Owned Properties. As of December 31, 2020, we owned 159 health care real estate properties located in 27 states and consisting of 107 ALFs, 51 SNFs and 1 behavioral health care hospital. These properties are operated by 29 operators.

Independent living communities, assisted living communities, memory care communities and combinations thereof are included in the assisted living property classification (collectively “ALF”). 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.

Depreciation expense on buildings and improvements, including properties classified as held-for-sale, was $38,945,000, $39,094,000, and $37,416,000 for the years ended December 31, 2020, 2019 and 2018, 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):

(1)	Represents contractual annual cash rent, except for Anthem Memory Care (“Anthem”) master lease which is based on estimated cash payments. See below for more disclosures relating to Anthem.

An affiliate of Senior Lifestyle Corporation (“Senior Lifestyle”) operates 23 properties under a master lease with a combination of independent living, assisted living and memory care units. Senior Lifestyle was provided deferred rent in the amount of $394,000 in April 2020 which has since been fully repaid, however, they failed to pay full rent during the second quarter of 2020. In accordance with ASC 842, we evaluated the collectibility of receiving substantially all of our lease payments from the Senior Lifestyle master lease through maturity and determined that we did not have the level of certainty required by the standard. Accordingly, we wrote-off a total $17,742,000 of straight-line rent receivable and lease incentives related to this master lease during the second quarter of 2020 and accounted for the Senior Lifestyle master lease on a cash basis effective July 2020. During April through December 2020, we received $9,200,000 of Senior Lifestyle’s $13,800,000 contractual rent due and applied their letter of credit and deposits totaling $3,725,000 to the remaining $850,000 balance of fourth quarter rent, $249,000 to unaccrued past due third quarter rent, $2,501,000 to accrued second quarter rent receivable and $125,000 to notes receivable. At December 31, 2020, Senior Lifestyle owed us $1,002,000 past due unaccrued rent. Also, during the fourth quarter of 2020, we recorded an impairment charge of $3,036,000 related to a memory care community that was operated by Senior Lifestyle. Subsequent to December 31, 2020, we transitioned 11 assisted living communities previously leased to Senior Lifestyle to two operators. These communities are located in Illinois, Ohio and Wisconsin. Total cash rent expected under these master lease agreements is $5,250,000 for the first lease year, $7,078,000 for the second lease year and $7,303,000 for the third lease year, escalating 2% annually thereafter. We are currently evaluating our options for the remaining 12 assisted communities operated by Senior Lifestyle, which may include re-leasing or selling some or all of the properties.

During the third quarter of 2020, an operator paid $542,000 of its contractual rent of $1,299,000. In accordance with ASC 842, we evaluated the collectibility of receiving substantially all of our lease payments from the operator’s master lease through maturity and determined that we did not have the level of certainty required by the standard. Accordingly, we wrote-off $1,156,000 of straight-line rent receivable related to this master lease during the third quarter of 2020. Effective September 1, 2020, we consolidated our two master leases with the operator into one combined master lease. Under the new combined master lease, we agreed to abate $570,000 of third quarter of 2020 rent along with $80,000 that had been deferred in second quarter of 2020. During the fourth quarter of 2020, we granted a $1,057,000 deferral of rent of the operator’s $1,299,000 contractual rent. The remaining deferred balance due from the operator is $355,000 as of December 31, 2020. Additionally, the new combined master lease allows the operator to defer rent as needed through March 31, 2021. We also recorded an impairment charge of $941,000 related to an assisted living community that was operated by the operator. The community was closed in October 2020. We are currently evaluating our options to sell this property.

On August 10, 2020, in the Quarterly Report on Form 10-Q, Genesis Healthcare, Inc. (“Genesis”) reported doubt regarding its ability to continue as a going concern. Accordingly, we evaluated the collectibility of receiving

substantially all of our lease payments from the Genesis master lease through maturity in accordance with ASC 842, and determined that we did not have the level of certainty required by the standard. As a result, we wrote-off $4,316,000 of straight-line rent receivable related to this master lease during the third quarter of 2020 and transitioned rental revenue recognition to cash basis in third quarter of 2020. Genesis is current on rent payments through February 2021.

Anthem Memory Care (“Anthem”) operates 11 memory care communities under a master lease and was placed in default in 2017 resulting from Anthem’s partial payment of its minimum rent. However, we did not enforce our rights and remedies pertaining to the event of default, under the stipulation that Anthem achieves sufficient performance and pays agreed upon rent. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Anthem and determined that it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. Anthem paid us annual cash rent of $9,900,000 in 2020, and we anticipate they will pay annual cash rent of $10,800,000 for the year ended December 31, 2021. We receive regular financial performance updates from Anthem and continue to monitor their performance obligations under the master lease agreement. Anthem has paid their agreed upon rent through February 2021.

Preferred Care, Inc. (“Preferred Care”) and affiliated entities filed for Chapter 11 bankruptcy in 2017 as a result of a multi-million-dollar judgment in a lawsuit in Kentucky against Preferred Care and certain affiliated entities. Preferred Care leased 24 properties (“Properties”) under two master leases from us and the Preferred Care operating entities that subleased those Properties did not file for bankruptcy. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Preferred Care and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. Preferred Care did not affirm our master leases and subsequently filed for Chapter 7 bankruptcy in 2019.

During the fourth quarter of 2019, we entered into multiple contracts to sell the Properties, all of which were completed by the end of the first quarter of 2020. The combined net proceeds from the sales, including the 2019 transactions, was approximately $77,900,000 resulting in a total gain of approximately $44,000,000. The Properties had a combined net book value of $35,600,000. The 21 properties sold in the first quarter of 2020, which included 2,411 beds in Arizona, Colorado, Iowa, Kansas and Texas, were sold through multiple transactions and generated net proceeds of $72,100,000. These 21 properties had a combined net book value of $29,100,000 and resulted in total gain on sale of $44,073,000.

Senior Care Centers, LLC and affiliates and subsidiaries (“Senior Care”) filed for Chapter 11 bankruptcy as a result of lease terminations from certain landlords and on-going operational challenges in December 2018. Senior Care did not pay us December 2018 rent and accordingly, in December 2018, we placed Senior Care on a cash basis. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of the straight-line rent receivable and lease incentive balance related to Senior Care and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. During 2019, we received the December 2018 unpaid rent, late fees and reimbursement of legal cost totaling $1,596,000 from Senior Lifestyle. In March 2020, Senior Care emerged from bankruptcy and affirmed our master lease. We continue to evaluate the collectibility of our Senior Care master lease on a quarterly basis. Senior Care is current on all its rent payments through February 2021.

During the year ended December 31, 2020, we consolidated four separate lease agreements into a single consolidated master lease with Brookdale Senior Living Communities, Inc (“Brookdale”) and extended the lease maturity date by one year to December 31, 2021. This new master lease provides three renewal options consisting of a four-year renewal option, a five-year renewal option and a 10-year renewal option. The notice period for the first renewal option is January 1, 2021 to April 30, 2021. The economic rent terms remain the same as the consolidated rent terms under the previous four separate lease agreements. In addition, we have extended a $4,000,000 capital commitment to Brookdale, which is available through December 31, 2021 at a 7% yield. As of December 31, 2020, we funded $1,700,000 under this commitment with a remaining commitment of $2,300,000. Brookdale is current on rent payments through February 2021.

The following table summarizes components of our rental income for the years ended December 31, 2020, 2019 and 2018 (in thousands):


	Year Ended December 31,
Rental Income		2020			2019			2018
Base cash rental income	$	132,789		$	134,117		$	127,477
Variable cash rental income		15,167	⁽¹⁾		16,462	⁽¹⁾		470	⁽¹⁾
Straight-line rent		1,778	⁽²⁾		4,487	⁽²⁾		9,550	⁽²⁾
Adjustment for collectability of rental income and lease incentives		(23,214)	⁽³⁾		(1,926)	⁽⁴⁾		—
Amortization of lease incentives		(426)			(385)			(2,092)
Total	$	126,094		$	152,755		$	135,405

(1)

The variable rental income for the year ended December 31, 2020 and 2019 includes contingent rental income of $111 and $464, respectively. Additionally, the variable rental income for the year ended December 31, 2020 and 2019 includes reimbursement of real estate taxes by our lessees. 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. Accordingly, the variable income for the year ended December 31, 2018, represents contingent rental income.

(2)

In accordance with ASC 842 lease accounting guidance, we evaluated the collectibility of lease payments through maturity and determined it was not probable that we would collect substantially all of the contractual obligations from certain master leases through maturity. Decreased due to these leases being accounted for on cash-basis.

(3)	Represents the write-off of straight-line rent receivable balances related to Senior Lifestyle, Genesis and another operator.

(4)	During the first quarter of 2019, we terminated a lease agreement and transitioned two operating seniors housing communities under the lease agreement to a new operator. As a result of the lease termination, we wrote-off $1,926 straight-line rent receivable in accordance with ASC 842.

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	$	35,601	2024-2029
California	ALF	2		30,849		17,092	2021-TBD	⁽¹⁾
Florida	MC	1		14,835		13,031	2028-2029
Kentucky and Ohio	MC	2		30,342		27,315	2028-2029
Texas	MC	2		25,265		23,715	2025-2027
South Carolina	ALF/MC	1		11,680		10,213	2028-2029
Total			$	151,866	$	126,967

(1)	The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies.

Acquisitions. The following table summarizes our acquisitions for the years ended December 31, 2020 through 2018. (dollar amounts in thousands):


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year	Type of Property	Price		Costs ⁽¹⁾		Costs		Properties	Beds/Units
2020	Skilled Nursing ⁽²⁾	$	13,500	$	81	$	13,581	1	140

2019	Assisted Living ⁽³⁾	$	35,719	$	315	$	36,034	3	230
	Skilled Nursing ⁽⁴⁾		19,500		97		19,597	1	90
	Land ⁽⁵⁾		2,732		51		2,783	—	—
Total		$	57,951	$	463	$	58,414	4	320

2018	Assisted Living ⁽⁶⁾⁽⁷⁾	$	39,600	$	65	$	39,665	3	177
	Land ⁽⁸⁾		695		48		743	—	—
Total		$	40,295	$	113	$	40,408	3	177

(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 acquired a SNF located in Texas.

(3)

We entered into a JV (consolidated on our financial statements) to purchase an existing operational 74-unit ALF/MC community. The non-controlling partner contributed $919 of equity and we contributed $15,976 in cash. Our economic interest in the real estate JV is approximately 95%. Additionally, we acquired an 80-unit MC and a 76-unit ALF/MC in Michigan for an aggregate purchase price of $19,000.

(4)	We acquired a newly constructed 90-bed SNF located in Missouri.

(5)	We acquired a parcel of land adjacent to an existing SNF in California. Additionally, we acquired a parcel of land and committed to develop a 90-bed SNF in Missouri. The commitment totals approximately $17,400.

(6)	We acquired two MC in Texas.

(7)	We entered into a JV (consolidated on our financial statements) to purchase an existing operational 89-unit ILF for $14,400 and to own the real estate and develop a 78-unit ALF/MC for $18,108 in Oregon.

(8)	We acquired an ALF and a MC in California, a MC in Ohio and an ALF/MC in Missouri. Furthermore, we entered into a JV and acquired an ALF/MC community.

(9)	We entered into a JV for the acquisition of land and development of an ILF/ALF/MC community in Wisconsin.

For further discussion related to the JV transactions discussed above and our partnerships and non-controlling interests, see Note 10. Equity.

Developments and Improvements. During the years ended December 31, 2020, 2019 and 2018, we invested the following in development and improvement projects (in thousands):


	Year Ended December 31,
	2020				2019				2018
Type of Property	Developments		Improvements		Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	4,491	$	6,842	$	14,088	$	2,544	$	27,505	$	2,292
Skilled Nursing Centers		12,208		71		6,436		—		7,774		500
Other		—		—		—		295		—		457
Total	$	16,699	$	6,913	$	20,524	$	2,839	$	35,279	$	3,249

Completed Projects. The following table summarizes our completed projects during the years ended December 31, 2020, 2019 and 2018 (dollar amounts in thousands):


		Number	Type	Number
		of	of	of			Total
Year	Type of Project	Properties	Property	Beds/Units	State	Investment
2020	Development	1	ALF/MC	78	Oregon	$	18,447
	Development	1	SNF	90	Missouri		16,587
Total		2		168		$	35,034

2019	Development	1	SNF	143	Kentucky	$	24,974
	Development	1	ILF/ALF/MC	110	Wisconsin		21,999
Total		2		253		$	46,973

2018	Development	1	MC	66	Illinois	$	14,668
Total		1		66		$	14,668

Properties held-for-sale. The following table summarizes our properties held-for-sale at years ended December 31, 2020 and 2019 (dollar amounts in thousands):


		Type	Number	Number
		of	of	of		Gross		Accumulated
At December 31,	State	Property	Properties	Beds/units		Investment		Depreciation
2020	n/a	n/a	—	—	$	—	$	—

2019	Colorado	SNF	3	275	$	8,045	$	3,774
	Iowa	SNF	7	544		14,610		9,723
	Kansas	SNF	3	250		14,111		6,674
	Texas	SNF	7	1,148		25,203		14,942
Total			20	2,217	$	61,969	$	35,113

Property Sales. The following table summarizes property sales during the years ended December 31, 2020 through 2018 (dollar amounts in thousands):


		Type		Number	Number
		of		of	of		Sales		Carrying		Net
Year	State	Properties		Properties	Beds/Units		Price		Value		Gain (Loss)
2020	N/A	N/A		—	—	$	—	$	—	$	129	⁽¹⁾
	Arizona	SNF		1	194		12,550		2,229		10,293
	Colorado	SNF		3	275		15,000		4,271		10,364
	Iowa	SNF	⁽²⁾	7	544		14,500		4,886		9,051
	Kansas	SNF		3	250		9,750		7,438		1,993
	Texas	SNF		7	1,148		23,000		10,260		12,287
Total 2020 ⁽³⁾				21	2,411	$	74,800	$	29,084	$	44,117	⁽³⁾

2019	N/A	n/a		—	—	$	—	$	—	$	500	⁽⁴⁾
	Arizona, Georgia and Texas	SNF	⁽⁵⁾	3	478		15,310		8,995		5,556
	Texas	ALF	⁽⁶⁾	1	140		1		3,830		(3,950)
Total 2019				4	618	$	15,311	$	12,825	$	2,106

2018	Alabama	SNF		4	454	$	27,975	$	5,695	$	21,987
	Kansas	ALF	⁽⁷⁾	—	—		350		346		—
	Ohio and Pennsylvania	ALF		6	320		67,500		16,352		48,695
Total 2018				10	774	$	95,825	$	22,393	$	70,682

(1)	Gain recognized from the $90 repayment of a holdback related to a property sold during the fourth quarter of 2019 and the reassessment adjustment of $39 from the holdback under the expected value model per ASC Topic 606, Contracts with Customers (“ASC 606”).

(2)

This transaction includes a holdback of $838 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC 606, we estimated and recorded the holdback value of $471. During the year ended December 31, 2020, we received $150 of the holdback. We reassessed the holdback under the expected value model and recorded an additional gain of $229.

(3)	Properties sold within the Preferred Care portfolio.

(4)	Gain recognized due to the receipt of funds held in escrow related to a portfolio of six ALFs sold during the second quarter of 2018.

(5)

We sold a property, previously operated by Preferred Care, located in Texas with a carrying value of $871 for $140. Additionally, we sold a property, previously operated by Preferred Care, located in Arizona with a carrying value of $6,485 for $7,250. This transaction includes a holdback of $1,091 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC 606, we estimated and recorded the holdback value of $613. Also, we sold a SNF located in Georgia with a carrying value of $1,639 for $7,920.

(6)	We sold an ALF located in Texas with a carrying value of $3,830.

(7)	We sold land adjacent to an existing ALF community in Kansas.

Mortgage Loans. At December 31, 2020, the mortgage loans had interest rates ranging from 9.3% to 10.1% and maturities ranging from 2043 to 2045. In addition, some loans contain certain guarantees, provide for certain facility fees. Please see Item 1. Business—Portfolio for a table that summarizes our loaned properties as of December 31, 2020.

The following table summarizes our mortgage loan activity for the years ended December 31, 2020, 2019 and 2018 (in thousands):


	2020			2019			2018
Originations and funding under mortgage loans receivable	$	4,253	⁽¹⁾	$	12,342	⁽²⁾	$	21,364	⁽³⁾
Pay-offs received		—			—			(1,086)
Scheduled principal payments received		(1,065)			(1,065)			(1,050)
Mortgage loan premium amortization		(4)			(4)			(4)
Provision for loan loss reserve		(32)			(113)			(192)
Net increase in mortgage loans receivable	$	3,152		$	11,160		$	19,032

(1)	During 2020, we funded an additional $2,000 under and existing mortgage loan. The incremental funding bears interest at 8.89% and escalating by 2.25% thereafter.

(2)	During 2019, we funded an additional $7,500 under an existing mortgage loan. The incremental funding bears interest at 9.41% fixed for two years and escalating by 2.25% thereafter.

(3)

During 2018, we funded an additional $7,400 under an existing mortgage loan for the purchase of a 112-bed SNF in Michigan. The incremental funding bears interest at 8.7%, fixed for five years, and escalating by 2.25% thereafter. Also, we funded additional loan proceeds of $7,125 under an existing mortgage loan for the purchase of a 126-bed SNF in Michigan. This incremental funding bears interest at 9.41%, fixed for five years, and escalating by 2.25% thereafter.

At December 31, 2020 and 2019 the carrying values of the mortgage loans were $257,251,000 and $254,099,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows (in thousands):


	Scheduled
	Principal
2021	$	1,175
2022		1,175
2023		1,175
2024		1,175
2025		1,175
Thereafter		253,968
Total	$	259,843