REAL ESTATE INVESTMENTS, NET

6 Months Ended

Jun. 30, 2024

The following table summarizes the Company’s investment in owned properties, and properties held in consolidated joint ventures, held for use as of June 30, 2024 and December 31, 2023 (dollars in thousands):


	June 30, 2024		December 31, 2023
Land	$	326,089	$	279,276
Buildings and improvements	1,734,970		1,620,014
Integral equipment, furniture and fixtures	102,876		100,504
Identified intangible assets	5,283		5,283

Real estate investments	2,169,218		2,005,077
Accumulated depreciation and amortization	(462,987)		(437,958)

Real estate investments, net	$	1,706,231	$	1,567,119

As of June 30, 2024, all of the Company’s owned and held for investment facilities were leased to various operators under triple-net leases. During the second and third quarters of 2022, the Company entered into triple-net lease agreements for two of the Company’s facilities which are being repurposed to behavioral health facilities. All of the triple-net 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 June 30, 2024, 20 facilities were held for sale. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information.

As of June 30, 2024, the Company’s total future contractual minimum rental income for all of its tenants, excluding operating expense reimbursements, assets held for sale and assets being repurposed, was as follows (dollars in thousands):


Year	Amount
2024 (six months)	$	110,578
2025	223,997
2026	224,609
2027	220,960
2028	218,885
2029	214,524
Thereafter	980,405
Total	$	2,193,958

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(1)	Properties	Lease Expiration	Option Period Open Date(2)		Option Type(3)	Current Cash Rent(4)


SNF	1	March 2029	4/1/2022	(5)	A / B(7)	$	858
SNF	4	November 2034	12/1/2024	(5)	A	3,988
SNF / Campus	2	October 2032	11/1/2026	(6)	B	3,314		(8)
SNF / Campus	1	May 2034	6/1/2027	(9)	B	1,293		(10)
SNF / Campus	1	May 2034	6/1/2028	(9)	B	1,293		(10)

(1) Excludes a purchase option on an 11 building SNF portfolio classified as held for sale as of June 30, 2024 and representing $5.1 million of current cash rent. The tenant is currently not eligible to elect the option.

(2) The Company has not received notice of exercise for the option periods that are currently open.

(3) Option type includes:

A - Fixed base price.

B - Fixed capitalization rate on lease revenue.

(4) Based on annualized cash revenue for contracts in place as of June 30, 2024.

(5) Option window is open until the expiration of the lease term.

(6) Option window is open for six months from the option period open date.

(7) Purchase option reflects two option types.

(8) Purchase option provides for purchase of two of three facilities. The current cash rent shown is an average of the range of $3.2 million to $3.4 million.

(9) Purchase option window is open for nine months from the option period open date.

(10) Purchase option provides for purchase of one of five facilities. The current cash rent shown is an average of the range of $1.0 million to $1.6 million. If the operator exercises its option to extend the term of the master lease, beginning on June 1, 2036 and ending nine months thereafter, the operator will have a purchase option for all facilities then remaining in the master lease.

Rental Income

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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Rental Income	2024		2023		2024		2023
Contractual rent due(1)	$	54,843	$	47,752	$	107,777	$	93,922
Straight-line rent	(7)		(7)		(14)		(14)
Amortization of lease incentive	(4)		—		(4)		—
Amortization of below-market lease intangible	575		—		1,150		—



Total	$	55,407	$	47,745	$	108,909	$	93,908

(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. Tenant operating expense reimbursements for the three months ended June 30, 2024 and 2023 were $1.9 million and $1.2 million, respectively. Tenant operating expense reimbursements for the six months ended June 30, 2024 and 2023 were $3.4 million and $1.9 million, respectively.

Recent Real Estate Acquisitions

The following table summarizes the Company’s acquisitions for the six months ended June 30, 2024 (dollars in thousands):


Type of Property	Purchase Price(1)		Initial Annual Cash Rent(2)		Number of Properties	Number of Beds/Units(3)
Skilled nursing	$	119,222	$	10,331	7	638
Multi-service campuses(4)	78,154		6,268		4	575
Assisted living(5)	11,036		1,022		1	86
Total	$	208,412	$	17,621	12	1,299

(1) Purchase price includes capitalized acquisition costs.

(2) Initial annual cash rent represents initial cash rent for the first twelve months.

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

(4) Includes two multi-service campuses held through a joint venture. See Note 11, Variable Interest Entities, for additional information.

(5) Includes one ALF held through a joint venture. See Note 11, Variable Interest Entities, for additional information.

Lease Amendments and Terminations

New Bayshire Lease. On April 1, 2024, a new master lease with affiliates of Bayshire, LLC (“Bayshire”) commenced to lease one SNF that was previously under a short-term master lease until Bayshire received regulatory approval. The short-term master lease was terminated. The Bayshire master lease had a term of approximately 15 years at the date of the lease, with two five-year renewal options and 3% fixed rent escalators. Initial annual cash rent under the new Bayshire master lease was $2.6 million. The Bayshire lease provides for a rent deferral of $0.4 million in the first year to be repaid in 15 installments beginning in year two.

Amended Eduro Lease and Amended Ensign Lease. On March 1, 2024, operations of two SNFs in Colorado operated by affiliates of Eduro Healthcare, LLC (“Eduro”) were transferred to subsidiaries of The Ensign Group, Inc. (“Ensign”). In connection with the transfer, the Company partially terminated the Eduro master lease and amended one existing triple-net master lease with Ensign to include the two SNFs and extended the initial lease term by 15 years. The applicable Ensign master lease, as amended, had a remaining term at the date of amendment of approximately 20 years with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the applicable Ensign master lease, as amended, increased by approximately $2.1 million and annual cash rent under the Eduro master lease, as amended, decreased by the same amount.

New Embassy Lease and Hillstone Lease Termination. On December 31, 2023, the Company terminated its master lease with affiliates of Hillstone Healthcare, Inc. (“Hillstone”). Effective January 1, 2024, in connection with the December 31, 2023 lease termination, one SNF was removed from the Hillstone master lease, was classified as held for sale as of March 31, 2024 and was sold during the three months ended June 30, 2024. See Note 4, Impairment of Real Estate Investments, Assets Held for Sale and Asset Sales, for additional information. In connection with the lease termination, the Company entered into a new triple-net master lease with a subsidiary of Embassy Healthcare Holdings, Inc. (“Embassy”) with respect to one multi-service campus. The Embassy lease has an initial term of approximately 10 years with two five-year renewal options and CPI-based rent escalators. Initial annual cash rent under the lease is approximately $0.6 million and the master lease provides Embassy with a partial rent abatement until required authorizations with respect to the ALF portion of the facility are obtained and occupancy levels reach a certain percentage.

Noble VA Lease Termination and New Pennant Lease. Effective March 16, 2023, two ALFs in Wisconsin were removed from a master lease with affiliates of Noble VA Holdings (“Noble VA”) and the Company terminated the applicable Noble VA master lease. Annual cash rent under the applicable Noble VA master lease prior to lease termination was approximately $2.3 million. In connection with the lease termination, the Company entered into a new lease (the “New Pennant Lease”) with the Pennant Group, Inc. (“Pennant”) with respect to the two ALFs. The New Pennant Lease had an initial term at the date of the lease of approximately 15 years with two five-year renewal options and CPI-based rent escalators. Annual cash rent under the new lease was approximately $0.8 million and the master lease provides Pennant with three months deferred rent to be repaid before the expiration or termination of the lease.