Lease Incentives

9 Months Ended

Sep. 30, 2022

Lease Incentives

Lease Incentives

5. Lease Incentives

Our non-contingent lease incentive balances at September 30, 2022 and December 31, 2021 were $2,001,000 and $2,678,000, respectively. The following table summarizes our lease incentives activity for the nine months ended September 30, 2022 and 2021 (in thousands):

				Nine Months Ended September 30,
	2022										2021
		Adjustment			Funding		Amortization		Write-off			Funding		Amortization
Non-contingent lease incentives	$	(174)	(1)	$	418	$	(665)	$	(256)	(2)	$	650	$	(386)

(1) Primarily relates to the sale of two ALFs in California during the second quarter of 2022.

(2) Represents the lease incentive balance write-off related to a closed property and subsequent lease termination and lease incentive balance write-off related to 12 assisted living communities transitioned to an existing operator.

Non-contingent lease incentives represent payments made to our lessees for various reasons including entering into a new lease or lease amendments and extensions. Contingent lease incentives represent potential contingent earn-out payments that may be made to our lessees in the future, as part of our lease agreements. From time to time, we may commit to provide contingent payments to our lessees, upon our properties achieving certain rent coverage ratios. Once the contingent payment becomes

probable and estimable, the contingent payment is recorded as a lease incentive. Lease incentives are amortized as a yield adjustment to rental income over the remaining life of the lease.