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Mortgage and Other Notes Receivable | 3 Months Ended
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Mar. 31, 2025
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] |
Mortgage and Other Notes Receivable | Mortgage and Other Notes Receivable At March 31, 2025, our investments in mortgage notes receivable totaled $173.4 million secured by real estate and other assets of the borrowers (e.g., Uniform Commercial Code liens on personal property) related to 15 facilities, and our investments in other notes receivable totaled $105.3 million, substantially all of which were guaranteed by significant parties to the notes or by cross-collateralization of properties with the same owner. At December 31, 2024, our investments in mortgage notes receivable totaled $175.8 million and other notes receivable totaled $113.4 million. These balances exclude a credit loss reserve of $18.9 million and $20.2 million at March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, we had two other notes receivable designated as non-performing that consisted of a mezzanine loan of $14.5 million due from affiliates of SLM and an unsecured loan with Bickford of $1.3 million. As of December 31, 2024, we had three loans designated as non-performing including a mortgage note receivable of $10.0 million due from affiliates of SLM. Interest income recognized, representing cash received, from these non-performing loans was $0.1 million and $0.5 million, respectively, for the three months ended March 31, 2025 and 2024. All other loans were on full accrual basis as of March 31, 2025. The credit loss reserve related to non-performing loans totaled $14.6 million and $16.1 million at March 31, 2025 and December 31, 2024, respectively. SLM In February 2025, we acquired an assisted living facility in Oviedo, Florida through the completion of a deed in lieu of foreclosure to settle a $10.0 million non-performing mortgage note receivable. We recorded the real estate assets acquired at their estimated fair values of $8.6 million which represents the net carrying value of the mortgage note receivable prior to completing the deed in lieu of foreclosure. In May 2025, we received $2.5 million in partial repayment of the principal on the $14.5 million unsecured loan due from SLM that is classified as non-performing. This repayment will result in a reduction of the reserve on this loan and a reduction of the credit loss expense of approximately $1.3 million in the second quarter of 2025. Vizion Health Loan Amendment In March 2025, we amended a mezzanine loan agreement with affiliates of Vizion Health and funded an additional $5.3 million in the first quarter of 2025. The balance of the loan as of March 31, 2025 was $18.0 million. The amendment to the loan agreement provides for an interest rate of 9.15% and a maturity date in May 2028. Montecito Medical Real Estate We have a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a fund that invests in medical real estate, including medical office buildings, throughout the United States. In the first quarter of 2025, approximately $6.2 million of principal was repaid upon the sale by the fund of one of the underlying properties. As of March 31, 2025, $9.4 million was outstanding on the loan associated with five medical office buildings with a combined purchase price of approximately $56.7 million. For both the three months ended March 31, 2025 and 2024, we recognized interest income of $0.5 million. Second Quarter 2025 Investments In May 2025, we entered into an agreement to fund up to $28.0 million on a construction loan for the development of an 84-unit assisted living and memory care facility to be located in Wyoming, Michigan and operated by Encore Senior Living. The loan agreement provides for an annual interest rate of 9.0%. Bickford Construction and Mortgage Loans As of March 31, 2025, we had one fully funded construction loan of $14.7 million to Bickford. The construction loan is secured by a first mortgage lien on substantially all of the related real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the property. Usual and customary covenants extend to the agreement, including the borrower’s obligation for payment of insurance and taxes. NHI has a fair market value purchase option on the property upon stabilization of the underlying operations. At March 31, 2025, we held a $12.1 million second mortgage as a component of the purchase price consideration in connection with the sale of six properties to Bickford in 2021. This second mortgage note receivable bears interest at a 10% annual rate and matures in April 2026. Interest income was $0.3 million for both the three months ended March 31, 2025 and 2024 related to the second mortgage. We did not include this note receivable in the determination of the gain recognized upon sale of the portfolio. Therefore, this note receivable is not reflected in “Mortgage and other notes receivable, net” in the Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024. During both the three months ended March 31, 2025 and 2024, Bickford repaid $0.1 million, of principal on this note receivable which is reflected in “Gains on sale of real estate, net” in the Condensed Consolidated Statements of Income. Senior Living We have provided a $15.0 million revolving line of credit to Senior Living whose borrowings under the revolver are to be used for working capital needs and to finance construction projects within its portfolio, including building additional units. The revolver matures in December 2031 at the time of the Senior Living lease maturity. At March 31, 2025, the revolver was fully funded and bore interest at 8.0% per annum. The Company also has a mortgage loan of $32.7 million with Senior Living collateralized by a 248-unit continuing care retirement community (“CCRC”) in Columbia, South Carolina. The mortgage loan matures in July 2025, which may be extended for one-year, and bears interest at an annual rate of 7.25%. Additionally, the loan conveys to NHI a purchase option at a stated minimum price of $38.3 million, subject to adjustment for market conditions. Credit Loss Reserve Our principal measures of credit quality, except for construction mortgages, are debt service coverage for amortizing loans and interest or fixed charge coverage for non-amortizing loans, collectively referred to as “Coverage.” A Coverage ratio provides a measure of the borrower’s ability to make scheduled principal and interest payments. The Coverage ratios presented in the table below have been calculated utilizing the most recent date for which data is available, December 31, 2024, using EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) and the requisite debt service, interest service or fixed charges, as defined in the applicable loan agreement. We categorize Coverage into three levels: (i) more than 1.5x, (ii) between 1.0x and 1.5x, and (iii) less than 1.0x. We update the calculation of Coverage on a quarterly basis. Coverage is not a meaningful credit quality indicator for construction mortgages as either these developments are not generating any operating income, or they have insufficient operating income as occupancy levels necessary to stabilize the properties have not yet been achieved. We measure credit quality for these mortgages by considering the construction and stabilization timeline and the financial condition of the borrower, as well as economic and market conditions. We consider the guidance in ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, when determining whether a modification, extension or renewal constitutes a current period origination. The credit quality indicator as of March 31, 2025 is presented below for the amortized cost, net by year of origination ($ in thousands):
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total
Mortgages |  |  |  |  |  |  |
more than 1.5x | $ | — |  | $ | 47,947 |  | $ | — |  | $ | 42,486 |  | $ | — |  | $ | 32,686 |  | $ | 123,119 |
between 1.0x and 1.5x | — |  | — |  | 725 |  | 28,405 |  | — |  | — |  | 29,130 |
less than 1.0x | — |  | — |  | — |  | — |  | — |  | 21,123 |  | 21,123 |
| — |  | 47,947 |  | 725 |  | 70,891 |  | — |  | 53,809 |  | 173,372 |
Mezzanine |  |  |  |  |  |  |
more than 1.5x | — |  | — |  | 530 |  | — |  | 17,965 |  | — |  | 18,495 |
between 1.0x and 1.5x | 1,873 |  | — |  | 231 |  | — |  | 12,664 |  | — |  | 14,768 |
less than 1.0x | — |  | 11,875 |  | — |  | — |  | — |  | 25,000 |  | 36,875 |
| 1,873 |  | 11,875 |  | 761 |  | — |  | 30,629 |  | 25,000 |  | 70,138 |
Non-performing |  |  |  |  |  |  |
between 1.0x and 1.5x | — |  | 1,344 |  | — |  | — |  | — |  | 14,500 |  | 15,844 |
| — |  | 1,344 |  | — |  | — |  | — |  | 14,500 |  | 15,844 |
Revolver |  |  |  |  |  |  |
more than 1.5x |  |  |  |  |  |  | 19,326 |
|  |  |  |  | Credit loss reserve | (18,910) |
|  |  |  |  |  |  | $ | 259,770 |
Due to the continuing challenges in financial markets and the potential impact on the collectability of our mortgages and other notes receivable, we forecasted a 20% increase in the probability of a default and a 20% increase in the amount of loss from a default on all loans, other than those designated as non-performing, resulting in an effective adjustment of 40%. The methodology for estimating the reserves for non-performing loans incorporates the sufficiency of the underlying collateral and the current conditions and forecasts of future economic conditions of these loans, including qualitative factors, which may differ from conditions existing in the historical periods. The allowance for expected credit losses is presented in the following table for the three months ended March 31, 2025 ($ in thousands):
Balance at January 1, 2025 | $ | 20,249 |
Provision for expected credit losses | 61 |
Write-offs charged to the allowance | (1,400) |
Balance at March 31, 2025 | $ | 18,910 |

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- Definition The entire disclosure for claims held for amounts due to entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/310-10/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 835 -SubTopic 30 -Name Accounting Standards Codification -Section 45 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482925/835-30-45-2 + Details
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