XML 27 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
Commitments And Contingencies
9 Months Ended
Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES

Bickford

In February 2015 we announced plans to develop five senior housing facilities in Illinois and Virginia to be managed by Bickford and each consisting of 60 private-pay assisted living and memory care units. The total estimated project cost is $55,000,000. These five properties represent the culmination of plans announced in 2012 between NHI and Bickford to construct a total of eight facilities. The first three communities, all in Indiana, opened in 2013 and 2014. As of September 30, 2016, land and development costs incurred on the project totaled $43,017,000. One facility opened in July 2016, two opened in October 2016, and two are planned to open during the first half of 2017.

In conjunction with our acquisition of five assisted living and memory care communities in June 2016, we have committed to fund an additional $2,400,000 for capital expenditures and the expansion of the existing facilities, the funding of which will be added to the lease base. No amounts have been funded toward our commitment as of September 30, 2016.

We have extended a $14,000,000 construction loan facility to Bickford for the purpose of developing and operating an assisted living/memory care community in Illinois. Funding as of September 30, 2016 was $1,500,000. Bickford may also borrow an additional $2,000,000 upon achieving certain operating performance metrics.

In February 2014 we entered into a commitment on a letter of credit for the benefit of Sycamore, an affiliate of Bickford, which previously held a minority interest in PropCo. At September 30, 2016, our commitment on the letter of credit totaled $3,930,000.

Chancellor

At September 30, 2016, we had a continuing commitment with Chancellor to provide up to $650,000 for renovations and improvements related to a senior housing community in Oregon. We have funded $52,000 as of September 30, 2016.

East Lake

In connection with our July 2015 lease of three senior housing properties, NHI has committed to East Lake certain lease incentive payments of $8,000,000 contingent on reaching and maintaining certain metrics, a contingent earnout of $750,000 payable to the seller upon attaining certain metrics, and the funding of an additional $400,000 for specified capital improvements. At acquisition, we estimated the seller contingent earnout payment to be probable and accordingly, have reflected that amount in our Condensed Consolidated Balance Sheet at September 30, 2016. We are unaware of circumstances that would change our initial assessment as to the contingent earnout and lease incentives. Funding of capital improvements and contingent payments earned will be included in the lease base when funded. Additionally, NHI has committed up to an additional $10,000,000 for capital improvements and potential expansion of the two CCRCs acquired in June 2016, of which $747,000 was drawn at September 30, 2016.

The Ensign Group

Our May 2016 lease of 15 skilled nursing facilities in Texas to The Ensign Group, as discussed in Note 2, includes a commitment from NHI to purchase four skilled nursing facilities in Texas for $56,000,000 which are leased to Legend and subleased to Ensign. The purchase window for the first facility is open. The other three facilities are under construction by the developer.

Life Care Services

As discussed in Note 4, we have a remaining loan commitment to an affiliate of Life Care Services for $26,064,000.

Santé

We are committed to fund a $3,500,000 expansion and renovation program at our Silverdale, Washington senior living campus and as of September 30, 2016, had funded $2,621,000, which was added to the basis on which the lease amount is calculated. In addition, we have a contingent commitment to fund a lease inducement payment of $2,000,000. Santé would earn the payment upon attaining and sustaining a specified lease coverage ratio. If earned, the payment would be due following calendar year 2016. At acquisition, incurring the contingent payments was not considered probable. No change to our initial assessment has been made as a result of operations to date in 2016, and accordingly, no provision for these payments is reflected in the condensed consolidated financial statements.

Senior Living Communities

As discussed in Note 4, as of September 30, 2016 we were committed to Senior Living to fund $15,000,000 on a revolving credit facility, with $10,904,000 undrawn, and $14,000,000 on a mezzanine loan, with $7,850,000 undrawn, related to the ongoing construction of a senior living campus on Daniel Island in South Carolina.

Senior Living Management

We are committed to furnish to our current tenant, Senior Living Management, Inc. (“SLM”), through its affiliates, loans of up to $24,500,000 to facilitate SLM’s acquisition of five senior housing facilities that it currently operates. The total amounts funded were $12,556,000 as of September 30, 2016.

Marathon/Village Concepts

We are committed to fund up to $350,000 in specific capital improvements to our independent living community in Chehalis, Washington. A total of $158,000 has been funded as of September 30, 2016, and added to the lease base on which the lease amount is calculated.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. While there may be lawsuits pending against certain of the owners and/or lessees of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no material adverse effect on our financial condition, results of operations or cash flows.