REAL ESTATE PROPERTIES HELD FOR INVESTMENT

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

As of March 31, 2019



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	304	34,049	$	3,716,115	$	(234,633	)	$	3,481,482
Senior Housing - Leased	88	7,147	1,220,158		(133,570		)	1,086,588
Senior Housing - Managed	23	1,603	305,173		(22,037		)	283,136
Specialty Hospitals and Other	22	1,085	621,236		(35,394		)	585,842
	437	43,884	5,862,682		(425,634		)	5,437,048
Corporate Level			634		(328		)	306
			$	5,863,316	$	(425,962	)	$	5,437,354

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



	March 31, 2019			December 31, 2018
Building and improvements	$	5,044,382		$	5,388,102
Furniture and equipment	221,123			237,145
Land improvements	1,317			1,254
Land	596,494			629,382
	5,863,316			6,255,883
Accumulated depreciation	(425,962		)	(402,338		)
	$	5,437,354		$	5,853,545

Operating Leases

As of March 31, 2019, 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 less than one year to 15 years. As of March 31, 2019, 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 condensed consolidated balance sheets and totaled $12.6 million and $12.4 million as of March 31, 2019 and December 31, 2018, respectively, and letters of credit deposited with the Company totaled approximately $95 million and $98 million as of March 31, 2019 and December 31, 2018, respectively. In addition, the Company’s tenants have deposited with the Company $14.2 million and $17.5 million as of March 31, 2019 and December 31, 2018, respectively, for future real estate taxes, insurance expenditures and tenant improvements related to the Company’s properties and their operations.

Subsequent to the notices of default and lease termination issued by the Company to Senior Care Centers during the third quarter of 2018, on December 5, 2018, the Company entered into a purchase and sale agreement (as amended in January 2019) to sell 26 skilled nursing/transitional care facilities and two senior housing communities operated by Senior Care Centers for an aggregate sales price of $282.5 million. In addition, on February 15, 2019, the Company entered into a settlement agreement with Senior Care Centers which, in accordance with the order entered by the bankruptcy court in March 2019, provides for the discharge by the Company of its claims against Senior Care Centers in exchange for $9.5 million of settlement payments, a portion of which would be applied to pay post-petition rent. The Company recorded such post-petition rent totaling $5.7 million during the three months ended March 31, 2019 and expects to record an additional $0.5 million of post-petition rent during the second quarter of 2019. On April 1, 2019, the Company completed the sale of the 28 facilities and received gross sales proceeds of $282.5 million as well as $5.0 million of the settlement payments (with the remaining $4.5 million of settlement payments payable on or before July 1, 2019). In connection with the sale, the Company entered into an agreement to indemnify the buyer from certain costs, expenses and liabilities related to the historical operations of the facilities by Senior Care Centers. Of the 10 remaining facilities operated by Senior Care Centers, the Company expects to re-tenant seven facilities to a current operator in the Sabra portfolio and to sell three facilities. During the three months ended March 31, 2019, the Company recorded an impairment charge of $92.2 million related to the Senior Care Centers facilities, which includes $10.2 million related to the Company’s estimated contractual indemnification obligations.

On December 19, 2018, the Company entered into a 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 management agreements pursuant to which Holiday would manage the Holiday Communities. On April 1, 2019, the Company completed the conversion of the Holiday Communities to its Senior Housing - Managed portfolio. In exchange for terminating the Holiday master lease, the Company received $57.2 million of total cash consideration.

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 three months ended March 31, 2019, no tenant relationship represented 10% or more of the Company’s total revenues.

The future minimum rental payments from the Company’s properties held for investment under non-cancelable operating leases were as follows (in thousands):

As of March 31, 2019



April 1 through December 31, 2019	$	351,250
2020	456,660
2021	452,218
2022	454,086
2023	437,112
Thereafter	2,440,245
	$	4,591,571

As of December 31, 2018



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

Senior Housing - Managed Communities

The Company’s Senior Housing - Managed communities offer residents certain ancillary services that are not contemplated in the lease with each resident (i.e., housekeeping, laundry, guest meals, etc.). These services are provided and paid for in addition to the standard services included in each resident lease (i.e., room and board, standard meals, etc.). The Company bills residents for ancillary services one month in arrears and recognizes revenue as the services are provided, as the Company has no continuing performance obligation related to those services. Resident fees and services includes $0.1 million of ancillary service revenue for each of the three months ended March 31, 2019 and 2018.