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Real Estate Investments, Net
 9 Months Ended
Sep. 30, 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 September 30, 2021 and December 31, 2020 (dollars in thousands):
September 30, 2021December 31, 2020
Land$251,347 $205,356 
Buildings and improvements1,609,834 1,477,849 
Integral equipment, furniture and fixtures103,739 97,836 
Identified intangible assets1,257 2,352 
Real estate investments1,966,177 1,783,393 
Accumulated depreciation and amortization(375,759)(335,294)
Real estate investments, net$1,590,418 $1,448,099 
As of September 30, 2021, all 225 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 (“CPI”) (but not less than zero), some of which are subject to a cap, or fixed rent escalators.
As of September 30, 2021, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, was (dollars in thousands):
YearAmount
2021 (three months)$47,765 
2022191,229 
2023191,024 
2024189,679 
2025189,650 
2026189,755 
Thereafter1,128,717 
Total$2,127,819 
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 ExpirationNext Option Open Date
Option Type(1)
Current Cash Rent(2)
ALF7October 20341/1/2022A$3,282 
SNF11November 20301/1/2022C4,944 
SNF1March 20294/1/2022
B / C(3)
779 
SNF / Campus2October 20321/1/2023B998 
SNF4November 203412/1/2024B3,789 
ALF2October 20341/1/2026A1,565 
(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 as of September 30, 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 September 30,
For the Nine Months Ended September 30,
Rental Income2021202020212020
Contractual rent due(1)
$48,081 $42,866 $140,988 $127,789 
Straight-line rent6 17 26 65 
Recovery of previously reversed rent(2)
— 1,047 — 1,047 
Lease termination revenue(2)
— 1,106 63 1,106 
Total$48,087 $45,036 $141,077 $130,007 
(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 and nine months ended September 30, 2020, the Company recovered approximately $1.0 million in rental revenue related to affiliates of Metron Integrated Health Systems (“Metron”) that was previously written off. In addition, in connection with the agreement to terminate its lease agreements with Metron and to sell the facilities to a third party, the Company received certain lease termination payments from Metron. During the nine months ended September 30, 2021, the Company recognized approximately $0.1 million in lease termination revenue. During the three and nine months ended September 30, 2020, the Company received approximately $1.1 million in lease termination revenue.
Recent Real Estate Acquisitions
The following table summarizes the Company’s acquisitions for the nine months ended September 30, 2021 (dollars in thousands):
Type of Property
Purchase Price(1)
Initial Annual Cash RentNumber of Properties
Number of Beds/Units(2)
Skilled nursing$57,973 $4,499 (3)4 509 
Multi-service campuses125,708 8,604 (4)4 640 
Total$183,681 $13,103 8 1,149 
(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 initial cash rent for the first twelve months excluding any impact of straight-line rent.
(4) Initial annual cash rent represents the first twelve months of rent upon commencement of the Company’s long-term net leases, which occurred during the three months ended June 30, 2021, upon the tenants’ receipt of licensing approval and increases to $9.4 million in the second year with CPI-based annual escalators thereafter.
Lease Amendments
Amended Noble Master Leases. During the three months ended September 30, 2021, the Company did not collect a portion of rent from affiliates of Noble Senior Services and Noble VA Holdings, LLC (collectively, “Noble”). On September 23, 2021, the Company amended its two existing triple-net master leases with Noble. The lease amendment granted a deferral for a total of $1.8 million of unpaid base rent, which represented approximately 4% of the Company’s total contractual base rent for the three months ended September 30, 2021. In connection with its agreement to the rent deferral, the Company also entered into a purchase agreement with Noble to acquire two assisted living facilities owned by Noble, which will be leased back to Noble under a short-term lease agreement upon closing of the acquisition while the Company pursues other tenants for the long-term. The lease amendment requires the deferred rent, as well as all contractual rent for the fourth quarter of 2021, to be paid in full upon closing the purchase of the two facilities. If the closing under the purchase agreement is not consummated within the timeframe provided in the purchase agreement, all unpaid rent will become immediately due and payable under the terms of the applicable master lease agreements. During the three months ended September 30, 2021, the Company recognized $2.2 million of rental income, exclusive of operating expense reimbursements, related to Noble’s master leases and recorded a corresponding rent receivable of $1.8 million, included within accounts and other receivables on the Company’s condensed consolidated balance sheets. As of September 30, 2021, the Company had $1.1 million of cash security deposits on-hand related to Noble.
Amended Ensign Master Lease. On August 1, 2021, the Company acquired two skilled nursing facilities. The facilities were leased to affiliates of The Ensign Group, Inc. (“Ensign”). In conjunction with the acquisition of the two facilities, the Company amended and extended the initial term of an existing triple-net master lease with Ensign to include the two skilled nursing facilities. The Ensign lease, as amended, has a remaining initial term of approximately 17 years, with three five-year renewal options and CPI-based rent escalators. Annual cash rent under the amended lease increased by approximately $2.2 million, with GAAP rent increasing by $2.5 million due to a $5.0 million prepayment of rent made at closing, which is being amortized on a straight-line basis over the remaining lease term.
Five Oaks Lease Termination and Amended Ensign Master Lease. On June 1, 2021, operating affiliates of Ensign acquired certain operations and assets of Five Oaks Healthcare, LLC (“Five Oaks”) under an agreement with Five Oaks. The agreement granted Ensign the right to occupy and operate four of the Company’s skilled nursing facilities in Washington that were previously being operated by Five Oaks. In conjunction with consenting to the transfer, the Company terminated the existing Five Oaks master lease, and amended and extended the term of an existing triple-net master lease with Ensign to include the four skilled nursing facilities. The Ensign lease, as amended, has a remaining term of approximately 15 years, with three five-year renewal options and CPI-based rent escalators. Annual cash rent under the terminated Five Oaks master lease was approximately $2.6 million, and annual cash rent under the amended Ensign lease increased by the same amount.
Premier Partial Lease Termination and Amended Noble VA Master Lease. On March 10, 2021 and July 1, 2021, two assisted living facilities in Wisconsin operated by affiliates of Premier Senior Living, LLC (“Premier”) were transferred to affiliates of Noble VA Holdings, LLC (“Noble VA”). In connection with the transfer, the Company partially terminated the Premier master lease and amended the existing triple-net master lease with Noble VA to include the two assisted living facilities. The Noble VA master lease, as amended, has a remaining term of approximately 13 years, with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the amended Noble VA master lease increased by approximately $1.3 million on March 10, 2021 and approximately $1.0 million on July 1, 2021 and annual cash rent under the partially terminated Premier master lease decreased by approximately the same amount. See above under “Amended Noble Master Leases” for additional information regarding the Company’s leases with Noble.
Twenty/20 Lease Termination and New Noble VA 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. In connection with the transfer, the Company entered into a new triple-net master lease with Noble VA. 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. See above under “Amended Noble Master Leases” for additional information regarding the Company’s leases with Noble.
Assets Held for Sale and Asset Sales
During the third quarter of 2021, the Company met the held for sale criteria on one assisted living facility operated by affiliates of Noble. As of September 30, 2021, the property continued to be held for sale and the carrying value of $4.9 million was primarily comprised of real estate assets.
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. 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. During the three months ended March 31, 2021, the Company recorded a loss of $0.2 million in connection with the sale.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 during the three months ended March 31, 2020. 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 mortgage loan.