2. Real Estate Investments

Assisted living properties, independent living properties, memory care properties, and combinations thereof are included in the assisted living property type. Range of care properties (or ROC) property type consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.

Any reference to the number of properties, number of schools, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Owned Properties. The following table summarizes our investments in owned properties at March 31, 2014 (dollar amounts in thousands):

						Average
			Number	Number of		Investment
Type of Property	Gross Investments	Percentage of Investments	of Properties (1)	SNF Beds	ALF Units	per Bed/Unit
Skilled Nursing	$459,351	48.3%	68	8,264	—	$55.58
Assisted Living	407,232	42.8%	98	—	4,629	$87.97
Range of Care	43,906	4.6%	8	634	274	$48.35
Under Development (2)	27,395	2.9%	—	—	—	—
Other (3)	13,607	1.4%	2	—	—	—
Totals	$951,491	100.0%	176	8,898	4,903

(1) We own properties in 27 states that are leased to 33 different operators.

(2) Includes three MC developments with a total of 168 units, a combination ALF and MC development with 81 units, and a SNF development with 143 beds.

(3) Includes two school properties and four parcels of land held-for-use.

Owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years. Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other costs necessary in the operations of the facilities. Many of the leases contain renewal options. The leases provide for fixed minimum base rent during the initial and renewal periods. The majority of our leases contain provisions for specified annual increases over the rents of the prior year that are generally computed in one of four ways depending on specific provisions of each lease:

(i) a specified percentage increase over the prior year’s rent, generally between 2.0% and 3.0%;

(ii) a calculation based on the Consumer Price Index;

(iii) as a percentage of facility net patient revenues in excess of base amounts; or

(iv) specific dollar increases.

We have a commitment to provide, under certain conditions, up to $5,000,000 per year through December 2014 to an existing operator for expansion of the 37 properties they lease from us. The estimated yield of this commitment is 9.5% plus the positive difference, if any, between the average yields on the U.S. Treasury 10-year note for the five days prior to funding, minus 420 basis points. As of March 31, 2014, no funds have been requested under this commitment.

Excluding the $5,000,000 per year commitment above, the following table summarizes our investment commitments as of March 31, 2014 and year-to-date funding on our development, redevelopment, renovation, and expansion projects (excludes capitalized interest, dollar amounts in thousands):

Type of Property	Investment Commitment	2014 Funding (2)		Commitment Funded	Remaining Commitment		Number of Properties	Number of Beds/Units
Skilled Nursing	$30,150	$ 1,757		$14,514	$15,636		7	760
Assisted Living (1)	50,656	11,360		22,021	28,635		7	385
Totals	$80,806	$13,117	(3)	$36,535	$44,271	(3)	14	1,145

(1) Includes the development of three MC properties for a total commitment of $30,256, one ALF/MC property for a total commitment of $5,800, and the expansion of three ALFs for a total commitment of $14,600.

(2) Excludes funding for completed development of $450.

(3) In April 2014, we funded $2,438 under investment commitments. Accordingly, we have a remaining commitment of $41,833.

Our construction in progress (or CIP) activity during the three months ended March 31, 2014 for our development, redevelopment, renovation, and expansion projects is as follows (dollar amounts in thousands):

Properties	Projects	CIP Balance at 12/31/13	Funded(1)	Capitalized Interest	Conversions out of CIP	CIP Balance at 3/31/14
Development projects:
Assisted living	5	$ 6,334	$ 4,541	$137	($8)	$11,004
Skilled nursing	1	5,893	1,166	118	—	7,177
Subtotal	6	12,227	5,707	255	(8)	18,181
Redevelopment, renovation and expansion projects:
Assisted living	3	8	6,819	52	—	6,879
Skilled nursing	5	2,433	591	—	—	3,024
Subtotal	8	2,441	7,410	52	—	9,903
Total	14	$14,668	$13,117	$307	($8)	$28,084

(1) Excludes $450 of capital improvement commitment funding which was capitalized directly into building.

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2014 (dollar amounts in thousands):

		Percentage		Number	Number of		Investment
Type of Property	Gross Investments	of Investments	Number of Loans	of Properties(1)	SNF Beds	ALF Units	per Bed/Unit
Skilled Nursing(2)	$154,564	91.4%	16	33	3,953	—	$39.10
Assisted Living	12,066	7.1%	3	8	—	211	$57.18
Range of Care	2,533	1.5%	1	1	99	74	$14.64
Totals	$169,163	100.0%	20	42	4,052	285

(1) We have investments in properties located in 9 states that include mortgages to 12 different operators.

(2) Includes a mortgage and construction loan secured by a closed skilled nursing property and a newly constructed 106-bed replacement property.

At March 31, 2014, the mortgage loans had interest rates ranging from 7.1% to 13.6% and maturities ranging from 2014 to 2043. In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20-year to 30-year amortization schedules. The majority of the mortgage loans provide for annual increases in the interest rate based upon a specified increase of 10 to 25 basis points.

During the three months ended March 31, 2014 and 2013, we received $519,000 and $462,000, respectively, in regularly scheduled principal payments. Additionally, during the three months ended March 31, 2014 and 2013, we funded $2,568,000 and $910,000, respectively, under a $10,600,000 mortgage and construction loan. This mortgage and construction loan is secured by a skilled nursing property and a parcel of land upon which a 106-bed replacement property was being constructed. During the three months ended March 31, 2014, we completed the construction of the 106-bed replacement skilled nursing property and relocated all the residents from the old property to the new property. The borrower is responsible for marketing and selling the old property. At March 31, 2014, we have a remaining commitment of $441,000 under this mortgage and construction loan. In April 2014, we funded $344,000 under a $12,000,000 mortgage loan capital improvement commitment. See Note 6. Commitments and Contingencies for further discussion.