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Real Estate Investments | 9 Months Ended
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Sep. 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 September 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 |  | $ | 681,365 |  | 52.7 | % | 103 |  | — |  | 5,607 |  | $ | 121.52 |
Skilled Nursing |  |  | 535,460 |  | 41.4 | % | 69 |  | 8,611 |  | — |  | $ | 62.18 |
Range of Care |  |  | 43,907 |  | 3.4 | % | 7 |  | 634 |  | 274 |  | $ | 48.36 |
Under Development(2) |  |  | 21,511 |  | 1.7 | % | — |  | — |  | — |  |  | — |
Other(3) |  |  | 10,216 |  | 0.8 | % | 1 |  | 118 |  | — |  |  | — |
Totals |  | $ | 1,292,459 |  | 100.0 | % | 180 |  | 9,363 |  | 5,881 |  |  |  |
| (1) |  | We own properties in 28 states that are leased to 27 different operators.
| (2) |  | Represents three development projects consisting of a 66-unit memory care community, a 108-unit independent living community and a 143-bed skilled nursing center.
| (3) |  | Includes 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 an investment of $78.39 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 nine months ended September 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 |  |  | 411 |  |  | 53,961 |  | 4 |  | 250
Land(4) |  |  | 5,425 |  |  | 63 |  |  | 5,488 |  | — |  | —
Totals |  | $ | 74,975 |  | $ | 519 |  | $ | 75,494 |  | 5 |  | 376
| (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.
| (4) |  | We acquired a parcel of land and improvements and entered into a development commitment of up to $24,325, including the land and bed rights purchase, for the development of a 143-bed skilled nursing center in Kentucky.
Subsequent to September 30, 2016, we purchased a parcel of land in Illinois and entered into a development commitment to construct a memory care community. The commitment totals approximately $14,500,000, including the land purchase. The following table summarizes our acquisitions for the nine months ended September 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
Assisted Living(2) |  |  | 156,097 |  | $ | 325 |  |  | 156,422 |  | 11 |  | 951
Land(3) |  |  | 13,533 |  |  | 97 |  |  | 13,630 |  | — |  | —
Totals |  | $ | 183,576 |  | $ | 422 |  | $ | 183,998 |  | 12 |  | 1,057
| (1) |  | We purchased and equipped the property by exercising our purchase option under a $10,600 mortgage and construction loan.
| (2) |  | We acquired a newly constructed 60-unit memory care property for $14,250 including a $2,000 working capital reserve. We also acquired a portfolio comprised of 10 independent, assisted living and memory care propertied for $142,000.
| (3) |  | We acquired parcels of land and entered into four development commitments in an amount not to exceed $55,529, including the land purchases, for the development of two 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 nine months ended September 30, 2016 and 2015 (in thousands):
|  | Nine months ended September 30, 2016 |  | Nine months ended September 30, 2015
|  |  |  | Expansion, |  |  |  | Expansion,
|  |  |  | Renovation and |  |  |  | Renovation and
|  | Development |  | Improvements |  | Development |  | Improvements
Assisted Living Communities |  | $ | 35,623 |  | $ | 2,134 |  | $ | 12,630 |  | $ | 3,843
Skilled Nursing Centers |  |  | — |  |  | 3,432 |  |  | 1,830 |  |  | 2,349
|  | $ | 35,623 |  | $ | 5,566 |  | $ | 14,460 |  | $ | 6,192
The following table summarizes our completed projects during the nine months ended September 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 |  |  | 11,776 |
Development |  | 1 |  | ALF |  | 66 |  | Illinois |  |  | 11,886 |
Development |  | 1 |  | ALF |  | 66 |  | California |  |  | 11,405 |
Development |  | 1 |  | ALF |  | 89 |  | South Carolina |  |  | 13,974 |
Improvement |  | 1 |  | SNF |  | 160 |  | Arizona |  |  | 4,672 |
|  | 6 |  |  |  | 503 |  |  |  | $ | 65,891 |
During the nine months ended September 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 and an assisted living community in Florida for an aggregate price of $11,850,000. As a result of these sales, we recognized a net gain on sale of $3,775,000. Also, we sold a school in New Jersey for $3,850,000 and recorded a net loss on sale in the amount of $193,000. Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at September 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 |  | $ | 222,030 |  | 93.8 | % | 12 |  | 28 |  | 3,644 |  | — |  | $ | 60.93 |
Assisted Living |  |  | 13,468 |  | 5.7 | % | 3 |  | 8 |  | — |  | 270 |  | $ | 49.88 |
Other(2) |  |  | 1,209 |  | 0.5 | % | 1 |  | — |  | — |  | — |  |  | — |
Totals |  | $ | 236,707 |  | 100.0 | % | 16 |  | 36 |  | 3,644 |  | 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 September 30, 2016, the mortgage loans had interest rates ranging from 7.3% to 13.9% 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. The following table summarizes our mortgage loan activity for the nine months ended September 30, 2016 and 2015 (in thousands):
|  | 2016 |  | 2015 |
Origination/Funding (1) |  | $ | 19,113 |  | $ | 53,427 |
Pay-offs |  | $ | 746 |  | $ | 2,487 |
Scheduled principal payments received |  | $ | 1,371 |  | $ | 1,794 |
| (1) |  | Secured by skilled nursing centers
During the nine months ended September 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.

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- Definition The entire disclosure for real estate owned (as defined). Generally, the largest component of real estate owned by lenders is assets taken in settlement of troubled loans through surrender or foreclosure. Real estate investments, real estate loans that qualify as investments in real estate, and premises that are no longer used in operations may also be included in real estate owned. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 40 -Section 40 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56956306&loc=d3e18551-111553 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 40 -Section 40 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=56956306&loc=d3e18511-111553 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 45 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=28367877&loc=d3e4437-111522 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 35 -Paragraph 17 -URI http://asc.fasb.org/extlink&oid=29634951&loc=d3e1424-110224 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03.10(4)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 35 -Paragraph 43 -URI http://asc.fasb.org/extlink&oid=29634951&loc=d3e1739-110224 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 11 -Article 9 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 28 -Article 12 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule III -Article 5 + Details
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