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Real Estate Investments (Tables)

9 Months Ended

Sep. 30, 2015

Summary of investments in owned properties

The following table summarizes our investments in owned properties at September 30, 2015 (dollar amounts in thousands):


								Average
			Percentage		Number	Number of		Investment
	Gross		of		of	SNF	ALF	per
Type of Property	Investments		Investments		Properties(1)	Beds	Units	Bed/Unit
Assisted Living	$	573,693	49.7	%	96	—	5,187	$	110.60
Skilled Nursing		500,161	43.3	%	69	8,513	—	$	58.75
Range of Care		43,907	3.8	%	7	634	274	$	48.36
Under Development(2)		26,675	2.3	%	—	—	—		—
Other(3)		10,213	0.9	%	1	—	—		—
Totals	$	1,154,649	100.0	%	173	9,147	5,461

(1)

We own properties in 27 states that are leased to 30 different operators.

(2)

Represents six development projects consisting of four MC properties with a total of 254 units, a 108-unit independent living property and an 89-unit combination ALF and MC property.

(3)

Represents one school property and three parcels of land held-for-use.

Summary of investments acquired

The following table summarizes our investments for the nine months ended September 30, 2015 (dollar amounts in thousands):


					Total		Number	Number
	Purchase		Transaction		Acquisition		of	of
Type of Property	Price(1)		Costs(2)		Costs		Properties	Beds/Units
Skilled Nursing(3)	$	13,946	$	—	$	13,946	1	106
Assisted Living(4)		156,097		325		156,422	11	951
Land(5)		13,533		97		13,630	—	—
Totals	$	183,576	$	422	$	183,998	12	1,057

(1)

Represents cost associated with our acquisitions; however, depending on the accounting treatment of our acquisitions, transaction costs may be capitalized to the properties’ basis and, for our land purchases with forward development commitments, transaction costs are capitalized as part of construction in progress. Additionally, transaction costs in the table above may differ from the acquisition costs line item in our consolidated statement of income as a result of transaction costs from prior year’s acquisitions.

(2)

We purchased the property by exercising our purchase option under a $10,600 mortgage and construction loan and equipped the property for $3,346. The property was added to an existing master lease at a lease rate equivalent to the interest rate in effect on the loan at the time the purchase option was exercised. Additionally, we paid the lessee a $1,054 lease inducement and will amortize as a yield adjustment over the life of the lease term. See Mortgage Loans below for further discussion of the loan agreement.

(3)

We acquired a newly constructed 60-unit MC property for $14,250 including a $2,000 working capital reserve which is recorded similarly to an earn-out and valued at $1,847 using a discounted cash flow analysis. As a result, our basis in the property was recorded at $14,132 which includes capitalized transaction costs. Additionally, we agreed to provide the lessee an earn-out up to $300 upon the property achieving a sustainable stipulated rent coverage ratio. When the working capital reserve and earn-out payments are funded, cash rent will increase by the amounts funded multiplied by the lease rate in effect at the time. We also acquired a portfolio comprised of 10 independent, assisted living and memory care properties for $142,000 and agreed to provide the lessee an earn-out up to $10,000, upon the portfolio achieving a sustainable stipulated rent coverage ratio, which will increase cash rent by the amount funded multiplied by the lease rate in effect at the time.

(4)

We acquired parcels of land and entered into four development commitments up to a total of $55,529, including the land purchases, for the development of two MC properties totaling 132 units, a 108-unit IL property and an 89-unit combination AL and MC property. Additionally, we acquired land and existing improvements on a 56-unit MC property and entered a development commitment up to a total of $12,182, including the land purchase, to complete the development of the MC property. Also, we purchased a parcel of land we previously leased pursuant to a ground lease.

Schedule of commitments

At September 30, 2015, we had commitments as follows (in thousands):


	Investment			2015		Commitment		Remaining
	Commitment			Funding		Funded		Commitment
Real estate properties (See Note 2)	$	90,758	(2)	$	24,425	$	26,482	$	64,276
Earn-out liabilities		16,300			—		—		16,300
Lease incentives (1)		4,202			493		527		3,675
Mortgage loans (See Note 2)		33,990	(2)		3,927		7,265		26,725
Joint venture investments (See Note 3)		25,650			20,143		20,143		5,507
Notes receivable (See Note 4)		2,650	(3)		502		637		2,013
Totals	$	173,550		$	49,490	$	55,054	$	118,496

(1)

As part of our lease originations or amendments, we may provide lease incentive payments to or on behalf of our lessees. These payments may either be one-time payments or commitments to fund at a future date, as presented above. Lease inducement payments are amortized as a yield adjustment over the term of the lease on a straight line basis.

(2)

Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand senior housing and long term care properties.

(3)

Represents loan and line of credit commitments.

Schedule of development, redevelopment, renovation, and expansion activity

Our construction in progress (or CIP) activity during the nine months ended September 30, 2015 for our development, redevelopment, renovation, and expansion projects is as follows (dollar amounts in thousands):


	CIP								CIP
	Balance at				Capitalized		Conversions		Balance at
Type of Property	12/31/2014		Funded(1)		Interest		out of CIP		9/30/2015
Skilled nursing	$	—	$	414	$	—	$	(397)	$	17
Assisted living		8,671		19,297		481		(9,871)		18,578
Total	$	8,671	$	19,711	$	481	$	(10,268)	$	18,595

(1)

Excludes $7,972 of funding directly capitalized into building and includes the previously discussed acquisition of the existing improvements of a 56-unit MC property for $6,315 and pre-development loan reclass totaling $716.

Schedule of additional loan commitments and amounts funded under the mortgage loans

The following table summarizes our additional loan commitments as of September 30, 2015, and amounts funded under these mortgage loans (dollar amounts in thousands):


	Additional								Number	Number
	Loan		2015		Commitment		Remaining		of	of
Type of Property	Commitment		Funding		Funded		Commitment		Properties	Beds/Units
Skilled Nursing	$	33,500	$	3,697	$	7,035	$	26,465	16	2,215
Assisted Living		490		230		230		260	1	100
Totals	$	33,990	$	3,927	$	7,265	$	26,725	17	2,315

Summary of investments in mortgage loans secured by first mortgages

The following table summarizes our investments in mortgage loans secured by first mortgages at September 30, 2015 (dollar amounts in thousands):


			Percentage		Number	Number	Number of		Investment
	Gross		of		of	of	SNF	ALF	per
Type of Property	Investments		Investments		Loans	Properties(1)	Beds	Units	Bed/Unit
Skilled Nursing	$	192,810	93.4	%	14	28	3,621	—	$	53.25
Assisted Living		13,731	6.6	%	3	8	—	270	$	50.86
Totals	$	206,541	100.0	%	17	36	3,621	270

(1)

We have investments in properties located in 7 states that include mortgages to 10 different operators.

Real estate properties

Schedule of completed development, improvement and construction projects

The following table summarizes our on-going investment commitments as of September 30, 2015, and amounts funded exclusively under these projects (excludes capitalized interest, dollar amounts in thousands):


				Total			Number	Number
	Investment		Commitment		Remaining		of	of
Type of Property	Commitment		Funded		Commitment		Properties	Beds/Units
Skilled Nursing(1)	$	6,000	$	17	$	5,983	2	314
Assisted Living(2)		84,758		26,465		58,293	36	2,097
Totals	$	90,758	$	26,482	$	64,276	38	2,411

(1)

Includes two commitments for renovation and expansion projects.

(2)

Includes the development of an IL property for $14,500, four MC properties for a total of $48,923 and one ALF/MC property for $16,535. Also, includes three commitments for renovation projects on 30 ALFs totaling $4,800.