PROPERTIES AND INVESTMENTS

3 Months Ended

Mar. 31, 2017

Real Estate [Abstract]

PROPERTIES AND INVESTMENTS

NOTE 2 – PROPERTIES AND INVESTMENTS

Leased Property

Our real estate properties, represented by 808 SNFs, 101 ALFs, 16 specialty facilities and one medical office building at March 31, 2017, are leased under provisions of single or master leases with initial terms typically ranging from five to 15 years, plus renewal options. Substantially all of our leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on specific provisions of each lease as follows: (i) a specific annual percentage increase over the prior year’s rent, generally between 2.0% and 3.0%; (ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index (“CPI”)); or (iii) specific dollar increases over prior years. Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

A summary of our investment in leased real estate properties is as follows:

	March 31,			December 31,
	2017			2016
	(in thousands)
Buildings	$	5,980,501		$	5,954,771
Land		756,803			759,295
Furniture, fixtures and equipment		454,288			454,760
Site improvements		206,326			206,206
Construction in progress		183,747			191,326
Total real estate investments		7,581,665			7,566,358
Less accumulated depreciation		(1,306,084	)		(1,240,336	)
Real estate investments - net	$	6,275,581		$	6,326,022

The following table summarizes the significant acquisitions that occurred in the first quarter of 2017:

Number of  Facilities				Country/	Total  Investment		Land		Building & Site Improvements		Furniture & Fixtures		Initial Annual Cash
SNF		ALF		State	(in millions)								Yield (%)
	-		1	VA	$	7.6	$	0.5	$	6.8	$	0.3		7.50

Asset Sales, Impairments and Other

During the first quarter of 2017, we sold 15 facilities for approximately $45.8 million in net proceeds recognizing a gain of approximately $7.4 million. Eleven of the sold facilities were previously classified as held for sale. In addition, we recorded a provision for impairment of approximately $7.6 million on three facilities, one of which was reclassified to held for sale on March 31, 2017. We reduced the net book value of the impaired facilities to their estimated fair values or, with respect to the facility reclassified to held for sale, to its estimated fair value less costs to sell. To estimate the fair value of the facilities, we utilized a market approach and Level 3 inputs (which generally consist of non-binding offers from unrelated third parties). Also see Note 7 – Assets Held For Sale for details. Our recorded impairments were primarily the result of a decision to exit certain non-strategic facilities and/or operators.