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Real Estate Investments | 12 Months Ended
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Dec. 31, 2016
Real Estate Investments |
Real Estate Investments | 5. Real Estate Investments Owned Properties. 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. As of December 31, 2016, we owned 181 health care real estate properties located in 28 states and consisting of 104 ALFs, 69 SNFs, 7 ROCs and 1 behavioral health care hospital. These properties are operated by 27 operators. Please see Item 1. Business Portfolio for a table that summarizes our owned properties as of December 31, 2016. Acquisitions and Developments. The following table summarizes our acquisitions for the twelve months ended December 31, 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 |  |  | 423 |  |  | 53,973 |  | 4 |  | 250
Land(4) |  |  | 6,891 |  |  | 108 |  |  | 6,999 |  | — |  | —
Totals |  | $ | 76,441 |  | $ | 576 |  | $ | 77,017 |  | 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 our construction in progress. Additionally, transaction costs may include costs related to the prior year due to timing and may include costs related to 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 which includes 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 improvement 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. Also, 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, including the land purchase.
The following table summarizes our acquisitions for the twelve months ended December 31, 2015 (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) |  | $ | 36,946 |  | $ | 87 |  | $ | 37,033 |  | 3 |  | 360
Assisted Living(3) |  |  | 156,097 |  |  | 590 |  |  | 156,687 |  | 11 |  | 951
Other(4) |  |  | 9,250 |  |  | 42 |  |  | 9,292 |  | 1 |  | 118
Land(5) |  |  | 16,333 |  |  | 352 |  |  | 16,685 |  | — |  | —
Totals |  | $ | 218,626 |  | $ | 1,071 |  | $ | 219,697 |  | 15 |  | 1,429
| (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 our construction in progress. Additionally, transaction costs may include costs related to the prior year due to timing and may include costs related to terminated transactions.
| (2) |  | We purchased a property in Wisconsin by exercising our purchase option under a $10,600 mortgage and construction loan and equipped the property for $3,346. Also, we acquired two skilled nursing centers in Texas totaling 254 beds for an aggregate purchase price of $23,000.
| (3) |  | Includes acquisition of a newly constructed 60-unit MC community for $14,250 including a $2,000 working capital reserve which was 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. Also includes acquisition of a portfolio comprised of 10 independent, assisted living and memory care communities for $142,000.
| (4) |  | We purchased a behavioral health care hospital in Nevada comprised of 116 medical hospital beds and 2 skilled nursing beds for $9,300.
| (5) |  | We acquired five parcels of land and entered into development commitments up to an aggregate total of $70,298, including the land purchases, for the development of three MC communities totaling 198 units, a 108-unit IL community and an 89-unit combination AL and MC community. We also purchased a parcel of land we previously leased pursuant to a ground lease. Additionally, we acquired land and existing improvements on a 56-unit MC community and entered a development commitment up to a total of $13,524, including the land purchase, to complete the development of the MC community.
The following table summarizes our investment in development and improvement projects for the years ended December 31, 2016 and 2015 (in thousands):
|  | Year ended December 31, 2016 |  | Year ended December 31, 2015
|  | Development |  | Improvements |  | Development |  | Improvements
ALF/ILF/MC |  | $ | 41,859 |  | $ | 3,034 |  | $ | 24,099 |  | $ | 3,950
SNF |  |  | 483 |  |  | 3,758 |  |  | 1,830 |  |  | 3,584
|  | $ | 42,342 |  | $ | 6,792 |  | $ | 25,929 |  | $ | 7,534
During the twelve months ended December 31, 2016, we completed the following development and improvement projects (dollar amounts in thousands):
|  | Number |  |  |  | Number |  |  |  |  |  |  |  |  |
|  | of |  | Type of |  | of |  |  |  |  |  |  |  |  |
Type of Project |  | Properties |  | Property |  | Beds/Units |  | State |  | 2016 Funding |  | Total Funding |
Development |  | 1 |  | MC |  | 66 |  | Illinois |  | $ | 2,980 |  | $ | 12,248 |
Development |  | 1 |  | MC |  | 56 |  | Texas |  |  | 1,110 |  |  | 11,776 |
Development |  | 1 |  | MC |  | 66 |  | Illinois |  |  | 7,331 |  |  | 11,962 |
Development |  | 1 |  | MC |  | 66 |  | California |  |  | 7,716 |  |  | 12,400 |
Development |  | 1 |  | ALF/MC |  | 89 |  | South Carolina |  |  | 9,170 |  |  | 15,080 |
Development |  | 1 |  | ILF |  | 108 |  | Kansas |  |  | 11,235 |  |  | 13,423 |
Improvement |  | 1 |  | SNF |  | 160 |  | Arizona |  |  | 3,432 |  |  | 4,672 |
|  | 7 |  |  |  | 611 |  |  |  | $ | 42,974 |  | $ | 81,561 |
The following table summarizes our completed projects during the twelve months ended December 31, 2015 (dollar amounts in thousands):
|  | Number |  |  |  | Number |  |  |  |  |  |  |  |  |
|  | of |  | Type of |  | of |  |  |  |  |  |  |  |  |
Type of Project |  | Properties |  | Property |  | Beds/Units |  | State |  | 2015 Funding |  | Total Funding |
Development |  | 1 |  | MC |  | 60 |  | Colorado |  | $ | 1,522 |  | $ | 10,703 |
Improvements |  | 1 |  | SNF |  | 121 |  | California |  |  | 1,481 |  |  | 1,481 |
Improvements |  | 1 |  | SNF |  | 196 |  | Texas |  |  | 522 |  |  | 522 |
Improvements |  | 2 |  | SNF |  | 141 |  | Tennessee |  |  | 39 |  |  | 2,200 |
|  | 5 |  |  |  | 518 |  |  |  | $ | 3,564 |  | $ | 14,906 |
During 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. During 2015, we sold a 112-bed skilled nursing center located in Texas for $1,600,000, resulting in net sales proceed of $1,537,000 and a net gain on sale of $586,000. No properties were sold during 2014. Subsequent to December 31, 2016, we entered into a contingent purchase and sale agreement to sell an 85-unit ROC community in Texas for $1,200,000. We performed a recoverability analysis on the property as of December 31, 2016 and determined that a portion of the carrying value of the property was not recoverable. Accordingly, we recorded an impairment charge of $766,000, included in our consolidated statement of income, to write the property down to its estimated sale price at December 31, 2016. Depreciation expense on buildings and improvements, including properties classified as held‑for‑sale, was $35,809,000, $29,329,000, and $25,424,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Future minimum base rents receivable under the remaining non‑cancelable terms of operating leases excluding the effects of straight‑line rent, amortization of lease inducement and renewal options are as follows (in thousands):
|  | Annual Cash |
|  | Rent |
2017 |  | $ | 133,296 |
2018 |  |  | 133,873 |
2019 |  |  | 129,482 |
2020 |  |  | 131,377 |
2021 |  |  | 117,298 |
Thereafter |  |  | 797,716 |
Mortgage Loans. At December 31, 2016, the mortgage loans had interest rates ranging from 7.3% to 13.9% and maturities ranging from 2017 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. Please see Item 1. Business Portfolio for a table that summarizes our loaned properties as of December 31, 2016. The following table summarizes our mortgage loan activity for the twelve months ended December 31, 2016 and 2015 (in thousands):
|  | Year ended December 31, |
|  | 2016 |  | 2015 |
Origination/Funding |  | $ | 20,685 |  | $ | 67,134 |
Pay-offs |  |  | 6,036 |  |  | 2,487 |
Scheduled principal payments received |  |  | 2,242 |  |  | 2,321 |
At December 31, 2016 and 2015 the carrying values of the mortgage loans were $229,801,000 and $217,529,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows (in thousands):
|  | Scheduled |
|  | Principal |
2017 |  | $ | 7,674 |
2018 |  |  | 8,297 |
2019 |  |  | 5,092 |
2020 |  |  | 8,815 |
2021 |  |  | 1,065 |
Thereafter |  |  | 201,173 |
Total |  | $ | 232,116 |
During the twelve months ended December 31, 2016, 2015 and 2014, we received $2,242,000, $2,321,000, and $2,159,000, respectively in regularly scheduled principal payments. During 2016, we received $6,036,000 plus accrued interest related to the early payoff of nine mortgage loans secured by skilled nursing centers located in Missouri, Texas and Washington.

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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=68051746&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=68051746&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=65884687&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 205 -SubTopic 10 -Section S99 -Paragraph 6 -Subparagraph (SX 210.5-04(c)(Schedule III)) -URI http://asc.fasb.org/extlink&oid=27047687&loc=d3e5864-122674 Reference 6: 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 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -SubTopic 360 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-28) -URI http://asc.fasb.org/extlink&oid=6590653&loc=d3e638233-123024 Reference 8: 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 9: 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(8)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 + Details
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