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Real Estate Investments (Tables)

3 Months Ended

Mar. 31, 2020

Summary of investments in owned properties

The following table summarizes our investments in owned properties at March 31, 2020 (dollar amounts in thousands):


								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investment		Investment		Properties ⁽¹⁾	Beds	Units	Bed/Unit
Assisted Living	$	876,319	60.9	%	107	—	6,164	$	142.17
Skilled Nursing		543,814	37.8	%	50	6,283	212	$	83.73
Under Development ⁽²⁾		6,684	0.5	%	—	—	—		—
Other ⁽³⁾		11,360	0.8	%	1	118	—		—
Total	$	1,438,177	100.0	%	158	6,401	6,376

(1)	We own properties in 27 states that are leased to 29 different operators.

(2)	Represents a 90-bed SNF development project located in Missouri.

(3)	Includes three parcels of land held-for-use, and one behavioral health care hospital.

Schedule of future minimum base rents receivable

Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent receivable, amortization of lease incentives and renewal options are as follows (in thousands):


	Cash
	Rent ⁽¹⁾
2020	$	101,584
2021		127,050
2022		128,250
2023		129,900
2024		126,374
Thereafter		625,531

(1)	Represents contractual cash rent, except for Anthem Memory Care (“Anthem”) lease which is based on cash rent received. See below for more information.

Summary of components of our rental income

The following table summarizes components of our rental income for the three months ended March 31, 2020 and 2019 (in thousands):


Rental Income		2020			2019
Base cash rental income	$	33,015		$	33,914
Variable cash rental income		4,282	⁽¹⁾		4,485	⁽¹⁾
Straight-line rent		839			1,238
Adjustment for collectibility of rental income		—			(1,926)	⁽²⁾
Amortization of lease incentives		(101)			(87)
Total	$	38,035		$	37,624

(1)

The variable rental income for the three months ended March 31, 2020, includes $60 related to contingent rental income and $4,222 related to our real estate taxes which were reimbursed by our operators. The variable rental income for the three months ended March 31, 2019 includes $150 related to contingent rental income and $4,335 related to our real estate taxes which were reimbursed by our operators. Per the provisions of ASC 842, any lessor cost, paid by the lessor and reimbursed by the lessee, must be included as a lease payment.

(2)

During the first quarter of 2019, we terminated a lease agreement and transitioned two operating seniors housing communities under the lease agreement to a new operator. As a result of the lease termination, we wrote-off $1,926 straight-line rent receivable to contra-revenue in accordance with ASC 842.

Summary of information about purchase options included in our lease agreements

Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. The following table summarizes information about purchase options included in our lease agreements (dollar amount in thousands):


	Type	Number
	of	of		Gross		Carrying	Option
State	Property	Properties		Investments		Value	Window
California	ALF/MC	2	$	38,895	$	36,307	2024-2029
California	ALF	2		29,655		16,588	2021-TBD	⁽¹⁾
Florida	MC	1		14,201		12,670	2028-2029
Kentucky and Ohio	MC	2		30,152		27,698	2028-2029
Texas	MC	2		25,265		24,180	2025-2027
South Carolina	ALF/MC	1		11,680		10,648	2028-2029
Total			$	149,848	$	128,091

(1)	The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies.

Summary of investments acquired

Acquisitions and Developments: The following table summarizes our acquisitions for the three months ended March 31, 2020 and 2019 (dollar amounts in thousands):


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year	Type of Property	Price		Costs ⁽¹⁾		Costs		Properties	Beds/Units
2020	Skilled Nursing ⁽²⁾	$	13,500	$	81	$	13,581	1	140

2019	Assisted Living ⁽³⁾	$	16,719	$	171	$	16,890	1	74

(1)

Represents cost associated with our acquisitions; however, upon adoption of ASU 2017-01, our acquisitions meet the definition of an asset acquisition resulting in capitalization of transaction costs to the properties’ basis. For our land purchases with forward development commitments, transaction costs are capitalized as part of construction in progress. Transaction costs per our Consolidated Statements of Income and Comprehensive Income represents current and prior year transaction costs due to timing and terminated transactions.

(2)	We acquired a SNF located in Texas.

(3)

We entered into a joint venture (“JV”) (consolidated on our financial statements) to purchase an existing operational 74-unit ALF/MC community. The non-controlling partner contributed $919 of equity and we contributed $15,971 in cash. Our economic interest in the real estate JV is approximately 95%.

Schedule of investment in development and improvement projects

During the three months ended March 31, 2020 and 2019, we invested the following in development and improvement projects (in thousands):


	2020				2019
Type of Property	Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	2,386	$	1,116	$	4,507	$	256
Skilled Nursing Centers		2,468		3		2,450		—
Other		—		—		—		3
Total	$	4,854	$	1,119	$	6,957	$	259

Schedule of completed projects

Completed Developments. The following table summarizes our completed developments during the three months ended March 31, 2020 and 2019 (dollar amounts in thousands):

Number

Type

Number

Total

Year

Type of Project

Properties

Property

Beds/Units

State

Investment

2020

Development ⁽¹⁾

ALF/MC

Oregon

16,341

2019

Development

SNF

143

Kentucky

24,974

(1)	Certificate of occupancy was received in March 2020, however, due to the COVID-19 pandemic, we have consented to delay the opening of this community to a later date to be determined.

Schedule of real estate investment property sold

Properties Sold. The following table summarizes property sales during the three months ended March 31, 2020 and 2019 (dollar amounts in thousands):


		Type		Number		Number
		of		of		of			Sales			Carrying			Net
Year	State	Properties		Properties		Beds/Units			Price			Value			Gain
2020	Arizona	SNF		1		194		$	12,550		$	2,229		$	10,293
	Colorado	SNF		3		275			15,000			4,271			10,365
	Iowa	SNF	⁽¹⁾	7		544			14,500			4,886			8,914
	Kansas	SNF		3		250			9,750			7,438			1,994
	Texas	SNF		7		1,148			23,000			10,260			12,288
Total 2020 ⁽²⁾				21	⁽²⁾	2,411	⁽²⁾	$	74,800	⁽²⁾	$	29,084	⁽²⁾	$	43,854	⁽²⁾

2019	N/A	N/A		—		—		$	—		$	—		$	—

(

(1)	This transaction includes a holdback of $838 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC Topic 606, Contracts with Customers, we estimated and recorded the holdback value of $471.

(2)	Properties sold within the Preferred Care portfolio.

Summary of investments in mortgage loans secured by first mortgages

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2020 (dollar amounts in thousands):


				Type	Percentage		Number of			Investment
		Gross		of	of				SNF	per
Interest Rate ⁽¹⁾	Maturity	Investment		Property	Investment		Loans ⁽²⁾	Properties ⁽³⁾	Beds	Bed/Unit
9.9%	2043	$	186,159	SNF	72.4	%	1	15	1,941	$	95.91
9.2%	2045		36,362	SNF	14.2	%	1	4	501	$	72.58
9.4%	2045		19,513	SNF	7.6	%	1	2	205	$	95.19
9.6%	2045		14,925	SNF	5.8	%	1	1	157	$	95.06
Total		$	256,959		100.0	%	4	22	2,804	$	91.64

(1)	The majority of the mortgage loans provide for annual increases in the interest rate after a certain time period based upon a specified increase of 2.25%.

(2)	Some loans contain certain guarantees, provide for certain facility fees and the majority of the mortgage loans have a 30-year term.

(3)	The properties securing these mortgage loans are located in one state and are operated by one operator.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the three months ended March 31, 2020 and 2019 (in thousands):



	2020		2019
Originations and funding under mortgage loans receivable	$	366	$	1,454
Scheduled principal payments received		(65)		(65)
Mortgage loan premium amortization		(1)		—
Provision for loan loss reserve		(3)		(14)
Net increase in mortgage loans receivable	$	297	$	1,375