As of December 31, 2021, mortgage notes receivable relate to seven fixed rate mortgages on 63 long-term care facilities. The mortgage notes are secured by first mortgage liens on the borrowers’ underlying real estate and personal property. The mortgage notes receivable relate to facilities located in six states, operated by six independent healthcare operating companies. We monitor compliance with mortgages and when necessary have initiated collection, foreclosure and other proceedings with respect to certain outstanding mortgage notes.

The principal amounts outstanding of mortgage notes receivable, net of allowances, were as follows:

(1)	Approximates the weighted average interest rate on 45 facilities as of December 31, 2021.

(2)	Other mortgage notes outstanding have a weighted average interest rate of 8.84% per annum as of December 31, 2021 and maturity dates ranging from 2023 through 2032.

Mortgage Note due 2027

On January 17, 2014, we entered into a $112.5 million first mortgage loan with Guardian. The loan was originally secured by seven SNFs and two ALFs located in Pennsylvania and Ohio. The mortgage is cross-defaulted and cross-collateralized with our existing master lease with the operator. In March 2018, we extended the maturity date to January 31, 2027 and provided an option to extend the maturity for a five year period through January 31, 2032 and a second option to extend the maturity through September 30, 2034. As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian failed to pay contractual rent and interest to us from October 2021 through December 2021 due to on-going liquidity issues. The Company is currently in on-going negotiations to restructure and amend Guardian’s lease and loan agreements. As part of the restructuring negotiations, on December 30, 2021, we acquired two facilities, previously subject to the Guardian mortgage loan, in consideration for a reduction of $8.7 million in the mortgage principal and added the facilities to the master lease agreement. Subsequent to year end, in February 2022, we completed additional restructuring activities related to Guardian, including selling and re-leasing certain facilities as discussed further in Note 23 – Subsequent Events.

As discussed in Note 9 – Allowance for Credit Losses, we reduced the risk rating on the mortgage loan from a 4 to a 5 during the third quarter of 2021, primarily due to the increased likelihood of a restructuring that would result in the modification of the mortgage loan terms. The reduction in risk rating increased our reserve on the mortgage loan, determined using our PD and LGD credit loss model, to $8.9 million as of the end of the third quarter. Following Guardian’s non-payment of rent and interest during the fourth quarter of 2021 and further negotiations with Guardian in the fourth quarter, we elected to further reduce the risk rating on the loan from a 5 to a 6 in the fourth quarter of 2021 and to evaluate the risk of loss on the loan on an individual basis. As the fair value of the 7 properties that collateralize the mortgage loan were estimated to be less than the remaining principal of $103.8 million, we reserved an additional $38.2 million through provision for credit losses in the fourth quarter. The total reserve on December 31, 2021, related to the mortgage loan is $47.1 million and reduces to the loan carrying value, to the estimated fair value of the collateral of $56.7 million. We also fully reserved approximately $1.0 million of contractual interest receivable related to the mortgage loan with Guardian in the fourth quarter of 2021 (see Note 9 – Allowance for Credit Losses). The mortgage loan was also placed on non-accrual status for interest recognition in October 2021 and we will utilize the cost recovery method for any proceeds received on the mortgage loan.

Mortgage Notes due 2029

At December 31, 2021, the $653.6 million of Mortgages Notes with Ciena Healthcare (“Ciena") consisted of the following:

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$415 million amortizing mortgage (the “Master Mortgage”) that matures in 2029. The Master Mortgage note bore an initial interest rate of 9.0% per annum which increases by 0.225% per annum. In May 2020, we amended the Master Mortgage to increase the interest rate by 54 basis points from 10.13% per annum to 10.67% per annum and we sold eight SNFs and one ALF located in Michigan to Ciena for $83.5 million (as discussed below). As of December 31, 2021, the outstanding principal balance of the Master Mortgage note is approximately $372.8 million and is secured by 25 facilities. The interest rate on the Master Mortgage was 11.13% at December 31, 2021.

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Additional borrowings in the form of incremental facility mortgages, construction and/or improvement mortgages with maturities through 2029 (with exception to one construction mortgage with principal of $9.3 million that matures in 2023) with initial annual interest rates ranging between 8.5% and 10% and fixed annual escalators of 2% or 2.5% over the prior year’s interest rate, or a fixed increase of 0.225% per annum. As of December 31, 2021, the outstanding principal balance of these mortgage notes which are secured by five facilities is approximately $132.4 million. During the second quarter of 2021, one construction mortgage, included in the mortgage notes described above, with an original maturity date of 2021 was extended to 2029 and converted into a facility mortgage. During the third quarter of 2021, we acquired a facility which was previously subject to a $13.9 million construction mortgage, also included in the notes described above, and subsequently leased the property back to Ciena.

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$44.7 million mortgage note related to five SNFs located in Michigan. The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 9.5% which increases each year by 0.225%. The interest rate on the mortgage note was 10.18% at December 31, 2021. As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $43.8 million. Additionally, the Company committed to fund an additional $9.6 million to Ciena if certain performance metrics are achieved by the portfolio.

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$83.5 million mortgage note related to eight SNFs and one ALF located in Michigan. These nine facilities were formerly leased to Ciena and were sold to Ciena by issuance of a first mortgage on May 1, 2020. In connection with this sale, we recorded a loss of $3.6 million related to the write-off of the nine facilities’ straight-line rent receivable. The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 10.31% which increases each year by 2%. The interest rate on the mortgage note was 10.52% at December 31, 2021. As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $83.2 million.

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$21.3 million mortgage note related to one SNF located in Ohio. The mortgage note matures on March 31, 2022 and bears an initial annual interest rate of 9.5%. In January 2022, we amended the mortgage note to increase the interest rate to 9.74% beginning April 1, 2022 and to extend the maturity date to December 31, 2022. As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $21.3 million.

The mortgage notes with Ciena are cross-defaulted and cross-collateralized with our existing master lease and other investment notes with the operator.

Other mortgage notes outstanding

Mortgage Note due 2032; interest at 10.50%

On July 1, 2021, we financed six SNFs in Ohio and amended an existing $6.4 million mortgage, inclusive of 2 Ohio SNFs, to include the six facilities in a consolidated $72.4 million mortgage for eight Ohio facilities bearing interest at an initial rate of 10.5% per annum. In conjunction with this transaction, we also acquired three Maryland facilities that were previously subject to a mortgage issued by Omega bearing interest at 13.75% per annum with a principal balance of $36.0 million that was included in other mortgage notes outstanding. The purchase price for these three facilities was equal to the remaining mortgage principal amount, and the three acquired Maryland facilities were subsequently leased back to the seller for a term expiring on December 31, 2032, assuming Omega exercises the options under the agreement. The base rent in the initial year is approximately $5.0 million and includes annual escalators of 2.5%. As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $72.4 million.

Mortgage Note due 2025; interest at 7.85%

In connection with the MedEquities Merger on May 17, 2019, the Company acquired a first mortgage lien issued to Lakeway Realty, L.L.C, an unconsolidated joint venture discussed in Note 11 – Investments in Joint Ventures, in the original principal amount of approximately $73.0 million bearing interest at 8% per annum based on a 25-year amortization schedule and maturing on March 20, 2025. We determined the acquisition date fair value of the acquired mortgage was $69.1 million. As of December 31, 2021 and 2020, this mortgage has a carrying value of $65.5 million and $67.0 million, respectively.