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Real Estate Investments
 6 Months Ended
Jun. 30, 2016
Real Estate Investments  
Real Estate Investments

2.Real Estate Investments

Assisted living communities, independent living communities, memory care communities and combinations thereof are included in the assisted living property classification (or collectively ALF). Range of care communities (or ROC) property classification 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 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 June 30, 2016 (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

 

$
649,818

 
50.3

% 
101

 

 —

 
5,511

 

$
117.91

 

Skilled Nursing

 

 
534,822

 
41.4

%  
69

 
8,546

 

 —

 

$
62.58

 

Range of Care

 

 
43,907

 
3.4

% 
7

 
634

 
274

 

$
48.36

 

Under Development(2)

 

 
43,353

 
3.4

% 

 —

 

 —

 

 —

 

 

 —

 

Other(3)

 

 
19,486

 
1.5

% 
2

 
118

 

 —

 

 

 —

 

Totals

 

$
1,291,386

 
100.0

% 
179

 
9,298

 
5,785

 

 

 

 

(1)

We own properties in 28 states that are leased to 28 different operators.

 

(2)

Represents five development projects consisting of three memory care communities with a total of 198 units, a 108-unit independent living community and an 89-unit combination assisted living and memory care community.

 

(3)

Includes one school, three parcels of land held-for-use, and one behavioral health care hospital. The behavioral health care hospital has two licensed skilled nursing beds and 116 acute care hospital beds which represents a $78.39 investment per bed.

 

 

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.

Acquisitions and Development: The following table summarizes our acquisitions for the six months ended June 30, 2016 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Total

    

Number

    

Number

 

 

Purchase

 

Transaction

 

Acquisition

 

of

 

of

Type of Property

 

Price

 

Costs(1)

 

Costs

 

Properties

 

Beds/Units

Skilled Nursing(2)

 

$
16,000

 

$
45

 

$
16,045

 
1

 
126

Assisted Living(3)

 

 
53,550

 

 
346

 

 
53,896

 
4

 
270

Totals

 

$
69,550

 

$
391

 

$
69,941

 
5

 
396

(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 may include costs related to the prior year due to timing and terminated transactions.

 

(2)

We acquired a newly constructed 126-bed skilled nursing center in Texas.

 

(3)

We acquired a newly constructed memory care community in Kentucky for $14,250 including a $2,000 holdback, a newly constructed assisted living and memory care community in Georgia for $14,300 and two memory care communities in Kansas for an aggregate purchase price of $25,000.  

 

The following table summarizes our acquisitions for the six months ended June 30, 2015 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Total

    

Number

    

Number

 

 

Purchase

 

Transaction

 

Acquisition

 

of

 

of

Type of Property

 

Price

 

Costs

 

Costs

 

Properties

 

Beds/Units

Skilled Nursing(1)

 

$
13,946

 

$

 —

 

$
13,946

 
1

 
106

Land(2)

 

 
11,011

 

 
78

 

 
11,089

 

 —

 

 —

Totals

 

$
24,957

 

$
78

 

$
25,035

 
1

 
106

(1)

We purchased and equipped the property by exercising our purchase option under a $10,600 mortgage and construction loan.

 

(2)

We acquired parcels of land and entered into three development commitments in an amount not to exceed $42,922, including the land purchases, for the development of a MC, an ILF and a combination ALF and MC. Additionally, we acquired land and existing improvements on a MC and entered a development commitment up to $12,182 to complete the development of the property.

 

The following table summarizes our investment in development and improvement projects for the six months ended June 30, 2016 and 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2016

 

Six months ended June 30, 2015

 

 

 

 

Expansion,

 

 

 

Expansion,

 

 

 

 

Renovation and

 

 

 

Renovation and

 

    

Development

    

Improvements

    

Development

    

Improvements

Assisted Living Communities

 

$
26,331

 

$
1,293

 

$
5,976

 

$
3,609

Skilled Nursing Centers

 

 

 —

 

 
2,794

 

 
1,830

 

 
2,340

 

 

$
26,331

 

$
4,087

 

$
7,806

 

$
5,949

 

 

The following table summarizes our completed projects during the six months ended June 30, 2016 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Number

    

 

    

Number

    

 

    

 

 

 

 

 

of

 

Type of

 

of

 

 

 

 

 

 

Type of Project

 

Properties

 

Property

 

Beds/Units

 

State

 

Total Funding

 

Development

 

1

 

ALF

 

66

 

Illinois

 

$
12,178

 

Development

 

1

 

ALF

 

56

 

Texas

 

 
12,712

 

 

 

2

 

 

 

122

 

 

 

$
24,890

 

 During the six months ended June 30, 2016, we sold a 48-unit assisted living community located in Florida for $1,750,000 which was previously written down to its estimated sale price in the fourth quarter of 2015. Additionally, we sold two skilled nursing centers in Texas for an aggregate price of $6,750,000. As a result of this sale, we recognized a net gain on sale of $1,802,000. 

Subsequent to June 30, 2016, we sold a school in New Jersey for $3,850,000 and recorded a net loss on sale in the amount of $192,000.

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at June 30, 2016 (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

  

$
220,465

  
93.7

%  
13

  
29

  
3,788

  

 —

  

$
58.20

 

Assisted Living

 

 
13,569

 
5.8

%  
3

 
8

 

 —

 
270

 

$
50.26

 

Other(2)

 

 
1,209

 
0.5

%  
1

 

 —

 

 —

 

 —

 

 

 —

 

Totals

 

$
235,243

 
100.0

%  
17

 
37

 
3,788

 
270

 

 

 

 

(1)

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

 

(2)

Includes a parcel of land secured under a short-term mortgage loan.

 

At June 30, 2016, the mortgage loans had interest rates ranging from 7.3% to 13.8% and maturities ranging from 2016 to 2045. 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 six months ended June 30, 2016, we received $645,000 plus accrued interest from the payoff of three mortgage loans secured by three skilled nursing centers. During the same period in 2015, we received $2,487,000 plus accrued interest related to the payoff of two mortgage loans secured by a skilled nursing center and a range of care community. During the six months ended June 30, 2016 and 2015, we received $953,000 and $995,000, respectively, in regularly scheduled principal payments.

The following table summarizes our mortgage loan origination and funding for the six months ended June 30, 2016 and 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 

 

 

    

2016

    

2015

 

 

 

Origination/Funding

 

Origination/Funding

 

Skilled Nursing Centers

 

$
17,128

 

$
52,847

 

 

During the six months ended June 30, 2015, we purchased and equipped a 106-bed skilled nursing center in Wisconsin for a total of $13,946,000 by exercising our purchase option under a $10,600,000 mortgage and construction loan.