Real Estate Investments (Tables)

12 Months Ended

Dec. 31, 2022

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, amortization of lease incentives and renewal options are as follows (in thousands):


	Cash
	Rent ⁽¹⁾
2023	$	120,817
2024		113,003
2025		103,690
2026		71,044
2027		67,087
Thereafter		200,663

(1)	Represents contractual cash rent, except for certain master leases which are based on estimated cash. Includes rent from subsequent acquisitions and excludes rent from subsequent dispositions. See Note 16. Subsequent Events for more information.

Summary of components of our rental income

The following table summarizes components of our rental income for the years ended December 31, 2022, 2021 and 2020 (in thousands):


	December 31,
Rental Income		2022			2021			2020
Base cash rental income	$	115,230	⁽¹⁾	$	107,692	⁽²⁾	$	132,789
Variable cash rental income		15,516	⁽³⁾		14,332	⁽³⁾		15,167	⁽³⁾
Straight-line rent		(1,369)	⁽⁴⁾		467	⁽⁵⁾		1,778
Adjustment for collectability of lease incentives and rental income		(256)	⁽⁶⁾		(758)	⁽⁶⁾		(23,214)	⁽⁶⁾
Amortization of lease incentives		(877)			(608)			(426)
Total	$	128,244		$	121,125		$	126,094

(1)

Increased primarily due to rent received from transitioned portfolios, rental income from acquisitions, completed development projects, annual rent escalations, and lease termination fee income of $1,181 received in connection with the sale of a 74-unit ALF partially offset by decreased rent from the sold properties.

(2)

Decreased primarily due to defaults of payments for lease obligations from Senior Lifestyle and Senior Care, abated and deferred rent and reduced rent from a sold property. This decrease was partially offset by increased rent from re-leasing 18 properties previously leased to Senior Lifestyle, completion of development projects and contractual rent increases.

(3)	The variable cash rental income for the years ended December 31, 2022, 2021 and 2020 primarily includes reimbursement of real estate taxes by our lessees.

(4)	Decreased primarily due to a deferred rent repayment, normal amortization and the impact of the 50% reduction of 2021 rent escalations for those leases accounted for on a straight-line basis.

(5)	Decreased due to more leases accounted for on a cash basis, normal amortization and the impact of the 50% reduction of 2021 rent escalations for those leases accounted for on a straight-line basis.

(6)	Represents straight-line rent receivable and lease incentives write-offs.

Summary of information about purchase options included in our lease agreements

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	$	33,719	2023-2029
Florida	MC	1		15,201		12,500	2029
Florida	SNF	3		76,767		75,999	2025-2027	⁽¹⁾
Nebraska	ALF	3		7,633		2,948	TBD	⁽²⁾
South Carolina	ALF/MC	1		11,680		9,052	2029
Texas	SNF	4		51,837		50,848	2027-2029	⁽³⁾
Total			$	202,013	$	185,066

(1)	During 2022, we entered into a joint venture to purchase three SNFs. For more information regarding this transaction, see Financing Receivable below.

(2)	Subject to the properties achieving certain coverage ratios.

(3)

During 2022, we purchased four SNFs and leased these properties under a 10-year lease with an existing operator. The lease allows the operator to elect either an earn-out payment or purchase option. If neither is elected within the timeframe defined in the lease, both elections are terminated. For more information regarding the earn-out see Note 11 Commitments and Contingencies.

Schedule of properties held-for-sale

Type

Number

Gross

Accumulated

State ⁽¹⁾

Property

Properties

Beds/units

Investment

Depreciation

ALF

13,015

2,305

(1)	During 2022, we recorded an impairment loss of $1,286 to write-down the carrying value of the community to its anticipated selling price.

Summary of acquisitions

Acquisitions. The following table summarizes our acquisitions for the years ended December 31, 2022 through 2020 (dollar amounts in thousands):


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year	Type of Property	Price		Costs		Costs		Properties	Beds/Units
2022 ⁽¹⁾	SNF	$	51,534	$	283	$	51,817	4	339

2021	n/a	$	—	$	—	$	—	—	—

(1)

The properties are located in Texas and are leased to an affiliate of an existing operator under a 10-year lease with two 5-year renewal options. Additionally, the lease allows the operator to elect either an earn-out payment or purchase option. If neither option is elected within the timeframe defined in the lease, both elections are terminated. The earn-out payment is available, contingent on achieving certain thresholds per the lease, beginning at the end of the second lease year through the end of the seventh lease year. The initial cash yield is 8% for the first year, increasing to 8.25% for the second year, then increases annually by 2.0% to 4.0% based on the change in the Medicare Market Basket Rate. In connection with transaction, we provided the lessee a 10-year working capital loan for up to $2,000 at 8% for first year, increasing to 8.25% for the second year, then increasing annually with the lease rate. At December 31, 2022, the working capital loan had an outstanding balance of $1,642.

Schedule of development and improvement projects


Type of Property		2022				2021			2020
	Developments		Improvements		Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	105	$	5,538	$	—	$	5,846	$	4,491	$	6,842
Skilled Nursing Centers		—		2,897		—		452		12,208		71
Other		—		559		—		—		—		—
Total	$	105	$	8,994	$	—	$	6,298	$	16,699	$	6,913

Schedule of completed developments


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

Schedule of property sold


		Type	Number	Number
		of	of	of		Sales		Carrying		Net
Year	State	Properties	Properties	Beds/Units		Price		Value		Gain (loss)⁽¹⁾
2022	California	ALF	2	232	$	43,715	$	17,832	$	25,867
	California	SNF	1	121		13,250		1,846		10,846
	Texas	SNF	1	—		485		697		(441)
	Virginia	ALF	1	74		16,895		15,549		1,344	⁽²⁾
	n/a	n/a	—	—		—		—		214	⁽³⁾
Total 2022			5	427	$	74,345	$	35,924	$	37,830

2021	Florida	ALF	1	—	$	2,000	$	2,626	$	(858)
	Nebraska	ALF	1	40		900		1,079		(200)
	Washington	SNF	1	123		7,700		4,513		2,562
	Wisconsin	ALF	3	263		35,000		28,295		5,595
	n/a	n/a	—	—		—		—		363	⁽³⁾
Total 2021			6	426	$	45,600	$	36,513	$	7,462

2020	Arizona	SNF	1	194	$	12,550	$	2,229	$	10,293
	Colorado	SNF	3	275		15,000		4,271		10,364
	Iowa	SNF	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
	n/a	n/a	—	—		—		—		129	⁽³⁾
Total 2020			21	2,411	$	74,800	$	29,084	$	44,117

(1)	Calculation of net gain (loss) includes cost of sales and write-off of straight-line rent receivable and lease incentives, when applicable.

(2)	In connection with this sale, the former operator paid us a lease termination fee of $1,181 which is not included in the gain on sale.

(3)	We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold during 2020 and 2019, under the expected value model per ASC Topic 606, Contracts with Customers.

Summary of investments in mortgage loans secured by first mortgages


					Type	Percentage		Number of					Investment
			Gross		of	of					SNF	ALF	per
Interest Rate	Maturity	State	Investment ⁽¹⁾		Property	Investment		Loans ⁽²⁾	Properties ⁽³⁾		Beds	Units	Bed/Unit
7.5%	2023	MO	$	1,886	OTH	0.5	%	1	—	⁽⁴⁾	—	—	$	n/a
7.5%	2024	LA		29,347	SNF	7.5	%	1	1		189	—	$	155.28
7.8%	2025	FL		14,308	ALF	3.6	%	1	1		—	68	$	210.41
7.3% ⁽⁵⁾	2025	NC/SC		56,317	ALF	14.3	%	1	13		—	523	$	107.68
7.3%	2026	NC		33,001	ALF	8.4	%	1	4		—	217	$	152.08
7.3%	2026	NC		797	OTH	0.2	%	1	—	⁽⁶⁾	—	—	$	—
10.6% ⁽⁷⁾	2043	MI		184,351	SNF	46.8	%	1	15		1,875	—	$	98.32
9.6% ⁽⁷⁾	2045	MI		39,026	SNF	9.9	%	1	4		480	—	$	81.30
9.8%⁽⁷⁾	2045	MI		19,750	SNF	5.0	%	1	2		201	—	$	98.26
10.1% ⁽⁷⁾	2045	MI		14,875	SNF	3.8	%	1	1		146	—	$	101.88
Total			$	393,658		100.0	%	10	41		2,891	808	$	106.42

(1)	Subsequent to December 31, 2022, we originated a $10,750 mortgage loan secured by a MC located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%.

(2)	Some loans contain certain guarantees and/or provide for certain facility fees.

(3)	Our mortgage loans are secured by properties located in six states with five borrowers.

(4)	Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF.

(5)	Represents the initial rate. This loan has an IRR of 8%.

(6)	Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community.

(7)	Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period.

Schedule of mortgage loan activity

The following table summarizes our mortgage loan activity for the years ended December 31, 2022, 2021 and 2020 (in thousands):


	Year Ended December 31,
	2022			2021			2020
Originations and funding under mortgage loans receivable	$	40,732	^{(1) (2)}	$	88,955	⁽³⁾	$	4,253	⁽⁴⁾
Application of interest reserve		6,192			298			—
Scheduled principal payments received		(1,175)			(1,175)			(1,065)
Mortgage loan premium amortization		(6)			(6)			(4)
Provision for loan loss reserve		(457)			(881)			(32)
Net increase in mortgage loans receivable	$	45,286		$	87,191		$	3,152

(1)	Subsequent to December 31, 2022, we originated a $10,750 mortgage loan secured by a MC located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%.

(2)

We originated two senior mortgage loans, secured by four ALFs operated by an existing operator, as well as a land parcel in North Carolina. The communities have a combined total of 217 units, with an average age of less than four years. The land parcel is approximately 7.6 acres adjacent to one of the ALFs and is being held for the future development of a seniors housing community. The mortgage loans have a four-year term, an interest rate of 7.25% and an IRR of 8%. We also funded an additional $2,000 under an existing mortgage loan.

(3)	We funded the following:

$1,638 mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF in Missouri and withheld an interest reserve of $142. The mortgage loan term is one year at a yield of 7.5%;

$27,047 mortgage loan secured by a 189-bed SNF in Louisiana with a regional operator new to us. The mortgage loan has a three-year term with one 12-month extension option and a yield of 7.5%;

$11,724 mortgage loan secured by a 68-unit ALF and MC in Florida operated by a regional operator new to us. At origination, we withheld an interest reserve of $806 and applied $156 of the reserve during 2021. The mortgage loan term is approximately 4 years at a 7.75% yield and includes an additional $4,177 loan commitment for the construction of a memory care addition to the property to be funded at a later date subject to satisfaction of various conditions;

$48,006 mortgage loan for the purchase of a 13-property seniors housing portfolio located in North (12) and South Carolina (1). The communities are operated by an existing LTC operator. At origination, we withheld an interest reserve of $4,496. The loan term is 4 years at a 7.25% yield and includes a commitment of $6,097 for capital improvements and $650 for working capital; and

$540 additional capital funding under our existing mortgage loans.

(4)	We funded an additional $2,000 under an existing mortgage loan.

Scheduled principal payments on mortgage loan receivables

Scheduled principal payments on mortgage loan receivables are as follows (in thousands):


	Scheduled
	Principal
2023	$	3,061
2024		30,522
2025		71,801
2026		34,972
2027		1,175
Thereafter		252,127
Total	$	393,658