In June 2024, we acquired a 110-unit ALF located in Sussex, Wisconsin, from Encore Senior Living (“Encore”). The acquisition price was $32.1 million, including $0.1 million in closing costs, and the cancellation of an outstanding construction note receivable held by us of $22.2 million including interest. We added the facility to an existing master lease with Encore for a term of 15 years at an initial lease rate of 8.25%, and annual escalators of 2.21%. Of the total purchase price $1.3 million was allocated to land and $30.8 million was allocated to buildings and improvements.

During the three and six months ended June 30, 2024, we completed the sale of two ALFs located in Louisiana, previously leased to one of our tenants on cash basis of accounting for revenue recognition, for net cash proceeds of $4.7 million, resulting in a gain of approximately $1.4 million.

The following table contains information regarding concentration in our Real Estate Investments portfolio of tenants or affiliates of tenants that exceed 10% of total revenues as of and for the six months ended June 30, 2024 and 2023, excluding $2.6 million for our corporate office, a credit loss reserve of $15.9 million and $351.1 million in real estate assets in the SHOP segment ($ in thousands):


	As of June 30, 2024					Revenues1
	Asset Class	Gross Real Estate2		Notes Receivable		Six Months Ended June 30,
						2024			2023

Senior Living Communities, LLC (“Senior Living”)	EFC	$	573,631	$	45,375	$	26,406	16%	$	25,658	16%
National HealthCare Corporation (“NHC”)	SNF	133,770		—		20,836		13%	18,983		12%
Bickford	ALF	426,798		16,697		20,691		12%	19,977		12%
All others, net	Various	1,339,754		194,699		66,369		40%	66,323		41%
Escrow funds received from tenants
for property operating expenses	Various	—		—		5,535		3%	5,830		4%
		$	2,473,953	$	256,771	139,837			136,771
Resident fees and services3						26,645		16%	23,493		15%
						$	166,482		$	160,264

As of June 30, 2024, we leased ten retirement communities to Senior Living. In the second quarter of 2024, two of the leases were amended to extend the maturity dates by two years and to provide up to $10.0 million of capital improvements on various properties, none of which was funded as of June 30, 2024. Rental revenue will increase at a lease rate of 8.5% applied to the amount expended. We recognized straight-line rent revenue of $(0.5) million and $(0.6) million from Senior Living for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we leased three ILFs and 32 SNFs to NHC, a publicly held company, under a master lease (four of which were subleased to other parties for whom the lease payments were guaranteed to us by NHC). Straight-line rent revenue of $0.1 million and $(0.6) million was recognized from NHC for the six months ended June 30, 2024 and 2023, respectively.

NHC Percentage Rent - Under the terms of our master lease agreement with NHC, rent escalates by 4% of the increase, if any, in each of the facility’s revenue over a base year and is referred to as “percentage rent.” The following table summarizes the percentage rent income from NHC ($ in thousands):

1 For purposes of the percentage rent calculation described in the master lease agreement, NHC’s annual revenue by facility for a given year is certified to NHI by March 31st of the following year.

As of June 30, 2024, we leased 39 facilities, including one property reclassified to assets held for sale in the second quarter of 2024, to Bickford under four leases. In 2022, we converted Bickford to the cash basis of revenue recognition based upon

Effective April 1, 2024, the combined rent for the Bickford leased portfolio was reset to $34.5 million per year with nominal increases through April 1, 2026, at which time the rent will be reset to a fair market value based on the Consumer Price Index (“CPI”). Base rent will escalate annually thereafter based on either a fixed percentage or CPI subject to a floor of 2% and a ceiling of 3%. As part of the lease amendments, we agreed to fund up to $8.0 million of capital improvements on various properties, of which less than $0.1 million was funded as of June 30, 2024. Rental revenue will increase at a lease rate of 8.0% applied to the amount expended.

During the three and six months ended June 30, 2024, Bickford repaid $1.3 million and $2.8 million, respectively, of its outstanding pandemic-related rent deferrals. During the three and six months ended June 30, 2023, Bickford repaid $0.4 million and $0.6 million, respectively, of its outstanding pandemic-related rent deferrals, in addition to the reduction in rent deferrals of $2.5 million recognized in connection with the acquisition of an ALF located in Chesapeake, Virginia from Bickford through a note receivable conversion. As of June 30, 2024, Bickford’s outstanding pandemic-related rent deferrals were $15.2 million.

Rental income associated with assets held for sale as of June 30, 2024 totaled $0.5 million and $0.9 million for the three and six months ended June 30, 2024, respectively, and $0.4 million and $1.0 million for the three and six months ended June 30, 2023, respectively.

During the three and six months ended June 30, 2024, we recorded impairment charges of approximately $0.7 million on one property reclassified to assets held for sale in the second quarter of 2024 in our Real Estate Investments segment. During the three and six months ended June 30, 2023, we recorded impairment charges of approximately $0.1 million on two properties and approximately $0.5 million on three properties, respectively, in our Real Estate Investments segment. The impairment charges were determined in connection with the preparation of the financial statements for the applicable quarterly period and are included in “Loan and realty losses (gains)” in the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023.

We reduce the carrying value of impaired properties to their estimated fair value or, with respect to the properties classified as assets held for sale, to estimated fair value less costs to sell. To estimate the fair values of the properties, we utilized a market approach which considered binding agreements for sales (Level 1 inputs), non-binding offers to purchase from unrelated third parties and/or broker quotes of estimated values (Level 3 inputs), and/or independent third-party valuations (Level 1 and 3 inputs).

In March 2024, we executed a purchase and sale agreement with a tenant to acquire its leased SLC for a purchase price of $38.5 million, subject to the tenant’s ability to secure financing for the purchase. The purchase and sale agreement expires in December 2024. Until the tenant provides notification that it has obtained financing, the property continues to be classified as held and used and leased pursuant to the existing triple-net lease that generates approximately $2.8 million in annual rent and expires in July 2027. The property had a net investment of $19.4 million as of June 30, 2024.

We have three tenants on the cash basis of accounting for revenue recognition for their leasing arrangements based on our assessment of each tenant’s ability to satisfy its contractual obligations. Cash rents received from these tenants for the three and six months ended June 30, 2024 and 2023 were as follows ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Bickford1	$	9,946	$	8,119	$	19,310	$	15,927
All others2	5,142		2,318		7,544		6,516
Total rental income from cash basis operators	$	15,088	$	10,437	$	26,854	$	22,443

1Excludes $2.5 million of rental income related to the reduction of pandemic-related rent deferrals recognized in connection with the acquisition of an ALF from Bickford in the first quarter of 2023.

In June 2024, we transitioned a leased SNF located in Wisconsin to a new operator. The new lease contains a purchase option to acquire the property at the end of the initial lease term in 2031 or during the renewal period at a fixed minimum internal rate of return on our investment. In the first quarter of 2024, we wrote off to “Rental income” the straight-line rent receivable of approximately $0.8 million associated with the terminated lease.

Certain of our leases contain purchase options allowing tenants to acquire the leased properties at a fixed base price plus a specified share in any appreciation, fixed base price, or a fixed minimum internal rate of return on our investment. At June 30, 2024, tenants had purchase options on four properties with an aggregate net investment of $78.5 million that will become exercisable between 2027 and 2031. Rental income from these properties with tenant purchase options was $2.0 million and $3.8 million for the three and six months ended June 30, 2024, respectively. Rental income from these properties with tenant purchase options was $1.8 million and $3.6 million for three and six months ended June 30, 2023, respectively.

We cannot reasonably estimate at this time the probability that any purchase options will be exercised in the future. Consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties.

Most of our leases contain annual escalators in rent payments. Some of our leases contain escalators that are determined annually based on a variable index or other factors that are indeterminable at the inception of the lease. The table below indicates the rental income recognized as a result of fixed and variable lease escalators ($ in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Lease payments based on fixed escalators	$	60,110	$	53,538	$	116,702	$	112,827
Lease payments based on variable escalators	2,358		2,103		6,251		3,696
Straight-line rent, net of write-offs	1,213		2,875		905		4,972
Escrow funds received from tenants for property operating expenses	2,802		3,212		5,535		5,830
Amortization of lease incentives	(723)		(776)		(1,446)		(1,075)
Rental income	$	65,760	$	60,952	$	127,947	$	126,250