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Real Estate Investments (Tables)
 3 Months Ended
Mar. 31, 2019
Real Estate Investments  
Summary of investments in owned properties

Owned Properties. The following table summarizes our investments in owned properties at March 31, 2019 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

Percentage

 

Number

 

Number of

 

Investment

 

 

 

Gross

 

of

 

of

 

SNF

 

ALF

 

per

 

Type of Property

 

Investment

 

Investment

 

Properties (1)

 

Beds

 

Units

 

Bed/Unit

 

Assisted Living

 

$

821,167

 

56.8

% 

104

 

 —

 

5,959

 

$

137.80

 

Skilled Nursing

 

 

587,410

 

40.6

%

72

 

8,893

 

261

 

$

64.17

 

Under Development (2)

 

 

25,952

 

1.8

% 

 —

 

 —

 

 —

 

 

 —

 

Other (3)

 

 

11,067

 

0.8

% 

 1

 

118

 

 —

 

 

 —

 

Total

 

$

1,445,596

 

100.0

% 

177

 

9,011

 

6,220

 

 

 

 

(1)

We own properties in 28 states that are leased to 29 different operators.

 

(2)

Represents two development projects, consisting of a 78-unit ALF/MC located in Oregon and a 110-unit ILF/ALF/MC in Wisconsin.

 

(3)

Includes three parcels of land held-for-use, and one behavioral health care hospital.

 

Schedule of future minimum base rents receivable

Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent receivable, amortization of lease incentives and renewal options are as follows (in thousands):

 

 

 

 

 

 

    

Annual Cash

 

 

 

Rent (1)

 

2019

 

$

101,223

 

2020

 

 

140,189

 

2021

 

 

131,128

 

2022

 

 

121,228

 

2023

 

 

124,492

 

Thereafter

 

 

729,390

 

(1)

Represents contractual annual cash rent, except for four master leases which are based on agreed upon cash rents. See below for more information.
Summary of information about purchase options included in our lease agreements

The following table summarizes components of our rental income for the three months ended March 31, 2019 and 2018 (in thousands):

 

 

 

 

 

 

 

 

Rental Income

 

 
2019

 

 
2018

 

Base cash rental income

 

$

24,314

(1)

$

31,455

 

Variable cash rental income

 

 

4,485

(2)

 

150

(2)

Straight-line rent receivable

 

 

1,238

(3)

 

3,440

 

Adjustment for collectibility

 

 

(1,926)

(4)

 

 —

 

Amortization of lease incentives

 

 

(87)

 

 

(540)

 

Total

 

$

28,024

 

$

34,505

 

(1)

Decreased due to recognition of $9,600 of cash rent received from Anthem, Preferred Care, Senior Care and Thrive as contra-expense titled Recovery of written-off straight-line rent receivable on the consolidated statements of income and comprehensive income and decreased rent from properties sold in 2018, partially offset due to increased rent from acquisitions, developments and capital improvement projects. See Note 1. General for further discussion.

 

(2)

The 2019 variable rental income includes $150 related to contingent rental income and $4,335 related to our real estate taxes which were reimbursed by our operators. Per the provisions of ASC 842, any lessor cost, paid by the lessor and reimbursed by the lessee, must be included as a lease payment. As discussed above, we adopted ASC 842 using a modified retrospective approach as of the adoption date of January 1, 2019. Accordingly, we are not required to report this revenue stream for periods prior to January 1, 2019.

 

(3)

In accordance with the newly adopted ASC 842 lease accounting guidance, we evaluated the collectibility of lease payments through maturity and determined that it was not probable that we would collect substantially all of the contractual obligations from Anthem, Thrive, Preferred Care and Senior Care leases through maturity. Decreased due to these leases are placed on cash-basis.

 

(4)

Represents write-off of straight-line rent receivable related to a terminated lease discussed above.

Summary of components of our rental income

The following table summarizes components of our rental income for the three months ended March 31, 2019 and 2018 (in thousands):

 

 

 

 

 

 

 

 

Rental Income

 

 
2019

 

 
2018

 

Base cash rental income

 

$

24,314

(1)

$

31,455

 

Variable cash rental income

 

 

4,485

(2)

 

150

(2)

Straight-line rent receivable

 

 

1,238

(3)

 

3,440

 

Adjustment for collectibility

 

 

(1,926)

(4)

 

 —

 

Amortization of lease incentives

 

 

(87)

 

 

(540)

 

Total

 

$

28,024

 

$

34,505

 

(1)

Decreased due to recognition of $9,600 of cash rent received from Anthem, Preferred Care, Senior Care and Thrive as contra-expense titled Recovery of written-off straight-line rent receivable on the consolidated statements of income and comprehensive income and decreased rent from properties sold in 2018, partially offset due to increased rent from acquisitions, developments and capital improvement projects. See Note 1. General for further discussion.

 

(2)

The 2019 variable rental income includes $150 related to contingent rental income and $4,335 related to our real estate taxes which were reimbursed by our operators. Per the provisions of ASC 842, any lessor cost, paid by the lessor and reimbursed by the lessee, must be included as a lease payment. As discussed above, we adopted ASC 842 using a modified retrospective approach as of the adoption date of January 1, 2019. Accordingly, we are not required to report this revenue stream for periods prior to January 1, 2019.

 

(3)

In accordance with the newly adopted ASC 842 lease accounting guidance, we evaluated the collectibility of lease payments through maturity and determined that it was not probable that we would collect substantially all of the contractual obligations from Anthem, Thrive, Preferred Care and Senior Care leases through maturity. Decreased due to these leases are placed on cash-basis.

 

(4)

Represents write-off of straight-line rent receivable related to a terminated lease discussed above.

Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. The following table summarizes information about purchase options included in our lease agreements (dollar amount in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type

 

Number

 

 

 

 

 

 

 

 

 

 

of

 

of

 

 

Gross

 

 

Carrying

 

Option

State

 

Property

 

Properties

 

 

Investments

 

 

Value

 

Window

California

 

ALF/MC

 

2

 

$

38,895

 

$

37,248

 

2024-2029

Kansas

 

MC

 

2

 

 

25,692

 

 

23,727

 

2019-2021

Texas

 

MC

 

2

 

 

25,265

 

 

24,800

 

2025-2027

Virginia

 

ALF/MC

 

1

 

 

16,890

 

 

16,822

 

2026-2029

Total

 

 

 

 

 

$

106,742

 

$

102,597

 

 

 

Summary of information about purchase options

The following table summarizes information about purchase options included in our lease agreements (dollar amount in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type

 

Number

 

 

 

 

 

 

 

 

 

 

of

 

of

 

 

Gross

 

 

Carrying

 

Option

State

 

Property

 

Properties

 

 

Investments

 

 

Value

 

Window

California

 

ALF/MC

 

2

 

$

38,895

 

$

37,248

 

2024-2029

Kansas

 

MC

 

2

 

 

25,692

 

 

23,727

 

2019-2021

Texas

 

MC

 

2

 

 

25,265

 

 

24,800

 

2025-2027

Virginia

 

ALF/MC

 

1

 

 

16,890

 

 

16,822

 

2026-2029

Total

 

 

 

 

 

$

106,742

 

$

102,597

 

 

 

Summary of investments acquired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type

 

Number

 

 

 

 

 

 

 

 

 

 

of

 

of

 

 

Gross

 

 

Carrying

 

Option

State

 

Property

 

Properties

 

 

Investments

 

 

Value

 

Window

California

 

ALF/MC

 

2

 

$

38,895

 

$

37,248

 

2024-2029

Kansas

 

MC

 

2

 

 

25,692

 

 

23,727

 

2019-2021

Texas

 

MC

 

2

 

 

25,265

 

 

24,800

 

2025-2027

Virginia

 

ALF/MC

 

1

 

 

16,890

 

 

16,822

 

2026-2029

Total

 

 

 

 

 

$

106,742

 

$

102,597

 

 

Acquisitions and Developments: The following table summarizes our acquisition for the three months ended March 31, 2019 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Number

 

Number

 

 

 

 

Purchase

 

Transaction

 

Acquisition

 

of

 

of

Year

 

Type of Property

 

Price

 

Costs (1)

 

Costs

 

Properties

 

Beds/Units

2019

 

Assisted Living (2) 

 

$

16,719

 

$

171

 

$

16,890

 

 1

 

74

(1)

Represents cost associated with our acquisitions; however, upon adoption of ASU 2017-01, our acquisitions meet the definition of an asset acquisition resulting in capitalization of transaction costs to the properties’ basis. For our land purchases with forward development commitments, transaction costs are capitalized as part of construction in progress. Transaction costs per our consolidated statements of income and comprehensive income represents current and prior year transaction costs due to timing and terminated transactions.

 

(2)

We entered into a joint venture (“JV”) to purchase an existing operational 74-unit ALF/MC community. The non-controlling partner contributed $919 of equity and we contributed $15,971 in cash. Our economic interest in the real estate JV is approximately 95%.  
Schedule of investment in development and improvement projects

 

During the three months ended March 31, 2019 and 2018, we invested the following in development and improvement projects (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2019

 

2018

Type of Property

 

Developments

 

Improvements

 

Developments

 

 

Improvements

 

Assisted Living Communities

 

$

4,507

 

$

256

 

$

6,803

 

$

122

 

Skilled Nursing Centers

 

 

2,450

 

 

 —

 

 

1,788

 

 

279

 

Other

 

 

 —

 

 

 3

 

 

 —

 

 

133

 

Total

 

$

6,957

 

$

259

 

$

8,591

 

$

534

 

 

Schedule of completed projects

Completed Developments. The following table summarizes our completed development during the three months ended March 31, 2019 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

Type

 

Number

 

 

 

 

 

 

 

 

of

 

of

 

of

 

 

 

 

Total

 

Type of Project

 

Properties

 

Property

 

Beds/Units

 

State

 

Investment

 

Development

 

1

 

SNF

 

143

 

Kentucky

 

$

22,451

 

 

Summary of properties held-for-sale

Properties held-for-sale.  The following table summarizes our property held-for-sale as of March 31, 2019 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type

 

Number

 

 

 

 

 

 

 

Number

 

 

of

 

of

 

 

Gross

 

 

Accumulated

 

of

State

 

Property

 

Properties

 

 

Investment

 

 

Depreciation

 

Beds/units

Texas

 

ILF

 

1

 

 

5,746

 

 

1,916

 

140

 

Schedule of mortgage loans secured by first mortgage

The following table summarizes our investments in mortgage loans secured by first mortgages at March 31, 2019 (dollar amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Type

 

Percentage

 

Number of

 

Investment

 

 

 

 

Gross

 

of

 

of

 

 

 

 

 

SNF

 

per

Interest Rate (1)

 

Maturity

 

Investment

 

Property

 

Investment

 

Loans (2)

 

Properties (3)

 

Beds

 

Bed/Unit

9.7%

 

2043

 

$

186,369

 

SNF

 

75.5

%

 1

 

15

 

2,029

 

$

91.85

9.2%

 

2045

 

 

34,038

 

SNF

 

13.8

%

 1

 

 4

 

501

 

$

67.94

9.4%

 

2045

 

 

14,950

 

SNF

 

6.1

%

 1

 

 1

 

157

 

$

95.22

9.4%

 

2020

 

 

11,418

 

SNF

 

4.6

%

 1

 

 2

 

205

 

$

55.70

Total

 

 

 

$

246,775

 

 

 

100.0

%

 4

 

22

 

2,892

 

$

85.33

(1)

The majority of the mortgage loans provide for annual increases in the interest rate after a certain time period based upon a specified increase of 2.25%.

 

(2)

Some loans contain certain guarantees, provide for certain facility fees and the majority of the mortgage loans have a 30-year term.

 

(3)

The properties securing these mortgage loans are located in one state and are operated by one operator.
Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the three months ended March 31, 2019 and 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2019

 

2018

 

Originations and funding under mortgage loans receivable

 

$

1,454

 

$

9,610

(1)

Scheduled principal payments received

 

 

(65)

 

 

(37)

 

Mortgage loan (premiums)

 

 

 —

 

 

(1)

 

Provision for loan loss reserve

 

 

(14)

 

 

(96)

 

Net increase in mortgage loans receivable

 

$

1,375

 

$

9,476

 

(1)

During 2018, we funded an additional $7,400 under an existing mortgage loan for the purchase of a 112-bed skilled nursing center in Michigan. The incremental funding bears interest at 8.7%, fixed for five years, and escalating by 2.25% thereafter.