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Major Operators | 9 Months Ended
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Sep. 30, 2014
Major Operators |
Major Operators | 7.Major Operators We have three operators from each of which we derive over 10% of our combined rental revenue and interest income from mortgage loans. In July 2014, Brookdale Senior Living, Inc. (or Brookdale), parent company of Brookdale Senior Living Communities, Inc. (or Brookdale Communities), merged with Emeritus Corporation. Brookdale Communities leases 37 assisted living properties with a total of 1,709 units owned by us representing approximately 8.4%, or $79,795,000, of our total assets at September 30, 2014 and 12.2% of our combined rental revenue and interest income from mortgage loans recognized for the nine months ended September 30, 2014. Prestige Healthcare (or Prestige) is a privately held company and operates 15 skilled nursing properties and two range of care properties that we own or on which we hold a mortgage secured by first trust deeds. These properties consist of a total of 2,176 skilled nursing beds and 93 assisted living units. Additionally, Prestige manages five parcels of land that we own. These assets represent 14.4% or $136,874,000, of our total assets at September 30, 2014 and generated 11.2% of our combined rental revenue and interest income from mortgage loans recognized for the nine months ended September 30, 2014. Senior Care Centers, LLC (or Senior Care) is a privately held company. Senior Care leases nine skilled nursing properties with a total of 1,190 beds owned by us representing approximately 10.7%, or $102,290,000, of our total assets at September 30, 2014 and generated 10.5% of our combined rental revenue and interest income from mortgage loans recognized for the nine months ended September 30, 2014. Our master leases with affiliates of Extendicare, Inc. (or Extendicare) and Enlivant (formerly known as Assisted Living Concepts, LLC (or ALC)) covering 37 assisted living properties with a total of 1,429 units will expire on December 31, 2014. In 2013, ALC merged with Aid Holdings, LLC, a Delaware limited liability company (or Aid Holdings), and Aid Merger Sub, LLC, a Delaware limited liability company and a wholly owned subsidiary of Aid Holdings (or Aid Merger Sub). Aid Holdings and Aid Merger Sub are affiliates of TPG Capital, L.P. For the nine months ended September 30, 2014, this portfolio generated approximately $8,223,000 or 9.4% of our combined rental revenue and interest income from mortgage loans. In October 2014, we entered into three agreements relating to the 37 assisted living properties as follows:
| · |  | We will sell 16 properties, consisting of 615 units located in Washington, Oregon, Idaho and Arizona to an affiliate of Enlivant for a sales price of $26,465,000. Accordingly, we expect to record a gain on sale of approximately $3,909,000 with closing expected to occur in December 2014. Additionally, we gave Enlivant consent to close a property located in Oregon. We are currently exploring sale and lease options for this property which has a net book value of $954,000.
| · |  | We will add 13 properties with 500 units in Indiana, Iowa, Ohio, Nebraska and New Jersey to an existing master lease with an affiliate of Senior Lifestyle (or Senior Lifestyle). Beginning January 1, 2015 the initial term of the amended and restated master lease will be 15 years and rent will increase by $5,100,000 over the current annual rent increasing annually by 2.6%.
| · |  | We re-leased seven properties with 278 units in Texas to Veritas InCare (or Veritas) under a new 10-year master lease. Beginning January 1, 2015 the initial rent will be $1,461,000 increasing 2.5% annually.
Extendicare and Enlivant are obligated to pay rent in accordance with the terms of the current master leases through December 31, 2014. The initial cash yield on the 20 properties re-leased to Senior Lifestyle and Veritas is comparable to the cash yield in 2014 under the expiring master leases with Extendicare and Enlivant. Additionally, the new and amended master leases will provide us with the potential for additional rent attributable to participation in revenue growth at the properties over a predetermined base amount. Our financial position and ability to make distributions may be adversely affected by financial difficulties experienced by Brookdale Communities, Prestige Healthcare, Senior Care, or any of our lessees and borrowers, including any bankruptcies, inability to emerge from bankruptcy, insolvency or general downturn in business of any such operator, or in the event any such operator does not renew and/or extend its relationship with us or our borrowers when it expires.

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