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 nine months ended September 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.

Rental income associated with assets held for sale as of September 30, 2024 totaled $0.2 million and $1.1 million for the three and nine months ended September 30, 2024, respectively, and $0.6 million and $1.5 million for the three and nine months ended September 30, 2023, respectively.

During the nine months ended September 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 months ended September 30, 2023, we recorded impairment charges of approximately $1.2 million on one property in our Real Estate Investments segment. During the nine months ended September 30, 2023, we recorded impairment charges of approximately $1.6 million on four properties 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” in the Condensed Consolidated Statements of Income for the three and nine months ended September 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 the 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, broker quotes of estimated values (Level 3 inputs), and/or independent third-party valuations (Level 1 and 3 inputs).

We lease a SLC that is subject to an outstanding purchase and sale agreement for the tenant to acquire the property for approximately $38.5 million. The purchase and sale agreement, as amended, expires in June 2025. The property continues to be classified as held and used and is leased pursuant to the existing triple-net lease that generates approximately $2.8 million in annual rent and expires in July 2027. The property will be reclassified to assets held for sale when the sale becomes probable, including when the tenant demonstrates its ability to obtain sufficient financing to close on the sale of the property within the terms of the purchase and sale agreement. The property had a net investment of $19.3 million as of September 30, 2024.

In October 2024, we acquired a portfolio of ten assisted living and memory care communities located in North Carolina for a total purchase price of $121.0 million, excluding $0.3 million in closing costs. The 15-year master lease, which includes two five-year extension options, has an initial lease rate of 8.25% with fixed annual escalators of 2%. The master lease includes a $10.0 million earnout incentive which will be added to the respective lease base if funded.

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 nine months ended September 30, 2024 and 2023,


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

Senior Living Communities, LLC (“Senior Living”)	EFC	$	576,829	$	42,896	$	39,980	16%	$	38,466	16%
Bickford Senior Living (“Bickford”)	ALF	431,085		16,647		31,233		13%	29,280		12%
National HealthCare Corporation (“NHC”)	SNF	133,770		—		30,426		12%	28,159		12%
All others, net	Various	1,336,671		192,418		99,050		40%	99,867		41%
Escrow funds received from tenants
for property operating expenses	Various	—		—		8,321		3%	8,738		4%
		$	2,478,355	$	251,961	209,010			204,510
Resident fees and services3						40,416		16%	35,860		15%
						$	249,426		$	240,370

As of September 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. Rental revenue will increase at a lease rate of 8.5% applied to the amount expended. We recognized straight-line rent revenue of $(0.4) million and $(0.9) million from Senior Living for the nine months ended September 30, 2024 and 2023, respectively.

As of September 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. Bickford has been on the cash basis of revenue recognition since the second quarter of 2022 based upon information obtained from Bickford regarding its financial condition that has raised substantial doubt as to its ability to continue.

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. Rental revenue will increase at a lease rate of 8.0% applied to the amount expended.

During the three and nine months ended September 30, 2024, Bickford repaid $1.1 million and $4.0 million, respectively, of its outstanding pandemic-related rent deferrals. During the three and nine months ended September 30, 2023, Bickford repaid $0.8 million and $1.3 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 September 30, 2024, Bickford’s outstanding pandemic-related rent deferrals were $14.0 million.

As of September 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 $0.2 million and $(0.9) million was recognized from NHC for the nine months ended September 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.

We had 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 as of September 30, 2024. Cash rents received from these tenants for the three and nine months ended September 30, 2024 and 2023 were as follows ($ in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Bickford1	$	9,850	$	8,607	$	29,161	$	24,534
All others2	1,855		3,446		9,398		9,963
Total rental income from cash basis operators	$	11,705	$	12,053	$	38,559	$	34,497

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.

Senior Living Management (“SLM”) has been on the cash basis of accounting for its four leased properties since the fourth quarter of 2022. In late September 2024, SLM notified us that ongoing liquidity constraints raised doubts about SLM’s ability to sustain its operations and pay its contractual rent and interest obligations prospectively. Effective October 1, 2024, one property was transitioned to a new operator under a new lease agreement, as previously planned, and the remaining three leased properties were transitioned pursuant to interim management agreements. The net book value of the leased properties was $16.3 million as of September 30, 2024, including $5.0 million associated with one property classified as assets held for sale.

SLM was current on its lease obligations through the six months ended June 30, 2024. Rental income from SLM recognized for the three and nine months ended September 30, 2024 was $0.4 million and $2.5 million, respectively. SLM repaid approximately $0.3 million in prior rent deferrals during the quarter ended June 30, 2024. Rental income from SLM for the property was $1.5 million and $4.3 million for the three and nine months ended September 30, 2023, respectively. Reference Note 4 for further discussion on the two non-performing notes receivable from SLM.

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.

In November 2024, we transitioned a leased ALF located in Alabama to a new operator and 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 September 30, 2024, tenants had purchase options on four properties with an aggregate net investment of $77.8 million that will become exercisable between 2027 and 2031. Rental income from these properties with tenant purchase options was $2.5 million and $6.3 million for the three and nine months ended September 30, 2024, respectively. Rental income from these properties with tenant purchase options was $1.8 million and $5.4 million for three and nine months ended September 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				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Lease payments based on fixed escalators	$	57,682	$	57,200	$	174,383	$	169,675
Lease payments based on variable escalators	2,412		1,830		8,663		5,879
Straight-line rent, net of write-offs	1,161		1,040		2,066		6,011
Escrow funds received from tenants for property operating expenses	2,786		2,908		8,321		8,738
Amortization of lease incentives	(723)		(723)		(2,168)		(1,798)
Rental income	$	63,318	$	62,255	$	191,265	$	188,505