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Real Estate Investments, Net
 12 Months Ended
Dec. 31, 2020
Real Estate [Abstract]  
Real Estate Investments, Net REAL ESTATE INVESTMENTS, NET
The following table summarizes the Company’s investment in owned properties at December 31, 2020 and December 31, 2019 (dollars in thousands):
 
December 31, 2020December 31, 2019
Land$205,356 $204,154 
Buildings and improvements1,477,849 1,400,927 
Integral equipment, furniture and fixtures97,836 93,005 
Identified intangible assets2,352 1,650 
Real estate investments1,783,393 1,699,736 
Accumulated depreciation and amortization(335,294)(285,536)
Real estate investments, net$1,448,099 $1,414,200 
As of December 31, 2020, 85 of the Company’s 218 facilities were leased to subsidiaries of Ensign on a triple-net basis under multiple long-term leases (each, an “Ensign Master Lease” and, collectively, the “Ensign Master Leases”) which commenced on June 1, 2014 and were subsequently modified (see “Pennant Spin” below for further information). The obligations under the Ensign Master Leases are guaranteed by Ensign. A default by any subsidiary of Ensign with regard to any facility leased pursuant to an Ensign Master Lease will result in a default under all of the Ensign Master Leases. As of December 31, 2020, annualized contractual rental income from the Ensign Master leases was $53.4 million and are escalated annually, in June, by an amount equal to the product of (1) the lesser of the percentage change in the Consumer Price Index (“CPI”) (but not less than zero) or 2.5%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the Ensign Master Leases are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). During the year ended December 31, 2020, the Company acquired four additional facilities leased to subsidiaries of Ensign on a triple-net basis which are not included under the Ensign Master Leases. As of December 31, 2020, annualized contractual rental income from the four additional Ensign facilities was $3.8 million and are escalated annually, in December, by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero) or 2.5%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of Ensign that are tenants under the four additional facilities are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs). The four additional facilities leased to subsidiaries of Ensign are guaranteed by Ensign but do not contain cross-default provisions with the Ensign Master Leases.
As of December 31, 2020, 15 of the Company’s facilities were leased to subsidiaries of Priority Management Group (“PMG”) on a triple-net basis under one long-term lease (the “PMG Master Lease”). The PMG Master Lease commenced on December 1, 2016, and provides an initial term of fifteen years, with two five-year renewal options. As of December 31, 2020, annualized contractual rental income from the PMG Master Lease were $27.9 million and are escalated annually by an amount equal to the product of (1) the lesser of the percentage change in the CPI (but not less than zero) or 3.0%, and (2) the prior year’s rent. In addition to rent, the subsidiaries of PMG that are tenants under the PMG Master Lease are solely responsible for the costs related to the leased properties (including property taxes, insurance, and maintenance and repair costs).
As of December 31, 2020, 114 of the Company’s 218 facilities were leased to various other operators under triple-net leases. All of these leases contain annual escalators based on the percentage change in the CPI (but not less than zero), some of which are subject to a cap, or fixed rent escalators.
As of December 31, 2020, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands):
YearAmount
2021$174,400 
2022174,497 
2023174,193 
2024174,294 
2025174,396 
Thereafter1,026,675 
$1,898,455 
Tenant Purchase Options
Certain of the Company’s operators hold purchase options allowing them to acquire properties they currently lease from the Company. A summary of these purchase options is presented below (dollars in thousands):
Asset TypePropertiesLease Expiration1st Option Open DateOption Type
Current Cash Rent(1)
ALF7October 20341/1/2021A$3,207 
SNF11January 20311/1/2022C$4,800 
SNF1March 20304/1/2022
B / C(2)
$766 
SNF / Campus2October 20321/1/2023B$959 
SNF4November 203412/1/2024B$3,789 
ALF2October 20341/1/2026A$1,559 
Option Type:
A - Fixed base price plus a specified share on any appreciation.
B - Fixed base price.
C - Fixed capitalization rate on lease revenue.
Notes:
(1) Based on annualized cash revenue for contracts in place at December 31, 2020.
(2) Purchase option reflects two option types.
Rental Income
The following table summarizes components of the Company’s rental income (dollars in thousands):
For the Year Ended December 31,
20202019
Rental Income
Contractual rent due(1)
$171,309 $166,056 
Straight-line rent77 1,385 
Adjustment for collectibility(2)
— (11,774)
Recovery of previously reversed rent(3)
1,047 — 
Lease termination revenue(4)
1,179 — 
Total$173,612 $155,667 

(1)Includes initial cash rent and tenant operating expense reimbursements, as adjusted for applicable rental escalators and rent increases due to capital expenditures funded by the Company. For tenants on a cash basis, this represents the lesser of the amount that would be recognized on a straight-line basis or cash that has been received.
(2)During the year ended December 31, 2019, and in accordance with ASC 842, the Company evaluated the collectibility of lease payments through maturity and determined that it was not probable that the Company would collect substantially all of the contractual obligations from five operators through maturity. As such, the Company reversed $7.8 million of contractual rent, $3.5 million of straight-line rent and $0.5 million of property tax reimbursements during the year ended December 31, 2019. If lease payments are subsequently deemed probable of collection, the Company increases rental income for such recoveries.
(3)During the year ended December 31, 2020, the Company recovered $1.0 million in rental income that was previously written off related to one operator.
(4)During the year ended December 31, 2020, in connection with the agreement to terminate its lease agreements with affiliates of Metron Integrated Health Systems (“Metron”) and to sell the facilities to a third-party, the Company received $1.2 million from Metron affiliates.
Recent Real Estate Acquisitions
The following table summarizes the Company’s acquisitions for the year ended December 31, 2020 (dollar amounts in thousands):
Type of Property
Purchase Price(1)
Initial Annual Cash Rent(2)
Number of Properties
Number of Beds/Units(3)
Skilled nursing$75,545 $6,453 6 715 
Multi-service campuses6,876 555 1 184 
Assisted living7,396 590 1 62 
Total$89,817 $7,598 8 961 
The following table summarizes the Company’s acquisitions for the year ended December 31, 2019 (dollar amounts in thousands):
Type of Property
Purchase Price(1)
Initial Annual Cash Rent(2)
Number of Properties
Number of Beds/Units(3)
Skilled nursing$254,760 $22,909 17 2,099 
Multi-service campuses59,344 5,203 4 762 
Assisted living12,596 1,031 1 96 
Total$326,700 $29,143 22 2,957 
The following table summarizes the Company’s acquisitions for the year ended December 31, 2018 (dollar amounts in thousands):
Type of Property
Purchase Price(1)
Initial Annual Cash Rent(2)
Number of Properties
Number of Beds/Units(3)
Skilled nursing$85,814 $7,715 10 926 
Multi-service campuses27,520 (4)2,240 2 177 
Assisted living— — — — 
Total$113,334 $9,955 12 1,103 
(1)    Purchase price includes capitalized acquisition costs.
(2)    Initial annual cash rent excludes ground lease income.
(3)    The number of beds/units includes operating beds at acquisition date.
(4)    The Company committed to fund approximately $1.4 million in revenue-producing capital expenditures over 24 months based on the in-place yield, which was included in the purchase price.

Lease Amendments
Twenty/20 Lease Termination and New Noble Master Lease. On December 1, 2020, five assisted living facilities in Virginia operated by Twenty/20 Management, Inc. (“Twenty/20”) were transferred to affiliates of Noble Senior Services (“Noble”). In connection with the transfer, the Company entered into a new triple-net master lease with Noble. The new lease has a remaining initial term of approximately 14 years, with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the new lease is approximately $3.2 million.
Pennant Spin. On October 1, 2019, Ensign completed its previously announced separation of its home health and hospice operations and substantially all of its senior living operations into a separate independent publicly traded company through the distribution of shares of common stock of Pennant. As a result of the Pennant Spin, as of October 1, 2019, the Company amended the Ensign Master Leases to lease 85 facilities to subsidiaries of Ensign, which had a total of 8,908 operational beds, and entered into a new triple-net master lease with subsidiaries of Pennant (the “Pennant Master Lease”) to lease 11 facilities, which had a total of 1,151 operational beds. The contractual initial annual cash rent under the Pennant Master Lease is approximately $7.8 million. The Pennant Master Lease carried an initial term of 15 years, with two five-year renewal options and CPI-based rent escalators. The contractual annual cash rent under the amended Ensign Master Leases was reduced by approximately $7.8 million. Ensign continues to guarantee obligations under the Ensign Master Leases and the Pennant Master Lease. If Pennant achieves a specified portfolio coverage and continuously maintains it for a specified period, Ensign’s obligations under the guaranty with respect to the Pennant Master Lease would be released.
Trillium Lease Termination and New Master Lease. On July 15, 2019, the Company terminated its existing master lease (the “Original Trillium Lease”) with affiliates of Trillium Healthcare Group, LLC (“Trillium”), which covered ten properties in Iowa, seven properties in Ohio and one property in Georgia.  On August 16, 2019, the Company entered into a new master lease (the “New Trillium Lease”) with Trillium’s Iowa and Georgia affiliates covering the ten properties in Iowa and the one property in Georgia. The Company recorded an adjustment to reduce rental income recognized under the Original Trillium Lease for unpaid contractual rent, straight-line rent and property tax reimbursements by approximately $3.8 million in the three months ended September 30, 2019.
On September 1, 2019, four of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease were transferred to affiliates of Providence Group, Inc. (“Providence”). In connection with the transfer, the Company amended its triple-net master lease with Providence. The amended lease had a remaining initial term of approximately 13 years as of September 1, 2019, and includes two five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $2.1 million.
Trio Lease Amendment. On November 4, 2019, the Company amended its existing master lease with affiliates of Trio Healthcare, Inc. (“Trio”), which covered seven facilities based in Dayton, Ohio. The amended lease has a remaining initial term of approximately 13 years, with two five-year renewal options and CPI-based rent escalators. The annual base rent due under the amended lease with Trio is approximately $4.7 million and provides for payment of percentage rent if Trio achieves certain increases in portfolio revenue.
Pristine Lease Termination. On February 27, 2018, the Company announced that it entered into a Lease Termination Agreement (the “LTA”) with Pristine for its nine remaining properties, with a target completion date of April 30, 2018. Under the LTA, Pristine agreed to continue to operate the facilities until possession could be surrendered, and the operations therein transitioned, to operator(s) designated by the Company. Among other things, Pristine also agreed to amend certain pending agreements to sell the rights to certain Ohio Medicaid beds (the “Bed Sales Agreements”) and cooperate with the Company to turn over any claim or control it might have had with respect to the sale process and the proceeds thereof, if any, to the Company. The transactions were timely completed, and on May 1, 2018, Trio took over operations in the seven facilities based primarily in the Dayton, Ohio area under a new 15-year master lease, while Hillstone Healthcare, Inc. (“Hillstone”) assumed the operation of the two facilities in Willard and Toledo, Ohio under a new 12-year master lease. In addition, amendments to the Bed Sales Agreements were subsequently executed, confirming the Company as the sole seller of the bed rights and the sole recipient of any proceeds therefrom. The aggregate annual base rent due under the new master leases with Trio and Hillstone is approximately $10.0 million, subject to CPI-based or fixed escalators.
Under the LTA, the Company agreed, upon Pristine’s full performance of the terms thereof, to terminate Pristine’s master lease and all future obligations of the tenant thereunder; however, under the terms of the master lease the Company’s security interest in Pristine’s accounts receivable has survived any such termination. Such security interest was subject to the prior lien and security interest of Pristine’s working capital lender, Capital One, National Association (“CONA”), with whom the Company has an existing intercreditor agreement that defines the relative rights and responsibilities of CONA and with its respect to the loan and lease collateral represented by Pristine’s accounts receivable and the Company’s respective security interests therein.
Impairment of Real Estate Investments, Asset Sales and Assets Held for Sale
On September 1, 2019, the Company sold three of the seven skilled nursing properties in Ohio operated by Trillium under the Original Trillium Lease for a purchase price of $28.0 million. During the three months ended September 30, 2019 and prior to the disposition, the Company recorded an impairment expense of approximately $7.8 million. In connection with the sale, the Company provided affiliates of CommuniCare Family of Companies (“CommuniCare”), the purchaser of the three Ohio properties, with a mortgage loan secured by the three Ohio properties for approximately $26.5 million. See Note 4, Other Real Estate Investments, Net for additional information.
As of September 30, 2019, the Company met the criteria to classify six skilled nursing facilities operated by affiliates of Metron as held for sale, which resulted in an impairment expense of approximately $8.8 million to reduce the carrying value to fair value less costs to sell the properties. The fair values of the assets impaired during the three months ended September 30, 2019 were based on contractual sales prices, which are considered to be Level 2 measurements within the fair value hierarchy. As of December 31, 2019, the properties continued to be held for sale and the carrying value of $34.6 million was primarily comprised of real estate assets. In February 2020, the six skilled nursing facilities were sold. In connection with
the sale for $36.0 million, the Company received $3.5 million in cash and provided subsidiaries of Cascade Capital Group, LLC (“Cascade”), the purchaser of the properties, with a short-term mortgage loan secured by these properties for $32.4 million. The mortgage loan bore interest at 7.5% and initially had a maturity date of March 31, 2020. In connection with the sale, the Company recognized a loss of approximately $0.1 million during the three months ended March 31, 2020. In April 2020, the mortgage loan was settled in connection with a new mortgage loan transaction between the Company and a third-party institutional lender as co-lenders, pursuant to which we received $18.9 million in cash and a new mortgage loan for $13.9 million. In July 2020, the Company received prepayment in full, including accrued interest, for the new $13.9 million mortgage loan. See Note 4, Other Real Estate Investments, Net, for further detail on the new mortgage loan.
On November 1, 2020, the Company sold the one remaining owned and operated independent living facility consisting of 168 units located in Texas with an aggregate carrying value of $4.2 million for gross proceeds of $4.5 million. In connection with the sale, the Company recognized a gain of $20,000.
During the year ended December 31, 2019, the Company sold one of its owned and operated independent living facilities consisting of 38 units located in Texas with an aggregate carrying value of $1.7 million for net proceeds of $3.3 million. In connection with the sale, the Company recognized a gain of $1.6 million.
During the year ended December 31, 2018, the Company sold three assisted living facilities consisting of 102 units located in Idaho with an aggregate carrying value of $10.9 million for an aggregate price of $13.0 million. In connection with the sale, the Company recognized a gain of $2.1 million.
During the fourth quarter of 2020, the Company met the criteria to classify one skilled nursing facility operated by affiliates of Five Oaks as held for sale. Assets held for sale includes the net book value of property the Company plans to sell within the next year. If the determination is made that the Company no longer expects to sell an asset within the next year, the asset is reclassified out of assets held for sale. As of December 31, 2020, the property continued to be held for sale and the carrying value of $7.2 million is primarily comprised of real estate assets. In February 2021, the property was sold. See Note 13, Subsequent Events, for additional information.