Other Assets

Items included in Other assets, net on the Company's Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 are detailed in the table below.



	Balance as of
(Dollars in thousands)	March 31, 2019		December 31, 2018
Notes receivable	$	24,119	$	24,110
Accounts and interest receivables	2,092		2,158
Straight-line rent receivables	3,593		3,254
Prepaid assets	515		487
Deferred financing costs, net	848		318
Leasing commissions, net	862		790
Deferred tax asset	2,008		2,024
Fair value of interest rate swaps	215		902
Above-market intangible assets, net	162		168
Right of use leased asset	141		—
Other	267		335
	$	34,822	$	34,546

The Company's $24.1 million in notes receivable at March 31, 2019 include mainly the following notes. Interest related to these notes is included in Other Operating Interest on the Company's Condensed Consolidated Statements of Income.


•	On April 25, 2018, the Company provided a $23.0 million loan to a newly formed company (Newco), secured by all assets and ownership interests in seven long-term acute care hospitals and one inpatient rehabilitation hospital. The loan, which matures on May 1, 2031, currently bears interest at 9% per annum, with principal payments beginning in May 2021. See Note 5 for more detail.


•	On December 31, 2018, the Company entered into notes with a tenant totaling $0.9 million. The notes bear interest at 9% per annum and mature on December 31, 2019.

The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through related parties any material impact in the activities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at March 31, 2019 are summarized in the table below.



Classification	Carrying Amount (in millions)		Maximum Exposure to Loss (in millions)
Notes receivable	$	0.9	$	0.9
Note receivable	$	23.0	$	23.0

Highlands Transition Update

As previously announced, the Company experienced payment issues with the old operator of Highlands Hospital ("Highlands"). Effective February 11, 2019, the Company signed a transition agreement (the "Transition Agreement"), to transition the property to a new operator and signed a lease with a new operator.

The old operator and new operator have signed an asset purchase agreement pursuant to which the new operator will take over the facility. In addition, the old operator and new operator have signed a management agreement and the new operator is currently managing Highlands pursuant to the management agreement. The new operator continues to perform due diligence and is in the process of preparing for transfer of licenses and related items customary for these types of transactions. We cannot provide assurance as to the timing, or whether, this transaction will actually close.

The new lease will be effective upon the transfer of the licenses to the new operator, which is anticipated to happen in the second half of 2019. The new lease provides for rental payments approximately equal to the amounts due under the previous agreements with the old operator.

The Company is receiving monthly payments under the Transition Agreement which approximate the amounts due from the old operator under the previous agreements. These payments are to continue as long as the Transition Agreement is in place. The Transition Agreement will terminate when the licenses are transferred to the new operator, at which time the new lease will become effective.

Since the Transition Agreement became effective in February, the Company only received payments during the first quarter for February and March and thus did not recognize revenue for the month of January representing approximately $0.3 million.

In addition, the Company incurred professional fees (legal and accounting) totaling over $0.1 million related to the workout and transition.

The Transition Agreement includes provisions for the Company to receive payment for the amounts due from the old operator that remain unpaid. The Company anticipates collecting all amounts due.