Real Estate Investments, Net

3 Months Ended

Mar. 31, 2021

Real Estate [Abstract]

Real Estate Investments, Net

REAL ESTATE INVESTMENTS, NET

The following table summarizes the Company’s investment in owned properties as of March 31, 2021 and December 31, 2020 (dollars in thousands):

	March 31, 2021		December 31, 2020
Land	$	243,457	$	205,356
Buildings and improvements	1,578,754		1,477,849
Integral equipment, furniture and fixtures	101,131		97,836
Identified intangible assets	2,658		2,352
Real estate investments	1,926,000		1,783,393
Accumulated depreciation and amortization	(348,550)		(335,294)
Real estate investments, net	$	1,577,450	$	1,448,099

As of March 31, 2021, all 222 of the Company’s facilities were leased to various operators under triple-net leases. All of these leases contain annual escalators based on the percentage change in the Consumer Price Index (but not less than zero), some of which are subject to a cap, or fixed rent escalators.

As of March 31, 2021, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, were (dollars in thousands): 

Year	Amount
2021 (nine months)	$	132,001
2022	176,082
2023	175,777
2024	174,467
2025	174,441
2026	171,488
Thereafter	860,010
Total	$	1,864,266

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 Type	Properties	Lease Expiration	1st Option Open Date	Option Type(1)	Current Cash Rent(2)
ALF	7	October 2034	1/1/2021	A	$	3,207
SNF	11	November 2030	1/1/2022	C	4,800
SNF	1	March 2029	4/1/2022	B / C(3)	766
SNF / Campus	2	October 2032	1/1/2023	B	959
SNF	4	November 2034	12/1/2024	B	3,789
ALF	2	October 2034	1/1/2026	A	1,559

(1) Option type includes:

A - Fixed base price plus a specified share on any appreciation.

B - Fixed base price.

C - Fixed capitalization rate on lease revenue.

(2) Based on annualized cash revenue for contracts in place at March 31, 2021.

(3) Purchase option reflects two option types.

Rental Income

The following table summarizes components of the Company’s rental income (dollars in thousands):

	For the Three Months Ended March 31,
Rental Income	2021		2020
Contractual rent due(1)	$	45,171	$	42,438
Straight-line rent	12		26
Lease termination revenue(2)	63		—
Total	$	45,246	$	42,464

(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 three months ended March 31, 2021, 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 $0.1 million from Metron affiliates.

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the three months ended March 31, 2021 (dollars in thousands):

Type of Property	Purchase Price(1)		Initial Annual Cash Rent		Number of Properties	Number of Beds/Units(2)
Skilled nursing	$	15,800	$	1,492	1	145
Multi-service campuses(3)	125,708		8,604		4	640
Total	$	141,508	$	10,096	5	785

(1) Purchase price includes capitalized acquisition costs.

(2) The number of beds/units includes operating beds at the acquisition date.

(3) Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which is scheduled to occur upon the tenants’ receipt of licensing approval and increases to $9.4 million in the second year with Consumer Price Index (“CPI”) based annual escalators thereafter. The facilities are currently being leased back to the seller under a short-term lease with a term of less than one year.

Asset Sales and Assets Held for Sale

As of March 31, 2021, there were no assets classified as held for sale. During the fourth quarter of 2020, the Company met the criteria to classify one skilled nursing facility operated by affiliates of Five Oaks Healthcare, LLC as held for sale. Assets held for sale include 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. On February 1, 2021, the Company closed on the sale of the one skilled nursing facility consisting of 90 beds located in Washington with a carrying value of $7.2 million, for net sales proceeds of $7.0 million. The Company recorded a loss of $0.2 million in connection with the sale.

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 three months ended December 31, 2020.

On February 14, 2020, the Company closed on the sale of six skilled nursing facilities formerly operated by affiliates of Metron. 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. In April 2020, the mortgage loan was settled with $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.

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 VA Holdings, LLC (“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.