultimately the tenant’s ability to generate sufficient liquidity to meet its obligations, including its obligation to continue to pay the rent due to the Company.

For the year ended December 31, 2018, no tenant relationship represented 10% or more of the Company’s total revenues.

As of December 31, 2018, the future minimum rental payments from the Company’s properties held for investment under non-cancelable operating leases were as follows (in thousands):



2019	$	465,766
2020	456,207
2021	452,346
2022	454,216
2023	437,277
Thereafter	2,407,064
	$	4,672,876